jurisdiction: US

text: b'United States\nDepartment of\nAgriculture Office of\n Inspector General\nOffice of\nInspector\nGeneral\n\nNo. 44\n\nNOVEMBER 2000 Semiannual Report\n to Congress\n FY 2000\xe2\x80\x94Second Half\n\x0cOn the cover: The eagle is used for the symbol of our law enforcement initiative \xe2\x80\x9cOperation Talon.\xe2\x80\x9d It represents law enforcement\nswooping down to snatch fugitive felons off the streets. See inside for details of this highly successful initiative. U.S. Fish and Wildlife\nService photo.\n\nThe U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national\norigin, sex, religion, age, disability, political beliefs, sexual orientation, or marital or family status. (Not all prohibited bases apply to all\nprograms.) Persons with disabilities who require alternative means for communication of program information (Braille, large print,\naudiotape, etc.) should contact USDA\xe2\x80\x99s TARGET Center at 202-720-2600 (voice and TDD).\n\nTo file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 1400 Independence\nAvenue, SW, Washington, D.C. 20250-9410 or call (202) 720-5964 (voice and TDD). USDA is an equal opportunity provider and employer.\n\x0c UNITED STATES DEPARTMENT OF AGRICULTURE\n OFFICE OF INSPECTOR GENERAL\n\n Washington D.C. 20250\n\n\n\n\n October 30, 2000\n\nThe Honorable Dan Glickman\nSecretary of Agriculture\nWashington, D.C. 20250\n\nDear Mr. Secretary:\n\nI am pleased to submit the Office of Inspector General\xe2\x80\x99s Semiannual Report to Congress summarizing\nour activities for the 6-month period which ended September 30, 2000.\n\nDuring this period, our audits and investigations yielded approximately $61 million in\nrecoveries, collections, restitutions, fines, claims established, and costs avoided. Further, management\nagreed to put more than $232 million to better use. We also identified nearly $16 million in questioned\ncosts that cannot be recovered. In addition, our investigations produced 240 indictments and\n251 convictions.\n\nWe are reporting on our Food Safety Initiative. We conducted a series of audits to determine whether\nthe meat and poultry inspection program remains effective under the science-based Hazard Analysis and\nCritical Control Point (HACCP) System. We reviewed HACCP, laboratory analyses, foreign imports,\nand the compliance program that carried over from the previous system. Positive steps have been\ntaken, but more needs to be done in all four areas reviewed.\n\nI again extend my appreciation to you, the Deputy Secretary, and the Congress for your support in\nfurthering our mutual efforts to improve the integrity and efficiency of the Department\xe2\x80\x99s programs and\noperations.\n\nSincerely,\n\n\n\n\nROGER C. VIADERO\nInspector General\n\nEnclosure\n\x0cContents\n\n\n Page\nExecutive Summary ............................................................................................................................................... 1\nSummaries of Audit and Investigative Activities ................................................................................................ 3\nOIG in Focus ........................................................................................................................................................... 4\nPublic Corruption Investigations .......................................................................................................................... 6\nWorkplace Violence Investigations ...................................................................................................................... 8\nFood Safety\n Food Safety and Inspection Service .................................................................................................................... 9\nNatural Resources and Environment\n Forest Service ...................................................................................................................................................... 11\nFarm and Foreign Agricultural Services\n Farm Service Agency .......................................................................................................................................... 13\n Risk Management Agency ................................................................................................................................... 16\n Foreign Agricultural Service ................................................................................................................................. 18\nFood, Nutrition, and Consumer Services\n Food and Nutrition Service .................................................................................................................................. 19\n Food Stamp Program .......................................................................................................................................... 19\n Child Nutrition Programs ...................................................................................................................................... 