PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 57

Foreword

We are proud to present the joint annual report of the President’s

Council on Integrity and Efficiency (PCIE) and the Executive

Council on Integrity and Efficiency (ECIE), which records the highlights of the Inspectors General (IGs) during FY 1997. This report

takes on special significance this year, as we mark the twentieth

anniversary of the Inspector General Act of 1978, which established

a framework of statutory and independent IGs and charged them

with supervising audits and investigations, recommending policies

and procedures that promote greater efficiency and economy, and

rooting out fraud and abuse in government.

We believe that, in the years since its inception, the IG

system has fulfilled the intent and objectives of the 1978 Act,

employing techniques, activities, and programs much like those

highlighted in this report. For example, PCIE/ECIE members,

often working in close cooperation, carried out numerous audits

and investigations to combat waste and fraud, protect an astonishing range of Federal programs and safeguard billions of taxpayer dollars. These activities enabled the IGs, during FY 1997,

to successfully prosecute more than 15,000 wrongdoers, achieve

$3 billion in restitution and investigative recoveries, and

disqualify more than 6,000 unscrupulous individuals or firms

from receiving government contracts.

This report also demonstrates the way PCIE/ECIE members

fulfill another important element of their mandate—overseeing

Federal programs to identify and correct financial and organizational problems that impede their efficiency or expose them to

abuse. Thus, in FY 1997, the PCIE/ECIE IGs identified a

total of $25 billion in funds that could be put to better use and

made many other recommendations that improved their agencies’

effectiveness, efficiency, and ability to serve the public.

During 1997 the IG community lost a valued colleague,

Dr. James F. Hoobler, the IG at the Small Business Administration.

Jim’s distinguished career of public service, which spanned three

decades and included seven agencies, demonstrated his personal

and intellectual commitment to the goal of thoughtful, dedicated,

and totally professional government management.

Eleanor Hill Thomas Blair

Vice Chair Vice Chair

President’s Council on Executive Council on

 Integrity and Efficiency Integrity and Efficiency
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 59

Table of Contents

Foreword

The Inspector General Community . . . . . . . . . . . . . . . . . . . . 1

PCIE/ECIE Projects and Committees

Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Inspection and Evaluation Committee . . . . . . . . . . . . . . 6

Integrity Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Investigations Committee . . . . . . . . . . . . . . . . . . . . . . . 7

Legislation Committee . . . . . . . . . . . . . . . . . . . . . . . . . 7

Professional Development Committee . . . . . . . . . . . . . . 8

Inspectors General Address Major Areas of

Government Vulnerability . . . . . . . . . . . . . . . . . . . . . . . 9

Helping Federal Agencies Improve Program

Management and Program Performance . . . . . . . . 10

Helping Federal Agencies Improve Financial

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Preventing Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Coordinating the Fight Against Fraud; Task Forces

and Major Joint Investigations . . . . . . . . . . . . . . . . 25

Significant Fraud Recoveries . . . . . . . . . . . . . . . . . . . . 29

OIG Fraud Investigations . . . . . . . . . . . . . . . . . . . . . . 34

Summaries of Statistical Accomplishments . . . . . . . . . . . . . . . 37

PCIE Membership Addresses and Hotline Numbers . . . . . . . . 50

ECIE Membership Addresses and Hotline Numbers . . . . . . . 52

Glossary of Acronyms and Abbreviations . . . . . . . . . . . . . . . 54
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 1

The Inspector General Community

Twenty years ago, Congress passed the Inspector General Act of

1978 (IG Act), which created independent audit and investigative

offices within 12 Federal agencies. Before that time, most Federal

audit and investigative resources were under the management of

specific Federal program offices—meaning that Federal auditors

and investigators were frequently under the direction of the

programs they were reviewing. This splintered system also made it

hard for these small audit and investigative offices to see a pattern

of abuse against their agency’s programs.

In the last 20 years, the Inspector General (IG) concept has

proven to be of significant benefit to the government—each year

billions of dollars are returned to the Federal Government or

better spent based on the recommendations from IG reports.

Because of this success, the IG concept has been gradually expanded to most of the Federal Government. In FY 1997, there

were 57 Offices of Inspector General (OIGs) providing oversight

to 59 Federal agencies.

“Inspector General” may seem an unusual name for a civilian

auditor/investigator. The modern civilian IG was derived from the

military custom of having an independent “Inspector General.”

IGs were first used in the American military during the Revolutionary War, when General Washington charged General von

Steuben with providing an independent review of the combat

readiness of the Continental Army’s troops. Today’s civilian IGs

are charged with a similar mission: detecting and preventing

fraud, waste, and abuse and promoting economy, effectiveness,

and efficiency so that their agencies are ready and able to serve

the public.

IG Independence The major way IGs are different from other Federal officials is

their independence. The Inspector General Act authorizes IGs to:

• conduct such investigations and issue such reports as the IG

thinks appropriate (with limited national security and law enforcement exceptions);

• issue subpoenas for information and documents outside the

agency (with same limited exceptions);

• have direct access to all records and information of the

agency;

• have ready access to agency heads;

• administer oaths for taking testimony;

• hire and control their own staff and contract resources; and
2 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

• request assistance from any Federal, State, or local government agency.

This statutory independence is meant to ensure the validity of

IG audits and investigations. The IGs articulated their view of

how this independent, yet cooperative, relationship with management should work in their 1994 “Inspectors General Vision

Statement and Strategies to Apply Our Reinvention Principles.”

IGs are interested in input on what projects they should pursue.

Except in special circumstances, IGs share drafts of their reports

with their agencies and respond to agency comments in final

reports. IGs also frequently provide “technical advice” on a

particular issue or piece of legislation to the Administration and

to members of Congress. Many IGs participate in the agency

head’s senior council, and frequently OIG staff provide advice to

agency “reinvention councils”—thereby providing advice as management policies are developed.

IG Mission In simple terms, the IGs have two basic roles: to find and report

on current problems and to foster good program management to

prevent future problems. This report describes many examples of

how the OIGs meet their specific statutory mission to:

• conduct and supervise audits and investigations relating to

the programs and operations of their agencies;

• review existing and proposed legislation and regulations

relating to the programs and operations of their agencies;

• provide leadership for activities designed to promote

economy, effectiveness, and efficiency and fight fraud, waste, and

abuse in their agencies’ programs; and

• inform their agency heads and the Congress of problems in

their agencies’ programs

In implementing this mission, the IGs prepare a variety of

reports, including:

Audit Reports. Most OIG resources are spent on audits. OIG

audits evaluate the performance of agency programs and supporting administrative and financial systems; compliance with relevant

laws and regulations; whether there are ways that funds could be

put to better use; whether contractors and/or grantees have met

their responsibilities to the government; and whether people or

firms doing business or receiving benefits from the government

have received funds to which they are not entitled and should

make restitution. By law, OIG audits are performed under

auditing standards set by the General Accounting Office (GAO).

In FY 1997 alone, OIG audits (and the related discipline of OIG

inspections) led to managers making decisions to better spend

more than $16 billion and to seek the return to the government

of over $3 billion.
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 3

Inspection Reports. Inspections are akin to policy and program

evaluations. Several of the OIGs have adopted inspections as a

quick way to spot test the effectiveness of their agency programs

or to do a broad review on issues affecting agency programs. The

IG councils have adopted professional standards to ensure the

validity and independence of IG inspections

Investigation Reports. In accordance with professional standards

and guidelines established by the Department of Justice (DOJ),

OIGs perform investigations of both criminal and administrative

wrongdoing against agency programs. When they deem necessary,

IGs can conduct investigations of outside beneficiaries, contractors

or grantees, or Federal officials—indeed, IGs are empowered to

investigate anyone who may have defrauded their agency’s programs. IGs are required to report suspected violations of criminal

law directly to the Attorney General and frequently work cooperatively with DOJ on criminal investigations. In FY 1997 alone, OIG

investigations led to the recovery of almost $3 billion and the

successful prosecution of 15,635, and the suspension or debarment of 6,365 people or businesses doing business with the government.

Semiannual Reports to Congress. These reports are specifically

required in the Inspector General Act. IGs must summarize their

most significant recent reports and management’s action on

significant IG recommendations. These reports provide a useful

overview of OIG activity.

IG Appointments IGs are appointed on the basis of their personal integrity and

their expertise in:

• accounting, auditing, financial analysis;

• law, management analysis, public administration; and

• investigations

The IGs serving at the cabinet-level departments and major

subcabinet agencies are nominated by the President and confirmed by the Senate. These IGs can be removed only by the

President. IGs at smaller independent agencies and corporations

are appointed by their agency head, who can also remove them

from office. In either case, both houses of Congress must be

notified if an IG is removed from office.

The President’s Council

on Integrity and

Efficiency (PCIE)

The Presidentially appointed Inspectors General work together

and coordinate their professional activities through the PCIE,

which was created by an Executive Order dated March 26, 1981,

and updated in 1986 and 1992. The PCIE works to promote

collaboration on integrity, economy, and effectiveness issues that
4 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

transcend individual government agencies and to increase the

professionalism and effectiveness of IG personnel throughout the

government. The PCIE is chaired by the Deputy Director for

Management of the Office of Management and Budget (OMB),

who is responsible for reporting to the President on its activities.

In addition to the Presidentially appointed IGs, members include

the Controller of the Office of Federal Financial Management, the

Special Counsel of the Office of Special Counsel (OSE), the Director of the Office of Government Ethics, the Deputy Director of

the Office of Personnel Management (OPM), and a representative

of the Director of the FBI.

Most of the work of the PCIE is done by its committees. That

work is summarized below. The PCIE also maintains two training

centers for OIG staff: the Inspectors General Auditor Training

Institute at Fort Belvoir and the Inspector General's Criminal

Investigator Academy at the Federal Law Enforcement Training

Center. PCIE members also join together in a number of substantive working groups, including the Government Performance and

Results Act Roundtable and the Information Technology Roundtable. Updated information on PCIE and individual OIG work can

be found at the IG community webpage, known as IGNet, located

at http://www.ignet.gov.

The ECIE, comprised primarily of the IGs appointed by agency

heads, was created by Executive Order on May 11, 1992. The

ECIE has the same mission as the PCIE: to address integrity and

efficiency issues that transcend individual government agencies

and to increase the professionalism and effectiveness of IG personnel throughout the government. The ECIE is also chaired by the

Deputy Director for Management of the OMB. In addition to the

agency-head-appointed IGs, members include the Controller of

the Office of Federal Financial Management, the Special Counsel

of the OSC, the Director of the Office of Government Ethics, the

Deputy Director of the OPM, and the Assistant Director, Criminal

Investigative Division of the FBI.

The Executive Council on

Integrity and Efficiency

(ECIE)
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 5

PCIE/ECIE Projects and Committees

The PCIE, in conjunction with the ECIE, maintains committees

to examine important issues and to assist them in their ongoing

efforts to improve the effectiveness of their members in fighting

fraud, waste, and abuse throughout the Federal Government.

Audit Committee Committee Issues Quality Control Guide

In April 1997, the Audit Committee issued the revised 1997 PCIE

External Quality Control Review Guide, a joint effort with the

Federal Audit Executive Council (the organization of the Assistant

Inspectors General for Audit). This guide, which will assist in

ensuring the quality and professionalism of audit functions, incorporates recent changes to the Government Audit Standards and

should improve the quality and completeness of future peer

reviews.

Audit Guidance

During FY 1997, an Audit Committee task force worked to ensure

that auditors have the most current guidance available to them

when performing federal financial statement audits. In December

1996, the Committee issued an audit alert letter to highlight

changes in accounting and auditing standards, legislation, and

regulations since the PCIE Federal Financial Statement Audit

Manual was published in January 1993. The task force has also

been reviewing the Financial Audit Manual to provide the GAO

with comments on intended revisions and assess the Manual’s

guidance relative to PCIE’s established policies and related OMB

requirements and professional standards. The task force is continuing this assessment and plans to provide the Audit Committee

with its recommendations in FY 1998.

“Master Contract” Established

The Audit Committee established a PCIE-wide “master contract,”

which OIGs can use for their independent public accountant (IPA)

contract needs. In addition to audit- and accounting-related services, the master contract has specialty services such as statisticians,

actuaries, economists, electronic data processing auditing services,

and other technical skills as they relate to audit activities. The first

set of contracts was awarded to 17 small business IPA firms in

October 1997. To meet specialized needs of some OIGs, a second

set of contracts was awarded to seven large business IPA firms in

December 1997. Much of the credit for this important initiative is

due to the Department of Labor OIG, the master contract’s host
6 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

agency. Labor OIG will administer both segments of the master

contract.

Report on Federal Civilian Agencies’

Aircraft Management Programs

As an Audit Committee project, the General Services Administration OIG, during FY 1997, issued the Combined Report on Federal Civilian Agencies’ Aircraft Management Programs, which

identified shortcomings in aircraft program safety, operations, and

administration. This report summarizes the results of 11 OIGs and

20 audit reports assessing the agencies’ efforts to operate their

aircraft in a safe, efficient, and effective manner and their ability

to gather and report accurate, complete, and timely aircraft data.

Several recommendations in these reports addressed the need to

implement adequate maintenance systems and establish comprehensive safety programs. In the area of aircraft operations, the

OIGs made numerous recommendations to their agencies which, if

adopted, could collectively result in savings of $63.4 million. The

affected agencies concurred with most of their respective OIG’s

findings and recommendations and either have taken or plan to

take corrective actions.

Prescreening of Federal Grants and Loans by Offices of Inspector General and Their Agencies' Grant and Loan Offices. This report examined the procedures used by OIGs and their respective agencies

to review federal assistance projects. It was intended to help IGs

establish more effective methods for preventing as well as detecting waste, fraud, and abuse by federal grant and loan recipients.

Working Relationships of OIG Inspection and Evaluation Units. This

study surveyed the working relationships of 15 inspection and

evaluation units with components inside and outside their OIGs.

Its aim was to identify practices for developing successful working

relationships between inspection and evaluation units and the

groups with which they work.

OIG Inspection and Evaluation Units: Examples of Impact. This report

compiled examples of the impact of inspection and evaluation

units located in 15 OIGs. It showed the varied nature of inspections and evaluations across the IG community and the kinds of

impact they have had.

Throughout the year, the Committee worked closely with the

Inspections Roundtable, whose primary focus was on staff development in inspection and evaluation units. The Roundtable sponsored a highly successful 3-day Executive Development Seminar

for unit managers at the Federal Executive Institute. It subsequently initiated a program to coordinate staff training more

effectively across the inspection and evaluation community and to

promote career development.

Inspection and Evaluation

Committee
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 7

The Integrity Committee is charged by Executive Order 12993 of

March 1996 with receiving, reviewing, and forwarding for further

investigation any allegations of wrongdoing by an Inspector

General or, under certain circumstances, OIG staff members. The

Committee is chaired by the Assistant Director for the Criminal

Division of the Federal Bureau of Investigation (FBI). Under

Executive Order 12993, the Special Counsel, the Director of the

Office of Government Ethics, and three Inspectors General serve

as members of the Integrity Committee.

