Nov. 5, 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:
Independent Auditor’s Report on the DoD Agency Wide Basic Financial Statements
This audit will determine whether the DoD Agency-Wide Basic Financial Statements as of September 30, 2018, and September 30, 2017, taken as a whole, were presented fairly, in all material respects, and in conformity with accounting principles generally accepted in the United States of America. The DoD Agency-Wide basic financial statements provide the financial status of the entire Department. The DoD OIG is the principal auditor for the DoD Agency-Wide basic financial statements. The Independent Auditors’ Report is published in the DoD Agency Financial Report in conjunction with the DoD Basic Financial Statements.
Understanding the FY 2018 DoD Agency Financial Report and Audit Results
This document will provide background on the DoD financial statement audit effort, discuss the contents of the DoD financial report, and explain the importance of the DoD financial statement audits to DoD operations and financial management. In addition, the document will provide information regarding the overall findings of 21 financial statement audits, an assessment of the DoD efforts to address the overall findings, and the DoD OIG’s view of additional actions the DoD should take to address the overall findings.
Investigation into the United States Air Force’s Failure to Submit Devin Patrick Kelley’s Criminal History Information to the Federal Bureau of Investigation
This investigation determines why the United States Air Force failed to submit Mr. Devin Patrick Kelley’s criminal history information to the FBI for inclusion in its databases. On November 5, 2017, Kelley shot and killed 26 people and injured 22 others at the First Baptist Church in Sutherland Springs, Texas. Kelley was able to purchase a firearm even though he had a disqualifying conviction while in the Air Force.
Fiscal Year 2019 Top DoD Management Challenges
Each Inspector General (IG) is required by Federal law to prepare an annual statement that summarizes what the IG considers to be the “most serious management and performance challenges facing the agency” and to assess the agency’s progress in addressing those challenges. The law also requires the IG’s statement to be included in the agency’s Financial Report. This year the DoD OIG identified 10 challenges based on a variety of factors, including DoD OIG oversight work, research, and judgment; oversight work done by other DoD Components; oversight work conducted by the Government Accountability Office; and input from DoD officials. While the DoD OIG reviewed DoD statements, documents, and assessments of these and other critical issues, the DoD OIG identified these top challenges independently. The DoD OIG also uses this document to determine areas of risk in DoD operations and where to allocate DoD OIG oversight resources. This document is forward-looking and identifies the top ten challenges facing the DoD in FY 2019 and in the future. The top management challenges document discusses each challenge, actions taken by the DoD to address the challenge, and oversight work by the DoD OIG and others related to the challenge.
Lead Inspector General Quarterly Reports to the United States Congress for Operation Inherent Resolve and Operation Pacific Eagle-Philippines July 1, 2018- September 30, 2018
This is the 15th Lead Inspector General (IG) quarterly report for Operation Inherent Resolve (OIR) covering the period July 1, 2018 through September 30, 2018, and the 5th Lead IG quarterly report for Operation Pacific Eagle-Philippines (OPE-P) covering the same period. Both reports describe the activities of the U.S. Government in support of OIR and OPE-P, as well as the work of the DoD, the Department of State, and the United States Agency for International Development. While this is the 15th report on OIR, it is the first report on the three new classified contingencies named by the Secretary of Defense February 9, 2018. Operation Yukon Journey and the two operations in Northwest Africa and East Africa are intended to degrade al Qaeda and ISIS-affiliated terrorists in the Middle East and some regions of Africa. The OPE-P report describes the conduct of the Lead IG agencies oversight mission through its audits, evaluations, and investigations. In addition, the Lead IG agencies issued its inaugural Joint Strategic Oversight Plan for OPE-P, which outlines planned oversight activities for this operation in FY 2019. The reports on the three classified contingency operations will be classified and not released publicly.
DoD Actions to Implement the Cybersecurity Information Sharing Act of 2015 Requirements
This audit determines whether the DoD took actions to implement the Cybersecurity Information Sharing Act of 2015 requirements. Specifically, it determines whether policies and procedures for sharing cyber threat indicators are sufficient; cyber threat indicators and defensive measures have been properly classified; security clearances authorized for the purpose of sharing cyber threat indicators and defensive measures with the private sector are properly accounted for; threat indicators and defensive measures are properly reviewed when shared with Federal or non-Federal entities; and barriers to sharing cyber threat indicators and defensive measures have been properly assessed.
DoD Oversight of Bilateral Agreements with the Republic of the Philippines
This audit determines whether the DoD has proper oversight of logistical support provided through the Acquisition and Cross Servicing Agreement with the Republic of the Philippines. An Acquisition and Cross Servicing Agreement is a bilateral agreement between the U.S. and authorized foreign countries to acquire or provide expedited or real-time logistic support, supplies, and services in exchange for reimbursement. Acquisition and Cross Servicing Agreements are used primarily to benefit forward-deployed commands and U.S. Forces — they are not a routine source of supply for a foreign country.