22\nMarketing and Regulatory Programs\n Agricultural Marketing Service ............................................................................................................................. 23\n Animal and Plant Health Inspection Service ........................................................................................................ 23\nRural Development\n Rural Housing Service ......................................................................................................................................... 25\n Rural Business-Cooperative Service ................................................................................................................... 26\nResearch, Education, and Economics\n Agricultural Research Service ............................................................................................................................. 28\nFinancial, Administrative, and Information Technology\n Financial Management ........................................................................................................................................ 29\n Information Technology ....................................................................................................................................... 30\n Government Performance and Results Act of 1993 ............................................................................................ 31\nStatistical Data\n Audits Without Management Decision ................................................................................................................. 32\n Indictments and Convictions ................................................................................................................................ 40\n Office of Inspector General Hotline ...................................................................................................................... 41\n Freedom of Information Act and Privacy Act Requests ....................................................................................... 42\nAppendix I: Inventory of Audit Reports Issued\n With Questioned Costs and Loans ................................................................................................................ 43\nAppendix II: Inventory of Audit Reports Issued\n With Recommendations That Funds Be Put to Better Use .......................................................................... 44\nAppendix III: Summary of Audit Reports Released Between\n April 1 and September 30, 2000 ...................................................................................................................... 45\n\x0cExecutive Summary\n\n\nThis is the 44th Semiannual Report of the Office of Operation Talon arrests continue to climb. As of\nInspector General (OIG), U.S. Department of Agriculture September 30, 2000, Operation Talon had resulted in\n(USDA), pursuant to the provisions of the Inspector 6,733 arrests of fugitive felons during joint OIG, State,\nGeneral Act of 1978 (Public Law 95-452), as amended. and local law enforcement operations throughout the\nThis report covers the period April 1 through country. Serious crimes perpetrated by those arrested\nSeptember 30, 2000. included homicide-related offenses (murder, attempted\n murder, manslaughter), sex offenses (child molestation,\nIn accordance with the requirements of the Inspector rape, attempted rape), kidnapping/abduction, assault,\nGeneral Act, this report describes matters relating to the robbery, and drug/narcotics violations.\nDepartment\xe2\x80\x99s programs and operations which occurred\nduring the reporting period. These include significant The former budget officer of the Natural Resources\nproblems, abuses, and deficiencies; significant Conservation Service\xe2\x80\x99s (NRCS) National Business\nrecommendations for corrective action; prior significant Management Center (NBMC) in Fort Worth, Texas,\nrecommendations unimplemented; prosecutorial pled guilty in Federal court to embezzling over\nreferrals; information or assistance refused; a list of $300,000 from NRCS. He embezzled money as the\naudit reports; a summary of significant reports; tables on budget officer at NBMC, as well as when assigned as\nquestioned costs and funds to be put to better use; an NRCS budget officer in Ohio. He was sentenced to\nprevious audit reports unresolved; significant revised serve 18 months in prison and ordered to make\nmanagement decisions; any significant management restitution of nearly $311,200.\ndecision disagreements; and a review of legislation and\nregulations. The owner of cotton warehouses in Georgia and South\n Carolina was sentenced to serve 35 months in Federal\nMonetary Results prison for his scheme to defraud approximately\n 140 cotton farmers out of their cotton and sales\nDuring this reporting period, we issued 51 audit and proceeds worth more than $9 million. The defendant\nevaluation reports and reached management decisions pled guilty to 32 felony counts involving mail fraud, wire\non 56. Based on this work, management officials fraud, and money laundering. The defendant was\nagreed to recover $10.2 million and to put an additional ordered to pay restitution of over $4 million.