The CIA violated federal laws and its own internal regulations by hiring independent contractors for a wide variety of intelligence and national security-related work that was supposed to be performed by government employees, according to a CIA Office of Inspector General (OIG) audit report obtained by VICE News in response to a Freedom of Information Act lawsuit.

The report said the CIA "relies heavily on independent contractors to accomplish important facets of its mission," particularly at the National Clandestine Service, the covert arm of the agency responsible for clandestine operations around the world. The report, dated June 22, 2012 but only declassified last month, raised numerous red flags about the CIA's use of independent contractors throughout all divisions within the agency, and for work performed work in areas that included covert operations and protective security services overseas.

By law, that work must be done by CIA employees.

The OIG did not scrutinize the CIA's "industrial contracts" with firms such as Booz Allen Hamilton, but instead reviewed independent contracts into which the agency enters with individuals, who the report said are made up largely of retired CIA case officers.

Senator Dianne Feinstein, the ranking Democrat on the Senate Intelligence Committee, reviewed the OIG report.

"I've had concerns for years about the extensive reliance on contractors by the government, and the intelligence community in particular," Feinstein told VICE News. "The Senate Intelligence Committee has focused in the past on bringing [independent contractors'] jobs back in-house where possible, and it's an area we'll continue to focus on."

The use of independent contractors by US intelligence agencies exploded after 9/11. At the CIA, the number of contractors working for the agency at one point surpassed the number of actual agency employees. At the end of the 113th session of Congress in January 2013, one year after the OIG concluded its audit, the Senate Intelligence Committee said in a report submitted to the Senate that it was concerned about the "dramatic increase in the use of contractors by the [intelligence community] since 9/11."

Although there were some efforts by the intelligence community to reduce the number of independent contractors by either ending their contracts or hiring them as government employees, "data reviewed by the Committee indicate that some elements of the [Intelligence Community] have been hiring additional contractors after they have converted or otherwise removed other contractors, resulting in an overall workforce that continues to grow."

The OIG said it looked at an unknown number of independent contractors' contracts and task orders during fiscal year 2010 (the exact number was redacted from the audit report), and examined whether the CIA complied with federal laws and regulations when it outsourced its work. The OIG found that the CIA did not.

"By using [independent contractors] for these functions, [some divisions within the CIA] have improperly transferred government authorities in violation of federal laws and CIA regulations," said the 39-page report [pdf at the end of this story], which was marked SECRET/NOFORN, meaning it was classified secret and the information could not be shared with foreign nationals. Notable among those laws was the Federal Activities Inventory Reform Act of 1998 (FAIR Act), which mandates that work that is "intimately related to the public interest" must be performed by federal employees.

"To put it another way, contractors have been allowed to usurp authority to which they are not entitled," said Steven Aftergood, who heads the Federation of Americans Scientists' Project on Government Secrecy. "Combined with the diminished oversight and accountability that contractors receive, that is an invitation to misconduct."

The report said "all [CIA] Directorates" use independent contractors. They include the CIA's Open Source Center, where independent contractors provide translation-related services; the Office of Security/Global Response Staff, which employs independent contractors who provide protective services overseas; the Directorate of Intelligence, where contractors "conduct research and analysis on assigned topics and prepare research papers and presentations"; and CIA University, where independent contractors "provide instruction and lectures, facility course segments, and create and provide support materials."

The OIG report singled out two of the offices within the CIA for using independent contractors to perform tasks that should have been carried out by federal employees — the National Clandestine Service and the CIA's Human Resources/Recruitment Center. The report said the latter entered into contracts with a redacted number of independent contractors "in part, to conduct phone and in-person interviews of applicants for employment within the [National Clandestine Service's] Professional Trainee (PT) and Clandestine Service Trainee (CST) Program, which is not in compliance with applicable federal laws" or the CIA's own internal regulations. Federal law explicitly prohibits "the use of contractors for 'the selection or non-selection of individuals for federal government employment, including the interviewing of individuals for employment.'"

Tim Shorrock, author of the book Spies for Hire: The Secret World of Intelligence Outsourcing, said that the report makes clear the National Clandestine Service "appears to be almost unrestrained" in its use of independent contractors.

The OIG report said the use of independent contractors by the National Clandestine Service is so widespread that it created the "appearance of an employer-employee relationship" between the CIA and the National Clandestine Service's independent contractors, which is a violation of CIA regulation and procedures and federal laws.

