May 9, 2018 —
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.
Significant reports expected to be issued within the next 30 days include:
Acquisition of the Navy’s Mine Countermeasure Mission Package
This audit determines whether the Navy is effectively managing the development of a mine countermeasures mission package that will allow the littoral combat ship to detect and neutralize or avoid mines in support of fleet operations. Specifically, this audit focuses on the mine countermeasures mission package systems that the Navy declared had met their initial operational capability requirements. Initial operational capability is declared when the selected user has been equipped and trained and is determined to be capable of conducting mission operations. The littoral combat ship is a Navy ship intended to be reconfigurable to enable the ship to counter submarine, surface, and mine threats and assure maritime access for joint forces.
Evaluation of DoD Hotline Allegation Regarding Safety at the Blue Grass Chemical Agent-Destruction Pilot Plant
This evaluation determines whether allegations that the Program Executive Office, Assembled Chemical Weapons Alternatives, along with the primary contractor, failed to comply with safety requirements at the Blue Grass Chemical Agent Destruction Pilot Plant during the design and construction phases. The Blue Grass Chemical Agent Destruction Pilot Plant is a DoD chemical weapons destruction facility which destroys existing stockpiles of lethal chemical agents and munitions.
Audit of the Trans-Africa Airlift Support Contract
This audit determines whether U.S. Africa Command adequately developed and validated the Trans‐Africa Airlift Support Contract requirements. In February 2017, U.S. Transportation Command awarded a firm fixed price indefinite delivery, indefinite-quantity contract to AAR Airlift, Berry Aviation Incorporated, and Erickson Helicopters to provide airlift services as required by U.S. Africa Command to support various efforts within its area of responsibility.
Audit of the Qualified Recycling Programs in the Department of the Navy
This audit determines whether the Navy provided adequate oversight of its qualified recycling program. A qualified recycling program is a program established at the installation or regional level that collects and sells eligible scrap materials, including paper, cardboard, plastics, scrap metal and glass.
DoD FY 2017 Compliance with Improper Payments Elimination and Recovery Act Requirements
This audit determines whether the DoD appropriately reported FY 2017 improper payments. Improper payments include payments made to ineligible recipients, duplicate payments, payments for goods and services not received, and payments for ineligible goods or services.
Evaluation of DoD Hotline Allegation Regarding the Actions of a Defense Contract Management Agency Contracting Officer on a Subcontractor’s Termination Settlement Proposal
This evaluation determines whether allegations that a Defense Contract Management Agency termination contracting officer failed to comply with federal regulations and contract terms when she did not uphold any of the Defense Contract Audit Agency’s questioned costs identified in its audit of the subcontractor’s $1.8 million termination settlement proposal.
Evaluation of DoD Hotline Allegation Regarding Defense Contract Management Agency-Baltimore’s Actions on Audit Findings Reported by Defense Contract Audit Agency
This evaluation determines whether allegations that a Defense Contract Mangement Agency contracting officer at the Baltimore field office did not take appropriate action on a Defense Contract Audit Agency report finding that identified $1.1 million in questioned contract costs.
Followup on DoD OIG Report No. DODIG-2013-099, “Compliance with Electrical and Fire Protection Standards of U.S. Controlled and Occupied Facilities in Afghanistan,” July 18, 2013 at Kandahar Airfield
This evaluation determines whether U.S. Central Command implemented our prior recommendations related to electrical and fire standards at Kandahar Airfield. The previous report findings and recommendations addressed hazardous conditions that were the result of insufficient compliance to minimum electrical and fire protection systems standards, as evidenced by 413 deficiencies found in the electrical and fire protection systems. In response to the findings and recommendations in the 2013 report, U.S. Central Command agreed to implement a plan to evaluate their facilities for compliance with electrical and fire safety standards.
Recently Issued Reports of Interest (to view report, if available, please click on title)
Lead Inspector General for Operation Inherent Resolve and Operation Pacific Eagle-Philippines | Quarterly Report to the United States Congress | January 1, 2018 – March 31, 2018
This is the 13th Lead Inspector General quarterly report on Operation Inherent Resolve (OIR), the overseas contingency operation to combat the Islamic State in Iraq and Syria, and the second quarterly report on Operation Pacific Eagle-Philippines (OPE-P), the overseas contingency operation to support the Philippine government’s fight against ISIS affiliates and other terrorist organizations. The report summarizes the quarter’s key events for both OIR and OPE-P. During this quarter, the Lead Inspector General agencies and oversight partners released six oversight reports related to OIR.