\n$232.4 million to better use.\n A corporation, its president, and its vice president were\nWe also issued 300 reports of investigation during this indicted for contract fraud involving a renovation project\nperiod. Our investigative efforts resulted in at an Agricultural Research Service research station in\n240 indictments, 251 convictions, and approximately Pennsylvania and renovation work for the U.S. Navy,\n$50.5 million in recoveries, fines, restitutions, claims with contracts totaling over $5.6 million. The president\nestablished, and cost avoidance. of the corporation has pled guilty to the charges and is\n awaiting sentencing. Trial is pending for the vice\nInvestigative Efforts president and corporation.\n\nThe owner of a San Francisco Bay area sausage A bookkeeper and two retail firm owners in Los Angeles\ncompany is in jail awaiting trial on charges that he shot have pled guilty to various tax and/or food stamp fraud\nand killed two Food Safety and Inspection Service charges following an investigation into a massive food\n(FSIS) compliance officers and a California Department stamp fraud conspiracy. One of the retailers was\nof Food and Agriculture (CDFA) investigator. He is also sentenced to 27 months in prison and $3 million in\ncharged with attempted murder of a second CDFA restitution, while the second retailer was sentenced to\nemployee, an inspector. The four officers were at the 9 months in prison and restitution of $4.1 million. We\nsausage company plant to discuss suspected Federal suspect that illegally obtained food stamp coupons\nand State meat production, labeling, and distribution worth in excess of $50 million were redeemed from\nviolations. The death penalty is being sought by the 1994 to 1997 by the 24 firms targeted for investigation\nState prosecutors. following the review of records seized from the\n bookkeeper.\n\n\n\n\n 1\n\x0cIn Minnesota, a husband and wife were found guilty of As a part of a proactive approach and increased\n46 felony counts that included conspiracy and various coordination and communication with the Risk\ntypes of fraud. The couple created and operated two Management Agency that resulted from our joint agency\nfarming corporations, and elicited the assistance of an roundtable, we devoted a large portion of our resources\nelderly neighbor as the \xe2\x80\x9cstraw\xe2\x80\x9d president and sole during this reporting period to several key areas: three\nshareholder of one of the corporations. From 1990 workgroups, the quality control system, and\nthrough 1999, the couple illegally obtained over implementation of the Agricultural Risk Protection Act of\n$940,000 in payments and loans. Sentencing is 2000. Among other benefits, this work should\npending. contribute to a more accurate and meaningful error rate\n for the Federal crop insurance program and a decrease\nThe Foreign Agricultural Service and a U.S. Private in the recurrence of the types of program abuses we\nVoluntary Organization (PVO) signed an agreement to have identified in the past.\nprovide for butter and butter oil, to be donated by the\nCommodity Credit Corporation, for assistance in the Operation \xe2\x80\x9cKiddie Care,\xe2\x80\x9d our nationwide initiative to\nRussian Federation. The proceeds were to be used for identify, remove, and prosecute unscrupulous Child and\nhumanitarian projects and investment in Russian Adult Care Food Program (CACFP) sponsoring\nagribusinesses. In December 1998, $980,000 was organizations, continued to be successful. OIG worked\nfraudulently wire-transferred from the account of the closely with the Food and Nutrition Service (FNS)\nPVO, through three U.S. banks, to a bank in Latvia, concerning needed regulatory and legislative changes\nwhere the funds were immediately withdrawn. To date, recommended in our August 1999 audit report. In June\n$966,000, or 98.6 percent of the stolen funds, has been 2000, Public Law 106-224 was enacted, which included\nrecovered and returned to the PVO. However, no provisions to restore program integrity to CACFP. We\nrecovered funds have been returned to USDA for use in are specifically reporting on audits and investigations in\nother U.S. food aid programs. New York, Arizona, California, Georgia, and Michigan.\n\nAudit Efforts OIG assisted the Farm Service Agency (FSA) in a\n critical area that is unnecessarily costing the\nWe are reporting on our Food Safety Initiative. OIG Government many millions of dollars\xe2\x80\x94the failure to\ninitiated a series of audits to determine whether FSIS\xe2\x80\x99 establish guaranteed loan losses as Government debt,\nmeat and poultry inspection program remains effective as required by law. As a result, losses in excess of\nunder the science-based Hazard Analysis and Critical $200 million were not reported to the U.S. Department\nControl Point (HACCP) System. We reviewed HACCP, of the Treasury during fiscal years (FY) 1997 through\nlaboratory analyses, foreign imports, and the compliance 2000 for collection. FSA has agreed to take the\nprogram that carried over from the previous system. necessary steps to fulfill the law and collect the debt.