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Auditors Need to Keep an Eye on Government Contractors

February 1, 2011

The Senate Subcommittee on Contracting Oversight held a hearing Tuesday on improving federal contract auditing, which will become increasingly important as the federal government professes to tighten its belt and rein in its budget deficit.

To help the senators tackle the unenviable task of wading into the dense and confusing thicket of contract oversight processes, the Government Accountability Office contributed a report on contract audits and their role in helping reduce improper payments. The report especially focuses on the Department of Defense, which accounts for the largest share of federal contract spending. After years of reports on the billions of dollars spent on controversial federal contractors like Halliburton and Blackwater, it’s no wonder that the DOD’s contractor spending could use some especially tough auditing.

But the DOD isn’t the only area of the federal government that could benefit from the scrutiny of auditors. The committee also heard testimony from witnesses ranging from the acting CFO of the Department of Education to officials at the Department of Energy and the General Services Administration, as well as outside government.

Brian Miller, the inspector general at the GSA, discussed some of the contractors from whom the agency had wrung multimillion dollar settlements after uncovering some of their shenanigans.

Storage technology maker EMC, for example, agreed to an $87.5 million settlement after an audit found that EMC had not made full disclosure of its pricing practices to the GSA, was not offering the government pricing comparable to what it was giving to its commercial customers, and was not complying with its contract requirements.

Auditors at the GSA also spotted problems with Hewlett-Packard’s pricing and discounting practices in 2004, according to Miller. HP offered to settle with the agency for less than $2 million. Guess again, HP. The auditors’ analysis showed that the damages to the government, and the taxpayer, were considerably more than the $2 million calculated by HP. Eventually the tech giant and the government reached a settlement of $55 million.

If Washington hopes to come anywhere close to solving its budget deficit mess, it’s going to need auditors like these who are willing to get tough with contractors and are not out to get jobs from them.

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