Watchdogs rap Defense information office for improper fee collection

The former administrator of a Defense Department office that collects vital scientific and business-related information engaged in "gross mismanagement" by failing to stop employees from improperly collecting millions of dollars in fees from its Pentagon customers, according to documents the Office of Special Counsel released this week.

The findings conclude a nearly two-year investigation by OSC and the Defense Department Inspector General's Office into questionable business practices by the Defense Technical Information Center, which reports to the undersecretary of Defense for acquisition, technology and logistics.

Investigators found that during a recent two-year period, DTIC employees improperly charged indirect costs for the goods and services they provided to their federal customers through their Information Analysis Center program.

"DTIC collected fees in excess of its actual costs and did not return its surpluses to its customers," OSC wrote in a Sept. 29 letter to President Obama. "As a result, DoD overcharged its customers by $12.1 million in FY 2007 and $9.7 million in FY 2008."

The IG audit report concluded the office violated the 1933 Economy Act when it used the fee surpluses to augment its budget and finance DTIC-wide investment opportunities -- a violation of federal accounting principles.

The allegations were first disclosed by a whistleblower, Russ Daul, the former director of the Resource Management Directorate at DTIC. Daul allowed OSC to release his name, the letter said.

IG investigators also found that R. Paul Ryan, the former administrator of DTIC, was notified of the improper accounting of fees but failed to establish a process to correct the errors, or to accumulate actual costs.

"We conclude that Mr. Ryan's actions … constituted gross mismanagement as defined by applicable standards," the IG wrote in the June report. "However, we found insufficient evidence to substantiate the allegation of abuse of authority."

Ryan's actions jeopardized DTIC's ability to perform its mission by damaging the office's reputation and credibility among its customers and with Congress, the audit said.

The former administrator disagreed with the conclusions, telling the IG that his actions "may have constituted simple negligence," but did not rise to the level of gross mismanagement. Ryan added the office's fee management process was well-known and tacitly approved of by other authorities, and the collected fees represented approximated actual costs.

In July, Ryan was moved out of DTIC and detailed to a nonsupervisory position in the Defense Department's chief technology office. The department has not yet named a new permanent administrator.

In response to the investigative findings, Defense has begun a comprehensive review of DTIC operations, including a full assessment of the office's financial accounting systems. In addition, a new review board will establish a plan for determining and returning the surplus fees, the OSC letter said.