High-Risk Series

In 1990, GAO began a special effort to identify federal programs at high risk for waste, fraud, abuse, and mismanagement. GAO issued a series of reports in December 1992 on the fundamental causes of the problems in the high-risk areas; it followed up on the status of these areas in February 1995. This, GAO's third series of high-risk reports, revisits these troubled government programs and designates five additional areas as high-risk (defense infrastructure, information security, the year 2000 problem, supplemental security income, and the 2000 decennial census), bringing to 25 the number of high-risk programs on GAO's list. The high-risk series includes an overview, a quick reference guide, and 12 individual reports. The high-risk series may be ordered as a full set, a two-volume package including the overview and the quick reference guide, or as 12 separate reports describing in detail these vulnerable government programs. GAO summarized the high-risk series in testimony before Congress (GAO/T-HR-97-22).

GAO found that: (1) improvement and simplification of DOD's contract payment system is imperative; (2) if DOD does not achieve effective control over its payment process, DOD's Defense Finance and Accounting Service will continue to risk overpaying contractors millions of dollars; (3) further, failure to reform the payment system perpetuates other financial management and accounting control problems and increases the administrative burden of identifying and correcting erroneous payments and their associated costs; (4) DOD is aware of the seriousness of its payment problems and is taking steps to address them; (5) with improved contractor cost-estimating systems, DOD could reduce the risk of overpricing and manage contracts more efficiently; (6) contractors' cost-estimating systems are a critical control for ensuring sound price proposals, which reduce the risk that the government will pay excessive prices, and permit less government oversight and management attention; (7) DOD has improved its oversight of contractors' cost-estimating systems, and some improvement in contractor systems is indicated; (8) nevertheless, poor cost-estimating systems remain an area of concern at some contractors' locations and require continued attention by contractors and government contracting officials; (9) maintaining public support for defense programs requires that potential fraud involving defense contractors be identified and dealt with swiftly; (10) DOD has established a voluntary disclosure program to encourage defense contractors to report potential civil or criminal procurement fraud to the government; (11) however, contractors' participation in the program has been relatively small and the dollar recoveries modest; (12) efforts to improve the administration of the program, including coordination between DOD and the Department of Justice, may encourage program participation and improve dollar recoveries; (13) as is the case with many other elements of defense, contract administration and audit resources have been reduced, and further reductions are planned; (14) at the same time, DOD continues to look to additional outsourcing opportunities, and it plans to increase its procurement budgets significantly in the coming years; (15) both these actions may increase contracting actions and the need for effective contract administration and audits; and (16) as DOD seeks to reengineer and streamline its contracting and acquisition processes, including contract administration and audit, new business process techniques will be key to accomplishing effective and efficient oversight in the future.