UPCOMING REPORTS

Significant reports expected to be released within the next 30 days include:

Funding Used for the Korean War 60-Year Commemoration.This audit determines whether the accounting of funds used by DoD for the Korean War 60-year commemoration in 2013 was accurate and complete.

Defense Hotline Allegations Concerning Labor Rates for the Counter Narco-Terrorism Technology Program. This audit determines whether DoD was properly charged labor rates for the Counter Narco-Terrorism Technology Program on a specific contract.

RECENTLY RELEASED REPORTS OF INTEREST (to view report, if available, please click on title)

DoD Efforts to Meet the Requirements of the Improper Payments Elimination and Recovery Act in FY 2013 (Report No. DoDIG-2014-059). This audit determined that DoD met five of the six requirements of the “Improper Payments Elimination and Recovery Act of 2010.” However, DoD did not meet the reduction targets for five of the eight payment programs with established targets. Further, DoD’s inability to ensure that all required payments were reviewed resulted in unreliable estimates and rates.

Defense Hotline Allegations Concerning the Fort Huachuca, Army Contracting Command–Aberdeen Proving Ground Contract Administration and Oversight Functions (Report No. DoDIG-2014-061). This audit determined that one allegation was partially substantiated and two allegations were unsubstantiated. In addition, contracting officials could improve the administration and oversight of contract W91RUS-10-C-0001. Contracting officials did not include adequate documentation to support incremental funding contract modifications within the contract file, did not properly authorize contract oversight or update the quality assurance surveillance plan, and did not evaluate contractor performance with standards that were compliant with the Army Federal Acquisition Regulation Supplement. Therefore, the DoD may have overpaid for contract cost increases.

Commercial Multimodal Cargo Procedures in Dubai Were Generally Effective, but Contract Oversight Could Be Improved (Report No. DoDIG-2014-058). This audit determined that U.S. Transportation Command (USTRANSCOM) generally used effective procedures for processing commercial multimodal cargo in Dubai. However, U.S. Central Command’s Customs and Border Clearance agents did not apply U.S.-compliant seals on 11 of the 51 containers tested, and USTRANSCOM contracting officials did not sufficiently oversee the multimodal contract.

Improvements to Controls Over Cash Are Needed at Army Disbursing Stations
in Kuwait and Saudi Arabia (Report No. DoDIG-2014-057). This audit determined that controls at Army disbursing stations at Camp Arifjan, Kuwait, and Riyadh, Saudi Arabia, were not adequate to safeguard, account for, document, and report cash. An Army disbursing station in Kuwait did not report a loss of funds of about $6.5 million. As a result of inadequate controls over cash, the Army increases its risk of loss because of errors,
theft, and fraud.

Defense Logistics Agency Land and Maritime Paid Too Much for High Mobility Multipurpose Wheeled Vehicle Repair Parts (Report No. DoDIG-2014-054). This audit determined that contracting officials negotiated questionable prices for repair parts purchased on its sole-source, commercial contract with AM General. Contracting officials applied escalation rates that exceeded U.S. Bureau of Labor Statistics market rates. As a result, contracting officials paid an additional $26.3 million for escalation rates that were not supported. Additionally, AM General overbilled Defense Logistics Agency Land and Maritime 34 times for a part purchased on the contract resulting in overpayments of at least $1.5 million. Once notified, AM General credited DoD about $1.62 million for overpayments related to the part.

Substantiated Reprisal for a Protected Communication. This investigation  substantiated an allegation that an active duty U.S. Army unit commander gave a soldier three adverse event-oriented performance counseling statements and a referred (adverse) Officer Evaluation Report in reprisal for that soldier's protected communications to a law enforcement official, to members of his chain of command, and to the Army Inspector General. This report is For Official Use Only.

An Assessment of Contractor Personnel Security Clearance processes in the Four Defense Intelligence Agencies (Report No. DODIG-2014-060). This assessment determined that there was a lack of effective personnel security policy and effective record keeping as well as an avoidance by agency security offices of personnel security adjudications for contractor personnel involved in misconduct. The assessment also determined there was a lack of information sharing and connectivity issues between databases. The assessment examined how, or if, substantiated investigations of misconduct were reported to Agency Clearance Adjudication Facilities and to the DoD Consolidated Adjudication Facility; if the referred investigations had been adjudicated; and the results of those security adjudications. Four recommendations were made to correct the issues.

DEFENSE CRIMINAL INVESTIGATIVE SERVICE HIGHLIGHTS (to view DoJ press release, if available, please click on title)

International Cybercrime, Identity Theft, and Credit Card Fraud Conspiracy Participants Plead Guilty. On March 31, 2014, Oleg Pidtergerya, and on April 1, Robert Dubuc, each pleaded guilty to a criminal information charging them with conspiracy to commit wire fraud, conspiracy to commit access device fraud, and identity theft. Pidtergerya and Dubuc admitted they knew that fraudulent accounts and credit cards were created using others’ identities, including members of DoD. They managed “cash out” crews that made ATM withdrawals and fraudulent purchases from these accounts, so far attempting to steal more than $15 million. This is a joint investigation with the U.S. Secret Service, Immigration and Customs Enforcement-Homeland Security Investigations, Customs and Border Protection, and IRS-Criminal Investigation.

