United States General Accounting Office

GAO Report to the Chairman, Subcommittee

on Administrative Oversight and the

Courts, Committee on the Judiciary, U.S.

Senate

February 1996 DOD PROCUREMENT

Use and

Administration of

DOD’s Voluntary

Disclosure Program

GAO/NSIAD-96-21

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-258881 

February 6, 1996

The Honorable Charles Grassley

Chairman, Subcommittee on Administrative

 Oversight and the Courts

Committee on the Judiciary

United States Senate

Dear Mr. Chairman:

In response to your request, we developed information on the Department

of Defense’s (DOD) Voluntary Disclosure Program, a program to encourage

defense contractors to voluntarily disclose potential civil or criminal

procurement fraud to the government. More specifically, this report

provides information and observations on (1) the extent of defense

contractor participation in the program, (2) the amount of money that has

been recovered, (3) the time taken to close cases, (4) the most common

type of disclosures, and (5) the extent of overlap between voluntary

disclosures and qui tam actions.1 DOD and Department of Justice policies

and practices, along with statutory and court restrictions, precluded our

access to many individual case files, negating our ability to fully evaluate

the program.

Results in Brief Although 48 of the top 100 defense contractors have made voluntary

disclosures, the total number of disclosures under the program has been

relatively small and the dollar recoveries have been modest. From its

inception in 1986 through September 1994, DOD reported that, of the

thousands of defense contractors, 138 contractors made 325 voluntary

disclosures of potential procurement fraud. DOD reported recoveries from

these disclosures to be $290 million, about 17 percent of total reported DOD

procurement fraud recoveries between fiscal years 1987 and 1994.

However, our review indicated that DOD’s reported recoveries of

$290 million were overstated because they included $75 million in

premature progress payments and amounts from disclosures made prior to

the program. Further, DOD accepted some disclosures into the program

that the Justice Department believed were triggered by imminent

government discovery and thus did not meet the criteria for admission.

1

A qui tam action is a civil action filed under the False Claims Act on behalf of the government by an

individual, called a “relator,” to recover damages resulting from alleged fraud.

Page 1 GAO/NSIAD-96-21 DOD Procurement
B-258881 

Voluntary disclosure cases took an average of about 2.8 years to close,

with about 25 percent taking over 4 years. Open cases are taking longer.

As of September 1994, DOD data showed that open cases averaged 

3.5 years, with over half of the cases disclosed in fiscal year 1990 still

open. Less than full contractor cooperation with the government and low

priority given by DOD and other investigative agencies to managing cases

expeditiously may be problems in some cases.

Most disclosures did not result in significant dollar recoveries for the

government. Of 129 closed cases, 81 cases, or about 63 percent, had

reported recoveries of less than $100,000, of which 52 cases, or 40 percent,

had no dollar recoveries. Forty-eight cases had reported recoveries of

$100,000 or more, of which 15 cases had reported recoveries of $2 million

or more.

There is little overlap between voluntary disclosures and qui tam actions.

Of the 129 voluntary disclosure cases closed since the program began, 

4 involved qui tam actions. In one case, the qui tam action identified

additional fraudulent activity and substantially increased the amount

recovered by the government.

Background In 1986, a report to the President on defense management concluded that

the defense industry needed to promote principles of ethical business

conduct, detect acts of procurement fraud through self-governance, and

voluntarily report potential fraud to the government. The report noted that

DOD awarded contracts worth about $164 billion in 1985, 70 percent of

which went to a group of 100 contractors. Twenty-five contractors

reportedly did business of $1 billion or more, 147 contractors did

$100 million or more, and almost 6,000 contractors did $1 million or more.

In fiscal year 1994, the number of contractors doing business with DOD did

not substantially change. Total DOD contracting for goods and services

over $25,000 in fiscal year 1994 amounted to $118 billion.

In response to the 1986 report, a number of defense contractors

established self-governance programs that included monitoring

compliance with federal procurement laws and voluntarily disclosing

violations to government authorities. These efforts became known as the

Defense Industry Initiative on Business Ethics and Conduct.

