Wednesday, May 19, 2010

Fraud Risk Indicators and Subsequent Referrals

In yesterday's post, we described how Government auditors are to be alert for indications of fraud, waste, abuse, or other irregular activity and how, as part of every audit, they are to review a listing of fraud indicators to familiarize themselves with some of the risk areas associated with the particular review being performed.

Once "potential irregular conduct" (that's the Government's terminology, not ours) is identified, the auditor makes a referral to the investigative agency of the department that awarded the contract. For DoD contracts, this is usually the Defense Criminal Investigative Service (DCIS). The referral is made using a DCAA Form 2000.

DCAA does not publicize its number of referrals. In recent testimony before the Commission on Wartime Contracting, the new DCAA Director provided the following list showing just the referrals related to contracts in Iraq and Afghanistan since April 2009.  Extrapolating from those numbers, it looks like DCAA made at least 126 referrals in 2009. Of course we don't have any further details on the nature of the irregular conduct but the descriptions of the irregular conduct is somewhat informative.

If you have trouble viewing this chart, you can download a .pdf copy here.

DCAA is not the only organization reporting suspected irregular conduct by contractors. The Defense Criminal Investigative Service reported that it had worked on 975 active cases of procurement related fraud in 2009. Some of those undoubtedly came from contractor employees calling the Fraud Hotline.

To view a DCAA Form 2000, go here.

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