Adding to all its other problems, the intelligence community’s inspector general, I. Charles McCullough III, has discovered a rash of fraud cases involving employees and contractors within the 16 agencies and the Office of the Director of National Intelligence (ODNI).

Between July 1, 2012, and March 31, McCullough’s office completed 26 investigations that substantiated violations of criminal law or administrative regulations. An additional 29 inquiries remain open, according to a heavily redacted inspector general’s report made public last week by Steven Aftergood on his Federation of American Scientists Web site.

The IG attributed the increase in cases to its own “initiative to proactively identify false billings by ODNI contractors.” This was achieved by increasing the recurring data available for analysis and running a data interrogation program that led to investigations of possible fraud.

Only seven closed cases that the Justice Department decided not to prosecute were briefly described in the IG report. There was no indication how many of the 19 other closed cases are being considered for prosecution. About 25 of the open investigations involve false claims for time worked, according to the report.

Aftergood characterized a few of the cases described in the report as “creative forms of misconduct.”

For example, an ODNI employee was discovered having operated a personal Web site during working hours using government computer systems to solicit and receive donations. In addition, the employee apparently contacted news media outlets to sell articles without first subjecting them to pre-publication review, as rules require.

Instead of prosecuting the case, the ODNI employee’s managers “issued him a letter of reprimand that restricts him from receiving a promotion, bonus award or step increase for three years,” the IG report said.

Twenty-three of the closed cases involved “labor mischarging” — the ODNI term for contractors padding their bills. Here, too, some appeared creative.

Two owners, who were the only employees of a subcontracting firm, mischarged 1,691 hours to the government for time running “a business for horse saddle padding,” according to the IG report.

The IG investigators also found that the two used their business to lease three BMW automobiles for personal use and to purchase artwork. Instead of prosecution, the case was turned over to the head of ODNI contracting activity to recover the unauthorized charges and to the Internal Revenue Service to see whether there were any tax violations.

In other cases, a contractor billed the government for 700 hours of labor not performed during a 14-month period. The person also employed government computer systems four to six hours a day for personal use “to include the administration of a distance education course being taught for a local university,” the IG said.

Another contractor billed the government for 400 hours working at home on matters “outside the scope of the contract” during a one-year period.

In these cases, as with others described as “labor mischarging,” the IG report said the government potentially could recover more than $1 million.

One incentive for the increased focus on fraud may have come from the IG’s review of the 2010 Improper Payments Elimination and Recovery Act, which requires agencies to “identify and estimate improper payments” and “conduct payment recapture audits with respect to each program and activity that expends $1 million or more annually, if conducting such audits would be cost-effective.”

The IG also reported that he and the Defense Department’s inspector general are conducting a joint review on “the disciplinary actions taken in response to misconduct substantiated by the IG” that was requested by the Senate Select Committee on Intelligence and begun in July 2012. As of March 31 it was in final draft form, according to the report.

In addition, the IG reported that he is involved in evaluating ODNI’s response to the 2010 Reducing Over-Classification Act, including the identification of policies and procedures “that may be contributing to persistent misclassification of material.”

Some items redacted from the IG’s report may be an illustration of the problem.

For example, a report on inspections of the Office of Legislative Affairs (conducted over four months in 2012) and the Office of the Chief Financial Officer (done this year over three months) both blacked out “challenges” found in the running of the offices. In both cases, however, the report left unclassified the “commendables” found. Pages in which the IG makes “open recommendations” and “corrective action” for both offices also were blacked out.

The citation made to justify the redacted portions refers to the section of a statute, 50 U.S. Code 3024, which gives authority to the director of national intelligence to “protect intelligence sources and methods from unauthorized disclosure.”

In these cases, though, it refers to allowing the withholding because they involve “intra-agency memos” and “pre-decisional recommendations” exempted under the Freedom of Information Act.

Apparently, what has been done right can be made public, but what may have been done wrong can’t.

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