To facilitate contractor self-governance and to encourage contractors to

adopt a voluntary disclosure policy, DOD established the Voluntary

Page 2 GAO/NSIAD-96-21 DOD Procurement
B-258881 

Disclosure Program in July 1986. This program provides general

guidelines, policy, and processes to enable DOD and its contractors to

address matters of wrongdoing the contractors discover. At the time, DOD

recognized that there was a need for a process to deal in a consistent

manner with matters disclosed by contractors. In return for voluntarily

disclosing potential wrongdoing and cooperating in any government audit

and investigation, the government generally allows a contractor to

conduct its own investigation, which the government then attempts to

verify expeditiously.

Upon receipt of an initial contractor disclosure, the DOD Inspector

General’s office (1) makes a preliminary determination as to whether the

disclosure satisfies the program’s requirements, (2) coordinates the

execution of the standard voluntary disclosure agreement, (3) assigns the

disclosure to a DOD criminal investigative organization for verification and

to a suspension and debarment authority, and (4) coordinates the

disclosure with the Justice Department for potential civil and criminal

action.

The Justice Department reviews all voluntary disclosures. It conducts,

either through its Defense Procurement Fraud Unit or through referral to

the appropriate U.S. Attorney’s Office, a preliminary inquiry to determine

if there is credible evidence suggesting prosecutable violation of federal

laws. The Justice Department has sole responsibility to initiate or decline

prosecution. It also has an opportunity to concur in the voluntary

disclosure agreement between the contractor and DOD.

Acceptance of a voluntary disclosure into the program by DOD is based on

four criteria. The contractor voluntarily disclosing the potential fraudulent

action must (1) not be motivated by the recognition of imminent detection,

(2) have status as a business entity, (3) take prompt and complete

corrective actions, and (4) fully cooperate with the government in any

ensuing investigation or audit.

Defense Contractor

Participation in the

Program

The number of voluntary disclosures under the program has been

relatively small and the dollar recoveries have been modest. From its

inception in 1986 through September 1994, DOD reported that 138 defense

contractors made 325 voluntary disclosures of potential procurement

fraud, of which 129 have been closed. According to DOD, 48 of the top 

100 defense contractors made 222 disclosures. The remaining 103

disclosures were made by 90 contractors from among the more than

Page 3 GAO/NSIAD-96-21 DOD Procurement
B-258881 

32,000 contractors doing business with DOD. Many contractors were

one-time users, but one large contractor accounted for 23 of the closed

cases. Figure 1 shows the annual number of disclosures reported since the

program’s inception.

Figure 1: Voluntary Disclosure Cases

Since Program Inception

1986 1987 1988 1989 1990 1991 1992 1993 1994

0

10

20

30

40

50

60

70

18

44

58

44 44

29

27

36

25

Fiscal year

Number of cases

a

Source: GAO analysis of DOD database.

aDisclosure in 14 cases was made prior to July 1986. The earliest was May 1984.

Acceptance into the program has its benefits for contractors. For example,

a contractor can expect (1) its liability in general to be less than treble

damages, (2) action on any suspension to be deferred until after the

disclosure is investigated, (3) the overall settlement to be coordinated with

government agencies, (4) the disruption from adversarial government

investigations to be reduced, and (5) the information may be kept

confidential to the extent permitted by law and regulation.

Page 4 GAO/NSIAD-96-21 DOD Procurement
B-258881 

The program also benefits the government. For example, DOD commented

that the existence of a structured format for addressing contractual and

legal violations encourages contractor ethics and internal review

programs. The Justice Department pointed out that the program promotes

corporate compliance with laws and regulations.

DOD/Justice Department

Disagree on Some

Admissions Into Program

According to DOD, the key to deciding if a disclosure is voluntary is

whether a contractor was aware of information the government possessed

or was about to discover, thus motivating the contractor to make a

disclosure. In a 1992 DOD review of the program, DOD noted cases in which

it had determined that contractors’ disclosures were eligible for admission

into the program, but the Justice Department disagreed and recommended

that the disclosures not be admitted into the program.

In 1992, when this disagreement was noted, the Justice Department

proposed that it and DOD establish a working group to resolve the issue. To

date, we were told, this has not occurred.

