Enhancing Fraud Risk Management in DOD Contracting Through Data Analytics

The document "DOD FRAUD RISK MANAGEMENT: Enhanced Data Analytics Can Help Manage Fraud Risks" from the Government Accountability Office (GAO) addresses the Department of Defense's (DOD) efforts in managing fraud risks related to contracting. The DOD, being the largest contracting agency in the federal government, has a significant responsibility to combat fraud risks. Despite taking initial steps to manage these risks, the GAO found that the DOD's strategy does not establish data analytics as a method for fraud risk management, nor does it provide clear direction for conducting such analytics.

Data analytics are crucial for preventing and detecting fraud, and they can include various techniques like data matching, which verifies key information to determine eligibility for federal contracts. However, the DOD's strategy lacks specifics on how data analytics should be used as a control activity for fraud risk management. It also fails to identify the entity responsible for ensuring that fraud-related data analytics activities are planned and implemented, does not establish clear roles and responsibilities, and does not provide timelines for designing and implementing data-analytics activities.

The GAO's analysis demonstrates the usefulness of DOD investigative data in informing fraud risk management, despite existing limitations. For instance, investigative data provide insight into the characteristics of fraud schemes and the results of DOD monitoring activities. However, the data on alleged and adjudicated procurement fraud cases are not always complete and cannot always be readily analyzed. The DOD does not have plans to obtain and analyze relevant investigative information and has only coordinated to some extent with Defense Criminal Investigative Organizations (DCIOs) to share information.

To improve the DOD's fraud risk management, the GAO made 11 recommendations, including establishing data analytics as a method for fraud risk management, improving the usability of investigative data, and obtaining and analyzing information from adjudicated procurement fraud cases. The DOD agreed with some but not all of the recommendations, while the DOD Office of Inspector General (OIG) agreed with all applicable recommendations. The GAO believes that implementing these recommendations is essential for the DOD to effectively manage fraud risks.