\nFSIS has taken positive steps, but more needs to be\ndone in all four areas reviewed. We audited the Department\xe2\x80\x99s implementation of\n Presidential Decision Directive (PDD) 63, \xe2\x80\x9cPolicy on\nThis reporting period, we completed our final analysis of Critical Infrastructure Protection.\xe2\x80\x9d The Department has\nthe $38 million Zephyr Cove Land Exchange at Lake neither fully identified its mission-essential infrastructure\nTahoe, which disclosed serious flaws in the Forest nor performed the necessary assessments to identify\nService\xe2\x80\x99s (FS) administration of the land exchange the threats, vulnerabilities, and potential magnitude of\nprogram, as had been indicated in a 1998 interim report. harm that could result from an attack. Also, the planned\nOur most recent audit disclosed a pattern similar to formation of a Critical Infrastructure Assurance Council,\npractices described in an August 1998 audit report. composed of agency management representatives to\nHowever, one exchange demonstrated the value of OIG ensure cyber infrastructure security and PDD 63\nintervention. compliance, was never established. The Office of the\n Chief Information Officer agreed with all our\n recommendations and has initiated corrective actions.\n\n\n\n\n2\n\x0c Summary of Audit Activities\nReports Issued ................................................................................................................................................. 51\n Audits Performed by OIG .................................................................................... 30\n Evaluations Performed by OIG ........................................................................... 6\n Audits Performed Under the Single Audit Act ..................................................... 13\n Audits Performed by Others ................................................................................ 2\n\nManagement Decisions Made\n Number of Reports .......................................................................................................................................... 56\n Number of Recommendations ........................................................................................................................ 399\n\nTotal Dollar Impact (Millions) .......................................................................................................................... $258.4\n Questioned/Unsupported Costs .......................................................................................... $ 26.0a,b,c\n Recommended for Recovery .............................................................................. $10.2\n Not Recommended for Recovery ........................................................................ $15.9\n Funds To Be Put to Better Use ............................................................................................ $232.4\n\na These were the amounts the auditees agreed to at the time of management decision.\nb The recoveries realized could change as the auditees implement the agreed-upon corrective action plan and seek recovery of amounts recorded\n as debts due the Department.\nc Because of rounding, this number does not equal the addition of the two numbers composing it. See Appendix I for exact numbers.\n\n\n\n Summary of Investigative Activities\nReports Issued ................................................................................................................................................... 300\nCases Opened ................................................................................................................................................... 348\nCases Closed ..................................................................................................................................................... 376\nCases Referred for Prosecution ......................................................................................................................... 205\n\nImpact of Investigations\n Indictments .................................................................................................................................................... 240\n Convictions .................................................................................................................................................... 251a\n Searches ........................................................................................................................................................ 111\n Arrests ........................................................................................................................................................... 