According to officials from the two departments, disagreements continue

over whether some disclosures should be admitted into the program. In

fact, two of the three cases that were the basis of the concerns reflected in

the 1992 review remain in the program as open cases, and the Justice

Department still has not concurred with DOD’s acceptance of these

disclosures into the program. The disagreement between the two

departments revolves around whether disclosures were triggered by

knowledge of imminent discovery by the government. In this regard, DOD

believes that it is its prerogative, not the Justice Department’s, to accept or

reject a contractor’s voluntary disclosure.

DOD stated that it did not always agree with the Justice Department on

whether a company should be admitted into the program. However, DOD

stated that it and the Justice Department have worked well together in

resolving the questions on a factual basis and that this cooperation has

grown significantly over the last 2 years. DOD stated that the DOD Inspector

General staff and representatives of the Defense Procurement Fraud Unit

meet every 6 weeks to discuss the status of disclosures. During our review,

we were told that these meetings were to resolve cases that had been open

for an extended period, not to address whether disclosures should be

accepted into the program.

Page 5 GAO/NSIAD-96-21 DOD Procurement
B-258881 

DOD-Reported

Recoveries Overstated

Through September 1994, DOD reported recoveries from the program of

about $290 million, of which about 38 percent is associated with cases that

are still open. The $290 million represents about 17 percent of the Justice

Department’s $1.7 billion in reported settlements on DOD procurement

fraud cases between fiscal years 1987 and 1994.

While the value of the voluntary disclosure program may well extend

beyond the amount of dollar recoveries, we note that most disclosures did

not result in significant dollar recoveries for the government. Of 129 closed

cases, 81 cases, or about 63 percent, had reported recoveries of less than

$100,000, of which 52 cases, or 40 percent, had no dollar recoveries.

Forty-eight cases had reported recoveries of $100,000 or more, of which 

15 cases had reported recoveries of $2 million or more. Figure 2 shows the

distribution of DOD-reported dollar recoveries for closed cases.

Page 6 GAO/NSIAD-96-21 DOD Procurement
B-258881 

Figure 2: Distribution of Reported

Recoveries

$0

$1-$100K

$100K-1M

$1-2M

$2-3M

$3-4M

$4-5M

$5-10M

$10-15M

Over $15M

0

10

20

30

40

50

60

52

29

25

8

5

3

1 2 3

1

Dollars recovered

Number of cases

Source: GAO analysis of DOD database.

The $290 million attributable to the program is overstated because it

includes an amount that should not be considered a recovery from the

program, as well as amounts related to disclosures made prior to the

formal initiation of the program. The reported recoveries include

(1) $75 million representing a contractor’s premature billings of progress

payments and (2) recoveries from voluntary disclosure cases that predated

the beginning of the program by up to 2 years. One case was closed before

the program began.

Page 7 GAO/NSIAD-96-21 DOD Procurement
B-258881 

With regard to the progress payments, both the contractor’s disclosure

report and the government’s subsequent investigative report showed the

contractor prematurely billed the government by about $75 million. The

Justice Department commented that the contractor then withheld

approximately $75 million in billings at the time of the voluntary

disclosure to rectify the premature billings. However, since DOD

subsequently paid the contractor in full the amounts due under the

contract, we believe the $75 million should not be claimed as a program

recovery.

DOD considers the submission of a claim for unearned progress payment to

be a false claim and thus appropriate for reporting under the program. The

Justice Department commented that there was no “recovery” of

$75 million and that the government was damaged by the interest lost on

the premature payments, the amount of which was included in the final

settlement with the contractor. In our view, a recovery properly

attributable to the voluntary disclosure program would be the interest cost

on the $75 million premature payment.

For 14 cases that predated the program, the DOD official responsible for the

program told us that in 8 cases, although the disclosures predated the

program announcement letter to industry, agreements were signed after

the announcement and recoveries were resolved under the program. He

said recoveries were made in three other cases after the program began.

The DOD official believes, therefore, that these 11 cases were appropriately

included in the program. However, he agreed that recoveries related to the

three remaining cases should not be attributed to the program and

indicated that DOD would reduce its reported recoveries—about

$900,000—for these three cases.

