Nov. 9, 2017 —
The DoD OIG newsletter summarizes the reports and investigations released by the Department of Defense Office of Inspector General in the previous month and those we anticipate releasing in the coming month. I encourage you to read these reports and to access our website, which lists reports and investigations by year, subject, and DoD component. You'll also find our project announcements and additional news releases highlighting investigations conducted by the Defense Criminal Investigative Service. Thank you for subscribing to our newsletter.
Defense Hotline Allegations on the Surface Electronic Warfare Improvement Program Block 3 Cost.This audit determines whether the Surface Electronic Warfare Improvement Program (SEWIP) Block 3 experienced significant cost increases over original estimates. SEWIP is an upgrade to the AN/SLQ-32 electronic warfare system that provides early detection, signal analysis, threat warning, and protection from anti-ship missiles.
Evaluation of the Evolved Expendable Launch Vehicle Program Quality Management System. This evaluation determines whether the DoD Evolved Expendable Launch Vehicle (EELV) prime contractors and a major subcontractor performed adequate quality assurance management. Specifically, the review determines the EELV contractors’ level of compliance with the aerospace and Defense industry quality standard that is contractually required during the design, manufacture, and testing of DoD weapon systems The EELV program is composed of three space launch vehicles that provide critical space-lift capability to support DoD and other National Security missions.
External Peer Review on the Defense Contract Audit Agency System Review Report. This review determines whether the Defense Contract Audit Agency (DCAA) system of audit quality control for the year that ended June 30, 2016, provided reasonable assurance of conformance to Government Auditing Standards. The DCAA is responsible for establishing and maintaining a system of quality control that is designed to provide it with reasonable assurance that the organization and its personnel comply with professional auditing standards and applicable legal and regulatory requirements.
DoD’s Response to Patient Safety Elements of the Military Health System Review. This evaluation determines whether the DoD responded to the patient safety elements in the 2014 Military Health System Review and has improved patient safety as directed by the Secretary of Defense. It also determines the general state of patient safety in the Military Health System and whether improvements are needed to ensure the health and readiness of the force.
DoD Implementation of Leahy Law Regarding Allegations of Child Sexual Abuse by Members of the Afghan National Defense and Security Forces (ANDSF). This evaluation was conducted in response to concerns and questions raised by several committees and individual members of Congress related to allegations of child sexual abuse by members of the Afghan National Defense and Security Forces (a practice sometimes known as “bacha bazi”). The evaluation reviews the DoD’s compliance with international and U.S. law and DoD policy, and specifically the Leahy Law, which contains legal prohibitions on the use of U.S. government funds for assistance to security forces in Afghanistan that have committed gross violations of human rights.
DoD Compliance With the Digital Accountability and Transparency Act of 2014. This audit determined that the DoD did not certify and submit complete, timely, accurate and quality DoD second quarter FY 2017 financial and award data to USASpending.gov. USASpending.gov is the publically accessible, searchable website mandated by the Federal Funding Accountability and Transparency Act of 2006 to give the American public access to information on how their tax dollars are spent. In addition, the DoD did not implement and use the Government-wide award data elements established by the Office of Management and Budget and the Department of the Treasury. As a result, DoD financial and spending data displayed on USASpending.gov was inconsistent and unreliable to policymakers and taxpayers.
United States Army Corps of Engineers Compliance With the Digital Accountability and Transparency Act of 2014. This audit determined that the U. S. Army Corps of Engineers (USACE) did not certify and submit complete award data, complete financial data related to procurement awards, accurate financial data, and quality financial data for publication on USASpending.gov. In addition, the USACE did not submit 2 of 10 Government-wide data elements applicable to financial data related to procurement award. As a result, USACE spending data displayed on USASpending.gov was inconsistent and unreliable to policymakers and taxpayers.
Recently issued Reports of Interest (to view report, if available, please click on title)
Report of Investigation on Allegations Related to the Department of Defense’s Decision to Relocate a Joint Intelligence Analysis Complex. Several members of Congress requested the DoD OIG investigate allegations that inaccurate or misleading information was intentionally conveyed to Congress in connection with the selection of Royal Air Force (RAF) Croughton, United Kingdom, as the location for a Joint Intelligence Analysis Complex (JIAC). The DoD OIG initiated the investigation and determined that some DoD officials did provide some inaccurate information to Congress, particularly with regard to the number of transoceanic submarine fiber optic cables (SFOCs) serving Lajes Field in the Azores. However, the DoD OIG did not find evidence to conclude that any DoD personnel intentionally provided inaccurate information to mislead Congress. Additionally, there was no evidence that anyone involved in the various cost comparisons that RAF Croughton, England was the preferred location for the JIAC, calculated them with an intent to distort the numbers. Moreover, the DoD OIG concluded that any inaccuracies and omissions in the DoD cost comparisons would not have changed the overall conclusions of the cost comparisons.