Aside from reviewing specific cases, the Committee addressed

several additional topics, including the adoption of Policy and

Procedures to formalize the framework of its investigations. The

Committee also established a working group to consider giving IGs

integrity-related training upon their appointment and annually

thereafter.

Integrity Committee

Investigations Committee Quality Standards for Investigations

During FY 1997 the Committee updated The Quality Standards

for Investigations, the guidelines applicable to Office of Inspector

General criminal investigators. The committee worked closely with

the full PCIE and ECIE in revising the standards. The revised

booklet was published in September 1997.

Employee Pamphlet

The Committee also completed an informational pamphlet about

employee rights and responsibilities during an OIG investigation.

The pamphlet was developed in response to concerns expressed at

a June 1997 hearing on oversight of investigative practices of IGs

before the Subcommittee on Government Management, Information, and Technology of the House Committee on Government

Reform and Oversight. The pamphlet is in electronic format, and

each Office of Inspector General can adapt it for use within its

agency.

Inspector General Criminal Investigator Academy Study

A study group formed by the Committee reviewed the operations

of the Inspector General Criminal Investigator Academy.

Legislation Committee The Legislation Committee’s activities in FY 1997 focused on

refining the relationship between IGs and the Congress. During

the year PCIE and ECIE met with the Chairmen, Ranking Minority Members, and staffs of both the Senate Committee on Governmental Affairs and the House Committee on Government Reform

and Oversight. These meetings facilitated exchanges of views and

information and provided Members with an increased awareness

of issues and problems the IG community faces.
8 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

Also during FY 1997 the House Subcommittee on Government

Management, Information, and Technology held a hearing on

“Oversight of Investigative Practices of Inspectors General.” As a

result the Legislation Committee, on behalf of the Subcommittee,

surveyed PCIE IGs about the investigative practices they use in

both criminal and administrative investigations.

Professional Development

Committee

During FY 1997, the Professional Development Committee hosted

a number of symposia and courses allowing PCIE and ECIE

members, along with others in the government, to exchange

information and expertise on emerging issues that have an impact

on OIG work. For example the Committee hosted, for ECIE

members, two courses taught by the Federal Law Enforcement

Training Center on “Employee Conduct Investigations” and “Continuing Legal Education.”

The Committee also hosted, for the PCIE and the Electronics

Roundtable, a number of fora on issues ranging from “Year 2000

Problems,” “Clinger-Cohen Act,” and “Electronic Commerce” to

“Research and Development Performance Measurements.”
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 9

The following narratives highlight how OIGs use audit, investigation, and inspection reviews to identify material weaknesses and

propose solutions, particularly in areas vulnerable to breakdown in

service, fraud, waste, or abuse.

OIGs devote the bulk of their resources to audits. These audits

are performed by OIG audit staff, by other Federal auditors under

cost-reimbursable agreement, or by nonfederal auditors under

various contracting arrangements.

Inspections are similar to policy and program evaluations and

are designed to support the overall mission of OIGs to promote

economy, efficiency, and effectiveness in program administration.

Inspections differ from audits in their comparatively short

timeframes, their flexible methodologies, and their use of multidisciplinary teams.

The IG Act requires IGs to provide policy direction for and to

conduct, supervise, and coordinate investigations relating to their

entities' programs and operations. The OIG investigations cover a

full range of criminal and administrative issues.

This report summarizes some of the results of OIG audits,

inspections, and investigations during FY 1997. The examples

provided are grouped into the following subject areas:

• Helping Federal Agencies Improve Program Management

and Program Performance;

• Helping Federal Agencies Improve Financial Management;

• Preventing Fraud;

• Coordinating the Fight Against Fraud;

• Significant Fraud Recoveries; and

• OIG Fraud Investigtions.

Inspectors General Address Major Areas

of Government Vulnerability
10 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

Helping Federal Agencies Improve Program

Management and Program Performance

In FY 1997, NASA OIG’s Environmental Audit group reviewed

Agency practices and policies on environmental issues. Meanwhile,

an OIG audit of a decommissioned nuclear reactor disclosed that,

the longer NASA delays the decommissioning of the Plum Brook

Reactor Facility, the greater will be the overall cost to the Agency.

The audit estimated that, if current reactor waste disposal problems

can be overcome and decommissioning of the facility were completed by year 2005, the Agency could avoid $5.5 billion in operations costs. Another environmental audit found that NASA, which

had been paying the full environmental cleanup costs at the Jet

Propulsion Laboratory, could save $57 million through cost-sharing

agreements. (NASA)

OIG Focus on

Environmental Practices

and Costs

OIG Evaluates HUD’s

2020 Management

Reform Plan

During FY 1997, OIG evaluated HUD’s 2020 Management Reform Plan, an effort to overhaul and improve the Department’s

operations. While concurring with the need for reform and with

some of the Plan’s measures, OIG was cautious about the potential

effectiveness of many Plan reforms and HUD’s ability to implement them. OIG also expressed reservations about the effectiveness of the Plan’s organizational changes. The study also stated

OIG’s concern about the absence of any formal consultation with

interested parties, the lack of a cost-benefit analysis and other

important studies before the 2020 reforms were announced. OIG

will continue to report to the Congress on the results of its reviews

of HUD’s reforms. (HUD)

Criteria Not Followed For

Highway Emergency

Funds

An OIG review of records in five States (California, Florida,

Georgia, Missouri, and Washington) that together received the

bulk of emergency repair funds provided by the Federal Highway

Administration (FHWA), found that FHWA needs to improve

program guidance and adherence to regulations, particularly in

addressing program improvements suggested through environmental reviews. While the Code of Federal Regulations requires

such “betterments” to be economically justified, FHWA program

guidance did not. OIG concluded that, had FHWA strictly followed these regulations, it could have made better use of $104

million. (DOT)
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 11

In FY 1996, Treasury’s Financial Management Service (FMS)

processed over 850 million government payments totaling $1.05

trillion. An OIG review found that, although FMS had implemented most of previous OIG recommendations to improve

controls over agency disbursements, it still needed to address a

material weakness on computer operations. Inadequate computer

security controls risk the theft of or tampering with computer

software and disbursement-related financial data. The review also

showed that, because the government can lose interest on prematurely disbursed funds, FMS should closely monitor premature

payments by the DOD, which escalated by over $1 billion from FY

1994 to FY 1995. Unless justified, FMS concurred with OIG

recommendations to strengthen computer security controls and

monitoring of agency disbursements. In addition, as agencies

convert to electronic payment systems, FMS will provide guidance to ensure that payments arrive as close to their due date as

possible. (Treasury)

Controls over

Government

Disbursements

Performance Audits

Reveal Inconsistencies

Shifting its emphasis from traditional compliance audits to evaluating environmental program results, OIG, in FY 1997, conducted

performance audits of specific EPA program areas such as hazardous waste cleanups at Superfund sites and EPA’s Air and Water

Quality Programs, as well as crosscutting issue areas such as

enforcement and automated systems. One such audit found that,

for a variety of reasons, EPA regions and State and local delegated

agencies have implemented environmental enforcement inconsistently, causing variations in penalties and numbers of enforcement

actions taken. Inconsistent enforcement can also lead to reduced

levels of environmental protection that put public health and the

environment at increased risk and to unfair treatment of industry

in cases where enforcement penalties are a function of locale

rather than conduct. The audit also disclosed that few State and

local delegated agencies used the economic benefit derived from

being out of compliance to determine penalty amounts, thereby

allowing violators an advantage over companies that had made the

expenditures to return to compliance with environmental laws.

OIG recommended that EPA work more closely with its regional

offices and State and local agencies to resolve these inconsistencies

and reinforce the importance of recovering the economic benefit

of noncompliance. (EPA)

Investigation of FBI

Laboratory

During FY 1997, OIG completed an 18-month investigation of

alleged wrongdoing and improper practices within certain sections

of the Federal Bureau of Investigation Laboratory. This investigation focused on some of the most significant cases handled by

DOJ, including the World Trade Center and Oklahoma City

bombing cases. Although the investigation did not substantiate
12 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

most allegations concerning the FBI Laboratory, the report made

40 recommendations, all accepted by the FBI, to enhance the

Laboratory’s performance, including recommendations that the

FBI continue to pursue Laboratory accreditation, restructure

certain sections of the Laboratory, change procedures for reporting results of scientific analyses, improve case documentation

practices, and institute a coordinated training program for examiners. Since the report was issued, OIG has continued to monitor

developments in the Laboratory and has worked with FBI managers to ensure the implementation of its recommendations for

Laboratory improvement. (DOJ)

OIG Discovers

Operational Disparities in

Federal Protective Service

(FPS)

In an FY 1997 study GSA’s OIG found that criminal investigators

of the FPS, which is responsible for law enforcement activities in

federal facilities, operate in a fragmented organization with

imbalanced staffing resources, disparate lines of authority, and

inconsistent approaches from region to region. The study concluded that the protection of federal employees and property is

potentially being compromised because regional criminal investigation activities are operating autonomously, with no program

accountability or measurable performance standards. Accordingly,

OIG issued recommendations to improve accountability by establishing a regional Special Agent-in-Charge position, eliminating

inconsistencies, setting measurable performance standards, emphasizing threat deterrence and clarifying the authority limits covering criminal investigations. (GSA)

OIG Monitors Tobacco

Sales in Military

Exchanges

An evaluation by the DOD OIG indicated that commissary and

military exchange pricing policies for tobacco products resulted in

prices up to 76 percent below commercial retail levels, thereby

encouraging consumption levels that conflicted directly with DOD

goals of a healthy military and reduced health care costs. OIG

analysis also disclosed that, while tobacco product sales in the DOD

retail system were running about $103 million annually, DOD’s

health care and lost productivity costs attributable to tobacco use

totaled about $930 million. As a result of the OIG inquiry, commissary prices were raised to the higher exchange price level, which

itself was subsequently increased during a 1-year test to determine

the impact of price changes on sales. DOD also banned sales to

minors and discouraged tobacco sales promotions. (DOD)

To maximize scarce dollars for science research and expand upon

science and engineering breakthroughs, NASA has concluded

international agreements to team with partners located all over the

world. Teaming, however, brings with it risks that OIG needs to

examine. For example, at the request of Congress, the NASA OIG

NASA International

Projects Examined
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 13

began looking into NASA’s participation in the Russian Mir Space

Station program. To date, three OIG reports have addressed

conditions aboard the Mir for the U.S. crews, post-mission debriefing activities, and timeliness of independent assessments of Space

Station activities. And, although international agreements pave the

way for more computer communications/information exchanges,

these exchanges also leave the Agency vulnerable to illegal systems

intrusions. The OIG investigations staff is therefore developing

the technical capability to detect, and subsequently prosecute,

violations associated with improper disclosure of advanced technology, intellectual property, and proprietary data. (NASA)

Steps to Improve and

Protect Federal Employees

Health Benefits Program

(FEHBP)

In FY 1997, OPM’s OIG continued to work closely with HHS to

protect the integrity of FEHBP by debarring health care providers

who have acted improperly or illegally. To meet the need for an

administrative sanctions capability to FEHBP and the health care

interests of its subscribers, OPM has used regulatory authority

derived from the Nonprocurement Debarment and Suspension

Common Rule to prevent providers who have previously been

excluded by the HHS OIG from participating in Medicare and

other programs under the Social Security Act. Since these providers have already been afforded due process opportunities by

HHS, OPM is able to accomplish the common rule debarments

with relatively brief notice and administrative review procedures.

This manner, with only a modest level of expenditure, gives

FEHBP and its subscribers greater protection, while meeting the

federal policy objective of giving debarments governmentwide

effect. (OPM)

Quality Improvement

Teams (QITs) and the

FEHBP

The QITs, partnerships between the OIG and OPM management

designed to identify and address high risk areas in agency internal

controls, continue to promote improvements in the agency’s

internal controls and financial management. One such team, in

collaboration with several FEHBP experience-rated carriers (ERC)

formed an ERCQIT to address the high risk areas in ERC financial reporting and audit requirements that had led to a disclaimer

of opinion in FY 1996 and FY 1997 FEHBP financial statements.

The ERCQIT produced and issued a draft FEHBP Experiencerated Carrier and Servicer Audit Guide, which details the financial

reporting and audit requirements that are expected to improve

controls over FEHBP financial statements. (OPM)

In auditing SBA’s “LowDoc” program, a new initiative designed to

greatly reduce the documentation required to apply for SBA

loans, OIG found that 13 out of 120 LowDoc loan applications

sampled were deficient and should not have been approved. OIG

Audit of SBA “LowDoc”

Program Reveals

Deficiencies
14 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

analysis revealed that the most common LowDoc deficiencies

involved the

• failure to perform IRS verifications and/or to reconcile

financial information;

• failure to require or document equity injections;

• improper use of loan proceeds or the failure to verify their

proper use; and

• failure to use joint payee checks to disburse loan proceeds

when required.

Based on these findings, OIG issued a set of recommendations

designed to improve the LowDoc program. (SBA)

NASA OIG Assesses

Information Technology

(IT) Vulnerabilities

Because NASA is a significant IT investor, spending more than a

billion dollars every year in technology, OIG has established an

ambitious plan to detect and minimize IT system vulnerabilities

and risks. Audit security reviews have been performed in several

data centers, while other audits included evaluations of NASA cost

studies in support of outsourcing laptops and workstations. OIG’s

Computer Crimes Unit, which investigates all forms of computer

crimes, works proactively with NASA’s Chief Information Officer to

exchange data and provide crosstraining on systems vulnerabilities.

OIG also performs inspections and assessments of information

security issues, covering the full spectrum of NASA’s security systems

and processes. (NASA)

OIG Finds Deficiencies in

Performance-Based

Contracting Incentives

During 1997, the Department of Energy (DOE) OIG reviewed cost

savings programs and DOE's development and administration of

performance-based contracts and the associated incentives used to

improve contractor performance. Reviews at the Richland Operations Office, the Rocky Flats Field Office, and the Nevada Operations Office revealed that some incentive fees were excessive in

relation to the cost of the work, other fees were paid for work

completed prior to establishment of the contract incentive, and, in

some cases, fees were paid for work that was either not completed or was easily achieved by the contractor. As a result, DOE

recovered approximately $2.5 million in fees and penalties for

work that was not performed and for incomplete work. DOE also

developed a corrective action plan to strengthen the organizational structure, processes, and criteria for administration of

performance-based incentives. (DOE)

OIG Audits National Park

Service (NPS) Housing

Costs

At congressional request, OIG audited costs incurred by NPS in

constructing high quality, energy-efficient homes for its employees

at Grand Canyon and Yosemite National Parks. The audit surveyed the average total costs to NPS of planning, designing, and
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 15

constructing 42 single-family houses and 34 apartments at these two

parks and found that they exceeded comparable costs in the local

private construction sector by as much as 100 percent. While the

Park Service attributed these disparities to the additional expenses

associated with improved energy efficiency, lower maintenance

costs, and greater durability, OIG formally recommended that it

meet its future housing needs in a more cost-effective way. (DOI)

An OIG evaluation revealed serious program and procurement

deficiencies in “CyberFile,” an online tax-filing system being

developed by NTIS for the Internal Revenue Service under an

interagency agreement. The inspection also found that “CyberFile”

planning was grossly inadequate and that its use of delivery order

contract and interagency agreements was both highly questionable in concept and circumvented federal statutes and regulations

in practice.