Army and Marine Corps Joint Light Tactical Vehicle
This audit determined that the Army and Marine Corps developed adequate test plans but have not demonstrated effective test results to prepare the Joint Light Tactical Vehicle (JLTV) program for full rate production. In addition, the JLTV requirements developer did not clearly define vehicle requirements. The JLTV program provides the Army and Marine Corps with a general-purpose, light tactical vehicle that is designed to deliver an optimal balance of protection, payload, and performance to enhance the effectiveness of ground combat and supporting forces. The requirements developer, the Marine Corps Assistant Deputy Commandant, Combat Development and Integration, acknowledged and accepted the JLTV test results although there were unmet critical requirements. As a result, the requirements developer did not change requirements, and chose not to incorporate the unmet maintenance-related vehicle performance requirements in the baseline vehicle to maintain program cost and schedule. Despite not meeting all maintenance-related performance requirements, the Joint Program Office estimates JLTV operations and support costs will be reduced by $8.3 billion due to better fuel usage and better reliability than expected.
Processing and Disposition of Equipment at the Defense Logistics Agency Disposition Services in Kuwait
This audit determined that officials in the Defense Logistics Agency (DLA) Disposition Services Kuwait did not consistently ensure that personnel responsible for disposing of equipment wore the required personal protective equipment, did not conduct annual job hazard analysis reviews, and did not identify and develop job hazard analyses as required by DLA guidance. As a result, DLA Disposition Services Kuwait officials and contractors responsible for disposing of equipment in Kuwait are susceptible to significant injuries.
Expeditionary Fast Transport Capabilities
This audit determined that the Navy Strategic and Theater Sealift Program Office officials obligated $2 billion for the Expeditionary Fast Transport (EPF) program that had deficiencies which prevented it from attaining the required performance capabilities. The EPF vessel is an aluminum catamaran that will be used to transport personnel, supplies, and equipment in support of a wide range of military and civilian contingencies, evacuations, and disaster relief. Navy officials accepted eight EPF vessels with deficiencies that could prevent the Military Sealift Command from accomplishing its missions. The Navy may also have to spend additional money to achieve the required performance capabilities for EPF vessels already provided to the Navy and for future EPF vessels that are still in production.
Protection of Patient Health Information at Navy and Air Force Military Treatment Facilities
This audit determined that DoD officials from the Defense Health Agency and Navy and Air Force medical treatment facilities did not consistently implement security protocols to protect systems that stored, processed, and transmitted electronic health records and patient health information. As a result, ineffective administrative, technical, and physical security protocols, resulting in Health Insurance Portability and Accountability Act violations, could cost military treatment facilities up to $1.5 million in penalties each year. This occurred because the DHA, Navy and Air Force did not have well defined, effectively implemented system security protocols, thus compromising the integrity, confidentiality and availability of PHI. Specifically, the DHA, Navy and Air Force security protocols for its systems that maintained PHI, did not protect against unauthorized access or disclosure of the data.
Access to Care at Military Treatment Facilities
This audit determined that three Air Force military treatment facilities —U.S. Air Force Hospital Langley at Joint Base Langley-Eustis, Virginia; David Grant U.S. Air Force Medical Center at Travis Air Force Base, California; and MacDill Air Force Base Clinic at MacDill Air Force Base, Florida—did not consistently meet access to care standards. Federal regulations establish access to care standards for the Military Health Service, including providing patients an appointment to visit a provider within 7 days for a routine appointment and within 24 hours for an urgent appointment. However, in March 2017, beneficiaries waited as long as 8.2 days on average for an urgent appointment at David Grant U.S. Air Force Medical Center, and in February 2017 beneficiaries waited as long as 22.8 days on average for a routine appointment at U.S. Air Force Hospital Langley. As a result, the 105,000 military health system beneficiaries enrolled at the three Air Force military treatment facilities may not have received the care they needed, and may have been at risk of increased health complications due to longer wait times.
TRICARE Payments for Standard Electric Breast Pumps and Replacement Parts
This audit determined that the Defense Health Agency overpaid for 54,006 of 59,241 breast pumps (91.2 percent) and 380,911 of 671,112 replacement parts (56.8 percent) provided to TRICARE beneficiaries. As a result, the DHA overpaid $16.2 million for standard electric breast pumps and replacement parts for TRICARE beneficiaries in all three TRICARE regions in 2016.
