Subcommittee on Government Operations Chairman Pete Sessions (R-Texas) opened a hearing addressing fraud risk management within the Department of Defense (DOD). The session, titled “Safeguarding Procurement: Examining Fraud Risk Management in the Department of Defense,” focused on strategies to combat contracting fraud and featured testimonies from the DOD Inspector General and U.S. Government Accountability Office witnesses.
Chairman Sessions highlighted significant financial discrepancies within the DOD, stating that billions have been lost to fraud over the past seven years. He noted that the department struggles to account for its annual expenditures and asset locations. Despite spending over $1 trillion annually, confirmed fraud from 2017 through 2024 amounted to approximately $10.8 billion, with this figure primarily representing recovered funds.
Sessions emphasized the reliance of DOD on contractors for goods and services, which constituted about 71 percent of total defense spending in fiscal year 2023, equating to roughly $431 billion. He pointed out longstanding issues with accounting for government property held by contractors, impacting both financial accountability and operational security.
The hearing referenced notable historical cases of fraud, such as "Fat Leonard," who orchestrated a major corruption scheme involving bribery of Navy officers and overcharging by at least $35 million. This case is still under investigation despite numerous inquiries dating back to 2006.
A recent GAO report criticized DOD's updated fraud risk management strategy for lacking data analytics capabilities that could help verify contractor eligibility and detect suspicious activities earlier. Sessions suggested that employing data analytics could have potentially thwarted schemes like Fat Leonard’s much sooner.
Highlighting another case from the Defense Criminal Investigative Service, Sessions described a situation where falsified documents concealed failures in manufacturing standards for machine gun parts—a situation posing potential harm to military personnel beyond its financial implications.
Sessions reaffirmed the Subcommittee's commitment to preventing future fraud rather than merely reacting after taxpayer dollars are lost. By examining contracting fraud within DOD and exploring preventive measures, he aims to improve government operations and safeguard resources allocated for national defense.
He concluded with optimism about future discussions contributing towards better understanding and addressing these challenges effectively.