OIG also noted that NTIS was not clearing its interagency

agreements with Commerce’s General Counsel and that the agency

had undertaken expansionary activities based on an overly broad

interpretation of its legislative authority. The OIG evaluation also

concluded that NTIS efforts to consolidate and relocate its operations have been slow and costly. Accordingly, OIG issued recommendations to resolve these problems and improve NTIS operations. OIG also recommended that Commerce defer proceeding

with proposed legislation to convert NTIS to a performance-based

organization. (DOC)

National Technical

Information Service

(NTIS) Operations and

Procurement Deficiencies

in the CyberFile Project

In its continuing effort to address illegal immigration issues, an OIG

inspection found that the Immigration and Naturalization Service

(INS) did not have an effective enforcement program to identify,

apprehend, and remove overstays. Although the overstay population is estimated at about 2 million, with annual increases of

125,000, in FY 1996 only about 10,000 were apprehended and

about 5,000 deported. To improve INS oversight of nonimmigrant

overstays, OIG recommended that INS develop an internal enforcement strategy to cope with the growing overstay population and

remedy deficiencies found in the information system it uses to deal

with nonimmigrants. (DOJ)

Review of INS’

Monitoring of

Nonimmigrant Overstay

Three OIG reviews revealed important deficiencies in the State

Department’s visa programs and operations. An audit of the

machine-readable visa (MRV) program disclosed that, despite

significant improvements since OIG’s 1993 audit, serious problems

still exist, including the lack of electronic authentication for the

MRV at ports of entry, the inability of the name check system used

OIG Audits Reveal

Significant Visa

Shortcomings
16 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

at some posts to identify individuals ineligible to enter the United

States, and lax oversight and guidance on MRV equipment and

supplies. OIG also found that the Diversity Visa Program, which

provides for 55,000 visas to be issued annually to persons from low

admission regions and countries, is vulnerable to fraud because of

difficulties in verifying applicant eligibility and the ease of obtaining

fraudulent documentation. Finally, the immigrant visa process,

because of weaknesses in determining eligibility and problems in

sharing information and coordinating with the multiple agencies

involved in evaluating the applicant’s qualifications, may not

adequately protect against visas being issued to unqualified applicants. (DOS)

Overseas Inspections Find

Deficiencies in Security

Resources and Policy

Guidance

In the course of inspecting diplomatic missions in 27 countries

during FY 1997, State OIG found that officials in the U.S. Mission

in China charged with protecting national security information

lacked the resources to maintain secure working conditions,

including an ability to meet increasing demand for secure office

space within Embassy Beijing and in our Consulates General in

China. OIG field inspections also found that closures and downsizing of USAID and U.S. Information Service offices in Africa have

severely impeded U.S. ability to pursue important foreign policy

objectives in that region and that our embassies in Africa suffered from lack of adequate policy guidance. The OIG finding of

insufficient guidance caused concern among senior Department

officials and resulted in a concerted effort by the executive branch

to refocus attention on this critical region. (DOS)

OIG Tightens Collection

Procedures for Blue Cross

and Blue Shield (BCBS)

Insurance Premiums

OPM disburses FEHBP health insurance premiums to Blue Cross

and Blue Shield through a letter of credit (LOC). However, OIG

audits have found that, in recent years, participating plans have

not been complying with the requirements of the LOC account,

which specifies that draw downs from the account must be made

on a “checks presented” basis. OIG found, however, that funds

were being drawn from the LOC account several days in advance

of the checks clearing the bank accounts, causing FEHBP to lose a

substantial amount of investment income. OIG is now working

with OPM program officials and the BCBS Association to find a

mutually acceptable method of determining the amount of lost

investment income due the government as a result of the early

withdrawal of funds. In addition, OPM officials aggressively

moved to reassign the LOC account from the BCBS Association to

individual participating BCBS plans, thereby enhancing accountability for the proper management of the LOC accounts. (OPM)
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 17

During FY 1997, after a review of the Railroad Retirement

Board’s draft Strategic and Annual Performance plans, OIG

recommended that management include previous performance

agreements, customer service standards, and performance measures from annual financial statements in the final plan; RRB

management subsequently changed both plans to reflect these

concerns. The review, which concluded that the RRB’s Strategic

Plan meets the requirements of the Government Performance and

Results Act (GPRA), is the first of several reviews to monitor the

implementation of the strategic plan and the reporting of performance data. (RRB)

OIG Reviews Draft

Performance and Strategic

Plans

Loan Guarantee Purchase

Process Audited

Another OIG audit recommended centralizing the SBA loan

guarantee purchase process to eliminate the conflict inherent in

asking SBA district offices to act as both loan marketers and loan

regulators. The audit found that some of the purchase decisions

reviewed were inappropriate because of SBA errors. Others,

however, resulted from a leniency arising from the district offices’

conflicting roles of maintaining a positive working relationship

with lenders while, at the same time, monitoring their performance or even, if they violate SBA regulations, imposing sanctions

on them. (SBA)

Joint Audit Efforts With

General Accounting

Office

During FY 1997, OIG continued to work with officials from the

Department and the Treasury Bureaus to address major financial

management and internal control problems that inhibit the production of timely, reliable, and auditable information. At the same

time, OIG established close and effective working relationships on

audits with the GAO under a Memorandum of Understanding

(MOU) that maximizes the efficiency of the GAO, the OIG, and

the Department in meeting their joint audit objectives. The MOU

specifies the responsibilities of each organization, provides for

joint audit efforts, and establishes reciprocal review processes.

(Treasury)

At BEP’s request, OIG assessed the Bureau’s strategic planning

process and its consistency with the GPRA. While from an overall

perspective, OIG found BEP’s strategic planning process to be

consistent with GPRA, it also identified ways that planning could

be improved through better product forecasting, strengthening

links between tactical planning and goal accomplishment, bolstering BEP’s performance appraisal system, and better managerial

practices. (Treasury)

Planning Assistance to

Bureau of Engraving and

Printing (BEP)
18 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

During FY 1997, OIG focused its audit efforts on information

management systems, financial management systems, and implementation of requirements under the GPRA. OIG audits concluded that, while USAID continues to make progress toward

developing the plans, performance indicators, and performance

measurement systems needed to meet GPRA requirements, the

agency needs to implement an effective computer security program and increase its efforts to avoid the adverse effects of the

year 2000 problem. Further, USAID’s New Management System

had been deployed before technical problems were corrected,

disrupting USAID operations and increasing USAID’s vulnerability to fraud and abuse in its programs. OIG also found that

USAID’s financial management systems do not comply with the

federal financial management system requirements. (USAID)

OIG Analyzes USAID

Financial and Information

Management Systems

An OIG review of the Appalachian Regional Commission (ARC)

visa waiver program, which permits foreign physicians to practice

in medical shortage areas of Appalachia, found instances of

sponsor misuse of physicians and failure to perform the approved

medical specialty at the correct location. Actions taken in response

to OIG recommendations, which included increased review of

physician/sponsor eligibility, periodic monitoring, sponsor certifications of compliance, extension of physician waiver periods, and

sponsor debarments, have drastically reduced cases of program

abuse. (ARC)

Inquiry Identifies Visa

Abuses

Improvements in Equal

Employment Opportunity

Commission (EEOC)

Benefits Process

In FY 1997, EEOC’s OIG completed a nationwide review of

discrimination complaints that were closed as “withdrawals with

benefits,” i.e., withdrawn at the request of the complainant

because they had been satisfactorily resolved by the receipt of

monetary and/or nonmonetary benefits. The complaints surveyed

represented $88.6 million in benefits received by complainants.

The study found serious discrepancies between the values of

benefits as reported and those which could be supported by

documentation, leading OIG to project that $13 million, or 15

percent of the benefits reported as received by complainants, were

either inaccurate or unsupported. EEOC management agreed to

improve the benefit decision process by improving documentation

requirements and stepping up reviews to ensure data accuracy.

(EEOC)

Improvements in Federal

Communications

Commission (FCC) Funds

Collections

The FCC’s OIG continues to focus on remedying deficiencies in

the Commission’s system for collecting revenues from the spectrum auction program, which totaled $23 billion in FY 1997. OIG

worked closely with FCC’s Collections Steering Committee to

create a more timely, accurate, and reliable collections system,
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 19

including steps to analyze the existing system and identify more

cost efficient and effective alternatives. The Collections Steering

Committee supported OIG’s recommendations to obtain and

initiate implementation of a commercial, off-the-shelf collections

system in FY 1998. (FCC)

Federal Reserve OIG

Studies Travel Costs

In FY 1997, OIG evaluated the efficiency and effectiveness of the

Federal Reserve Board’s travel administration, proposing actions to

foster the design and implementation of an automated process. OIG

proposals included outsourcing the transportation reservation

process, maximizing the use of discount airfares and expanding the

government travel card program Boardwide. Streamlining FRB

procedures for authorizing travel, expense reconciliation, billing for

air and rail tickets, and collecting funds due also formed part of

these recommendations, which could result in cost savings of

$267,000 annually. (FRB)

OIG reviewed NSF’s logistical support for the Antarctic Program

operations and identified ways to improve its efficiency and cost

effectiveness. The U.S. Navy currently provides logistical support

services for the program, but, by the end of FY 1999, it will

relinquish support services in Christchurch, New Zealand, to

NSF’s prime contractor and turn flight operations over to the Air

National Guard. The OIG review identified and recommended

ways that the transfer of Antarctic Program support services can

be done more efficiently and cost effectively, with estimated

potential cost savings of $16 million over a 5-year period. A

review of the transfer of flight operations is currently under way.

(NSF)

OIG Examines National

Science Foundation (NSF)

Antarctic Program

During FY 1997, Smithsonian’s OIG, as part of its ongoing program of auditing and reviewing the National Collections, reviewed

collections management procedures at the National Museum of

American History, which has about 1.5 million artifacts, items,

and objects in its collections. OIG found that the Museum needed

to improve the methods used in inventorying and maintaining upto-date records of the collections because some records were

inaccurate. Museum staff were also not systematically following

up on objects and artifacts loaned to other museums. OIG therefore recommended that Museum officials improve their procedures for periodic inventories and update the status of collection

items, objects, and artifacts to ensure that records are accurate

and complete. (Smithsonian)

Smithsonian OIG Finds

Records Deficiencies
20 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

Helping Federal Agencies Improve

Financial Management

OIG Assesses Financial

Management

OIG audited the Department of Labor’s financial statements for

FY 1996, noting the continuing lack of audit assurance for tax

revenues for the Unemployment Trust Fund and the Black Lung

Disability Trust Fund which, as of September 30, 1996, owed the

U.S. Treasury more than $5 billion. These problems resulted from

issues related to the verification of data DOL received from other

Federal agencies. The OIG semiannual report raised concerns

about the continued solvency of the Trust Fund. DOL agreed that,

under current operating conditions, a change in the statutory

operating structure of the Trust Fund will be necessary to meet its

obligations. OIG’s report on internal controls also identified three

material weaknesses related to:

• the Wage and Hour Division’s Civil Money Penalties and Back

Wage systems;

• allowances for uncollectible accounts; and

• controls over user access and segregation of duties in certain

data processing systems. (DOL)

Excess Funding of

National Oceanic and

Atmospheric

Administration (NOAA)

Satellite Programs

OIG’s inspection of NOAA satellite funding in FY 1997 reviewed

how large balances of unspent NOAA funds had accumulated at

the National Aeronautics and Space Administration (NASA) and

how NOAA managers identify and report unspent funding. OIG

found that, in FYs 1994-96, NOAA received more funding than it

needed for the joint NOAA-NASA Polar-orbiting Operational

Environmental Satellite system because it failed to adjust its

budget requests to reflect slowed spending in the program and

inappropriately transferred ground systems funds to the Polar

Satellite account at NASA. OIG identified $101.3 million in

funds to be put to better use as a result of the excess funding

that had accumulated during those years. Excess funds represent

funding not needed to meet NASA current year or forward

funding requirements and therefore are available to support

other NOAA program needs or reduce NOAA’s future satellite

budget requests. OIG also identified an additional $79.3 million

in accumulated NOAA funds at NASA that exceeded the

amounts needed for NASA’s weather satellite work. NOAA’s

practice of sending funds to NASA went unquestioned for years

because NOAA lacks adequate financial controls to ensure the

efficient use of its budget authority. OIG took steps to prevent

such an accumulation of excess funds in the future. (DOC)
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 21

In FY 1997, OIG audited financial and procurement practices at

the International Law Enforcement Academy (ILEA) in Budapest, Hungary, which receives $11.2 million in federal funding.

While OIG was able to verify that funds were spent as intended,

the audit faulted both the American Embassy at Budapest and

ILEA management charged with oversight responsibilities for

using inappropriate procedures to obligate and expend ILEA

funding. OIG recommended that ILEA hire an experienced

financial assistant and take other steps to enhance controls over

these funds. (DOS)

Audit of the International

Law Enforcement

Academy (ILEA)

An OIG inquiry found that FAA grant managers did not routinely

or speedily review the status of funds remaining in airport improvement grants, often lacked the information needed to track

the progress of projects, and did not deobligate unneeded funds

promptly. As a result, an OIG review of 39 projects identified

more than $28 million in idle grant funds and $1.3 million in

unneeded funds. OIG recommended that FAA make deobligation

a regular part of the project financing process and that managers

get enough information about projects’ status to monitor them

effectively. FAA concurred with these findings. (DOT)

Federal Aviation

Administration (FAA)

Needs To Effectively

Close Out Airport Grants

OIG Stresses Improving

Financial Procedures

During FY 1997, the Corporation for National and Community

Service (CNS) OIG continued to work with CNS management to

improve the effectiveness of CNS financial management. A series

of OIG reports assessed the Corporation’s financial operations,

addressed significant deficiencies in its financial systems, analyzed

the documentation used to support CNS financial statements, and

examined material weaknesses in the management control structure. These reports produced over 125 recommendations to

improve the efficiency and effectiveness of the Corporation’s

financial operations and reduce vulnerability to fraud. A remedial

plan was put in place, many of the simpler issues were resolved

quickly, and a longer term plan for addressing the more complex

problems was established. (CNS)

To strengthen the Nuclear Regulatory Commission’s financial

management, OIG has emphasized the tasks required under the

Chief Financial Officers Act. Since the NRC is required by law to

collect approximately 100 percent of its budget through fee assessments, the agency is regarded as a commercial activity, making

NRC’s financial statements subject to audit. Based on joint efforts

by OIG and the agency, NRC has received, and continues to

retain, its unqualified opinion on its financial statements. NRC has

also taken corrective actions based on OIG recommendations to

improve its overall financial management. (NRC)

OIG Takes Steps to

Improve Financial

Management
22 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

Pursuant to the Government Management Reform Act of 1994, in

FY 1997 HHS prepared, and OIG audited, consolidated departmentwide financial statements. As part of this review, and for the

first time in the history of the Medicare program, a comprehensive, statistically valid sample of fee-for-service claims was taken.

