Data Mining: Results and Challenges for Government Program Audits and Investigations.

GAO-03-591T March 25, 2003

The Subcommittee on Technology, Information Policy, Intergovernmental Relations, and the Census, House Committee on Government Reform asked GAO to testify on its experiences with the use of data mining as part of its audits and investigations of various government programs. GAO's testimony focused on (1) examples and benefits of the use of data mining in audits and investigations and (2) some of the future uses and challenges in expanding the use of data mining in audits of federal programs. Much of GAO's experience with data mining to date relates to its audits of the Department of Defense's (DOD) credit card programs.

GAO's data mining work related to audits and investigations of federal government credit card and other programs has identified fraud, waste, and abuse resulting from breakdowns in internal controls. We used these data mining techniques, in conjunction with systematic internal control testing, to make recommendations to federal agencies to develop effective systems and controls that provide reasonable assurance that fraud, waste, and abuse in these credit card and other programs are minimized. For these programs, GAO's data mining often involves extracting information on credit card users or vendors using a set of defined criteria (e.g., vendors that the federal government would not typically do business with) and then having auditors and investigators follow-up on selected transactions or vendors. Data mining alone is generally not sufficient to identify systemic breakdowns in controls and to provide management with recommendations to improve systems of internal controls. Systemic breakdowns can best be demonstrated using statistical tests of key controls along with a thorough assessment of the overall control environment. Data mining results serve to "put a face" on the control breakdowns and provide managers with examples of the real and costly consequences of failing to properly control these large programs. Recent GAO audits using data mining of DOD purchase and travel card programs have identified numerous prohibited purchases of goods and services from vendors such as restaurants, grocery stores, casinos, toy stores, clothing or luggage stores, electronics stores, gentlemen's clubs, legalized brothels, automobile dealers, and gasoline service stations. GAO's use of data mining has expanded beyond the government credit card programs. At the request of several congressional committees and Members, we currently have underway a number of audits and investigations that will utilize data mining, including: (1) DOD vendor pay systems; (2) Army military pay systems; (3) Department of Housing and Urban Development housing programs; and (4) Department of Energy national laboratories. Challenges to expanding the use of data mining in the federal arena include data integrity and security issues. For example, DOD has long-standing problems with financial systems that are fundamentally deficient and are unable to provide timely and reliable data. Data security issues related to the use of large, detailed databases are another issue that must be considered before undertaking a data mining project. With the right mix of technology, human capital expertise, and data security measures, GAO believes that data mining will prove to be an important tool to help it to continue to improve the efficiency and effectiveness of its audit and investigative work for the Congress.