Defense Contract Management Agency’s Information Technology Service Contracts
This audit determined that for 11 DoD Information Technology (IT) service contracts, valued at $61 million, Defense Contract Management Agency (DCMA) contracting officials did not properly define requirements that included measurable performance standards for eight contracts, develop an acquisition plan for one contract, or submit offers for Small Business Administration acceptances for two contracts awarded through the 8(a) program for small disadvantaged businesses. In addition, DCMA officials used flexible ordering agreements to award 5 contracts, which violated Federal Acquisition Regulation requirements. As a result, DCMA contracting officials acquired $56.4 million in IT services on contracts with poorly defined or nonexistent performance work statements that may not meet the performance needs to execute the DCMA mission.
Controls Over the Guam Base Operations Support Services Contract
This audit determined that the Naval Facilities Engineering Command Marianas (NAVFACMAR) adequately monitored contractor performance and conducted sufficient invoice reviews for goods and services provided under the Guam Base Operations Support Services contract. The contract required that the contractor provide labor, supervision, management, materials, equipment, transportation, and other items necessary to deliver 14 services such as facilities maintenance, wastewater treatment, and other services.
Defense Information Systems Agency Contract Awards at Defense Information Technology Contracting Organization Europe
This audit determined that the Defense Information Technology Contracting Organization (DITCO) Europe contracting personnel did not adequately conduct or document market research for telecommunication service contracts, as required by federal regulation. Specifically, DITCO Europe contracting personnel experienced latency issues or errors when uploading files to the acquisition system As a result, DITCO Europe contracting personnel cannot support that they conducted market research before soliciting offers and could not demonstrate that all contract requirements and decisions were fully supported throughout the contract file.
Noncompetitive Information Technology Contracts at the Defense Health Agency
This audit determined that the Defense Health Agency Contracting Office - Health Information Technology (DHA CO-HIT) contracting personnel did not properly award four information technology contracts, valued at $242.3 million. For one contract valued at $237.9 million, the DHA CO-HIT contracting officer did not appropriately apply the sole-source authority cited, include all of the minimum Federal Acquisition Regulation requirements in the justification, or properly award a short-term sole source contract to avoid a lapse in service by a delay in awarding a follow-on contract. For three other contracts, valued at $4.4 million, DHA CO-HIT contracting personnel did not meet one of the Federal Acquisition Regulation criteria for the authority cited by not determining a fair and reasonable price or appropriately advertising award opportunities. As a result, the Defense Health Agency contracting officials awarded a contract without using full and open competition.
Payments to Electromagnetic Pulse Commission Support Contractor
This audit determined that the Washington Headquarters Services contracting officers approved contractor invoices from a Electromagnetic Pulse Attack Commission support contractor that included questionable hours. Washington Headquarters Services contracting officials also did not require the contractor to submit payment requests to the Defense Contract Audit Agency for review and approval. As a result, the contractor might have been paid $118,755 more than the contract allowed, and Washington Headquarters Services contracting officer’s may have to pay for the additional unpaid hours submitted on time cards for May 2017, and voluntary services performed in July 2017.
Quality Control Review of the Baker Tilly Virchow Krause, LLP, FY 2016 Single Audit of National Marrow Donor Program
This quality control review determined that the Baker Tilly single audit did not perform sufficient audit procedures to verify the Donor Program’s compliance with the cash management compliance requirement. The review also identified deficiencies in the audit documentation for the testing of allowable costs, procurement suspension and debarment, reporting, and special tests and provisions compliance requirements that need to be addressed in future single audits.
DEFENSE CRIMINAL INVESTIGATIVE SERVICE HIGHLIGHTS (to view DOJ press release, if available, please click on title)
Owners of Kentucky Moving Companies Sentenced for Defrauding the Army
In April 2018, Lonnie Curl and William Montgomery were sentenced to 15 months in prison, a $7,500 fine and ordered to pay $132,413 in restitution to the Army after pleading guilty to charges related to a conspiracy to overbill the Army for household goods shipment moves to members of the military. Curl and Montgomery co-owned three moving companies in Kentucky and participated in a conspiracy to increase the weight of household goods shipments billed to the Army. Further, the companies and its owners admitted to violating the False Claims Act and on January 10, 2018 agreed to pay $264,826.52 in civil penalties and damages. The criminal case was investigated by the Defense Criminal Investigative Service and the U.S. Army Criminal Investigative Command (Army CID).