The audit also noted insufficient documentation to support the

amounts reported in HCFA’s financial statements and in the

consolidated statements of the Department as a whole. In addition, the Department lacked important internal controls over

grants and had systemic weaknesses in several accounting controls.

Recognizing the benefits of audited financial statements, the

Department has made a commitment to achieving financial discipline and to ensuring accountability for federal dollars. OIG

believes that HHS has taken important first steps toward reaching

those goals. (HHS)

OIG Performs Audit of

Health Care Financing

Administration (HCFA)

Program

Amtrak OIG Identifies

Gaps in Financial

Controls

The Amtrak OIG found that, due to an internal control weakness,

$7.4 million of ticket revenues in the Corporation’s bank accounts

were neither earning investment income nor available for current

operations. Another audit revealed that Amtrak, through inefficient monitoring, had failed to realize $7.1 million in cost savings

from an information technology outsourcing agreement. OIG

recommended steps to remedy these situations and prevent a

recurrence. (Amtrak)
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 23

Preventing Fraud

Data Match Identifies

$109 Million In Excess

Pell Grant Awards

An OIG review of system controls over the student eligibility

process found that, for award year 1995-96, at least 102,000

students were overawarded approximately $109 million in federal

Pell Grants because they either failed to report or underreported

their income on their student aid applications. It also found that

almost 1,200 students illegally improved their Pell Grant eligibility

by falsely claiming to be veterans, thereby receiving over $1.9

million in grants to which they were not entitled. OIG therefore

recommended that the Department of Education compare reported income with Internal Revenue Service (IRS) computer

records and initiate a data-matching agreement with the Department of Veterans Affairs (VA) to verify the status of applicants

claiming to be veterans. IRS has advised OIG that it will seek

congressional authority for the match; similar arrangements with

the VA are in progress. (ED)

Joint Investigation to

Prevent Fraudulent

Acquisition of Bank

As a result of a case worked jointly with the FBI, Federal Deposit

Insurance Corporation OIG was able to protect a financially

troubled California bank from an attempt by an Israeli citizen and

two American security brokers to fraudulently acquire the institution. The Israeli citizen allegedly attempted to raise funds for the

purchase of the bank through an offering of certificates of deposit

(CDs) through a firm controlled by the two security brokers. The

CDs were offered, purportedly on behalf of the bank, at grossly

inflated prices in an attempt to obtain brokered deposits. In

response to the offering, the brokers allegedly collected more

than $7.5 million in a 2-day period, of which over $4.7 million

was wired to another California bank in an account held by the

Israeli’s attorney. The Israeli allegedly then intended to use a

portion of the funds to purchase the troubled institution, with the

remainder to be used for his personal benefit. Through coordination with Federal Deposit Insurance Corporation’s Division of

Supervision, the FDIC froze the funds and returned them to the

investors. The three involved in the scheme were indicted on

charges of wire fraud and aiding and abetting. (FDIC)

OIG Audit Finds Dual

Compensation Payments

During FY 1997 OIG audited VA procedures and controls to

identify veterans illegally receiving both VA compensation payments

and military reservist pay. The audit revealed that, in 90 percent of

the cases of active military reservists also receiving military reserve

pay, VA had failed to offset disability compensation payments.

The inquiry further established that dual compensation payments

of $21 million had been made between fiscal years 1993 and 1995
24 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

with an additional $8 million projected annually in subsequent

years. OIG concluded that these dual payments had occurred

because procedures established between VA and the DOD were

either ineffective or not fully implemented. OIG recommended

that VA and DOD improve their cross-check and other procedures

to eliminate these abuses. (VA)

OIG Focus on Pension

Fraud

During FY 1997, the Pension Benefit Guaranty Corporation OIG,

after learning that the Corporation was not systematically referring

pension fraud cases to their investigators, opened an investigation

into the agency’s reporting of checks that were cashed after a

pension plan participant’s death. Aside from an investigation that

has already resulted in a conviction, OIG has taken the initiative

to assist the agency in making systemic improvements, including

timely OIG notification of fraud and administrative followthrough on cases where fraudulently received amounts are not

accepted for prosecution. (PBGC)

The Government Printing Office’s OIG, in cooperation with the

Department of Labor, is participating in the Vice President’s Task

Force on Workers’ Compensation Fraud. The OIG audit and

investigative team currently has 13 active criminal investigations

and is also examining the administration and program controls of

the GPO worker’s compensation program, which provides benefits

of about $6 million annually. (GPO)

Investigating Worker’s

Compensation Fraud

Fraud Awareness

Briefings

The CNS OIG continued its Fraud Awareness Briefings for CNS

employees and grantee staff. Briefings designed for new employees were used to explain OIG’s purpose and function, while other

briefings for staff with oversight responsibilities focused on areas

where early intervention by program managers can identify

potentially fraudulent acts. Since initiating the briefings program,

OIG has noted positive changes in employee and grantee attitudes

about OIG’s role and, as witnessed by an upswing in hotline calls

and contacts, an increase in the reporting of possible cases of

fraud, waste, and abuse. (CNS)

CNS Fraud Prevention

Program

OIG’s Fraud Prevention Program combines investigation with

prevention. Information about weaknesses in internal controls and

other systemic conditions with the potential to encourage or

permit fraud is shared by OIG with CNS and grantee staff, as are

all OIG recommendations designed to reduce or eliminate that

potential. CNS managers are required to report back to OIG on

actions taken under this program. (CNS)
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 25

Coordinating the Fight Against Fraud; Coordinating the Fight Against Fraud;

Task Forces and Major Joint Investigations

FY 1997 saw the culmination of Operation “Restore Trust,” a

multistate project that targeted fraud, waste, and abuse in three

high-growth areas of the health care industry: home health,

nursing homes, and durable medical equipment. As the project’s

coordinator, OIG assembled multidisciplinary teams from within

its own organization, the Health Care Financing Administration,

the Administration on Aging, the State Medicaid agencies and

fraud control units, Department of Justice, and the State Attorneys

General offices. OIG also enlisted the support and participation of

the public and the industry by establishing a confidential hotline

to receive allegations of fraud and abuse. The success of “Restore

Trust,” which yielded $23 in identified overpayments for every $1

spent, was underscored by measures taken by the administration

and the Congress in response to OIG’s findings and recommendations. For example, largely as a result of OIG’s disclosure of

abusive practices in the home health industry, HHS suspended

certification of new home health agencies for participation in

Medicare to permit the introduction of program safeguards. In

another step to eliminate inappropriate expenditures, the Balanced

Budget Act of 1997 made fundamental changes in the way Medicare pays for home health services. The lessons of “Restore Trust”

were also incorporated in the Health Insurance Portability and

Accountability Act of 1996 (HIPAA), which enabled OIG, in

cooperation with other Federal, State, and local agencies, to further intensify and extend its antifraud efforts; in FY 1997, the

first year of HIPAA implementation, this collaborative effort

yielded a record $1.2 billion in judgments and settlements from

health care fraud cases. (HHS)

Fighting Health Care

Fraud and Abuse

Operation “Safe Home”

Fights Violent Crime,

Fraud, and Abuse

During FY 1997, OIG continued its strong support of, and participation in, Operation “Safe Home,” a program to combat violent

crime in public and assisted housing, fraud in public housing

administration, and equity skimming in multifamily insured

housing. OIG continues to work with law enforcement agencies on

all levels to identify and follow through on cases involving drugs

and crime, embezzlement, false claims, and illegal use of any

assets/income of HUD properties. During FY 1997, more than

3,000 arrests were made for violent crime and drug activities, and

in excess of $1 million in cash was seized. In the fraud area, a

contractor was sentenced for accepting $250,000 from a housing

authority and kicking back $100,000, even though he did not

work. And, in the multifamily equity skimming area, HUD repossessed a hospital after one of the owners admitted to diverting over
26 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

$6 million, which he used to make cash payments and no-interest

loans to himself. (HUD)

“Operation Talon” Nets

2,930 Fugitive Felons

“Operation Talon,” a nationwide law enforcement initiative led by

OIG, has resulted in the arrest of 2,930 fugitive felons, most of

whom were illegally receiving food stamps. Carried out in conjunction with other law enforcement agencies and State and local social

service agencies across the country, this ongoing initiative matches

felony fugitive files with food stamp recipient records, enabling

OIG agents and other law enforcement officers to apprehend the

fugitives. The operation has taken a significant number of dangerous and violent criminals off the streets, while saving millions in

taxpayer dollars. (USDA)

College Officials Plead

Guilty To Multiple Fraud

Charges

A joint investigation by the OIGs of the Departments of Education

and Interior, the IRS, and the FBI found evidence that, from

1991 to 1994, a total of $2.6 million dollars in federal funds was

embezzled from Oglala Lakota College (OLC), Kyle, South Dakota.

The investigation revealed that OLC checks were being written

and deposited into bank accounts of fictitious businesses and/or

companies that OLC did little if any business with. The embezzled

funds were used to purchase real estate, automobiles, drugs, art

work, and trips to Las Vegas for gambling and other entertainment. As a result of this investigation, OLC’s former vice president for business affairs, under a plea agreement, pled guilty to

conspiracy, theft of federal funds, theft from tribal organization,

money laundering, and asset forfeiture. Another participant in the

conspiracy pled guilty to conspiracy, theft of federal funds, theft

from tribal organization, money laundering, and criminal forfeiture. (ED)

Fighting Fraud in

Emergency Assistance

Programs

Because the Federal Emergency Management Agency (FEMA) is

responsible for coordinating the activities of all U.S. Government

agency responses to Presidentially declared disasters, its OIG has

taken the lead in establishing and directing task forces that

investigate fraud and misconduct associated with disaster activities. These task forces, which often include law enforcement

personnel from the Small Business Administration, Postal Service,

FBI, and other Federal agencies involved in disaster programs,

operate under the direction of the Assistant U.S. Attorney

responsible for criminal or civil prosecutions within the affected

area. The task forces also attempt to deter crime by publicizing

these fraud prevention efforts through the media and by encouraging citizens to report fraud to the task forces or the FEMA

OIG hotline. These task forces have made more than 130 arrests

and indictments, and recovered over $7 million. (FEMA)
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 27

OIG also continued its efforts to remove associates of organized

crime from some of the nation’s largest labor unions by working

closely with court-appointed monitors to remove corrupt officials

from unions and restore democratic representation for their

membership. One case involved Hotel Employees and Restaurant

Employees Local 54, which, following the OIG investigation, was

placed under monitorship after a civil RICO action was filed by

the Federal Government. The monitorship has since been dissolved and the union returned to control of its members. OIG

investigations also helped the court-appointed monitor of the

Teamsters Local 282 to remove four individuals from the union for

their association with the Gambino organized crime family. (DOL)

Racketeer Influenced and

Corrupt Organizations

(RICO) Act Actions

“Operation Badfellas”

Produces Arrests and

Convictions

A multiagency undercover investigation, “Operation Badfellas,”

conducted by the Department of Justice OIG in cooperation with

the Bureau of Prisons (BOP), and the FBI/New York Police Department Organized Crime Task Force, resulted in the arrest of 11

current or former BOP correctional officers, 6 inmates, and 8

civilians. The investigation revealed that the correctional officers

had accepted bribes to allow the smuggling of drugs, food, and

other contraband into the prison, moving organized crime inmates

to facilitate “mob business,” permitting unauthorized visits, providing access to BOP computer systems, and switching urine samples in

order to defeat random drug tests. During FY 1997, 15 defendants,

including 5 correctional officers, pled guilty; another 8 await trial,

and 2 have been acquitted. Three defendants have received sentences ranging from 6 months’ incarceration and 36 months’

supervised release to 87 months’ incarceration and 60 months’

supervised release. (DOJ)

Eleven Convicted In

Massive Fraud Scheme

OIG participated in a multiagency investigation of a massive

student loan, IRS tax, and Department of Housing and Urban

Development (HUD) benefits fraud scheme, which involved bribing Social Security Administration (SSA) and California Department of Motor Vehicles employees to obtain fraudulent Social

Security numbers and drivers licenses. These bogus documents

were then used to support over 30 applications for federal Parent

Loans for Undergraduate Students loans on behalf of individuals

who were not attending the college, federal tax returns and

applications for HUD housing benefits. As a result of this investigation, eleven people pled guilty or were convicted during a

federal criminal trial. (ED)

Joint Investigation Finds

Theft of Government

Property

As the result of a joint investigation by the General Services

Administration (GSA), Defense Criminal Investigative Service,

Department of Transportation, and the FBI, three government

officials were given sentences ranging from 18 months in prison
28 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

and restitution of $277,000 to 3 years’ probation for removing

property with an acquisition cost of $1,034,000 from a federal

surplus property site. Approximately $500,000 of the stolen

property has been recovered. (GSA)

OIG Investigation of

Professional

Misrepresentation and

Fraud

A joint investigation by the OIGs of Interior and Labor revealed

that the president of a Colorado environmental engineering and

consulting firm had, by misrepresenting his academic qualifications to provide mine safety training to underground miners,

issued bogus training certifications to numerous employees of

private companies and of the U.S. Geological Survey. As a result

of this joint investigation, the company official was charged with

making false certifications, a federal offense. After fleeing to avoid

prosecution, the company official pled guilty to that charge and

was sentenced to 21 months’ imprisonment and 2 years of probation. He and his company were also barred from participating in

all federal procurement and nonprocurement programs for 15

years. (DOI)

Investigation Finds

Indian Officials Engaged

in Corruption

OIG and the U.S. Attorney’s Office, District of Minnesota, jointly

investigated allegations of federal program fraud, civil rights

violations related to election fraud, bribery, embezzlement of tribal

funds, and other corrupt activities by elected officials of a Minnesota Indian tribe. The investigation focused on the tribe’s construction of a gaming casino and the award of a $2.8-million

construction subcontract to a company owned by the tribal councilman and retaining the tribal chairman as a silent partner. The

investigation resulted in the indictment and conviction of the

chairman of the tribe, its secretary/treasurer, and the tribal councilman, who received sentences totaling 134 months’ imprisonment

and 108 months’ probation and were ordered to make payments

of $67,000 and $844,000 in fines and restitution respectively.