931b\n\nTotal Dollar Impact (Millions) .......................................................................................................................... $50.5\n Recoveries/Collections .......................................................................................................... $ 9.3c\n Restitutions ........................................................................................................................... $34.6d\n Fines ..................................................................................................................................... $ 3.9e\n Claims Established ................................................................................................................ $ 1.7f\n Cost Avoidance ..................................................................................................................... $ 1.0g\n\nAdministrative Sanctions\n Employees ...................................................................................................................................................... 31\n Businesses/Persons ...................................................................................................................................... 1,128\n\na Includes convictions and pretrial diversions. Also, the period of time to obtain court action on an indictment varies widely; therefore,\n the 251 convictions do not necessarily relate to the 240 indictments.\nb\n Includes 726 Operation Talon arrests and 205 arrests not related to Operation Talon.\nc\n Includes money received by USDA or other Government agencies as a result of OIG investigations.\nd\n Restitutions are court-ordered repayments of money lost through a crime or program abuse.\ne\n Fines are court-ordered penalties.\nf\n Claims established are agency demands for repayment of USDA benefits.\ng Consists of loans or benefits not granted as the result of an OIG investigation.\n\n\n\n\n 3\n\x0cOIG in Focus\n\n\nThe following article is reprinted from the March/April investigations could be useful to members of\n2000 issue of the Asset Forfeiture News, a bimonthly the asset forfeiture community because efforts\npublication of the Asset Forfeiture and Money along similar lines could be employed by other\nLaundering Section, Criminal Division, U.S. Department agencies. This article highlights some of these\nof Justice. The publication is a central source of forfeiture-related investigative operations.\nFederal forfeiture information, and articles in the Asset\nForfeiture News are intended to assist Federal Success Stories\nprosecutors and agents in enforcing the forfeiture laws\nby providing guidance, information, and references. \xe2\x80\xa2 Operation \xe2\x80\x9cKiddie Care,\xe2\x80\x9d OIG\xe2\x80\x99s Presidential\n Initiative to identify, remove, and prosecute\n In the Spotlight With USDA OIG unscrupulous Child and Adult Care Food\n Forfeiture Staff Program (CACFP) sponsoring organizations,\n is one of those successes. Among those\n The U.S. Department of Agriculture (USDA) recently convicted were the president and\n programs and operations encompass much her assistant of a day care operation in\n more than simply farm issues. They involve a Michigan. They were found guilty of fraud,\n variety of issues relating to food safety, embezzlement, conspiracy, and money\n marketing, and regulatory initiatives; natural laundering related to defrauding CACFP of\n resources and the environment; and rural an estimated $17 million between 1989 and\n development; as well as food, nutrition, and 1993. The jury also awarded forfeiture of\n consumer services. Based on this broad scope more than $1.1 million in cash and three\n of issues, forfeiture statutes can apply to a properties. The president was sentenced to\n variety of cases involving USDA programs and 9 years in prison and ordered to pay more\n operations. than $13.5 million in restitution and a\n $10 million fine. This case was handled\n In fact, the USDA Office of Inspector General jointly with the Federal Bureau of\n (OIG) has been working to combat criminal Investigation (FBI).\n activity relating to USDA programs through the\n use of forfeiture procedures for nearly a \xe2\x80\xa2 A tobacco dealer was convicted of money\n decade. For example, USDA loan, regulatory, laundering, false statements, mail fraud, and\n and nutrition programs are vulnerable to fraud conspiracy for his role in a scheme that\n through money laundering (18 U.S.C. \xc2\xa7\xc2\xa7 1956, resulted in the illegal sale of more than\n 1957), specified unlawful activities, and other 20 million pounds of excess tobacco. As a\n forfeiture-related violations. In addition, result of the conviction, the Government\n investigations involving smuggling may detect forfeited assets including the defendant\xe2\x80\x99s\n specified unlawful activities leading to forfeiture, residence in Spotsylvania County, Virginia,\n such as false statements (18 U.S.C. \xc2\xa7 542), valued at $1.95 million; $3 million in cash or\n smuggling (18 U.S.C. \xc2\xa7 545), Racketeer substitute assets; a rental house in\n Influenced and Corrupt Organization (RICO) Fredericksburg, Virginia, with a value of\n (18 U.S.C. \xc2\xa7 1963), and money laundering. about $150,000; and a quarter horse\n Other forfeiture-related statutes applicable to purchased for $500,000 by the defendant.