By Sarah N. Lynch

WASHINGTON (Reuters) - The U.S. Drug Enforcement Administration's program for paying confidential sources to assist with narcotics-trafficking investigations is riddled with deficiencies that could open the door to fraud and abuse, the Justice Department's internal watchdog said on Thursday.

The Justice Department's Inspector General found in an audit that the DEA continued to pay so-called deactivated sources, or people who did not qualify to receive money because they had been arrested or had committed serious crimes.

In one instance, the report says the DEA paid a source who had provided false testimony in trials and depositions. Over a five-year period, this confidential source was used by 13 different DEA field offices and paid $469,158.

All told, the audit found that the DEA has paid about $9.4 million to more than 800 deactivated sources from fiscal-year 2011 through 2015.

"While we did not review the circumstances of all of these payments in depth, for available information it appears that paying deactivated sources is common enough to justify much closer managerial oversight and review of such payments," the report says.

The report also raises questions about the DEA's practice of paying so-called limited use sources, or tipsters who offer up information independently to the government.

These kinds of sources are considered low-risk, yet the audit found they were among some of the highest-paid sources.

Of 477 "limited sources" reviewed, they received a collective $26.8 million.

DEA spokeswoman Barbara Carreno said the agency revised its policies surrounding "cooperating sources" after a similar inspector general report released in July 2015.

"Today's report highlights the need for continued improvement," Carreno said.

Earlier this month, a father and son pleaded guilty to lying to U.S. investigators while working on a narcotics probe of Venezuela's first lady.

(Additional reporting by Julia Edwards in Washington; Editing by Matthew Lewis)