Virginia Foxx Asks Witness: Are Instances Of DoD Fraud, Dishonesty Declining Or Just Underreported?

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During a House Oversight Committee hearing on Wednesday, Rep. Virginia Foxx (R-NC) questioned Seto Bagdoyen, Director of Forensic Audits and Investigative Services at the U.S. Government Accountability Office, about fraud within the Department of Defense.

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00:00The distinguished young chairman who sits on this committee and who has

00:08Distinguished service to the United States Congress. Mrs. Fox is recognized. Dr. Fox is recognized.

00:14Thank you, Mr. Chairman for your distinguished service

00:18My question is for both of our witnesses. I'll start

00:23Mr. Bagdawan you can answer first. We can all agree we must hold bad actors accountable for

00:30Poor Performance and Fraud. Federal agencies including DOD may suspend or disbar

00:37Contractors for sustained poor performance or serious lack of business honesty or integrity

00:43Suspended or debarred entities are prohibited from entering into new contracts with federal agencies

00:50With suspensions lasting no more than 12 months and debarments usually lasting three years

00:56According to an industry study there has been a significant decline in suspensions and debarments in recent years

01:05Do you believe that instances of contractor poor performance and dishonesty are

01:12Actually declining or are they being reported less often?

01:17That's a good question. I'm glad you asked it

01:19Dr. Fox I will have to get back to you on this. This is beyond my area of expertise, but we do have

01:27People at GAO who may be able to provide an answer for you if I I do want an answer. So mr. Mayo. Do you have anything to add to that?

01:39I

01:41You know it doesn't as has an impact on us and so and I but I okay, I think you're probably correct

01:51Okay, mr. Bagdewan a GAO report

01:56From early 2024 notes that data analytics can help inform fraud miss risk

02:02Management and are a significant tool for helping agencies transition from a costly pay and chase model

02:09To an approach that is more focused on fraud prevention while the DOD's risk the fraud risk management strategy

02:17Referred generally to data analytics. It does not establish as a specific fraud risk management control activity in your opinion

02:26Is this a missed opportunity for the department to root out fraud in what benefits and cost savings?

02:32Could be achieved if DOD made greater use of data analytics sure?

02:38Thank you again for your question. It's a it's a very good question

02:41It's a timely one as I mentioned earlier in response to another member's question

02:46We do expect an updated and I fraud risk and I fraud strategy later next month and

02:53It's our understanding that DOD will make data analytics and explicit requirement

02:58In that strategy of course that remains to be seen

03:03We will give it a very good scrub to make sure that whatever DOD is proposing to do

03:09Is responsive to our recommendation, but the key point is if they implement the recommendation on paper

03:17They send me something over to look

03:20And review that's the start then they have to go operationalize that and and achieve results

03:27So having a requirement for data analytics is not the big is not the end of the story

03:34I understand that well, what do you think is the biggest obstacle?

03:40For DOD identifying cases of fraud or abuse

03:44Before they occur is that lack of having analytics that is a significant part of it

03:50Also, it's the commitment to look if you don't acknowledge you have fraud

03:53Then you're not really going to bother to have controls in place to figure it out

03:59Are you aware of other federal agencies doing a great a good job fighting procurement fraud?

04:06And if you do what lessons can we learn from those examples?

04:11Sure

04:13Unfortunately, I've been doing fraud risk management work for about 11 years now at GAO and many

04:19Agencies big intermediate and small struggle with this

04:25But one of the ones that we have pointed out as being a success story is the export import bank of the United States

04:33They started a tone at the top made it a priority and then took all the steps necessary to implement

04:40Fraud risk management capacity

04:43We are in the process of starting a mandated review of where they are

04:47And we should be reporting on that sometime next year

04:51So we will go back and make sure that what what they did put in place remains effective

04:57Thank you. Mr. Chairman. I think what

05:01Mr. Baguwan especially has pointed out is that there there has to be

05:06The willingness to look for fraud first of all

05:12And there's a need I think for us as an oversight committee to stay on top of this issue

05:19And to push for that

05:21You know, it's really really sad that so many people who work for the federal government

05:26Do not understand that it's the hard-working taxpayers who provide the funds for these programs

05:34And that all of us deserve them to have that attitude where they want to save every penny

05:41I have that attitude the people in my office have that attitude and

05:46Some way or another we have to infuse the entire federal government with that attitude. Thank you for your indulgence. Mr. Chairman

05:52Jim

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