\n cases investigated by USDA OIG include One of the tobacco dealer\xe2\x80\x99s codefendants\n bribery of public officials (18 U.S.C. \xc2\xa7 201), was a \xe2\x80\x9cMontana Freeman.\xe2\x80\x9d This\n interference with commerce resulting from the investigation was conducted jointly with the\n taking or attempted taking of property by Internal Revenue Service (IRS).\n extortionate means (18 U.S.C. \xc2\xa7 1951), and\n racketeering (18 U.S.C. \xc2\xa7 1962(c)). USDA OIG \xe2\x80\xa2 Assets worth an estimated $4 million were\n has achieved successes in an array of asset seized from the vice president of a North\n forfeiture-related cases, and has worked with Carolina vegetable oil supply company after\n various Federal agencies during the the vice president and others were convicted\n investigations. Knowledge of these varied of conspiring to underfill contracts to deliver\n\n\n\n4\n\x0c vegetable oil to USDA\xe2\x80\x99s Commodity Credit \xe2\x80\xa2 In Morgan City, Louisiana, a former store\n Corporation (CCC). As a result of the owner pled guilty in Federal court to\n scheme, CCC was defrauded of over conspiracy and money laundering involving\n $2 million in vegetable oil. After paying food stamp trafficking. Not authorized to\n approximately $132,000 in kickbacks and accept food stamps herself, the former store\n bribes, the vice president laundered the owner operated her store under a fictitious\n remaining funds, paying off his home name and fraudulently redeemed over\n mortgage in South Carolina, making a $397,000 in food stamps. In her plea\n downpayment on a lavish home in the agreement, she agreed to forfeit over\n mountains of North Carolina, and purchasing $68,000 in cash, a pickup truck, silver bars,\n an oceanfront condominium. He also funded and a coin collection, all of which were\n a baseball field that bears his name for a seized as the result of a search of her\n private college in South Carolina, bought residence, store, bank accounts, and safe-\n gemstones from a New York diamond deposit box. The former owner was\n broker, and made downpayments on canning sentenced to serve 4 years in prison and\n and bottling manufacturing equipment. The ordered to pay over $384,000 in restitution,\n assets seized from the vice president include in addition to forfeiting the above property.\n the two homes, the condominium, the\n manufacturing equipment, and $410,000 in A Recent Development\n cash. This case represents one of the\n largest successful prosecutions involving One fairly new development in forfeiture laws\n CCC contract fraud. The case was handled relating to USDA is a criminal forfeiture statute\n jointly with the U.S. Agency for International under the Special Supplemental Nutrition\n Development OIG, the FBI, and the IRS. Program for Women, Infants, and Children,\n which is a USDA program commonly known as\n\xe2\x80\xa2 Two owners operating a horse export/import WIC. On October 31, 1998, President Clinton\n business in Virginia and Germany and their signed the William F. Goodling Child Nutrition\n company pled guilty to smuggling and Reauthorization Act of 1998 (Act), Pub. L. No.\n providing falsified information concerning the 105-336, 112 Stat. 3143 (1998). Section 203 of\n age of horses being exported from Germany. the Act contains criminal forfeiture provisions for\n The German veterinarians unknowingly certain WIC violations. These forfeiture\n issued inaccurate health certificates for provisions are not retroactive and apply only to\n export to the United States. The certificates WIC forfeiture violations that occurred after\n were presented to officials of USDA\xe2\x80\x99s Animal October 31, 1998.\n and Plant Health Inspection Service in order\n to avoid 50 days of quarantine in the United The Future\n States, a requirement for all horses over the\n age of 731 days in order to prevent the There are ongoing USDA cases involving\n spread of Contagious Equine Metritis. The forfeiture actions in cities from coast to coast,\n horse owner is responsible for paying for the and they are used to combat violations such as\n quarantine process. Consequently, at least money laundering, smuggling, food stamp\n four horses were imported into the United trafficking, and bribery, to name a few. As\n States without being placed in quarantine. illustrated, USDA OIG has been employing\n The Government seized the owners\xe2\x80\x99 horse asset forfeiture as a tool to further its law\n farm in Virginia, valued at $1.2 million, which enforcement efforts in many areas for some\n the owners forfeited in this case. time. Certain of these areas may offer ideas for\n parallel successes by other agencies. Building\n on existing efforts can only further invigorate\n already robust law enforcement efforts\n throughout the asset forfeiture community.\n\n\n\n\n 5\n\x0cPublic Corruption Investigations\n\n\nA top priority for OIG is the investigation of serious restitution. Three other cases also resulted in\nallegations of employee misconduct. During the past convictions.