Evaluation of Contracting Officer Actions on Contractor Pricing Proposals Deemed Inadequate by the Defense Contract Audit Agency
This evaluation determines whether contracting officer actions during contract negotiations complied with acquisition regulations when contractor pricing proposals were deemed inadequate by the Defense Contract Audit Agency. Price proposals can be deemed inadequate if they do not comply with the Federal regulation. Examples of inadequacies include price proposals that contain insufficient summary cost schedules and cost element breakdowns, consolidated summaries of individual material and services, or contractor evaluations of subcontractor cost estimates.
RECENTLY ISSUED REPORTS OF INTEREST (to view report, if available, please click on title)
Report of Investigation John M. Richardson Admiral U.S. Navy
This investigation examined the Chief of Naval Operations’ (CNO) response to sexual harassment and sexual assault allegations against a member of his personal staff, his Public Affairs Officer (PAO). The DoD OIG determined that Navy leadership took action to investigate the allegations. However, the DoD OIG concluded that after the investigations and legal reviews were completed, and the CNO made the decision to move his PAO, the CNO did not take sufficient action to ensure that his decision was implemented in a timely manner, which sent the wrong message about how seriously the CNO took the allegations of sexual harassment.
FY 2019 Comprehensive Oversight Plan for Overseas Contingency Operations
This plan describes the Lead Inspector General and partner agencies’ oversight of U.S. activities in support of three ongoing overseas contingency operations, Operation Inherent Resolve (Syria and Iraq), Operation Pacific Eagle – Philippines, and Operation Freedom’s Sentinel (Afghanistan), and three new overseas contingency operations (in Africa and the Middle East), which are covered in a classified appendix to the plan. This is the fourth annual joint strategic oversight plan submitted to Congress by the Lead Inspector General for Overseas Contingency Operations.
System Review Report on the Defense Contract Management Agency Office of Internal Audit and Inspector General
This review determined that the system of quality control for the Defense Contract Management Agency Office of Internal Audit and Inspector General for the period that ended May 31, 2018, was suitably designed and executed to provide the Defense Contract Management Agency Office of Internal Audit and Inspector General with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material aspects. The Defense Contract Management Agency Office of Internal Audit and Inspector General received a rating of pass.
System Review Report on the Air Force Audit Agency
This review determined that the system of quality control for the Air Force Audit Agency for the period that ended December 31, 2016, was suitably designed and executed to provide management with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. The Air Force Audit Agency received a rating of pass.
DEFENSE CRIMINAL INVESTIGATIVE SERVICE HIGHLIGHTS (to view DOJ press release, if available, please click on title)
Amerisourcebergen Agreed to Pay $625 Million to Settle Civil Fraud Allegations Resulting from its Repackaging and Sale of Adulterated Drugs and Unapproved New Drugs, Double Billing, and Providing Kickbacks
On October 1, 2018, the Department of Justice announced that AmerisourceBergen Corporation agreed to pay the Government $625 million to resolve alleged violations of the False Claims Act. Between January 2001 and January 2014, two of AmerisourceBergen Corporation’s subsidiaries allegedly repackaged cancer medications to manufacture millions of pre-filled syringes, which were not approved for sale by the Food and Drug Administration. The production of the syringes allowed AmerisourceBergen Corporation to sell more doses than it bought from the original drug manufacturers and overbill Federal health care programs. This was a joint investigation with the Defense Criminal Investigative Service (DCIS), the Food and Drug Administration Office of Criminal Investigations, the Health and Human Services Office of Inspector General (OIG), the Office of Personnel Management OIG, and the Department of Veterans Affairs OIG.
Former U.S. Navy Commander Sentenced for Bribery Conspiracy with Foreign Defense Contractor in Massive U.S. Navy Corruption and Fraud Case
On October 19, 2018, Troy Amundson, a former Navy commander, was sentenced to 30 months in prison, followed by 3 years of supervised release, and ordered to pay a $10,000 fine and $21,625 in restitution for Federal bribery conspiracy charges. Amundson is the latest Navy official to plead guilty and be sentenced in the wide-ranging corruption and fraud investigation involving foreign defense contractor Leonard Glenn Francis and his Singapore-based company, Glenn Defense Marine Asia. Earlier this year, Amundson pleaded guilty to one count of conspiracy to commit bribery, admitting that he conspired with Francis and others to receive things of value, including entertainment expenses and the services of prostitutes, in exchange for taking official acts for the benefit of Glenn Defense Marine Asia. This is a joint investigation with DCIS, the Navy Criminal Investigative Service, and the Defense Contract Audit Agency.
