Army cancels recruitment program after allegations of bonus payout fraud

July 27, 2011: Army Secretary John McHugh speaks during a ceremony at Walter Reed Army Medical Center in Washington. (AP)

Army Secretary John McHugh has eliminated a years-old recruitment program for the National Guard and Reserve after an internal audit found widespread fraud -- including reported allegations that recruiters were skimming bonus money paid to sign up new service members.

Army spokesman George Wright confirmed to FoxNews.com that McHugh "immediately terminated those programs and their funding" after seeing the audit, which identified "instances of fraud in Recruiting Assistance Programs."

He has since ordered a "comprehensive investigation and review," which is ongoing.

The Washington Post first reported on the audit, which detailed the alleged fraud in a program that paid $2,000 bonuses to so-called "recruiting assistants" to bring in new Guard and Reserve members. The audit claimed recruiters who weren't eligible were secretly splitting some of that money with the "recruiting assistants."

According to the report, more than 1,700 officials were flagged over $92 million in bonus transactions at risk of fraud. That represents over a quarter of bonus money paid since the program was launched six years ago.

The audit reportedly included one case where dozens of recruiting assistants as well as recruiters unauthorized to receive the bonus money shared the same bank account.

The conspirators also allegedly claimed at times to refer people who already had decided to enlist, according to the report. Some of these cases have already led to prosecution.

The program was instituted at a time when the U.S. military needed to add to its ranks for the wars in Iraq and Afghanistan.

Wright said in a written statement that "the Army will take appropriate action" if further criminal conduct is uncovered.

"Because of the sensitivity of the criminal investigation, providing any further details or comment would be inappropriate," he said.