Voluntary Disclosures

Take an Average of 

2.8 Years to Complete

For closed cases, DOD records show that it took an average of 2.8 years to

complete a voluntary disclosure case, with about 25 percent taking over 

4 years. DOD records also show that the contractors’ investigation took

about 21 percent of the time and that the federal audit/investigation took

about 52 percent of the time. Figure 3 shows the time to complete the

closed cases.

Page 8 GAO/NSIAD-96-21 DOD Procurement
B-258881 

Figure 3: Time to Complete Voluntary Disclosure Cases

Less than 1 year 1 - 2 yr 2 - 3 yr 3 - 4 yr 4 - 5 yr 5 - 6 yr Over 6 years

0

5

10

15

20

25

30

35

29

16

27

22

19

5

8

Length of time

Number of cases

Source: GAO analysis of DOD database.

Note: Data on three cases was insufficient to calculate lapsed time.

More than half the disclosures made since the program began are still

reported as open. As of September 30, 1994, there were 173 open cases

that have been open an average of 3.5 years. Twenty-nine of 44 cases

disclosed in fiscal year 1990 and 13 cases disclosed in fiscal year 1987, the

first full year of the program, were still reported as open. Further, the open

case load is growing. The number of open cases at the end of fiscal year

1994 was greater than it was at the end of fiscal year 1990, despite a

Page 9 GAO/NSIAD-96-21 DOD Procurement
B-258881 

decline in the number of disclosures over the past 4 fiscal years. A Justice

Department official suggested that some open cases may have been

completed but not shown as closed in DOD’s records. Between October

1994 and the end of June 1995, only 2 cases were closed while 15 were

accepted into the program.

Contractor

Cooperation May Be a

Problem in Some

Cases

A Justice Department official responsible for the program commented that

not all contractors fully cooperate with the government and that this is

one factor that makes investigations a time-consuming process and delays

settlements. The official stated that few companies provide the

government all its witness interview memoranda and that fewer still agree

to provide the government a “road map” of the cases, believing that they

are not obliged to serve as the government’s investigator. According to this

official, companies making voluntary disclosures tend to provide more

assistance in a government investigation when the potential business and

legal risks to the contractor are greater or when they want to give the

impression that the company is turning over “a new leaf.”

Our review identified two instances of less than full contractor

cooperation. In one case, the company official destroyed records related

to its disclosure. According to DOD, this company was successfully

criminally prosecuted and fined, the official was sentenced to jail, and the

company was debarred. The government’s investigation took 13 months,

according to DOD information. In the other case, the contractor denied

documents to government investigators, and the DOD Inspector General

ultimately issued a subpoena to obtain the information. The government’s

investigation took about 5 years, according to DOD information. The Justice

Department said that the investigation included not only the disclosure but

an additional series of allegations made in the related qui tam case, which

was filed almost simultaneously with the company’s report. DOD officials

considered removing this contractor from the program due to lack of

cooperation but did not.

The DOD official responsible for the program, however, stated that while

there have been instances of less than total, or in a few cases very little,

cooperation, they have been the exception rather than the rule. He added

that disclosing a wrongdoing, conducting an internal investigation, and

providing an internal investigative report without resorting to subpoenas

or grand juries, were far more cooperative than would be present in any

adversarial investigation.

Page 10 GAO/NSIAD-96-21 DOD Procurement
B-258881 

Case Management Is a

Low Priority

To ensure that each case is processed adequately and expeditiously, DOD

guidelines require the investigative agencies to prepare a case progress

report every 90 days summarizing the ongoing investigation and discussing

case management issues, such as the status of the investigation and the

level of contractor cooperation, and to forward the report to the DOD

program manager. DOD also requires the investigative agencies to schedule

a meeting with other appropriate program officials, such as those from the

Justice Department and other DOD criminal investigative agencies, within

14 days of the progress report. The purpose of the meeting is to review the

status of the case and determine what more needs to be done on each

open investigation.

According to the DOD program manager, investigative agencies are not

systematically sending in the progress reports, and, in some cases, the

reports that are submitted do not meet the program’s reporting

requirements. Further, he told us that the meetings are not taking place

because staffing is limited and priority is given to new cases over open

cases. He also said DOD had not been following up to ensure that the DOD

requirements were met and cases were handled expeditiously.