(DOI)

Following a joint OIG and Postal Inspection Service investigation,

three college instructors were indicted for their roles in the

fraudulent payment of VA educational assistance benefits to

veterans enrolled at a community college. This 3-year investigation

disclosed that, from 1988 to 1995, more than 300 student veterans

had received over $3.8 million in benefits without attending

regular classes by paying kickbacks of up to $200 per student each

semester. As a result of the investigation, the VA announced

administrative sanctions against the college and a program of

frequent, onsite compliance inspections. In a collateral action, the

U.S. Attorney’s Office has recovered $370,000 in restitution and

efforts to recover additional funds are continuing. (VA)

Interagency Investigation

Reveals VA Benefits

Fraud
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 29

Significant Fraud Recoveries

OIG has broadened its fraud-fighting efforts to include more

emphasis on civil remedies, an approach which has proven highly

effective in fighting abuses perpetrated by large corporations and

other schemes involving health care related services. In FY 1997,

the 1,255 civil actions resulting from OIG’s efforts yielded more

than $1 billion, greatly exceeding both the number of actions and

dollar amounts recorded in any previous year for civil judgments

and settlements. One of the most productive initiatives targeted

marketing and billing practices of the nation’s largest independent

laboratories. In coordination with DOJ and other law enforcement

agencies, OIG found a common abuse in which profiles ordered

by physicians and other tests performed in a single automated

analysis were “unbundled” to obtain higher Medicare reimbursement. Three major laboratories agreed to settlements of $642

million to resolve this liability under the False Claims Act for this

practice. The success of the cases resulted in two salutary movements: a series of qui tam actions against other laboratories for

similar violations, and a project that was initiated targeting hospital laboratories that both unbundled and double billed tests. The

latter project has thus far resulted in settlements with 40 hospitals

for recoveries of more than $10.7 million. (HHS)

HHS Recovers $1 Billion

in Health Care Fraud

Funds

Multiagency Investigation

Reveals Laboratory Fraud

An investigation by the OIGs of DOD and five other agencies

resulted in a laboratory agreeing to pay $325 million to resolve

issues of civil false claims to Medicare, Civilian Health and

Medical Program of the Uniformed Services (CHAMPUS), and

other Federal and State health care programs. The issues

concerned greatly inflated insurance billings through unbundling of clinical test profiles, e.g., inflating reimbursement by

billing multiple laboratory procedures separately rather than

jointly. The laboratory was also found to have fabricated test

codes and double billed for tests not actually performed. (DOD)

An OIG investigation found that a senior quality inspector at a

major DOD contractor had falsified inspection records, directed

others to falsify records, and knowingly caused defective equipment to be provided to the Department of Defense. The equipment affected approximately 3,000 critical flight parts used by the

military. The inspector was fined and sentenced to prison. The

contractor pled guilty and was fined $18.5 million in addition to a

civil settlement of $88 million. (DOD)

Department of Defense

OIG Finds Aircraft Parts

Fraud
30 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

An OIG investigation completed in FY 1997 examined fraud

related to the export of commodities to Iraq through USDA

export credit guarantee programs. The Government of Iraq, with

the help of guaranteed loans obtained through these programs,

was able to import various commodities from the United States;

however, after invading Kuwait, Iraq began to default on the

loans. In FY 1997, these investigations culminated in a global

settlement between the U.S. Government, a prominent international grain company in New York, and the company’s foreign

affiliate. The grain company paid $25 million to the U.S. Government in settlement of any potential civil claims, while its affiliate

paid a $10-million fine after pleading guilty to a criminal charge

of conspiracy to defraud USDA. Three associated entities agreed

to permanent debarment from federal programs. (USDA)

$35-Million Settlement for

Export Program

Violations

In FY 1997 the Department of Veterans Affairs OIG recovered,

from various contractors, over $32 million in overcharges on

Federal Supply Schedule (FSS) contracts. These recovered funds

were the subject of 15 audit reports and a number of settlement

agreements stemming from the contractor’s noncompliance with

the defective pricing and price reduction provisions contained in

their contracts, or overcharges resulting from computational

errors in their Public Law 102-585, (Veterans Healthcare Act of

1992) prices. As a result of one investigation conducted jointly

with the Department of Justice, one contractor paid VA $22.1

million, the largest FSS program settlement in VA’s history. (VA)

$32 Million in Contractor

Overcharges Recovered

Investigations of

Environmental Protection

Agency (EPA) Contracts

Result in Indictments and

Settlements

In FY 1997, OIG investigated high cost program and administrative areas such as assistance agreements and contracts, with special

emphasis on removals and remediation at Superfund cleanup sites

and environmental programs and employees with the potential to

undermine the integrity of the EPA and/or the public trust in its

ability to carry out its mission to protect public health and safety.

During FY 1997, OIG’s investigations produced 20 criminal

indictments, informations, and criminal complaints; 10 convictions

and guilty pleas; $4 million in total settlements, recoveries, fines

and restitutions; and 36 suspensions, debarments, and other

actions. OIG investigations also identified various systemic vulnerabilities that resulted in program improvements. (EPA)

Investigations of Small

Business Administration

(SBA) Loan Discrepancies

and Fraud

In FY 1997 OIG focused on preventing and detecting waste,

fraud, and abuse by monitoring SBA policies and procedures and

cooperating with other federal programs and entities. OIG's

ongoing program of verifying all federal tax information submitted in support of SBA loan applications with the IRS resulted in
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 31

denial of about $4 million in potential loans because of significant

tax information discrepancies. In another instance, OIG used the

Department of Justice’s Affirmative Civil Enforcement program,

which targets for civil action fraud cases that might not be prosecuted criminally, to achieve more than $2.9 million in recoveries

and fines. (SBA)

OIG Looks at “Work for

Others” Program

After an earlier review revealed possible fraud, OIG investigated

the “Work for Others” program at a DOE national laboratory in

California, which permits other Federal agencies and commercial

entities the use of unique laboratory capabilities. An investigation

of discrepancies among program cost accounts revealed that the

laboratory contractor wrongly assessed costs associated with certain

program customers to avoid cost overruns and compensate for

mismanagement of the program. Coordination with the U.S.

Attorney’s Office resulted in the contractor reimbursing DOE over

$2.9 million in FY 1997. This investigation has led to closer

scrutiny of the “Work for Others” program and has enhanced

DOE’s ability to guard against future abuses and losses in this

area. (DOE)

Excessive Expenses

Found and Recovered

In August 1997, DOE recouped $11.7 million, plus $2.2 million in

interest, from Westinghouse Savannah River Corporation as

reimbursement for excessive relocation and travel expenses paid to

employees of Westinghouse and another DOE contractor. The OIG

auditor who had originally identified the unallowable costs was

awarded the Department’s Exceptional Service Award for his

outstanding work with Departments of Energy and Justice attorneys

in pursuing the government’s claims. (DOE)

$2.4-Million Settlement

Reached

Following one OIG investigation, an EPA contractor, CDM Federal

Programs Corporation, agreed to a $2.4-million administrative

settlement connected with the $8-million cleanup of the asbestos

dump site in Meyersville, New Jersey. After completion of the

cleanup, OIG investigated allegations that, instead of replacing the

asbestos-contaminated soil with clean fill, CDM used soil that had

been obtained from a hazardous waste site. After examining the

soil, EPA concluded that it did not meet the contract specifications

because it contained debris and chemical contaminates at levels not

acceptable for use at the site. The agreement requires CDM to pay

up to $2.4 million in cleanup costs for the removal and disposal of

the defective backfill, the installment of clean fill, and the performance of any additional asbestos work at the site. (EPA)
32 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

The importance of the work done by the FDIC OIG in auditing

legal fee bills was underscored in FY 1997 when the managing

partner of a Manhattan-based law firm was successfully prosecuted

for defrauding the Resolution Trust Corporation (RTC) and FDIC.

The firm, which had served as outside counsel for both agencies,

had been the subject of one of the 236 legal fee bill audits conducted by the RTC and FDIC OIGs that have questioned millions

of dollars related to fees that were not adequately supported with

original time records. The investigation of the managing partner

disclosed that he had defrauded the two agencies of approximately $1.4 million in an overbilling scheme. As part of the

scheme, the managing partner altered original time records, then

attempted to cover up his actions during the OIG audit by destroying records and by instructing others to make false statements to the auditors. As a result of the investigation, conducted

with OIG assistance by the FBI and the U.S. Attorney’s Office for

the Southern District of New York, the managing partner pleaded

guilty to criminal charges of mail fraud, false claims, false statements, and obstructing a Federal OIG audit. The managing

partner and the successor law firm also agreed to pay over $2.9

million to settle the government’s potential civil claims arising

from the false billing. The circumstances of this case dramatically

illustrate the potential for serious risks that the Federal Government faces in its contracts with outside counsel and the critical

need for strong oversight and strict controls over billings submitted by firms conducting business on behalf of the government.

(FDIC)

Legal Fee Bill Audit and

Investigation Lead to

Guilty Plea and $2.9-

Million Settlement

Investigation into

Concealed Assets Results

in Successful Prosecution

Working with a task force established by the U.S. Attorney’s Office

in the District of Massachusetts to locate hidden assets of those

failing to satisfy their criminal or civil financial penalties, OIG

made significant progress in pursuing individuals who fail to pay

their court-ordered restitution. The first such investigation began

after an FDIC attorney reported suspicions that three convicted

felons were concealing their assets and lying to probation officials

about their financial ability to pay combined restitution of $1.5

million to FDIC after their conviction for defrauding a Massachusetts bank. After their release from prison, the three men paid

less than 2 percent of the restitution owed to FDIC over their 2-

year probationary period, claiming to their probation officers that

they were indigent. The investigation, however, found that, while

on probation, the men in fact lived lavish life-styles and transferred millions in assets to their wives and numerous corporations

they controlled. Based on evidence developed by the OIG investigation, a judge in U.S. District Court, District of Massachusetts,

found that the men could have made restitution in full during

their 2 years of supervised release, but had instead conspired to
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 33

hide their assets. A subsequent civil proceeding to seize their assets

to prevent funds from being diverted or drained resulted in

payment of $1.1 million in restitution to FDIC. (FDIC)

GSA OIG Recovers $5.1

Million in Overcharges

In FY 1997, a company that sells office furniture to the government

made a final payment of $2.3 million to resolve its potential civil

False Claims Act liability. The payment brought the total paid by

the company to $5.1 million for overcharging federal customers

between 1987 and 1993 by failing to offer the government the same

reductions in price it had offered its dealers, as required under the

contracts. OIG also found that the company had received rebates or

discounts from freight companies which the company did not pass

on to its government customers, resulting in overcharges to the

government. (GSA)

Bogus Per Diem Claims

and Environmental

Crimes

Investigations conducted by the Tennessee Valley Authority’s OIG,

in some instances with the cooperation of the FBI, revealed that a

number of TVA contractors’ employees had submitted fraudulent

per diem for temporary living expense claims. These investigations

led to realized or potential recoveries to TVA of more than

$379,700 during 1997. OIG also joined the FBI, DOE, EPA and

agencies of the State of Tennessee in forming an Environmental

Crimes Joint Task Force, aimed at enhancing law enforcement

efforts to identify and prosecute those committing environmental

crimes in eastern Tennessee. (TVA)

Civil Suit Leads to

$245,000 Reimbursement

OIG found that a former USAID contractor had illicitly received

advance payments by inflating its invoices for equipment shipped

early in the life of the contract. The company agreed to settle a civil

suit brought against it in the U.S. District Court, District of Columbia by paying $245,000 to reimburse the government for lost

interest on unallowable advance payments. (USAID)

Supplier Fraud Settlement

Reached

An OIG investigation resulted in a civil suit charging that one

USAID supplier had filed false and inaccurate invoices and shipping documents to obtain payments for materials that had not

been shipped. The settlement agreement reached in this case

required the company and its president to pay the U.S. Government $50,000; the defendants also were barred from government

contracting for five years. (USAID)
34 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

OIG Fraud Investigations

During FY 1997, OIG contributed to the government’s effort to

reduce the influence of organized crime and labor racketeering in

unions and the workplace. OIG successfully identified, targeted,

and investigated cases involving investment brokers and plan

administrators who have ties to organized crime and who abuse or

defraud union pension funds. Accomplishments in this area included the conviction of four individuals who were trustees, advisers or service providers to the Teamsters Local 875 Pension Fund in

New York. The four engaged in a scheme to temporarily divert

pension assets to invest in an offshore, lucrative but high risk

investment scheme, which lost approximately $10 million of the

pension fund’s $30 million when offshore investors stole the

money. (DOL)

OIG Finds Criminal

Involvement in Employee

Benefits and Pension

Plans

In its FY 1997 reviews of sponsors administering CACFP, OIG

continued to find widespread problems, including serious deficiencies in their administration of the program and some cases of

program fraud. OIG also found unsafe or unsanitary conditions

and licensing violations at some day care homes; these were

reported to local health or licensing authorities. Of the original 12

sponsors reviewed, OIG is conducting criminal investigations on 4;

24 additional investigations are ongoing in 12 states. In one case,

OIG obtained four convictions of a husband and wife who owned

and operated a sponsoring organization and of another couple

who ran the day-to-day operations for them. All four were

charged with defrauding the program of approximately $2.3

million by submitting inflated budgets and by diverting CACFP

funds to themselves. One couple received prison sentences of 3

and 2 years and paid $2.2 million in restitution; the other couple

was sentenced to 7 months each and ordered to pay a total of

$60,000 in restitution. Also, the government has seized four

residential and commercial properties valued in excess of $2

million that were fraudulently acquired by the subjects. These

problems led OIG to launch a national initiative to identify abusive

CACFP sponsors that will include “sweeps” of sponsors and providers by OIG auditors and investigators with the assistance of

USDA Food and Nutrition Service and State agency personnel.

Sponsors found to be abusing the program will be removed from

sponsorship; ineligible payments will be recovered; and, if warranted, prosecutions will be sought. (USDA)

Abuse and Deficient

Management Found in

Child and Adult Care

Food Program (CACFP)
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 35

OIG investigates and forwards for prosecution cases of those who

use the Social Security number (SSN) card for fraudulent purposes such as the practice of counterfeiting the SSN card, obtaining SSN cards through false information, and using the card to

obtain benefits and services fraudulently from government agencies, credit card companies, etc. In one case, OIG found that one

applicant, Howard T. Porter, by submitting counterfeit birth

certificates and other documentation, had obtained over 1,300

fraudulent SSNs. In FY 1997, Porter was arrested and charged in

a 16-count federal indictment with conspiracy and knowingly

submitting false information to obtain SSNs, while a collateral

investigations by California Department of Motor Vehicle Investigators determined that 250 persons, using names and bogus

SSNs obtained by Porter, had received California drivers licenses,

thereby assuming new identities. Another investigation by the

U.S. Secret Service determined that two other persons, also

employing names and false SSNs obtained from Porter, were

currently in federal prison for using fictitious names to carry out

credit card fraud exceeding $7 million. The Secret Service also

identified approximately 60 other credit card fraud suspects who,

using names and SSNs obtained by Porter, had committed credit

card fraud exceeding $20 million. (SSA)

Bogus Social Security

Documentation and Credit

Card Fraud

Cannibalized Plane Parts

Tracked; Traffickers

Prosecuted

OIG, acting on information supplied through FAA’s Suspected

Unapproved Parts Notification Program, determined that an

Illinois-based aviation parts broker had purchased parts from a

British Airways 747 damaged beyond further use by Iraqi forces

during the Persian Gulf war. Although British Airways had submitted an insurance claim for this plane and its insurer had

ordered the aircraft to be dismantled and destroyed, parts of its

engines were obtained by an unlicensed parts broker who shipped

them to the United States using false Customs declarations. The

parts were later resold and installed in other aircraft. As a result

of OIG’s investigation, the parts broker and a Kuwaiti national

both pleaded guilty to mail fraud and the unapproved parts were

removed from the aircraft in which they had been reinstalled.