Two Intelligence Officials and a Business Owner Indicted for Bid Rigging
On October 5, 2018, a grand jury indicted Kevin Kuciapinski, Randolph Stimac, and Myckhael Kuciapinski on a variety of procurement fraud charges. During the time period relevant to the indictment, Kevin Kuciapinski was an active duty Air Force major working at the National Reconnaissance Organization, Stimac was an employee of the National Security Agencyand Myckhael Kuciapinski was the wife of Kevin Kuciapinski and chief executive officer of a company that attempted to do business with the United States. According to the indictment, from 2013 through 2015, the individuals conspired to unlawfully obtain and disclose source selection information related to a National Security Agency contract. The goal of the conspiracy was for Kevin Kuciapinski and Randolph Stimac to provide a competitive advantage to Myckhael Kuciapinski's bid or proposal by providing her source selection information. This was a joint investigation with DCIS, the National Reconnaissance Organization OIG, the National Security Agency OIG, Air Force Office of Special Investigations, and the Internal Revenue Service Criminal Investigation.
Defense Contractor Agrees to Pay United States Up to $7.8 Million to Settle False Claims Act Investigation
On October 9, 2018, the Department of Justice announced that Arena Americas has agreed to a settlement with the U.S. to resolve allegations that it wrongfully obtained small business set-aside contracts with the DoD. According to the settlement agreement, the U.S. contends that Arena Americas worked with Military Training Solutions, LLC to obtain small business defense contracts that were supposed to be performed by Military Training Solutions, LLC, but were performed by Arena Americas. As a result of this scheme, millions of dollars in defense contracts were wrongfully awarded to Arena Americas instead of legitimate small businesses. Military Training Solutions, LLC previously entered into a settlement agreement with the U.S. to resolve its liability under the False Claims Act, and the owner of Military Training Solutions, LLC pleaded guilty to one felony count of receiving kickbacks in connection with a similar scheme. This was a joint investigation with DCIS, the Small Business Administration OIG, and U.S. Army Criminal Investigation Command.
Defense Contractor Agrees to Pay $1 Million to Settle Allegations under the False Claims Act
On October 15, 2018, the Department of Justice announced that Alpha Research & Technology, Inc. (ART) a company that provides command and control systems to the Air Force, has agreed to pay the U.S. $1 million to resolve allegations that it violated the False Claims Act. Between 2006 and 2011, ART submitted inflated contract proposals to the Government. ART’s proposals included millions of dollars of prohibited expenses, such as the design and construction of a private residence, personal vehicles, a personal caretaker, and a weekend at the Hotel del Coronado in San Diego, California. This was a joint investigation with DCIS, Air Force Office of Special Investigations, and Defense Contract Audit Agency.
Darien Man Pleads Guilty to Defrauding Service Member
On October 18, 2018, the Department of Justice announced that Christopher Teixeira pleaded guilty in Federal court to one count of wire fraud for the theft of more than $57,000 from a former Navy service member. According to court documents and statements, the former service member was scheduled to receive a medical severance payment from the Navy in January 2017. The former service member provided his MyPay login and password information to Teixeira, whom he trusted with some financial responsibilities. Before the former service member received the payment, Teixeira changed the direct deposit information associated with the MyPay account to a bank account controlled by Teixeira. The Defense Finance and Accounting Servicethen sent the service member’s payment to the bank account controlled by Teixeira. After receiving the payment, Teixeira logged back into the MyPay account and changed the direct deposit instructions back to the former service member’s bank account. This was a joint investigation with DCIS and the Defense Finance and Accounting Service.
ANNOUNCED PROJECTS (to view the announcement letters, if available, please click on the title)
Audit of DoD Protective Security Details
The objective of this audit is to determine whether DoD Components are properly executing protective security details of DoD officials.
Audit of DoD Service-Disabled Veteran-Owned Small Business Contract Awards
The objective of this audit is to determine whether the DoD awarded Service-Disabled Veteran-Owned Small Business set-aside and sole-source contracts to eligible contractors. The Federal Government’s goal is to award at least three percent of all Federal contracting dollars to service-disabled veteran-owned businesses each year.
U.S. and Coalition Efforts to Train, Advise, Assist, and Equip Afghan Tactical Air Coordinators and Air Liaison Officers
The objective of this evaluation is to determine whether U.S. and Coalition efforts to train, advise, assist, and equip Afghan Tactical Air Coordinators and Air Liaison Officers meet air-to-ground integration objectives identified in operational plans and applicable policies. Afghan Tactical Air Coordinators and Air Liaison Officers are Afghan Air Force personnel embedded within Afghan National Army units to allow ground forces to provide precise targets to pilots, improving strike accuracy and minimizing impact to civilian lives and infrastructure.
Quality Control Review of the PricewaterhouseCoopers LLP's FY2017 Single Audit of the CNA Corporation
The objective of this audit is to determine whether the audit work performed by PricewaterhouseCoopers LLP of the CNA Corp., was done in accordance with Single Audit Uniform Guidance requirements and applicable auditing standards.
Evaluation of the V-22 Osprey Engine Air Particle Separator
The objective of this evaluation is to determine whether the V-22 Osprey Program Office developed the Engine Air Particle Separator to protect the engines in desert environments. The V-22 Osprey is a hybrid aircraft with functional aspects of both a helicopter and airplane. The Engine Air Particle Separator is a system designed to remove sand from the air before reaching the engine.