Washington (CNN) -- The military research wing that last week launched a hypersonic aircraft test is being investigated after questions were raised about potential conflicts of interest in awarding lucrative contracts.
The audit by the Department of Defense's inspector general will look at the "adequacy" of the handling by the Defense Advanced Research Projects Agency, known as DARPA, of "selection, award, and administration of contracts and grants" in fiscal years 2010 and 2011, according to a memo the inspector general sent to government watchdog group Project on Government Oversight.
The investigation is a "partial response" to the oversight group, which had written to the Pentagon about concerns regarding ties between DARPA personnel, both leaders and researchers, and a company that has received money from the research unit, according to a separate letter from the inspector general informing DARPA of the initiation of the audit.
The inspector general will also examine "the effectiveness of avoiding or preventing conflicts-of-interest," according to the letter to the oversight group.
The announcement of the audit was first reported by Wired's Danger Room blog.
Project on Government Oversight had expressed concerns about DARPA to the inspector general after it was revealed by Wired that the director, Regina Dugan, had financial and familial relations with contractor RedXDefense, a company that she co-founded and that is run by her father. Dugan's uncle is also on the company's board.
"If there's anything wrong with the RedXDefense contracts specifically and with DARPA contracting generally, we hope these two reviews find it. There's enough smoke to make us wonder if there's fire," said the oversight group's director of investigations, Nick Schwellenbach.
DARPA maintains that it complies with Pentagon policies on financial and personal conflicts of interest, arguing that Dugan's past association with the company is transparent.
"Upon assuming her position, the director recused herself, in accordance with federal ethics laws and regulations, from any dealings between the agency and RedXDefense," said DARPA spokesman Eric Mazzacone. "Since becoming director, Dr. Dugan has not participated in any dealings between the agency and RedXDefense."
DARPA had dealings with RedXDefense before Dugan became the agency's director, previously awarding it approximately $4.3 million in funding, according to Mazzacone. Since Dugan became the director in July 2009, RedXDefense has submitted five proposals worth approximately $6.6 million, and $1.8 million has been awarded for one of those proposals.
RedXDefense's focus is in explosion detection and protection, according to its website. The company owes Dugan about $250,000, according to financial disclosure documents published by the Project on Government Oversight. She also has between $151,000 and $305,000 in assets and income from RedXDefense, it said.
RedXDefense said it has no comment on the investigation, its contracts from DARPA or its relationship with Dugan.
DARPA was in the news Thursday with a test of the Falcon Hypersonic Test Vehicle, billed as the fastest aircraft ever launched. It is believed to have crashed into the Pacific Ocean after researchers lost control of it. The vehicle was launched by a Minotaur IV rocket from Vandenberg Air Force Base in California before separating and re-entering the atmosphere over the Pacific.
The triangular wedge is capable of reaching Mach 20, approximately 13,000 miles per hour, according to DARPA.