It is my pleasure to report on the accomplishments of the Office of the Inspector General, Department of Defense, for the period October 1, 1998, through March 31, 1999. The report summarizes significant Department-wide audit and investigative efforts during this period. Over- sight projects relating to the intelligence community are discussed in a separate classified annex. The Highlights section provides a brief overview of the most significant issues discussed in the report. Chapter One contains brief updates on what we consider to be the Department's principal high risk areas. We have also included more detailed discussions of two special emphasis areas-- Chemical and Biological Deftnse, and Bribery, Kickbacks and Corruption. Chapter Two contains discussions of other important audit and investigative efforts that took place during the period, again resulting in significant criminal prosecutions and the identification of large dollar savings and recoveries. This reporting period has been especially busy and productive. Supporting the Year 2000 conversion remains our top discretionary internal audit priority. We also continued to devote significant resources in working with the Department toward achieving unqualified opinions on critical financial statements. Although this goal is not yet at hand, progress is being made through cooperation among our office, the Department, the General Accounting Office and the Office of Management and Budget. We are also working closely with the Department in the areas of acquisition reform legislation and in the development of a strong computer intrusion investigation unit.