\n6 months, such investigations resulted in 15 convictions\nof current or former USDA employees and 31 personnel \xe2\x80\xa2 The former budget officer of the Natural Resources\nactions. Some recent investigations follow. Conservation Service\xe2\x80\x99s (NRCS) National Business\n Management Center (NBMC) in Fort Worth, Texas,\nAMS Inspectors Sentenced to Prison for pled guilty in Federal court to embezzling over\nBribery Scheme $300,000 from NRCS. He embezzled money as the\n budget officer at NBMC, as well as when assigned as\nWe reported last period that a 21/2-year investigation an NRCS budget officer in Ohio. He was sentenced\nuncovered a scheme by which Agricultural Marketing in Federal court to serve 18 months in prison,\nService (AMS) graders accepted bribes from produce followed by 3 years\xe2\x80\x99 supervised release, and ordered\nwholesalers at the Hunts Point Market in New York City to make restitution of nearly $311,200.\nin return for downgrading produce. The wholesalers\nthen used the lower grades to negotiate downward the \xe2\x80\xa2 A former County Executive Director (CED) for the\nprice they paid growers for the produce. The scheme, Farm Service Agency (FSA) in Washington State\ndetailed in a 65-count racketeering and bribery pled guilty to charges stemming from her\nindictment unsealed in U.S. District Court, took place embezzlement of approximately $230,000. Over a\nover 2 decades and was so pervasive that some of the 5-year period, the CED made, signed, and issued\ninspectors took more than $100,000 a year in illegal approximately 124 USDA checks that were\npayoffs. The actions of the AMS inspectors were purportedly either payments to farmers participating\norganized, and, after completing an inspection, they in USDA programs or payments of administrative\nwould kick back a portion of the bribe proceeds to the expenses of the FSA office. The carbon copies of\nnight supervisor who was in charge of assigning them to these checks and the underlying documentation\n\xe2\x80\x9cpaying\xe2\x80\x9d locations. Nine AMS employees were indicted showed that the checks were issued to various\non Racketeer Influenced and Corrupt Organization payees for legitimate expenses and payments.\n(RICO) charges and pled guilty to charges of bribery. However, on each of the actual checks, the CED\nIn addition, 15 owners or employees of produce typed her own name as payee and then converted\nwholesalers were indicted on bribery charges with the funds to her own use. She was sentenced to\n8 pleading guilty. One convicted inspector had a serve 18 months in prison, to be followed by 3 years\n$100,000 brokerage account, which was seized as part of supervised release, and ordered to make full\nof the investigation. Others used their bribe monies for restitution. An FSA County Office Review team\ndrugs, prostitutes, and automobiles. initially uncovered the embezzlement.\n\nSince our last report, seven AMS graders were \xe2\x80\xa2 A former Forest Service (FS) employee in Arizona\nsentenced to imprisonment ranging from 15 to 30 was charged in a County Superior Court with\nmonths and fines of $4,000 to $70,000. Three owners fraudulent schemes and artifices, as well as theft of\nor employees of produce wholesalers received Government funds. Our investigation showed that,\nsentences ranging from 6 months\xe2\x80\x99 home confinement to from December 1998 through November 1999, the\n15 months in prison and a total of over $45,000 in fines employee used an FS-issued Purchasing Card\nand restitution. One wholesale employee was Management System credit card for more than\nacquitted. The investigation is continuing with additional 300 personal purchases totaling over $23,000.\ntrials and sentencing pending. Sentencing is pending.\n\nOIG Thwarts Several Embezzlements, \xe2\x80\xa2 An FS clerk in Arizona was convicted, along with her\nSentences Include Prison Terms husband, of embezzling approximately $17,000. The\n clerk and her husband, who was a deputy sheriff,\nSeveral OIG investigations addressed embezzlements were both sentenced to 3 years\xe2\x80\x99 probation. They\nby USDA employees, including two cases involving made full restitution at the time of sentencing. Both\nhundreds of thousands of dollars. OIG efforts yielded resigned from their agencies. This case was worked\nsignificant prison terms in those cases, as well as full with FS Law Enforcement and Investigations agents.\n\n\n\n6\n\x0c\xe2\x80\xa2 In Missouri, a former Rural Development loan was suspended and finally removed from his position as\n processor pled guilty to embezzling $11,570 in Rural CED before criminal sentencing.\n Development funds that were intended as payments\n toward borrowers\xe2\x80\x99 home loan accounts. From Store Owners and WIC Clerks Convicted of\n January to March 1999, the employee convinced Conspiracy and Money Laundering\n 12 different borrowers whose home loan accounts\n were in or near default to send various sums of In Minnesota, a joint investigation with the IRS led to the\n money directly to him under the guise that he would indictment of both the owner and the manager of a retail\n terminate foreclosure actions. The employee was grocery store for money laundering, as well as food\n sentenced to serve 1 month in prison and 5 months stamp and Special Supplemental Nutrition Program for\n of home confinement, followed by 3 years\xe2\x80\x99 probation, Women, Infants, and Children (WIC) voucher trafficking.