Most Disclosures

Were for Contract

Mischarging and

Product Substitution

According to DOD data, the most frequent violation types disclosed were

for contract mischarging and product substitution. Contract mischarging is

applying material or labor charges to the wrong contract; product

substitution is delivering products other than those specified in the

contract. Other disclosures dealt with violations relating to overpricing of

contracts negotiated under the Truth in Negotiations Act, false claims or

statements, and excessive progress payment. Table 1 shows the number

and types of violations disclosed for the closed cases.

Table 1: Number and Types of

Disclosures for Cases Closed Through

September 1994 Category of violation

Number of

cases

Contract mischarging 57

Product substitution 32

Overpricing 14

Progress payments 3

False claims/statements 12

Other 11

Total 129

Source: GAO analysis of DOD database.

Page 11 GAO/NSIAD-96-21 DOD Procurement
B-258881 

Little Overlap Exists

Between Qui Tam

Actions and Voluntary

Disclosures

In 1986, the False Claims Act was amended to increase the qui tam

relator’s share of recovery in fraud settlements. Since that time, DOD

procurement-related qui tam actions have steadily increased, while

voluntary disclosures have decreased. Figure 4 shows the number of

DOD-related qui tam actions filed and the number of DOD voluntary

disclosures made since 1987. While the increase in qui tam actions may be

related to the increase in a relator’s share of the recovery, we found no

data to explain the decrease in disclosures.

Figure 4: DOD-related Qui Tam and

Voluntary Disclosure Cases Since

1987

1987 1988 1989 1990 1991 1992 1993 1994

0

20

40

60

80

100

Fiscal year

Number of cases

Voluntary Disclosure Qui Tam

Source: GAO analysis of DOD database.

There is little overlap between voluntary disclosures and related qui tam

actions. For the 129 voluntary disclosure cases closed since the program

began, only 4 involved qui tam actions. In one case we examined, the

Page 12 GAO/NSIAD-96-21 DOD Procurement
B-258881 

government benefited because the qui tam action (1) provided a road map

essential to the government’s case, (2) identified additional fraudulent

activity, and (3) increased the amount of money recovered by the

government.

According to a DOD official, some contractors claim that the threat of a qui

tam action might discourage voluntary disclosures because the company’s

investigation creates potential qui tam relators as more employees become

aware of the potential fraud. He added that a contractor runs the risk of an

employee filing a qui tam action before it can complete its investigation or

even adequately define the issue to make a sufficiently complete voluntary

disclosure for acceptance into the program. On the other hand, this DOD

official remarked that other contractors indicated they would make

disclosures in spite of possible qui tam actions. Other reasons cited for a

contractor not making a voluntary disclosure include (1) contractor

management conflicts between disclosing potential fraud to the

government and the contractor’s perceived duty to protect stockholder

value; (2) contractor uncertainty of prosecution outcome from disclosing

potential fraud; (3) the high cost of internal investigations, which is usually

stipulated to be an unallowable cost for government reimbursement

purposes; and (4) differences between contractor disclosure policies and

its practices.

According to an official in the DOD Inspector General’s office, voluntary

disclosures and qui tam actions complement each other and qui tams act

as a “check and balance” to the program and contractor honesty.

Agency Comments In commenting on a draft of this report, DOD emphasized that the program

generates positive results and is clearly in the government’s best interest.

DOD’s comments are presented in their entirety in appendix I, along with

our evaluation of them.

The Justice Department said that it is committed to the program and that

the program has been remarkably effective in nurturing business honesty

and integrity and in bringing good new cases to the government’s

attention. It believes the program to be a model for government voluntary

disclosure programs. The Justice Department’s comments are presented in

their entirety in appendix II, along with our evaluation of them.

Page 13 GAO/NSIAD-96-21 DOD Procurement
B-258881 

Scope and

Methodology

We reviewed overall statistical information on the program’s

accomplishments, as well as information on qui tam actions and their

relationship to voluntary disclosures. We also reviewed limited

information on one of four qui tam cases. In addition, we talked to experts

inside and outside of the government on the program’s merits and on its

relationship to qui tam actions. We performed limited tests of the data

reviewed and found some inaccuracies. Thus, while we have concerns

about the reliability of the data, it represents the only source of

comprehensive information on the program’s accomplishments other than

individual case files.