Quality Control Review of the Deloitte & Touche LLP FY 2015 Single Audit of Battelle Memorial Institute. This review determined that the Deloitte & Touche (D&T) single audit of Battalle Memorial Institute generally met auditing standards and Office of Management and Budget Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations” requirements. D&T however, erroneously omitted a paragraph on the overall opinion of its audit. As a result, D&T had to reissue the audit report to include the required opinion paragraph that was omitted from the original D&T audit report. In addition, the DoD OIG identified deficiencies with sampling methodologies and the documentation of audit procedures that need to be addressed by D&T in future audits.
Followup Audit: Military Sealift Command Management of Spare Parts Inventory and Purchases for Sealift Program Roll-On/Roll-Off Ships. This audit determined that Military Sealift Command (MSC) officials did not effectively implement corrective actions to address deficiencies identified in a previous DoD OIG audit report. The subject report related to MSC’s ineffective management of the excess spare parts inventory on two Large, Medium-Speed, Roll-On/Roll‑Off ships (LMSR) and failure to ensure the contractor followed contract requirements when purchasing parts for the ships. Specifically, MSC officials did not ensure competition for the purchase of spare parts or adequately revise the contract to require its contractor to query the Defense Supply System in advance of spare parts purchases. Additionally, MSC officials did not conduct the 100 percent inventory of spare parts aboard the four Large, Medium-Speed, Roll-On/Roll‑Off ships; update on-hand quantities based on the 100 percent inventory results, or reevaluate allowance levels based on the results of the 100 percent inventory. As a result, MSC may have overpaid for spare parts. In addition, MSC’s delay in implementing corrective actions increased the likelihood that the contractor purchased spare parts already aboard the ships.
DEFENSE CRIMINAL INVESTIGATIVE SERVICE HIGHLIGHTS (to view DOJ press release, if available, please click on title)
Supervisory Pharmacist of New England Compounding Center Convicted of Racketeering Leading to Nationwide Fungal Meningitis Outbreak. On October 25, 2017, Glenn Chin, the supervisory pharmacist at New England Compounding Center (NECC), was convicted by a Federal jury of racketeering, racketeering conspiracy, mail fraud, and false labeling in connection with a nationwide fungal meningitis outbreak. In 2012, 753 patients in 20 states were diagnosed with a fungal infection after receiving injections of preservative-free methylprednisolone acetate (MPA) manufactured by NECC. Of the 753 patients infected, 64 patients in nine states died. Chin manufactured three lots of the contaminated MPA, which comprised more than 17,000 vials of medication. Chin ignored NECC’s drug formulation worksheets and standard operating procedures. Specifically, he sterilized the MPA substantially less than what the recipe required and failed to validate or verify the sterilization. Chin then directed the vials of medication be shipped prior to receiving test results confirming their sterility and directed pharmacy technicians to mislabel the vials to conceal this practice. In addition, Chin prioritized drug production over cleaning, directed the forging of cleaning logs, and routinely ignored mold and bacteria found inside the clean rooms. This was a joint investigation with the Federal Bureau of Investigation, the Department of Veterans Affairs OIG, the U.S. Postal Inspection Service, and the U.S. Food and Drug Administration, Office of Criminal Investigations.
Miami-Dade County Residents Pleaded Guilty to Conspiracy to Illegally Export Prohibited Articles to Syria in Violation of U.S. Export Control Laws. On October 4, 2017, Ali Caby, also known as Alex Caby; Arash Caby, also known as Axel Caby; and Marjan Caby pleaded guilty to conspiracy to defraud the United States and to illegally exporting aviation parts and equipment to Syria in violation of the International Emergency Economic Powers Act. Ali Caby, Arash Caby, and Marjan Caby exported dual-use goods, that is, articles that have both civilian and military application, to the Syrian Arab Airlines (Syrian Air). Syrian Air was designated as a Specially Designated National by the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC). U.S. persons and entities are prohibited from doing business with SDNs without obtaining a license from OFAC. Ali Caby ran the Bulgaria office of AW-Tronics, a Miami export company that was managed by Arash Caby. Ali Caby and Arash Caby closely supervised and encouraged subordinate employees of AW-Tronics in the willful exportation of parts and equipment to Syrian Air. Marjan Caby, as AW-Tronics’ export compliance officer and auditor, facilitated these exports by submitting false and misleading electronic export information to Federal agencies. This was a joint investigation with the Federal Bureau of Investigation; the South Florida Joint Terrorism Task Force; the Department of Homeland Security; the U.S. Customs and Border Protection; and the Department of Commerce, Office of Export Enforcement.
Former Military Contractor Found Guilty of Fraud Charges. On October 10, 2017, William R. Whyte, of Ontario, Canada, was found guilty of major fraud against the United States, wire fraud, and false claims. Whyte was the owner and chief executive officer of Armet Armed Vehicles, Inc. In April 2006, Armet entered into a $4.8 million contract to provide the DoD with 24 armored vehicles for use in Iraq. In June 2006, Armet entered into a second contract, valued at $1.6 million, to deliver an additional eight armored vehicles. Both contracts included specific requirements for the armoring of the vehicles. The contract required that the first 24 armored trucks be delivered by July 31, 2006; however, Whyte and Armet did not ship a single vehicle by that deadline. Armet ultimately supplied six armored vehicles after the contract deadline and was paid $2,019,454, including an $824,000 progress payment. Whyte misrepresented that the vehicles met the ballistic and blast protection requirements, and had intentionally under armored the vehicles. This was a joint investigation with the Federal Bureau of Investigation; the Special Inspector General for Iraq Reconstruction; and the Department of Justice, Fraud Section.
