Finally, the DOD regulation requires periodic evaluations of local  activities, which implement DOD’s ethics program, to ensure they meet  standards. To implement its ethics  program, DOD relies on local ethics counselors within DOD’s military  services and agencies to train and counsel employees on conflict-of- interest and procurement integrity rules. Training and Counseling Results Are Not Measured

DOD has delegated responsibility for training and counseling to more than  2,000 ethics counselors assigned to commands and organizations  worldwide. At the   12 DOD locations we visited we found training and counseling efforts  varied in the content of ethics information provided, who is required to  attend training and counseling, and how often the training and counseling  is provided. DOD currently evaluates its ethics program’s performance in terms of  process indicators—such as the number of financial disclosure forms  completed, the number of ethics counselors, and the amount of time spent  by ethics counselors on training and counseling services. Additionally, DOD does not know whether the training and counseling  includes all relevant conflict-of-interest and procurement integrity rules. For information on reported allegations of  potential misconduct the ethics officials referred us to the inspectors  general offices. As a result, DOD has not  determined if reports of potential misconduct are increasing or decreasing  and why such a change may be occurring. Specifically,  defense regulations provide that contractors should have (1) a written  code of ethical conduct; (2) ethics training for all employees; (3) periodic  reviews of its compliance with its code of ethical conduct; (4) systems to  detect improper conduct in connection with government contracts; and  (5) processes to ensure corrective actions are taken. While DOD evaluates components of contractors’ financial and  management controls, neither the Defense Contract Management Agency  nor the Defense Contract Audit Agency—the agencies responsible for  oversight of defense contractors’ operations—had assessed the adequacy  of contractors’ practices for hiring current and former government  employees. This review found that the company relied excessively on employees to  self-monitor their compliance with post-government employment  restrictions. The review concluded that by relying on employees to  monitor their own behavior, the company increased the risk of  noncompliance, due to either employees’ willful misconduct or failure to  understand complex ethics rules. Recommendations

We are making three recommendations to the Secretary of Defense to take  actions to improve DOD’s knowledge and oversight of its ethics program  and contractors’ ethics programs to raise the level of confidence that  DOD’s business is conducted with impartiality and integrity:    Regularly assess training and counseling efforts for quality and content, to  ensure that individuals covered by conflict-of-interest and procurement  integrity rules receive training and counseling that meet standards  promulgated by DOD Standards of Conduct Office. Ensure ethics officials, as required by the joint ethics regulation, track and  report on the status of alleged misconduct to the military services and  defense agencies head ethics officials. Our report identifies opportunities to improve (1) DOD’s  efforts to train and counsel its workforce to raise awareness of ethics rules  and standards as well as DOD measures of the effectiveness of these  efforts and (2) DOD’s knowledge of defense contractors’ programs to  promote ethical standards of conduct. To assess DOD’s knowledge of defense contractors’ programs to promote  ethical standards of conduct, we interviewed seven defense contractors  about their ethics programs and hiring practices of former government  employees.
Why GAO Did This Study

In fiscal year 2004, the Department of Defense (DOD) spent more than $200 billion to purchase goods and services. To help ensure defense contracts are awarded fairly and current and former employees do not use their knowledge of DOD acquisition activities to gain financial or other benefits, DOD personnel are required to conduct themselves in a manner that meets federal ethics rules and standards. Regulations require DOD to implement an ethics program and provide that contractors meet certain ethics standards. For this report, GAO assessed (1) DOD's efforts to train and counsel its workforce to raise awareness of ethics rules and standards as well as DOD measures of the effectiveness of these efforts and (2) DOD's knowledge of defense contractors' programs to promote ethical standards of conduct.

What GAO Found

To implement its ethics program, DOD has delegated responsibility for training and counseling employees on conflict-of-interest and procurement integrity rules to more than 2,000 ethics counselors in DOD's military services and agencies. These efforts vary in who is required to attend training and counseling, the content of ethics information provided, and how often the training and counseling is provided. While some variation may be warranted, DOD lacks the knowledge needed to determine whether local efforts are meeting the objectives of its ethics program--in large part because DOD does not systematically capture information on the quality and content of the training and counseling or employee activity as they relate to ethics rules and restrictions. Specifically, ethics counselors were unable to tell us if people subject to procurement integrity rules were trained. Instead, DOD evaluates its ethics program in terms of process indicators--such as the number of people filing financial disclosure forms, the number of ethics officials providing training and counseling services, and the amount of time ethics officials spend on such activities--which do not provide metrics to assess the effectiveness of local training and counseling efforts. DOD also lacks adequate information on the number and status of allegations of potential misconduct related to conflict-of-interest and procurement integrity rules. Ethics officials did not know of 53 reported allegations of potential misconduct referred to inspectors general offices. DOD has taken several actions since October 2004 aimed at enhancing its ethics program. However, without knowledge of training, counseling, and reported allegations of misconduct, DOD is not positioned to assess the effectiveness of its efforts. DOD's knowledge of defense contractor efforts to promote ethical standards is also limited. Defense regulations provide that contractors should have ethics programs, provide ethics training for all employees and implement systems to detect improper conduct in connection with government contracts. Despite these regulations, DOD had not evaluated the hiring practices of the contractors GAO contacted. Neither the Defense Contract Management Agency nor the Defense Contract Audit Agency--the agencies responsible for oversight of defense contractors' operations--had assessed the adequacy of contractors' practices for hiring current and former government employees. An independent review of one of DOD's largest contractors found that the company lacked the management controls needed to ensure an effective ethics program. Instead, the review found that the company relied excessively on employees to self-monitor their compliance with post-government employment restrictions. The review concluded that by relying on self-monitoring, the company increased the risk of noncompliance, due to either employees' willful misconduct or failure to understand complex ethics rules.