A Team 7 Investigation into a defective camera surveillance system along the U.S.-Canadian border has sparked a massive federal probe.

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Now, the results are in: Auditors say taxpayers paid millions of dollars for "phantom" cameras, missing parts and fraudulent repair bills.

Two years ago, we showed you how a border security tool called "Remote Video Surveillance" was badly broken. Now, the U.S. Inspector General confirms our findings in a 423-page audit, plus adds new charges of fraud and tax waste.

Computerized, see-all cameras scan the Washington-British Columbia border for intruders day and night. That is, when they're working.

A KIRO Team 7 Investigation discovered thousands of breakdowns in the first year of operation.

The U.S. Inspector General used our investigations as a base for an audit, which details millions of dollars in tax waste and potential criminal fraud.

MORE ON THIS STORY COMPENDIUM OF AUDITS OF THE FEDERAL TECHNOLOGY SERVICE REGIONAL CLIENT SUPPORT CENTERS[pdf file]

"I thought it was just blatant, the overcharging on cameras, the substitution of cheaper cameras, the out-and-out charging of cameras and poles that didn't even exist. I mean, I was stunned how thorough the report was," said Gene Davis, a retired Sector Assistant Border Patrol Chief.

Davis said contractors' over-billing is serious, but these days, failures in security systems can be catastrophic.

"To perpetuate this kind of fraud, I mean, not only rip off taxpayers, but the danger, the peril it puts the country in," he said.

According to the federal probe, straight north of Seattle, taxpayers paid for 36 remote video camera sites, but only 32 actually exist. Just that is $1 million in over-billing.

Other problems detailed in the audit included unsupported use of time and materials, misuse of funds, inadequate or non-existent bidding and a finding that 96 percent of the parts used to repair cameras "could not be traced."

Border Patrol spokesperson Jo Giuliano said private contractors and faulty equipment are largely to blame for camera problems, but …

"We're stewards of the public's money. They're entitled to be assured that money is being spent as well as it can be and the product they purchase with that money is being used to its full capability," Giuliano said.

This audit finding is more than just tax waste, and could lead to a criminal prosecution. Taxpayers paid $6.7 million to operate a camera repair operation, which the Department of Homeland Security says "little or no work was performed during the past year."

"If they don't go forward and someone held accountable for this, what kind of message does that set for other contractors out there?" asked Gene Davis.

KIRO Team 7 Investigators were also the first to expose how a Texas congressman's daughter grabbed a $200 million no-bid contract to install the camera surveillance systems first in Blaine, then nationwide.

The Inspector General found that odd as well.

I'm told by sources inside that agency that parts of this could be forwarded to the Justice Department as a criminal case.