Felony Indictment Leads to Extradition. On April 3, 2014, Italian national Romano Pisciotti appeared in U.S. District Court after being extradited from Germany following a one-count felony indictment charging him with violating the Sherman Antitrust Act. The indictment alleged that Pisciotti conspired with other contractors to rig bids, fix prices, and allocate market shares for sales of marine hose, affecting prices for hundreds of millions of dollars in sales. Marine hose is used to transfer oil between tankers and storage facilities. This was a joint investigation with the Naval Criminal Investigative Service (NCIS), the U.S. Marshals Service and the FBI.

Army Soldier Jailed for Bribery and Theft. On April 9, 2014, former Sergeant 1st Class James Edward Travis was sentenced to 60 months imprisonment, three years of supervised release, and ordered to pay $422,302 restitution. In addition, three bank accounts totaling $46,131 were seized along with a 2011 Chevrolet Sliverado, and a money judgment valued at $165,758 was ordered. Travis pleaded guilty to accepting bribes and theft of government property. According to court records, while Travis was stationed in Afghanistan as a paying agent and contracting officer representative, he accepted kickbacks from vendors. Travis and others also stole JP-8 tanker truck fuel, resulting in a loss to the government of more than $422,000. This was a joint investigation with the Office of the Special Inspector General for Afghanistan Reconstruction, U.S. Army Criminal Investigation Command and the FBI.

Physical Therapy Clinics Settle False Claims Allegations. On April 9, 2014, Thomas Bray and Rajeev Gupta, owners of Alliance Rehabilitation, LLC and Active Physical Therapy Services, LLC; and Geeta Trehan, manager of a consolidated billing office, entered into a five-year Corporate Integrity Agreement and agreed to pay the United States $2.78 million. The Defense Health Agency will receive $1.2 million of the total settlement. It was alleged that the two physical therapy clinics submitted false claims, falsely representing that the services provided were rendered or supervised by a particular therapist, to Trehan for processing and billing to Medicare and TRICARE. This was a joint investigation with the U.S. Department of Health and Human Services Office of Inspector General (OIG).

False Claims Act Allegations Lead to $1.9 Million Settlement. On April 9, 2014, Frazier Masonry Corp., F-Y Inc., CTI Concrete & Masonry Inc., Masonry Technology Inc., Masonry Works Inc., Russell Frazier, and Robert Yowell paid the government nearly $1.9 million to settle allegations that they misrepresented their status, by claiming to be small businesses, in contracts at two U.S. Marine Corps bases. This was a joint investigation with NCIS and the Small Business Administration OIG.

RECENTLY ANNOUNCED PROJECTS (to view the announcement letters, click on the title)

Audit of DoD Multiple-Award Contracts for Services at Space and Naval Warfare Systems Command. The objective of this audit is to determine whether contracting officials provided a fair opportunity to compete, supported price reasonableness determinations, and performed surveillance for task orders issued under multiple award contracts for services in accordance with federal and DoD procedures. DoD IG will perform the audit at U.S. Navy Space and Naval Warfare Systems Center Pacific.

Summary Report on Military Construction Projects in Afghanistan and Iraq. The objective of this report is to summarize systematic problems specific to military construction projects in Afghanistan and Iraq, identified in audit reports issued by DoD IG, Army Audit Agency, and Air Force Audit Agency. 

Audit of Requirements and Contract Oversight of Military Construction Projects at Camp Lemonnier, Djibouti. The objective of this audit is to determine whether DoD is constructing facilities in accordance with legislative authorities and if DoD is providing adequate quality assurance and oversight of military construction projects at Camp Lemonnier, Djibouti.

Follow up Quality Control Review of the Grant Thornton, LLP, FY 2011 Single Audit of the Henry M. Jackson Foundation for the Advancement of Military Medicine. The objective of this review is to determine whether the audit work performed by Grant Thornton on the FY 2011 single audit was done in accordance with Office of Management and Budget Circular A-133 requirements and applicable auditing standards. DoD IG discontinued its original review and issued Report No. DoDIG-2013-124, dated Aug. 26, 2013, when it was determined some of the audit work papers could not be relied on and additional audit work needed to be performed to support the audit opinion.

Assessment of Department of Defense Efforts to Build Counterterrorism and Stability Operations Capacity of Foreign Military Forces with “Section 1206” Funding. The objective of this assessment is to determine whether the DoD Global Train and Equip Program, stipulated by Public Law 109-163, Section 1206, as amended, is providing intended results and whether the coordination efforts between the Department of State and DoD appropriately support the planning and execution of the funding under examination.

TESTIMONY/PREPARED STATEMENTS

Statement for the Record by DoD IG Jon T. Rymer on Oversight of Small Agencies. DoD Inspector General Jon T. Rymer submitted a statement for the record for an April 10, 2014, hearing to address the oversight of smaller federal agencies before the Subcommittee on Financial and Contracting Oversight, Senate Committee on Homeland Security and Governmental Affairs. Mr. Rymer, as chairman of the Council of the Inspectors General on Integrity and Efficiency Audit Committee, discussed recent efforts by the Audit Committee to confirm that IGs for small agencies meet the requisite standards for performing critical audit oversight work.