The Department of Defense (DoD) is the largest contracting agency in the Federal government – with contracts ranging from IT services to major weapon systems – leaving the agency inherently susceptible to fraud. A new report from the Government Accountability Office (GAO) says that the Pentagon can get a better handle on mitigating fraud by leveraging data analytics.
GAO explained that while DoD updated its fraud risk management strategy in August 2023, the new strategy doesn’t include data analytics as a method for managing fraud risk nor does it provide direction to conduct data analytics.
According to GAO, data analytics techniques such as data matching can be used to help identify potentially fraudulent contractors. For instance, DoD can use third-party data sources to verify whether bidders are correctly claiming small business status.
“DoD’s strategy refers generally to data analytics but does not establish it as a specific fraud risk management control activity,” the report says. “Accordingly, the strategy does not identify which DoD entity has the authority to ensure that fraud-related data-analytics activities are planned and implemented.”
“The strategy does not establish clear roles and responsibilities for all entities with data-analytics roles,” the report adds. “It also does not provide timelines for designing and implementing data-analytics activities. As a result, DoD is missing an opportunity to provide direction in areas that are critical to achieving its data-analytics goals and managing fraud risks.”
GAO is making 11 recommendations to DoD and the DoD Office of Inspector General (OIG). These include DoD establishing data analytics as a key method for fraud risk management and providing necessary direction on data analytics in its strategy.
The other recommendations include improving the usability of investigative data by DoD for fraud risk management and “obtaining and analyzing information from adjudicated procurement fraud cases.”
Finally, it recommends that the DoD OIG collaborate with the DoD on the development of leading practices towards improving the usability of investigative data by the DoD for fraud risk management purposes.
DoD agreed with some but not all of the recommendations, while the OIG agreed with all of them. GAO said it continues to believe all of its recommendations are warranted, emphasizing that the DoD strategy’s general references to data analytics are not enough.
“Without discussing with specificity what data analytics are to be used and how they are to be used, the strategy does not effectively establish data analytics as a distinct method for preventing, detecting, and responding to fraud,” the report says.