(DOT)

Operation “Border Vigil”

Uncovers Fraudulent

Payments

“Border Vigil” is designed to identify and resolve situations where

aliens and citizens are illegally receiving Supplemental Security

Income (SSI) payments for which they are unqualified by residency requirements. For example, a pilot “Border Vigil” program

in El Paso, Texas, found that more than 7 percent of SSI recipients were not residents of the United States, while in Niagara

Falls, New York, almost 10 percent of all recipients were fraudulently collecting SSI benefits. Given the hundreds of thousands of
36 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

SSI recipients in border areas, these pilot program samples

demonstrate the likelihood of substantial fraud. As a result of

these initial surveys, during FY 1997, SSA’s El Paso office

stopped payments to 156 unqualified recipients and identified

$1.6 million in fraudulent payments. (SSA)

An OIG audit found that not all prisoners in correctional facilities,

who are not entitled to receive SSA benefits during their incarceration, were being identified in a timely manner, or at all, by

SSA. As a result, SSA initiated aggressive efforts to terminate

benefit payments to incarcerated recipients and arranged for the

Federal Bureau of Prisons, all State prisons, and more than 3,500

local facilities to report prisoner data to SSA in a timely manner.

SSA’s actuary estimates that initiatives resulting from OIG’s audit

work on prisoner benefits will save SSA around $3.4 billion over 7

years, of which about $480 million was saved during 1997. (SSA)

OIG Identifies Social

Security Payments to

Prisoners
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 37

Summaries of Statistical Accomplishments

The tables on the following pages demonstrate the impact of OIG

audits and inspections. The tables summarize key statistical accomplishments reported in individual IG semiannual reports to the

Congress for the 6-month periods ending March 31 and September 30, 1997. The statistical accomplishments relate to recommendations that funds be put to better use, management decisions on

recommendations that funds be put to better use, questioned costs,

and management decisions on questioned costs.

Audits and Inspections Recommendations That Funds

Be Put to Better Use

The IG Act defines a recommendation that funds be put to better

use as “a recommendation by the Office that funds could be used

more efficiently if management of an establishment took actions

to implement and complete the recommendation, including

(A) reductions in outlays; (B) deobligations of funds from programs or operations; (C) withdrawal of interest subsidy costs on

loans or loan guarantees, insurance, or bonds; (D) costs not

incurred by implementing recommended improvements related

to the operations of the establishment, a contractor, or grantee;

(E) avoidance of unnecessary expenditures noted in preaward

reviews of contract or grant agreements; or (F) any other savings

which are specifically identified.”

Table I (pp. 38-39) summarizes the statistical accomplishments

of the OIGs for FY 1997. PCIE member audits recommended

that about $24 billion be put to better use; ECIE member audits

recommended that about $454 million be put to better use.

Management Decisions on Recommendations

That Funds Be Put to Better Use

Table II (pp. 40-41) reports on the status of FY 1997 management decisions on OIG audit recommendations that funds be put

to better use. PCIE managers agreed with about $15 billion in

recommendations that funds be put to better use; ECIE entity

managers agreed with about $352 million in recommendations

that funds be put to better use.
38 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

Table I.

PCIE — Recommendations that Funds Be Put to Better Use

Entity OIG DCAA1 Total

ACDA - - -

CNS - - -

DOC2 342,095,634 1,237,342 343,332,976

DOD 3,230,197,000 3,954,859,771 7,185,056,771

DOE3 272,452,399 - 272,452,399

DOI4 70,272,591 2,816,802 73,089,393

DOJ 69,503,010 - 69,503,010

DOL5 28,893,468 - 28,893,468

DOS 4,536,330 4,536,330

DOT 115,778,000 - 115,778,000

ED 141,793,546 - 141,793,546

EPA - 1,443,000 1,443,000

FDIC 17,027 - 17,027

FEMA 238,616,413 - 238,616,413

GSA 81,294,164 62,443 81,356,607

HHS6 3,416,267,000 - 3,416,267,000

HUD 4,741,000 - 4,741,000

NASA7 5,537,434,156 - 5,537,434,156

NRC - 41,133 41,133

OPM 85,800 - 85,800

RRB - - -

SBA8 46,000,991 - 46,000,991

SSA 699,500,000 - 699,500,000

Treasury9 104,898,000 25,806,000 130,704,000

USAID 89,264,000 - 89,264,000

USDA 5,426,480,354 2,833,509 5,429,313,863

USIA 711,000 711,000

VA10 200,400,000 17,000,000 217,400,000

TOTALS $ 20,121,231,883 $ 4,006,100,000 $ 24,127,331,883

1 Defense Contract Audit Agency

2

 DOC - Includes Inspection results.

3

 DOE - $269,667,259 from Audits, $2,785,140 from Inspections.

4

 DOI - Includes $12,903,153 for Indirect Cost Proposals Negotiated by OIG.

5

 DOL - $23,879,194 from Audits, $5,014,274 from Inspections.

6

 HHS - Includes Inspection results.

7

 NASA - For semiannual period 10/96-3/97: $7.6 million from Audits, $3.6 million from Investigations.

- For semiannual period 4/97-9/97: $5.5 billion from Audits, $20.6 million from Investigations.

- Total FY 1997 from Investigations: $24.2 million.

8

 SBA - Includes cost avoidances in the amount of $31,590,118 from Investigations.

9

 Treasury - Includes $76,847,000 from IRS Inspection Service.

10 VA - Includes $13.9 million from Investigations.
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 39

Table I.

ECIE — Recommendations that Funds

Be Put to Better Use

Entity Total

Appalachian Regional Commission (ARC) $ 1,012,000

Corporation for Public Broadcasting (CPB) 70,000

Federal Labor Relations Authority (FLRA) 3,630

Federal Reserve Board (FRB) 267,000

Federal Trade Commission (FTC) 732,000

National Railroad Passenger Corp. (NRPC1) 10,520,361

National Science Foundation (NSF) 124,176,453

Peace Corps (PC) 30,000

Smithsonian Institution (SI) 615,711

Tennessee Valley Authority (TVA) 12,256,301

U.S. Postal Service (USPS)2 304,858,952

TOTAL $ 454,542,408

1 Amtrak

2 Figures reflect both work done directly by the U.S. Postal Service

Office of Inspector General and by U.S. Postal Service audit and

investigation units under the oversight of the OIG.
40 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

Table II.

PCIE - Management Decisions on Recommendations

that Funds Be Put to Better Use

No Mgmt. Dec. Recs. Issued Recs. Agreed Recs. Not Agreed No Mgmt. Dec.

Entity Start FY 1997 in FY 1997 to by Mgmt. to by Mgmt. End FY 1997

ACDA $ - $ - $ - $ - $ -

CNS - - - - -

DOC 127,231,979 146,142,219 181,464,269 43,294,301 47,760,278

DOD 12,853,385,000 7,236,297,000 4,214,125,000 5,143,868,000 10,731,689,000

DOE 370,858,822 269,667,259 95,821,4121 356,163,572 191,326,2372

DOI 450,678,489 73,089,393 151,553,941 2,601,387 369,612,554

DOJ 15,327,970 69,503,010 63,327,679 14,000,000 7,503,301

DOL 55,054,4443 24,223,4684 5,784,1055 47,932 73,445,875

DOS 1,605,900 4,536,330 1,586,708 19,192 4,526,330

DOT 149,491,000 115,778,000 174,276,000 13,157,000 77,836,000

ED 49,003,000 141,793,546 116,708,884 50,980,110 23,106,552

EPA6 56,644,562 1,443,000 6,154,935 31,965,185 5,381,970

FDIC - 17,027 17,027 - -

FEMA 392,641 238,616,413 7,546,973 392,641 231,069,440

GSA7 180,689,774 81,356,607 246,789,158 15,447 15,266,298

HHS8 180,574,000 3,416,267,000 3,424,053,000 113,000 172,675,000

HUD 1,011,000 4,741,000 1,455,000 285,000 4,013,000

NASA 133,161,501 5,513,248,699 5,561,295,169 43,000 85,072,033

NRC - 41,133 41,133 - -

OPM - 85,500 - 85,500 -

RRB - - - - -

SBA 325,000 14,410,873 5,370,719 - 9,365,154

SSA - 699,500,0009 535,700,000 143,400,000 20,400,000

Treasury 30,928,000 130,704,00010 86,798,000 4,808,000 70,026,000

USAID 13,386,00011 90,753,000 17,209,000 8,834,000 78,097,000

USDA 1,352,782,780 5,429,313,863 267,432,995 2,466,021 6,512,295,693

USIA - 711,000 10,000 - 701,000

VA 38,200,000 203,500,000 124,000,000 14,900,000 102,800,000

TOTALS $15,999,599,695 $23,905,739,280 $15,227,388,938 $5,831,469,288 $18,833,968,715

1

 DOE - Includes $2,785,140 from Inspections.

2 DOE - The figure for this dollar item includes sums for which management decisions on the savings were deferred.

3 DOL - Includes $4,670,000 from Inspections.

4

 DOL - Includes $344,274 from Inspections.

5 DOL - Includes $5,014,274 from Inspections, $769,831 from Audits.

6

 EPA - Dollar value of nonawards or unsuccessful bidders, $14,585,472.

7

 GSA - No management decision of $24,522 which resulted from prior period adjustments.

8

 HHS - Includes results of Inspections.

9

 SSA - This dollar amount has been modified due to developments that occurred after issuance of OIG's reports

entitled Effectiveness in Obtaining Records to Identify Prisoners (A-01-9402004, 5/10/96) and Effectiveness

of the Social Security Administration's Procedures to Process Prisoner Information, Suspend Payments and

Collect Overpayments (A-01-96-61083, 6/24/97). SSA's Chief Actuary estimated a cost avoidance of about

$3.4 billion over 7 years, with $480 million to be realized in 1997. 10Treasury - Includes four IRS Inspection Service Reports with dollar value of recommendations totaling $76,847,000.

11USAID - The ending balance at 9/30/96 ($13,355,732) was increased by $49,950 to reflect the increase in the amount of

a recommendation contained in one report.
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 41

Table II.

ECIE — Management Decisions on Recommendations

that Funds Be Put to Better Use

No Mgmt. Dec. Recs. Issued Recs. Agreed Recs. Not Agreed No Mgmt. Dec.

Entity Start FY 1997 in FY 1997 to by Mgmt. to by Mgmt. End FY 1997

ARC $ 0 $ 1,012,000 $ 634,000 $ 378,000 $ 0

CPB 0 70,000 0 0 70,000

FLRA 0 3,630 3,630 0 0

FRB 0 267,000 0 0 267,000

FTC 0 732,000 732,000 0 0

GPO1 4,619,898 0 4,619,898 0 0

NEH2 16,000 0 16,000 0 0

NRPC 0 10,520,361 2,200,890 113,300 8,206,171

NSF 37,385,100 124,176,453 31,212,565 25,462,992 104,885,996

PC 0 30,000 0 0 30,000

SI 565,898 615,711 640,397 541,212 0

TVA 3,693,411 12,256,301 10,968,861 192,100 4,788,751

USPS3 75,657,740 304,858,952 301,181,783 0 79,334,909

TOTALS $ 121,938,047 $ 454,542,408 $ 352,210,024 $ 26, 687,604 $ 197,582,827

1

 Government Printing Office

2

 National Endowment for the Humanities

3 Figures reflect both work done directly by the U.S. Postal Service Office of Inspector General and by

U.S. Postal Service audit and investigation units under the oversight of the OIG.
42 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

Table III.

PCIE — Questioned Costs

Entity OIG DCAA Total

ACDA - - -

CNS 2,024,000 - 2,024,000

DOC 13,655,570 - 13,655,570

DOD - 1,946,393,196 1,946,393,196

DOE 2,631,8701 - 2,631,870

DOI 9,374,1782 8,161,816 17,535,994

DOJ 30,571,227 - 30,571,227

DOL 26,300,572 - 26,300,572

DOS 1,504,170 1,504,170

DOT 26,591,000 - 26,591,000

ED 17,074,024 - 17,074,024

EPA 176,556,555 2,783,267 179,339,822

FDIC 20,927,7943 - 20,927,794

FEMA 30,889,466 303,655 31,193,121

GSA 81,356,607 - 81,356,607

HHS 195,575,000 440,000 196,015,000

HUD 17,895,000 17,895,000

NASA 74,400,000 14,400,000 88,800,000

NRC - 182,066 182,066

OPM 71,732,753 - 71,732,753

RRB - - -

SBA 2,784,550 - 2,784,550

SSA 4,644,334 - 4,644,334

Treasury 258,000 6,787,000 7,045,000

USAID 9,713,000 6,549,000 16,262,000

USDA 1,241,758,9434 - 1,241,758,943

USIA 527,000 - 527,000

VA 18,200,000 17,000,000 35,200,000

TOTALS $ 2,076,945,613 $ 2,003,000,000 $ 4,079,945,613

1

 DOE - $1,971,870 from Inspections; $660,000 from Audits.

2

 DOI - Includes questioned costs of $4,713,130 for single audits.

3

 FDIC - Includes results of both Audits and Evaluations.

4

 USDA - Includes $6,779,442 in recommendations from work performed by nonfederal auditors.
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 43

Questioned Costs

The IG Act defines a quesitoned cost as "a cost that is questioned

by the Office because of (a) an alleged violation or provision of

law, regulation, contract, grant, or cooperative agreement, or

other agreement or document governing the expenditure of

funds; (b) a finding that, at the time of the audit, such cost is not

supported by adequate documentation; or (c) a finding that the

expenditure of funds for the intended purpose is unnecessary or

unreasonable."

Table III (pp. 42-43) and Table IV (pp. 44-45) present, respectively, the total costs questioned by OIGs in FY 1997 and the

total amount of management decisions to disallow costs questioned by OIGs. During FY 1997, PCIE OIG audits resulted in

approximately $4 billion in questioned costs and ECIE OIG audits

resulted in approximately $39.4 million in questioned costs.