DOD and Justice Department policies and practices prevented our access to

open voluntary disclosure case files. Our access to closed case file

information was also limited when, according to Justice Department

officials, it contained information covered by rule 6(e) of the Federal

Rules of Criminal Procedure, which governs secrecy requirements of

grand jury proceedings. As a result, the Justice Department would not

provide us with the bulk of several closed case files we initially selected

for review. Furthermore, according to the Justice Department, some of the

documents in two of three closed cases we selected for initial review were

unavailable because of a court-imposed protective order in one case and a

confidentiality agreement between the U.S. Attorney’s Office and the

company in the other case. We conducted our review from May 1994 to

July 1995 in accordance with generally accepted government accounting

and auditing standards.

Unless you publicly announce its contents earlier, we plan no further

distribution of this report until 30 days from its issue date. At that time, we

will send copies to the Secretary of Defense; the Attorney General,

Department of Justice; the Director, Office of Management and Budget;

and other interested congressional committees. Copies will also be made

available to others upon request.

Page 14 GAO/NSIAD-96-21 DOD Procurement
B-258881 

Please contact me at (202) 512-4587 if you or your staff have any questions

concerning this report. The major contributors to this report are listed in

appendix III.

Sincerely yours,

David E. Cooper

Associate Director,

Defense Acquisitions Issues

Page 15 GAO/NSIAD-96-21 DOD Procurement
Contents

Letter 1

Appendix I 

Comments From the

Department of

Defense

18

Appendix II 

Comments From the

Department of Justice

24

Appendix III 

Major Contributors to

This Report

31

Table Table 1: Number and Types of Disclosures for Cases Closed

Through September 1994

11

Figures Figure 1: Voluntary Disclosure Cases Since Program Inception 4

Figure 2: Distribution of Reported Recoveries 7

Figure 3: Time to Complete Voluntary Disclosure Cases 9

Figure 4: DOD-related Qui Tam and Voluntary Disclosure Cases

Since 1987

12

Abbreviations

DOD Department of Defense

Page 16 GAO/NSIAD-96-21 DOD Procurement
Page 17 GAO/NSIAD-96-21 DOD Procurement
Appendix I 

Comments From the Department of Defense

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 18 GAO/NSIAD-96-21 DOD Procurement
Appendix I 

Comments From the Department of Defense

Now on pp. 1 and 3.

See comment 1.

See comment 2.

Page 19 GAO/NSIAD-96-21 DOD Procurement
Appendix I 

Comments From the Department of Defense

Now on pp. 1 and 5.

See comment 3.

See comment 3.

Now on pp. 6-8.

See comment 4.

Page 20 GAO/NSIAD-96-21 DOD Procurement
Appendix I 

Comments From the Department of Defense

See comment 5.

Now on pp. 8-10.

Now on p. 10.

See comment 6.

Page 21 GAO/NSIAD-96-21 DOD Procurement
Appendix I 

Comments From the Department of Defense

Now on p. 11.

Now on p. 11.

Now on pp. 12-13.

See comment 7.

Page 22 GAO/NSIAD-96-21 DOD Procurement
Appendix I 

Comments From the Department of Defense

The following are GAO’s comments on the Department of Defense’s (DOD)

letter dated October 13, 1995.

GAO Comments 1. The Voluntary Disclosure Program is available to all DOD contractors

regardless of size. Even if individuals were eliminated from consideration,

there would still remain thousands of “business entities” to which the

program is available. Thus, the number of voluntary disclosures has been

relatively small and the dollar recoveries modest.

2. We recognize that the program’s value may extend beyond that which

can be measured by dollar recoveries alone and that fraud prevention

efforts may be enhanced through encouraging contractor self-governance.