Jacksonville Cardiovascular Practice Agreed to Pay More Than $440,000 to Resolve False Claims Act Allegations for Failing to Reimburse Government Health Care Programs. On October 13, 2017, First Coast Cardiovascular Institute, P.A. (FCCI) agreed to pay $448,821 to resolve allegations that it violated the False Claims Act (FCA) by knowingly delaying repayment of more than $175,000 owed to Medicare, Medicaid, TRICARE, and the Department of Veterans Affairs. FCCI allegedly accrued credit balances or overpayments owed to Federal health care programs. These credit balances often occur in a medical practice, for example, when two insurers share responsibility for a payment and one pays too much. In 2009, amendments to the FCA made it a violation to knowingly fail to pay back an obligation owed to the United States and its Federal health care programs. Despite repeated warnings, FCCI failed to pay back the money it owed until being notified that the Department of Justice had opened an investigation into their failure to repay the Government. This was a joint investigation with the Department of Veterans Affairs and the Department of Health and Human Services Office of Inspector General.
Government Contractor Agrees to Pay $2.6 Million to Settle False Claims. On October 16, 2017, Triple Canopy, Inc., agreed to pay $2.6 million to settle civil False Claims Act (FCA) allegations that the company submitted false claims for payment to the DoD for unqualified security guards stationed in Iraq. In 2009, Triple Canopy contracted with the Joint Contracting Command, an entity established to provide contracting support related to the U.S. Government’s relief and reconstruction efforts in Iraq. Triple Canopy was required to perform a variety of security services at Al Asad Airbase. Allegedly, Triple Canopy knowingly billed the United States for security guards who could not pass contractually required firearms proficiency tests. Triple Canopy allegedly concealed the guards’ inability to satisfy the firearms testing requirements by creating false test scorecards. This investigation was initiated as a result of a civil lawsuit filed under the qui tam provisions of the FCA. This was a joint investigation with the Army Criminal Investigation Command.
RECENTLY ANNOUNCED PROJECTS (to view the announcement letters, if available, please click on the title)
DoD Voting Assistance Programs for Calendar Year 2017. The objective of this evaluation is to report to Congress by March 31, 2018, regarding the effectiveness, during the preceding calendar year, of voting assistance programs, and the Army, Navy, Air Force, and Marine Corps compliance during the preceding calendar year with their voting assistance programs.
Audit of the Management of Prepositioned Stock in the U.S. European Command. The objective of this audit is to determine whether the Army and Marine Corps are effectively managing the storage and maintenance of prepositioned stock in the U.S. European Command’s area of responsibility. Prepositioned stock is war-reserve material and equipment strategically located to facilitate a timely response in support of Combatant Commander requirements during the initial phases of an operation. Prepositioned stocks include items such as combat vehicles, spare parts, munitions, and medical supplies.
Processing and Disposition of Equipment at the Defense Logistics Agency Disposition Services in Kuwait. The objective of this audit is to determine whether the Defense Logistics Agency Disposition Services is properly processing and disposing of equipment in Kuwait, such as excess DoD personal property; foreign excess personal property; and scrap, hazardous waste, and property requiring demilitarization.
Interagency Coordination Group of Inspectors General for Guam Realignment Fiscal Year 2017. The objective of this audit is to compile a detailed statement of all obligations, expenditures, and revenues associated with military construction on Guam in response to Public Law 111-84, “FY2010 National Defense Authorization Act.” Section 2835 of the Act established the Interagency Coordination Group of Inspectors General for Guam Realignment and requires the group to submit an annual report summarizing, for the preceding calendar year, the activities under programs and operations funded with amounts appropriated or otherwise made available for military construction on Guam.
Attestation of the FY 2017 DoD Performance Summary Report of the Funds Obligated for National Drug Control Program Activities. The objective of this review is to attest to whether the FY 2017 DoD Performance Summary Report is presented in all material respects, in conformity with the Office of National Drug Control Policy Circular, “Accounting of Drug Control Funding and Performance Summary, January 18, 2013.” The DoD Performance Summary Report describes how DoD executed the counternacotics program in accordance with the DoD Counternarcotics Global Threat Strategy.
Attestation of the FY 2017 Detailed Accounting Report of Funds Obligated for National Drug Control Program Activities. The objective of this review is to attest to whether the funds that the DoD obligated for the National Drug Control Program in FY 2017 are reported, in all material respects, in conformity with the Office of National Drug Control Policy Circular, “Accounting of Drug Control Funding and Performance Summary, January 18, 2013.”