"There are significant risks to the CIA associated with treating [independent contractors] as employees, including the potential liability for taxes and employee benefits that would have been withheld or paid had the individuals been treated as employees, and potential criticism that the CIA is circumventing its Congressionally mandated personnel ceiling by utilizing [independent contractors] as employees," the audit report said.

A page from the declassified OIG report.

One of the most notable of the CIA's National Clandestine Service contracts is the sole-source contract to create and manage the CIA's "enhanced interrogation" program. That contract was awarded to two retired Air Force psychologists who operated and managed the program and was worth $181 million over five years, according to a report by the Senate Intelligence Committee that probed the efficacy of the CIA's program.

Additionally, VICE News obtained a copy of a CIA contract awarded to Burlington, Massachusetts–based Centra Technology, which the CIA paid more than $40 million for administrative support and other tasks related to the Senate's investigation of the CIA. Feinstein, the former chairwoman of the Senate Intelligence Committee who oversaw the investigation, said the expenditure was a "waste of taxpayer dollars."

The report says the "number of [National Clandestine Service] contract actions increased by 55 percent from fiscal years 2008 to 2010." In many instances contractors began performing work before they were even awarded a contract or task order, a practice that the OIG said "must cease."

"These actions, referred to as unauthorized commitments, are non-binding agreements made by representatives without the authority to enter into contracts on behalf of the US government," the report said.

A section of the OIG audit that identified the National Clandestine Service contracts "with unauthorized commitments" was entirely redacted.

The report also said that independent contractors working for the CIA's counterterrorism center "are performing a supervisory role," a job that should be performed by CIA employees, and another instance in which the CIA violated federal law.

Shorrock said the report shows that CIA officials "have authority to contract with whoever they want, with no paper trail, and to let these privateers do whatever they choose."

"From the National Clandestine Service to black ops and on down the line, virtually every part of the CIA hires independent contractors, 'almost all' of them being retired case officers who are getting wealthy in the process," he said. "Yet there's virtually no oversight, admittedly no documentation, and, according to the report, 42 percent of the time contractors start work without a written contract or even a task order. This is not what you would expect of a secret intelligence service supposedly protecting the national interest."

Scott Amey, an attorney with the non-profit watchdog group Project on Government Oversight, said he's not surprised that contractors are violating the law by performing work that is supposed to be performed by government employees.

"Some of these concerns cited in the report apply to every federal agency, but there is something heightened because we know very little about the CIA's work and who is performing it," Amey said.

The OIG's audit report contained a section titled "What Contractors Can and Can't Do," along with a list of recommendations to address the issues the OIG raised about the CIA's reliance on independent contractors.

Both sections were completely redacted, but whatever the recommendations were, the CIA said it implemented them.

"The OIG made multiple recommendations to various [offices] across the Agency as a result of this audit," said Ryan Trapani, a CIA spokesperson. "All the OIG's recommendations have been implemented by CIA, and the OIG has deemed those actions as satisfying the recommendations."

The report went on to say that task orders were handed out to independent contractors without any specific tasks to be performed. "Instead, almost all of the task orders we reviewed merely stated that [independent contractors] are required to 'provide operational support' to a specific [CIA] station or base," the report said.

At a June 18, 2014 hearing before the Senate Committee on Homeland Security and Governmental Affairs entitled "The Intelligence Community: Keeping Watch Over Its Contractor Workforce," Senator Tom Carper, the committee's chairman, said in his opening remarks that "an agency that turns over too much responsibility to contractors runs the risk of hollowing itself out and creating a weaker organization."

"The agency could also lose control over activities and decisions that should lie with the government, not with contractors," Carper said. "Second, the use of contractors for mission-critical work creates an additional layer of management between the contractor employees and the government. Adding layers makes it more difficult to conduct oversight and to assign accountability. And, third, when agencies turn to contractors as a 'default' option without careful analysis, they run the risk of paying more to get work done than they would have paid if they had just relied on Federal employees."

The exact number of independent contractors who worked for the CIA at the time of the OIG's review was redacted from the audit report, as was the monetary value of their contracts.One of the findings of the OIG's audit was that the CIA could not back up its claims with documentary evidence that the money the agency spends to outsource its work is fair and reasonable.

"Contracting officers and procurement officers are not adequately documenting the price analysis and negotiations used to substantiate the fairness and reasonableness of the prices paid for [independent contractor] services," the report said. "Without such documentation, there is no evidence that analysis is being performed and that the resulting prices are, in fact, fair and reasonable. If the analysis is not being performed, the CIA could be paying more for [independent contractor] services than it should."