In this regard, the importance of fraud prevention is highlighted by a DOD

Inspector General reported in March 1993 that stated that,

“The number of current investigative cases and resulting recoveries of money to the

Government and convictions of defense contractors being conducted by the Defense

Criminal Investigative Service shows that fraud is still increasing. The Federal Bureau of

Investigations statistics shown for the United States substantiate the same trend. Losses

due to fraud are approximately $200 billion a year.”

Although our report notes that the program represented about 17 percent

of the Justice Department’s $1.7 billion in reported settlements on DOD

procurement fraud cases between fiscal years 1987 and 1994, actual

program recoveries were a matter of disagreement.

3. We modified the report’s text to incorporate DOD’s comments.

4. We continue to disagree with DOD on reporting the $75 million in

premature progress payments as a recovery of the program since the

amount was ultimately paid to the contractor.

5. We modified the report’s text to incorporate DOD’s comments.

6. We modified the report’s text to incorporate DOD’s comments.

7. We modified the report’s text to incorporate DOD’s comments.

Page 23 GAO/NSIAD-96-21 DOD Procurement
Appendix II 

Comments From the Department of Justice

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

See comment 1.

Page 24 GAO/NSIAD-96-21 DOD Procurement
Appendix II 

Comments From the Department of Justice

See comment 2.

Page 25 GAO/NSIAD-96-21 DOD Procurement
Appendix II 

Comments From the Department of Justice

See comment 3.

See comment 4.

Page 26 GAO/NSIAD-96-21 DOD Procurement
Appendix II 

Comments From the Department of Justice

See comment 5.

Now on p. 3.

See comment 6.

Now on p. 4.

See comment 7.

Now on p. 4.

See comment 8.

See comment 9.

Now on p. 8.

See comment 10.

Now on p. 10.

See comment 11.

Page 27 GAO/NSIAD-96-21 DOD Procurement
Appendix II 

Comments From the Department of Justice

Now on p. 12.

See comment 12.

Now on p. 13.

See comment 13.

Now on p. 14.

See comment 14.

Page 28 GAO/NSIAD-96-21 DOD Procurement
Appendix II 

Comments From the Department of Justice

The following are GAO’s comments on the Department of Justice’s letter

dated October 11, 1995.

GAO Comments 1. We do not make the conclusion that the Voluntary Disclosure Program

is not a useful or effective means of identifying or combatting fraud.

2. We agree that statistics alone do not tell the whole picture of the

potential contribution of the program. We recognize that the program’s

value may extend beyond that which can be measured by available

statistics and that corporate compliance that comes out of voluntary

disclosures can have long-term effects on business honesty and integrity.

3. DOD continues to report two open cases in which the Justice Department

did not concur because it believed the contractor was motivated by

recognition of imminent detection.

4. While we attempted to work with the Justice Department in obtaining

information from closed case files, the length of time it took to obtain

information did not allow us to complete our audit in a timely manner.

Further, without knowledge of the information withdrawn from the files,

we could not effectively evaluate the administration of the program.

5. We have deleted this sentence based on the Justice Department’s

comments.

6. For purposes of background and brevity, we summarized the criteria for

program acceptance. A full presentation of the criteria does not, in our

view, add to the background presentation.

7. We have modified the report based on the Justice Department’s

comments.

8. We have modified the report based on the Justice Department’s

comments.

9. We have modified the report based on the Justice Department’s

comments.

10. Although the government was damaged by the amount of lost interest

on the premature payment to the contractor, the $75 million represents the

amount of the progress payment and does not include interest lost.

Page 29 GAO/NSIAD-96-21 DOD Procurement
Appendix II 

Comments From the Department of Justice

11. We have modified the report based on the Justice Department’s

comments.

12. We have modified the report based on the Justice Department’s

comments.

13. We have modified the report based on the Justice Department’s

comments.

14. We have modified the report based on the Justice Department’s

comments.

Page 30 GAO/NSIAD-96-21 DOD Procurement
Appendix III 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Phillip A. Goulet

Charles W. Thompson

Office of General

Counsel, Washington,

D.C.

William T. Woods

Raymond J. Wyrsch

Dallas Regional Office John E. Clary

Joe D. Quicksall

Ronald J. Salo

(705079) Page 31 GAO/NSIAD-96-21 DOD Procurement
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