Table III.

ECIE — Questioned Costs

Entity Total Entity Total

ARC $ 75,000 NRPC 24,265,226

CPB 17,138 NSF4 5,396,675

FCC1 446,958 PC 8,916

FHFB2 350 PCC5 2,623,365

FLRA 4,533 TVA 1,154,103

GPO 63,771 USPS6 5,229,965

NEA3 105,893

TOTAL $ 39,391,893

1

 Federal Communications Commission

2

 Federal Housing Finance Board

3

 National Endowment for the Arts

4

 Includes $12,811 questioned by DCAA.

5

 Panama Canal Commission

6

 Figures reflect both work done directly by the U.S. Postal Service Office

of Inspector General and by U.S. Postal Service audit and investigation

units under the oversight of the OIG.
44 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

Table IV.

PCIE — Management Decisions on Audits With Questioned Costs

No Mgmt. Dec. Recs. Issued Recs. Agreed Recs. Not Agreed No Mgmt. Dec.

Entity Start FY 1997 in FY 1997 to by Mgmt. to by Mgmt. End FY 1997

ACDA $ - $ - $ - $ - $ -

CNS 1,766,000 2,024,000 169,000 536,000 3,085,000

DOC 5,350,889 13,655,570 3,056,637 5,947,239 10,002,583

DOD 8,922,600,000 2,003,000,000 1,396,800,000 918,900,000 8,609,900,000

DOE 17,510,3701 660,000 1,457,869 9,994,421 6,717,811

DOI 45,905,2612 17,535,994 12,340,547 11,682,922 39,417,786

DOJ 10,728,850 30,571,227 17,105,413 - 24,194,664

DOL 25,625,173 26,300,572 6,737,686 5,390,397 39,797,622

DOS 1,004,1703 1,400,000 626,579 1,400,000 -

DOT 139,235,000 26,591,000 22,011,000 105,926,000 37,889,000

ED 497,915,715 25,477,130 217,399,754 104,921,679 199,338,889

EPA 309,342,179 179,339,822 56,747,885 170,957,668 260,976,448

FDIC - 20,927,7944 18,356,491 2,573,376 -

FEMA 11,867,5065 31,193,121 27,579,657 6,031,174 9,449,796

GSA 5,508,442 39,696,937 34,025,6086 10,678,789 5,892,985

HHS 507,321,000 196,015,000 125,161,000 21,727,000 556,448,000

HUD 24,132,000 44,200,0007 23,045,000 11,451,000 22,835,000

NASA 650,471 74,468,473 14,000,000 - 61,118,944

OPM 34,485,949 71,732,7538 76,404,377 20,003,475 9,810,850

RC - 182,066 64,056 - 118,010

RRB - - - - -

SBA 769,698 2,784,550 164,923 - 3,389,325

SSA 269,638 4,374,696 4,246,323 - 398,011

Treasury 8,384,000 7,045,000 2,803,000 1,198,000 11,428,000

USAID 10,839,0009 16,302,000 3,846,000 10,995,000 12,300,000

USDA 264,049,335 1,241,758,943 919,011,091 103,652,746 485,517,457

USIA 3,868,000 527,000 141,000 112,000 4,142,000

VA 8,900,000 35,200,000 37,500,000 2,100,000 4,500,000

TOTALS $10,858,028,646 $ 4,112,963,648 $ 3,020,800,896 $ 1,526,178,886 $10,418,668,181

1

DOE - This bottom line figure has been adjusted downward by $269 to the correct figure of $6,717,811 due to rounding on

one monetary impact statement submitted to the OIG. 2

DOI - Data does not reconcile to total because some reports have amounts in both the allowed and disallowed categories.

3

DOS - This figure was adjusted from $626,579 as the result of judicial appeal.

4FDIC - Includes Audits and Evaluation results. FDIC management disallowed nearly $2,100 more than the OIG questioned based on report recommendations. 5

FEMA - Three of the 21 reports totaling $2,725,552 were in appeal status when the reporting period began. They were

resolved/closed during the reporting period. 6

GSA - Includes $5,392,003 that management decided to seek that exceeded recommended amounts.

7

HUD - Amount includes results for 22 cases of multifamily equity skimming with settlements totaling $17,869,427 which

were not in issued audit reports. 8

OPM - This includes $13.1 million which was the subject of a joint effort of the Office of Audits and the Office of

Investigations. 9USAID - The ending balance at 9/30/96 ($10,789,997) was increased by $48,669 to reflect increases in the amount of

recommendations contained in two reports.
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 45

Table IV reports on the status of FY 1997 management decisions to disallow costs questioned by OIGs. PCIE/ECIE managers

agreed with over $3 billion in questioned costs.

The following tables illustrate the results obtained through OIG

investigations during FY 1997. They summarize the statistical

accomplishments reported by the individual IGs in their semiannual reports to the Congress as of March 31 and September

30, 1997. The accomplishments — successful criminal prosecutions, administrative sanctions, and investigative recoveries —

include results of joint investigtations.

During FY 1997, ECIE OIG investigations resulted in 10,048

successful criminal prosecutions, of which 10,013 were accomplished by the U.S. Postal Service; PCIE OIG investigations

resulted in 5,613 successful prosecutions, of which 1,469 were

deportations by SSA (Table V, p. 46).

Investigations

Table IV.

ECIE — Management Decisions on Audits With Questioned Costs

No Mgmt. Disallowances Disallowances No Mgmt.

 Entity Decision Recs. Issued Agreed to Not Agreed Decision

Start FY 1997 in FY 1997 by Mgmt. to by Mgmt. End FY 1997

ARC $ 205,000 $ 75,000 $ 71,000 $ 107,000 $ 102,000

CPB 0 17,138 0 0 17,138

FCC 1,780,646 446,958 1,961,191 1,233 265,180

FHFB 0 350 0 0 350

FLRA 0 4,533 4,533 0 0

GPO 334,403 63,771 81,941 0 316,630

NEA 948,895 105,893 13,672 1,026,486 14,630

NEH 74,500 0 54,000 0 20,000

NRPC 764,596 24,265,226 10,610,990 61,382 14,357,450

NSF 9,611,016 5,396,675 1,875,667 4,599,118 8,532,906

PC 69,424 8,916 60,383 0 17,957

PCC 145,488 2,623,365 370,777 1,480,614 917,462

SI 1,100,878 0 0 0 1,100,878

TVA 627,876 1,154,103 1,071,623 311,000 399,356

USPS1 3,723,155 5,229,965 892,552 1,205,903 6,854,665

TOTALS $ 19,385,877 $ 39,391,893 $ 17,068,329 $ 8,792,736 $ 32,916,602

1 Figures reflect both work done directly by the U.S. Postal Service Office of Inspector General and by

U.S. Postal Service audit and investigation units under the oversight of the OIG.
46 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

Table V.

PCIE — Successful Criminal Prosecutions

Entity Total Entity Total

ACDA 1 GSA 31

CNS 1 HHS 215

DOC 1 HUD 314

DOD 332 NASA 25

DOE 25 NRC 2

DOI 60 OPM 20

DOJ 91 RRB 89

DOL 225 SBA 54

DOS 9 SSA1 2,507

DOT 324 Treasury2 348

ED 70 USAID 2

EPA 10 USDA 703

FDIC 25 USIA 0

FEMA 19 VA 110

TOTAL 5,613

1

 SSA - Of which 1,469 were deportations.

2

 Treasury - Non-OIG = 341 (includes the Internal Affairs and Inspection

Services of Treasury's Law Enforcement Bureaus: ATF, Customs, IRS,

and Secret Service).

ECIE — Successful Criminal Prosecutions

Entity Total Entity Total

EEOC1 1 NSF 1

FCC 2 PBGC3 1

FHFB 1 PC 3

FTC 1 PCC 1

GPO 3 SEC4 1

NARA2 1 TVA 12

NRPC 7 USPS5 10,013

TOTAL 10,048

1

 Equal Employment Opportunity Commission

2

 National Archives and Records Administration

3

 Pension Benefit Guaranty Corporation

4

 Securities and Exchange Commission

5

 Figures reflect both work done directly by the U.S. Postal Service

Office of Inspector General and by U.S. Postal Service audit and

investigation units under the oversight of the OIG.
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 47

During FY 1997, PCIE OIG investigations resulted in 2,128

personnel actions; ECIE OIG investigtions resulted in 3,645

personnel actions, including 3,493 actions by the U.S. Postal

Service (Table VI, below).

Table VI.

PCIE — Personnel Actions

Entity Total Entity Total

ACDA 2 GSA 22

CNS 3 HHS 6

DOC 22 HUD 10

DOD 153 NASA 43

DOE1 39 NRC 40

DOI 61 OPM 3

DOJ 130 RRB 1

DOL2 213 SBA 2

DOS 87 SSA 44

DOT 38 Treasury3 985

ED 10 USAID4 11

EPA 19 USDA 66

FDIC 15 USIA 8

FEMA 3 VA 92

TOTAL 2,128

1 DOE - 23 from Investigations, 16 from Inspections

2DOL - Includes individuals who received counseling and retraining.

3 Treasury - Includes Internal Affairs and Inspection Services of Treasury's

Law Enforcement Bureaus: ATF, Customs, IRS, and Secret Service.

4 USAID - One termination occurred July 1996 but was reported in FY1997.

ECIE — Personnel Actions

Entity Total Entity Total

CPSC1 1 NSF 8

EEOC 1 PBGC 30

FCC 1 PC 29

FRB 1 PCC 2

FTC 1 SEC 11

GPO 37 SI 5

NARA 4 TVA 12

NLRB2 3 USPS3 3,493

NRPC 8

TOTAL 3,647

1

 Consumer Products Safety Commission

2

 National Labor Relations Board

3

 Figures reflect both work done directly by the U.S. Postal Service Office

of Inspector General and by U.S. Postal Service audit and investigation

units under the oversight of the OIG.
48 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

 PCIE OIG investigations resulted in more than 6,000 suspensions or debarments during FY 1997, and ECIE OIG investigations

resulted in 25 suspensions or debarments (Table VII, below).

Table VII.

PCIE — Suspensions/Debarments

Entity Total Entity Total

ACDA 0 GSA 80

CNS 0 HHS 2,719

DOC 0 HUD 107

DOD 214 NASA 14

DOE 58 NRC 0

DOI 4 OPM 1,887

DOJ 1 RRB 0

DOL1 61 SBA 2

DOS 1 SSA 0

DOT 36 Treasury 2

ED 22 USAID 2

EPA 10 USDA 1,099

FDIC2 0 USIA 0

FEMA 0 VA 21

TOTAL 6,340

1 DOL - DOL's Office of Investigations has two major investigative programs:

(1) the Division of Program Fraud, which administers an investigative

program within DOL to detect and deter fraud, waste, and abuse in the

operation and administration of DOL programs and (2) the Division of

Labor Racketeering, whose primary emphasis benefits plans. As a result,

the definition of Debarments/Sanctions has been broadened as follows:

The subject, entity or firm was prohibited from doing business with

the Government and/or was barred from serving in any labor

union or employee benefit plan position as the result of criminal

conviction, a civil action (including a Civil RICO Judgement), or a

government or internal disciplinary proceeding.

2 FDIC - FDIC has no suspension/debarment procedures in effect during the

covered period.

ECIE - Suspensions/Debarments

Entity Total Entity Total

FCC 1 NSF 3

GPO 20 PCC 1

TOTAL 25
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 49

PCIE OIG investigations during the period resulted in recoveries of funds totaling approximately $2.6 billion; ECIE OIG investigations during FY 1997 resulted in recoveries of funds totaling

approximately $379 million (Table VIII, below).

Table VIII.

PCIE — Investigative Recoveries

Entity Total Entity Total

ACDA $ - GSA 18,054,013

CNS 2,057 HHS 1,186,229,000

DOC 395,742 HUD 17,040,057

DOD 961,758,189 NASA 47,170,557

DOE1 4,295,503 NRC 15,100

DOI 6,394,590 OPM2 23,802,197

DOJ 4,464,943 RRB 6,918,892

DOL 34,100,000 SBA 24,681,064

DOS 868,697 SSA3 64,000,000

DOT 12,418,807 Treasury4 10,544,000

ED 13,936,047 USAID5 7,950,247

EPA 3,930,000 USDA 80,219,074

FDIC 8,925,390 USIA 547

FEMA 55,000,000 VA 17,600,000

TOTAL $ 2,610,714,713

1 DOE - Includes $2,730 from Inspections.

2OPM - Includes $13.1 million, which was the subject of a joint effort of the

Office of Audits and the Office of Investigations.

3

SSA - Includes $21,450,322 based on calculations of actual dollar loss by

actions that resulted in the termination of improper payments or improper

expenditures of program funds over a 5-year period.

4

Treasury - Includes $10,383,000 from non-OIG activities, including the

Internal Affairs and Inspection services of Treasury'sLaw Enforcement

Bureaus: ATF, Customs, IRS and Secret Service.

5

USAID - One restitution of $21,000 occurred in July 1996 but was reported FY

1997.