Three More Defendants Charged in Fraud Scheme Involving Small Business Contracts
On April 18, 2018, James E. Hubbell of Sussex, Wisconsin, Jorge Lopez of Worthington, Minnesota, and Telemachos Agoudemos of Big Bend, Wisconsin agreed to plead guilty to an information charging them with federal crimes related to a long-term fraud scheme led by Brian L. Ganos involving government-funded contracts intended to benefit small businesses. According to the charges, the scheme involved Ganos, Hubbell, and others operating construction companies with straw owners who qualified as a disadvantaged individual or as a service-disabled veteran, but who did not actually control the companies. The participants fraudulently obtained small business program certifications to win millions of dollars in government-funded contracts to which they were not entitled. Hubbell and Lopez agreed to plead guilty to conspiring to defraud the United States. Agoudemos agreed to plead guilty to making false statements to federal agents in order to conceal that the company did not qualify as a Service-Disabled Veteran-Owned Small Business. The maximum penalties for these offenses is five years in prison and a $250,000 fine. This was a joint investigation with Army CID, Department of Veterans Affairs OIG, Federal Bureau of Investigation, Small Business Administration OIG, and General Services Administration OIG.
Tampa Resident Sentenced to More Than 20 Years in Federal Prison for Tricare Health Care Fraud Scheme
On April 17, 2018, Monty Ray Grow was sentenced to 262 months in prison and ordered to pay approximately $18 million in restitution. On February 5, 2018, a federal jury in Miami had convicted Grow of 18 criminal charges, including conspiracy to commit health care fraud, conspiracy to pay and receive health care kickbacks, unlawful receipt of health care kickbacks and money laundering. Grow enticed Tricare beneficiaries to order expensive and unnecessary drugs by either paying the beneficiaries for their prescriptions, or paying for prescriptions of their family and friends. The expensive and unnecessary drugs were then billed to Tricare. Additionally, Grow fraudulently inflated the price the pharmacy billed to Tricare by manipulating the formulations and selling ingredients to the pharmacy that were artificially engineered in order to maximize profits. Eight co-conspirators have pleaded guilty to federal criminal charges arising out of Grow’s fraud scheme. This is a joint investigation with Army CID and the Food and Drug Administration (FDA) Office of Criminal Investigations.
Allergan To Pay $3.5 Million To Settle False Claims Act Allegations Relating To LAP-BAND Bariatric Medical Device
On April 16, 2018, Allergan Inc., agreed to pay $3.5 million to resolve allegations that it caused health care providers to submit false claims to Medicare and other federal healthcare programs relating to the LAP-BAND Adjustable Gastric Banding System (LAP-BAND). The FDA approved the LAP-BAND for weight reduction for adult patients with obesity who failed more conservative weight-reduction alternatives. Alergan distributed, marketed, and sold the LAP-BAND, an inflatable silicone band that is placed around a patient’s stomach during a surgical procedure. Allergan allegedly sold LAP-BANDs with defective or flawed access ports. This is a joint investigation with the Health and Human Services OIG and the Office of Personnel Management OIG.
Multiple Defendants Charged in Fraud and Money Laundering Scheme Involving Over $200 Million in Small Business Contracts
On April 3, 2018, Brian L. Ganos, Mark F. Spindler, and the Sonag Company, Inc., were charged with a 12-year fraud and money-laundering scheme related to over $200 million in government-funded contracts intended to benefit small businesses. According to the indictment, the conspiracy involved operating construction companies with straw owners who qualified as a disadvantaged individual or as a service-disabled veteran, but who did not actually control the companies. The conspirators then fraudulently obtained small business program certifications to win government-funded contracts to which they were not entitled. This is a joint investigation with the Federal Bureau of Investigation, the General Services Administration OIG, Department of Veterans Affairs OIG, Department of Transportation OIG, Small Business Administration OIG, DCAA, and Army CID.
Two Tennessee Health Care Executives Charged For Role in $4.6 Million Medicare Kickback Scheme
On April 9, 2018, John Davis and Brenda Montgomery were arrested and charged for their alleged participation in a $4.6 million Medicare kickback scheme involving durable medical equipment. Each were charged with conspiracy to defraud the United States and to pay and receive health care kickbacks, and with receiving health care kickbacks. The conspiracy by Davis, the former CEO of Comprehensive Pain Specialists, a pain management company, and Montgomery, the founder of CCC Medical, Inc., a durable medical equipment company, allegedly involved approximately $750 thousand in illegal health care kickbacks and the submission of over $4.6 million in fraudulent claims to Medicare. From June 2011 to June 2017, Montgomery allegedly paid Davis a percentage of the Medicare proceeds, as kickbacks, in exchange for Davis directing Comprehensive Pain Specialists employees and providers to send Medicare durable medical equipement orders and referrals to Montgomery’s CCC Medical. This is a joint investigation with Health and Human Services OIG and the Tennessee Bureau of Investigation Medicaid Fraud Control unit.
