Army Secretary John O. Marsh Jr. announced yesterday that he has suspended $30 million in monthly overhead payments to Hughes Helicopter Inc., saying Defense Department auditors found "numerous accounting deficiencies," including duplicate billings to the government and unallowable claims for executive bonuses, travel, bad debts and membership dues.
Marsh said he has named Undersecretary James R. Ambrose to investigate "serious charges of accounting irregularities" by the firm, which holds $4 billion in Army contracts. He said the suspension began May 17 and will continue until the deficiencies are corrected.
Marsh failed to quantify or give specific illustrations of the overcharges found during an audit of Hughes Helicopter records between 1979 and 1984 but said they involve "millions of dollars."
The indefinite suspension of payments to Hughes is the latest action in a Pentagon effort to discipline defense firms that abuse provisions of contracts allowing them to bill for certain "general and administrative" costs incurred in weapons production.
Investigators have discovered hundreds of millions of dollars in frivolous claims presented to the government.
Hughes Helicopter, once part of the empire built by the late Howard R. Hughes and sold to McDonnell Douglas Corp. in January 1984, is prime contractor for the AH64 Apache helicopter, which has aroused controversy in Congress because of cost overruns.
McDonnell Douglas spokesman Jerry Meyer said the parent company became aware of "problems and deficiencies" in Hughes Helicopter accounting practices after it purchased the firm.
He said that Hughes had made "substantial progress" after starting to correct problems in 1982 and that McDonnell Douglas accelerated improvements.
These, he said, have satisfied the corporation "that Hughes Helicopter now has good accounting procedures and good internal control standards. We think we can demonstrate they're already in place."
But C. Richard Whiston, the Army's chief of legal services, told reporters that audits resulting in the suspension uncovered problems before and after the sale to McDonnell Douglas.
Whitson declined to estimate how much money might be involved in the questionable billings. At a minimum, he said, it includes $1.7 million for executive bonuses paid by the firm in 1983 to keep key officers on board for the sale to McDonnell Douglas.
Hughes Helicopter apparently billed the government twice for the bonuses as part of its overhead claims -- and it was paid once -- despite Defense Department warnings that the charges were unallowable, he said.
The Pentagon pays contractors for overhead charges without reviewing the bills. Auditors eventually judge the billings but often years after they are submitted and after the defense firms have earned interest on the payments.
A summary of the Defense Contract Audit Agency (DCAA) findings released yesterday said Hughes Helicopter billed for numerous unallowable overhead expenses, including consultants' fees for preparing contract proposals, advertising, bad debts, legal expenses, membership dues and travel. No details were furnished by the agency.
Auditors found large discrepancies in the company's internal records. There were no payroll vouchers to support $61 million in employe salaries reported for 1983 and $7.7 million in 1982, according to the DCAA.
When auditors asked for a reconciliation, according to the summary, "we were advised that was an impossible task."
The company also was found to lack vouchers for 37 percent of its "recorded costs" in 1983, and its internal accounts included duplicate entries for several expenses, the auditors said.
An Army spokesman said it was unclear how much of the unsupported expenses were billed to or paid by the government.