ECIE — Investigative Recoveries

Entity Total Entity Total

FCC $ 60,000 NSF 500,241

FHFB 1,608 PBGC 16,965

FTC 9,285 PC 3,400

GPO 405,736 PCC 24,250

ITC 1 1,786 SEC 17,000

NARA 2,830 SI 587

NEA 26 TVA 2,919,494

NRPC 113,251 USPS 2 375,099,077

TOTAL $ 379,175,536

1 International Trade Commission

2 Figures reflect both work done directly by the U.S. Postal Service Office

of Inspector General and by U.S. Postal Service audit and investigation

units under the oversight of the OIG.
50 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

The President's Council on Integrity and Efficiency

Membership addresses and Hotline Numbers %

G. Edward DeSeve, Acting Chair, PCIE

Acting Deputy Director for Management

OFFICE OF MANAGEMENT AND BUDGET

17th & Pennsylvania Avenue NW, Rm. 260

Washington, DC 20503

Eleanor Hill, Vice Chair, PCIE

Inspector General

DEPARTMENT OF DEFENSE

400 Army Navy Drive, Rm. 1000

Arlington, VA 22202-2884

% 800/424-9098 or 703/604-8546

Thomas D. Blair, Vice Chair, ECIE

Inspector General

SMITHSONIAN INSTITUTION

955 L’Enfant Plaza, Room 7600

Mail Stop: 905

Washington, DC 20560

% 202/287-3676

Jeffrey Rush, Jr., Inspector General

AGENCY FOR INTERNATIONAL DEVELOPMENT

Ronald Reagan Building, Room 6.6D

1300 Pennsylvania Avenue NW

Washington, DC 20523

% 800/230-6539 or 202/712-1023

Roger C. Viadero, Inspector General

DEPARTMENT OF AGRICULTURE

1400 Independence Avenue SW

Room 117-W

Washington, DC 20250-2301

% 800/424-9121 or 202/690-1622

(TDD: 202/690-1202)

L. Britt Snider, Inspector General

CENTRAL INTELLIGENCE AGENCY

Room 2X30, New Headquarters

Washington, DC 20505

Johnnie Frazier, Acting Inspector General

DEPARTMENT OF COMMERCE

14th & Constitution Avenue NW

Room 7898C

Washington, DC 20230

% 800/424-5197 or 202/482-2495

(TDD: 800/854-8407 or 202/482-5923)

Luise S. Jordan, Inspector General

CORPORATION FOR NATIONAL SERVICE

1201 New York Ave. NW, Suite 8100

Washington, DC 20525

% 800/452-8210

John P. Higgins, Acting Inspector General

DEPARTMENT OF EDUCATION

600 Independence Avenue SW, Room 4006

Washington, DC 20202-1510

% 800/MIS-USED (800/647-8733) or 202/205-5770

Gregory H. Friedman, Principal Deputy Inspector General

DEPARTMENT OF ENERGY

1000 Independence Avenue SW

Room 5D-039

Washington, DC 20585

% 800/541-1625 or 202/586-4073

Nikki L. Tinsley, Acting Inspector General

ENVIRONMENTAL PROTECTION AGENCY

401 M Street SW, Room NE3309(2410)

Washington, DC 20460

% 800/424-4000 or 202/260-4977

Thomas J. Pickard, Assistant Director

Criminal Investigative Division

FEDERAL BUREAU OF INVESTIGATION

935 Pennsylvania Avenue NW

Rm. 7116

Washington, DC 20535

Gaston L. Gianni, Jr., Inspector General

FEDERAL DEPOSIT INSURANCE CORPORATION

801 17th Street NW, Room 1096

Washington, DC 20434-0001

% 800/964-FDIC (800/964-3342)

George J. Opfer, Inspector General

FEDERAL EMERGENCY MANAGEMENT AGENCY

500 C Street SW, Suite 505

Washington, DC 20472

% 800/323-8603

William R. Barton, Inspector General

GENERAL SERVICES ADMINISTRATION

18th & F Streets NW, room 5340

Washington, DC 20405

% 800/424-5210 or 202/501-1780

%
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 51

Stephen D. Potts, Director

OFFICE OF GOVERNMENT ETHICS

1201 New York Avenue NW, Suite 500

Washington, DC 20005-3917

June Gibbs Brown, Inspector General

DEPARTMENT OF HEALTH & HUMAN SERVICES

330 Independence Avenue SW, Rm. 5250

Washington, DC 20201

% 800/HHS-TIPS (800/447-8477)

Susan Gaffney, Inspector General

DEPARTMENT OF HOUSING & URBAN DEVELOPMENT

451 7th Street SW, Room 8256

Washington, DC 20410-4500

% 800/347-3735 or 202/708-4200

Richard Reback, Acting Inspector General

DEPARTMENT OF THE INTERIOR

1849 C Street NW, Mail Stop 5431

Washington, DC 20240

% 800/424-5081 or 202/208-5300

Michael R. Bromwich, Inspector General

DEPARTMENT OF JUSTICE

950 Pennsylvania Avenue NW, Room 4706

Washington, DC 20530

% 800/869-4499

Charles C. Masten, Inspector General

DEPARTMENT OF LABOR

200 Constitution Avenue NW, Room S-1301

Washington, DC 20210

% 800/347-3756 or 202/219-5227

Roberta L. Gross, Inspector General

NATIONAL AERONAUTICS & SPACE ADMINISTRATION

300 E. Street SW, Code W, Room 8V69

Washington, DC 20546

% 800/424-9183

Hubert T. Bell, Inspector General

NUCLEAR REGULATORY COMMISSION

Mail Stop T5 D28

Washington, DC 20555

% 800/233-3497

Patrick E. McFarland, Inspector General

OFFICE OF PERSONNEL MANAGEMENT

1900 E. Street NW, Room 6400

Washington, DC 20415-0001

% Fraud, waste, and abuse: 202/606-2423

Healthcare fraud: 202/418-3300

Martin J. Dickman, Inspector General

RAILROAD RETIREMENT BOARD

844 North Rush Street, Rm. 450

Chicago, IL 60611-2092

% 800/800/772-4258

Elaine Kaplan, Special Counsel

OFFICE OF SPECIAL COUNSEL

1730 M Street NW, Suite 300

Washington, DC 20036

% Disclosure, 800/872-9855; Hatch Act Information,

800/85-HATCH (800/854-2824); Whistleblower

protection, 800/572-2249

Karen S. Lee, Acting Inspector General

SMALL BUSINESS ADMINISTRATION

409 Third Street SW, 7th Floor

Washington, DC 20416

% 800/767-0385 or 202/205-7151

James Huse, Jr., Acting Inspector General

SOCIAL SECURITY ADMINISTRATION

Altmeyer Building, Suite 300

6401 Security Boulevard

Baltimore, MD 21235

% 800/269-0271

Jacquelyn L. Williams-Bridgers, Inspector General

DEPARTMENT OF STATE, ARMS CONTROL & DISARMAMENT AGENCY, AND U.S. INFORMATION AGENCY

2201 C Street NW, Room 6817

Washington, DC 20520-6817

% 202/647-3320 (Collect calls are accepted.)

Kenneth Mead, Inspector General

DEPARTMENT OF TRANSPORTATION

400 Seventh Street SW, Room 9210

Washington, DC 20590

% 800/424-9071 or 202/366-1461

Richard B. Calahan, Deputy Inspector General

DEPARTMENT OF THE TREASURY

1500 Pensylvania Avenue NW, Rm 2412MT

Washington, DC 20220

% 800/359-3898

Richard J. Griffin, Inspector General

DEPARTMENT OF VETERANS AFFAIRS

810 Vermont Avenue NW, Rm. 1114TW

Washington, DC 20420

% 800/488-8244 or 202/565-8644

Note: The members listed are those in service

as of July 1, 1998.

 All hotline numbers listed above were

current as of the printing date of this report.
52 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

G. Edward DeSeve, Acting Chair, ECIE

Acting Deputy Director for Management

OFFICE OF MANAGEMENT AND BUDGET

17th & Pennsylvania Avenue NW, Rm. 260

Washington, DC 20503

Thomas D. Blair, Vice Chair, ECIE

Inspector General

SMITHSONIAN INSTITUTION

955 L’Enfant Plaza, Room 7600

Mail Stop: 905

Washington, DC 20560

% 202/287-3676

Eleanor Hill, Vice Chair, PCIE

Inspector General

DEPARTMENT OF DEFENSE

400 Army Navy Drive, Rm. 1000

Arlington, VA 22202-2884

% 800/424-9098 or 703/604-8546

Fred E. Wiederhold, Jr.,

Inspector General, Amtrak

Department of Internal Affairs

400 North Capital Street NW

Washington, DC 20001

% 202/906-4600

Hubert N. Sparks, Inspector General

APPALACHIAN REGIONAL COMMISSION

1666 Connecticut Avenue NW, Suite 215

Washington, DC 20235

% 800/532-4611 or 202/884-7667

A. Roy Lavik, Inspector General

COMMODITY FUTURES TRADING COMMISSION

Three Lafatette Centre

1155 21st Street NW, Suite 520

Washington, DC 20581

% 202/418-5510

Thomas F. Stein, Inspector General

CONSUMER PRODUCT SAFETY COMMISSION

4330 East West Highway

Bethesda, MD 20814-4408

% 301/504-0573

The Executive Council on Integrity and Efficiency

Membership addresses and Hotline Number % s

Fred Lau, Acting Inspector General

CORPORATION FOR PUBLIC BROADCASTING

901 E Street NW

Washington, DC 20004-2006

% 800/599-2170 or 202/783-5408

Aletha L. Brown, Inspector General

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION

1801 L Street NW, Suite 3001

Washington, DC 20507

% 800/849-4230 or 202/663-7020

Eldon W. Stoehr, Inspector General

FARM CREDIT ADMINISTRATION

1501 Farm Credit Drive, Suite 4100

McLean, VA 22102-5090

% 800/437-7322 or 703/883-4316

H. Walker Feaster, III, Inspector General

FEDERAL COMMUNICATIONS COMMISSION

1919 M Street NW, Suite 752

Washington, DC 20554

% 202/418-0473

Lynne A. McFarland, Inspector General

FEDERAL ELECTION COMMISSION

999 E. Street NW, Room 940

Washington, DC 20463

% 202/219-4267

Edward Kelley, Inspector General

FEDERAL HOUSING FINANCE BOARD

1777 F Street NW

Washington, DC 20006

% 800/276-8329 or 202/408-2900

Francine C. Eichler, Inspector General

FEDERAL LABOR RELATIONS AUTHORITY

607 14th Street NW, 2nd Floor

Washington, DC 20424-0001

% 800/331-3572

Tony P. Kominoth, Inspector General

FEDERAL MARITIME COMMISSION

800 North Capitol Street, Room 1072

Washington, DC 20573

% 202/523-5865

%
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 53

Aileen Armstrong, Inspector General

NATIONAL LABOR RELATIONS BOARD

1099 14th Street NW, Room 9820

Washington, DC 20570

% 800/736-2983

Philip Sunshine, Acting Inspector General

NATIONAL SCIENCE FOUNDATION

4201 Wilson Boulevard, Room 1135

Arlington, VA 22230

% 703/306-2004

Victor Diamond, Inspector General

PANAMA CANAL COMMISSION

Unit 2300

APO AA 34011-2300

% 800/622-2625, Ext. 272-7801

Charles D. Smith, Acting Inspector General

PEACE CORPS

1990 K Street NW, Suite 5300

Washington, DC 20526

% 800/233-5874

Wayne Robert Poll, Inspector General

PENSION BENEFIT GUARANTY CORPORATION

1200 K Street NW, Suite 470

Washington, DC 20005-4026

% 800/303-9737

Karla W. Corcoran, Inspector General

UNITED STATES POSTAL SERVICE

1735 North Lynn Street

Arlington, VA 22209

% 888/USPS-OIG (888/877-7644)

Walter Stachnik, Inspector General

SECURITIES AND EXCHANGE COMMISSION

450 Fifth Street NW, Stop 11-7

Washington, DC 20549

% 202/942-4460

George T. Prosser, Inspector General

TENNESSEE VALLEY AUTHORITY

400 W. Summit Hill Drive, Room ET 4H

Knoxville, TN 37902-1499

% 800/323-3835

Note: The members listed are those in service

as of July 1, 1998.

 All hotline numbers listed above were

current as of the printing date of this report.

Barry R. Snyder, Inspector General

FEDERAL RESERVE SYSTEM

20th Street & Constitution Ave NW

Mail Stop 300

Washington, DC 20551

% 800/827-3340 or 202/452-6400

Frederick J. Zirkel, Inspector General

FEDERAL TRADE COMMISSION

6th Street & Pennsylvania Avenue NW

Washington, DC 20580

% 202/326-2800

Robert G. Andary, Inspector General

GOVERNMENT PRINTING OFFICE

North Capitol & H Streets NW (Stop: IG)

Washington, DC 20401

% 800/743-7574

Jane E. Altenhofen, Inspector General

INTERNATIONAL TRADE COMMISSION

500 E Street SW, Room 515

Washington, DC 20436

% 800/500-0333

Edouard R. Quatrevaux, Inspector General

LEGAL SERVICES CORPORATION

750 First Street NE, 10th Floor

Washington, DC 20002-4250

% 800/678-8868 or 202/336-8936

Kelly A. Sisario, Inspector General

NATIONAL ARCHIVES & RECORDS ADMINISTRATION

8601 Adelphi Road, Room 1300

College Park, MD 20740

% 800/786-2551 or 301/713-7305

H. Frank Thomas, Inspector General

NATIONAL CREDIT UNION ADMINISTRATION

1775 Duke Street

Alexandria, VA 22314-3428

% 800/778-4806 or 703/518-6357

Edward Johns, Inspector General

NATIONAL ENDOWMENT FOR THE ARTS

1100 Pennsylvania Avenue NW, Room 207

Washington, DC 20506

% 202/682-5402

Sheldon L. Bernstein, Inspector General

NATIONAL ENDOWMENT FOR THE HUMANITIES

1100 Pennsylvania Ave NW, Room 419

Washington, DC 20506

% 202/606-8423
54 — PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997

Glossary of Acronyms and Abbreviations

ARC Appalachian Regional Commission

BCBS Blue Cross and Blue Shield

BEP Bureau of Engraving and Printing

BOP Bureau of Prisons

CACFP Child and Adult Care Food Programs

CHAMPUS Civilian Health and Medical Program of the Uniformed Services

CNS Corporation for National and Community Service

DCAA Defense Contract Audit Agency

DOC Department of Commerce

DOD Department of Defense

DOE Department of Energy

DOI Department of Interior

DOJ Department of Justice

DOL Department of Labor

DOS Department of State

DOT Department of Transportation

ECIE Executive Council on Integrity and Efficiency

ED Department of Education

EEOC Equal Employment Opportunity Commission

EPA Environmental Protection Agency

ERC Experience-rated carrier

FAA Federal Aviation Administration

FBI Federal Bureau of Investigation

FCC Federal Communications Commission

FDIC Federal Deposit Insurance Corporation

FEHBP Federal Employees Health Benefits Program

FEMA Federal Emergency Management Agency

FHWA Federal Highway Administration

FMS Financial Management Service

FPS Federal Protective Service

FRB Federal Reserve Board

FSS Federal Supply Schedule

GAO General Accounting Office

GPO Government Printing Office
PCIE/ECIE: A Progress Report to the President, Fiscal Year 1997 — 55

GPRA Government Performance and Results Act

HCFA Health Care Financing Administration

HHS Department of Health and Human Services

HIPAA Health Insurance Portability and Acountability Act

HUD Department of Housing and Urban Development

ILEA International Law Enforcement Academy

INS Immigration and Naturalization Service

IRS Internal Revenue Service

IT Information technology

LOC Letter of credit

MOU Memorandum of Understanding

MRV Machine-readable visa

NASA National Aeronautics and Space Administration

NOAA National Oceanic and Atmospheric Administration

NPS National Park Service

NRC Nuclear Regulatory Commission

NSF National Science Foundation

NTIS National Technical Information Service

OIG Office of Inspector General

OMB Office of Management and Budget

OPM Office of Personnel Management

OSC Office of Special Counsel

PGBC Pension Benefit Guaranty Corporation

PCIE President’s Council on Integrity and Efficiency

QIT Quality Improvement Team

RICO Act Racketeer Influenced and Corrupt Organizations Act

RRB Railroad Retirement Board

RTC Resolution Trust Corporation

SBA Small Business Administration

SSA Social Security Administration

SSI Supplemental Security Income

SSN Social Security number

Treasury Department of the Treasury

TVA Tennessee Valley Authority

USAID U.S. Agency for International Development

USDA U.S. Department of Agriculture

VA Department of Veterans Administration