Bulgarian National Arrested for Conspiracy to Defraud the United States and Illegally Export Prohibited Articles to Syria in Violation of U.S. Export Control Laws
On April 12, 2018, Zhelyaz Andreev, a Bulgarian national, was arrested pursuant to an Interpol Red Notice based on an indictment charging him with conspiracy to violate the International Emergency Economic Powers Act and the U.S. Department of Treasury Office of Foreign Assets Control (OFAC) regulations. Allegedly, Andreev worked in the Bulgaria office of AW-Tronics, a Miami export company, which shipped and exported various aircraft parts and equipment to Syrian Arab Airlines. Syrian Arab Airlines is the Syrian government’s airline, which is an entity designated and blocked by OFAC for transporting weapons and ammunition to Syria in conjunction with Hizballah, a terrorist organization, and the Iranian Revolutionary Guard Corps. This is a joint investigation with the Federal Bureau of Investigation, Department of Commerce, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, U.S. Customs and Border Protection, and South Florida Joint Terrorism Task Force.
ANNOUNCED PROJECTS (to view the announcement letters, if available, please click on the title)
Audit of the Afghan Personnel and Pay System
The objective of this audit is to determine whether the DoD implemented the Afghan Personnel and Pay System to accurately pay and track Afghan forces. U.S. Forces – Afghanistan developed and transitioned to the Afghan Personnel and Pay System, which is a human resource system that will store human resources information, track recruits, record training, and assign qualified personnel into needed assignments based on force requirements.
Audit of Air Force Fighter Aircraft Maintainers
The objective of this audit is to determine whether the Air Force has addressed the shortage of maintainers for its fighter aircraft. Fighter aircraft maintainers provide aircraft maintenance to ensure the Air Force is able to sustain high levels of readiness and air superiority through mission-capable aircraft.
Project Announcement: Evaluation of DoD Efforts to Train, Advise, Assist, and Equip the Armed Forces of the Republic of the Philippines
The objective of this evaluation is to assess the U.S. train, advise, assist, and equip efforts to build and sustain the Armed Forces of the Philippines' capabilities to counter the expansion of violent extremist organizations.
Audit of DoD's Use of Director, Operational Test and Evaluation Assessments in Making Production Decisions for Major Defense Acquisition Programs
The objective of this audit is to determine whether DoD milestone decision authorities and acquisition program managers appropriately consider information and guidance from the Director, Operational Test and Evaluation in making program decisions.
Control Review of the Grant Thornton LLP, FY 2017 Single Audit of Concurrent Technologies Corporation
The objective of this review is to determine whether the audit work performed by Grant Thornton of Concurrent Technologies Corporation was conducted in accordance with Single Audit Uniform Guidance requirements and applicable auditing standards.
Audit of Defense Finance and Accounting Service Commercial Pay Program Improper Payments Reporting
The objective of this audit is determine whether the DoD reported accurate and complete improper payment estimates for the Defense Finance and Accounting Service Commercial Pay Program.
Audit of Iraqi Border Guard Equipment
The objective of this audit is to determine whether the Combined Joint Task Force-Operation Inherent Resolve and the 1st Theater Sustainment Command validated the requirements for Iraqi border guard equipment against demonstrated needs, and accounted for border guard equipment.
Audit of Defense Hotline Allegations Concerning the MQ-9 Block 5 Reaper Unmanned Aircraft System
The objective of this audit is to determine whether the Air Force is allowing a contractor to inappropriately charge for MQ-9 Block 5 Reaper repairs prior to the DoD accepting the aircraft, is using the MQ-9 Block 5 Reaper aircraft to support operational missions, and is procuring excess MQ-9 Block 5 spare parts.
Audit of Defense Hotline Allegations Concerning Tanium Software
The objective of this audit is to determine whether the Air Force and the Defense Innovation Unit Experimental complied with processes and procedures for cybersecurity and acquisition of the Tanium software program. Tanium is a software that quickly scans an enterprise and reports on suspicious behavior or programs.