\n and ordered to pay full restitution. It also led to the indictment of two former WIC clerks for\n conspiracy to steal WIC vouchers. The former clerks,\nCED Pleads Guilty in Sexual Harassment of who worked for the city of Minneapolis, were stealing\nEmployee unclaimed vouchers and selling them at the\n neighborhood grocery store. The owner of the store\nIn Michigan, a former FSA CED pled guilty to one count admitted that he bought the vouchers from the WIC\nof assault and battery in front of a County Circuit Court employees. He also purchased electronic food stamp\njudge. He was sentenced to a 90-day jail sentence benefits and stolen baby formula from other individuals.\n(which is suspended pending the completion of sexual During 1 year, food stamp and WIC redemptions\nabuse counseling), 1 year of probation, and payment of exceeded the store\xe2\x80\x99s reported retail food sales by nearly\ncourt costs and fees. The CED sexually harassed a $200,000. The store owner and manager each pled\nsubordinate employee by inappropriately touching her guilty to money laundering. The WIC clerks pled guilty\non at least 31 separate occasions over the course of to conspiring to steal over $200,000 worth of vouchers\n2 days. He also abused his time and attendance. He from the program. All are awaiting sentencing.\n\n\n\n\n 7\n\x0cWorkplace Violence Investigations\n\n\nMurder Charges Lodged in Deaths of FS Special Agent and Law Enforcement\nCompliance Officers Officer Assaulted\n\nThe owner of a San Francisco Bay area sausage While investigating the origin of a suspicious fire in a\ncompany is in jail awaiting trial on charges that he shot national forest in Missouri, an FS special agent and a\nand killed two Food Safety and Inspection Service law enforcement officer (LEO) were confronted by a\n(FSIS) compliance officers and a California Department man with a handgun. The man, who owned property\nof Food and Agriculture (CDFA) investigator. He is also near the forest, ignored repeated instructions from the\ncharged with attempted murder of a second CDFA FS agent to put the weapon down. Once the man had\nemployee, an inspector. The four officers were at the finally placed the weapon on the ground, he ignored\nsausage company plant to discuss suspected Federal further instructions to step away. When he suddenly\nand State meat production, labeling, and distribution and unexpectedly reached for the weapon, the FS agent\nviolations. The case is being prosecuted jointly under discharged his own firearm. The property owner was\nCalifornia State criminal statute by an Alameda County subsequently charged with assault on a Federal officer\nDistrict Attorney with the assistance of an Assistant U.S. and pled guilty to a misdemeanor offense. He was\nAttorney from the Northern District of California. The sentenced to probation.\nSan Leandro Police Department, OIG, and the FBI are\nconducting the investigation with the assistance of Four Arrested for Assaulting FS Law\nFSIS. The death penalty is being sought by the State Enforcement Officer\nprosecutors.\n Four men were arrested and charged in Federal court\nFSIS Compliance Officer Assaulted for assaulting an FS LEO who was performing routine\n patrol duties in a New Mexico national forest. The LEO\nIn Michigan, an FSIS compliance officer was assaulted approached the four men, who were in a parked vehicle\nby the owner of a deer processing and catering in the forest, drinking alcohol and smoking. The four\nestablishment after the owner suddenly became men got out of the vehicle and attacked the LEO,\nabusive during an inspection. The compliance officer, fracturing his skull, breaking his jaw, and causing\nnot injured in the scuffle, had to end the inspection and lacerations to his face and head. The men fled the\nleave the premises. The owner pled guilty in Federal scene and were later arrested and charged. The four\ncourt to one count of assaulting a Federal officer and subjects were denied bail and are awaiting trial. OIG\nwas sentenced to 2 months\xe2\x80\x99 home confinement, assisted the FBI in the investigation.\n3 years\xe2\x80\x99 probation, participation in a mental health\ntreatment program, a $2,500 fine, and a fee of $276 for\nelectronic monitoring equipment during the home\nconfinement.\n\n\n\n\n8\n\x0cFood Safety\n\n\n \xe2\x80\xa2 Pathogen and Residue Testing Program by FSIS\n FOOD SAFETY AND INSPECTION SERVICE\n Laboratories Needs To Be Expanded and Controls\n (FSIS)\n Improved\n\nFSIS administers a comprehensive system of inspection \xe2\x80\xa2 There were material control weaknesses:\nlaws to ensure that meat, poultry, and egg products\nmoving in interstate and foreign commerce for use as \xe2\x96\xa0 An incomplete data base precluded many meat\nhuman food are safe, wholesome, and accurately and poultry establishments from testing.\nlabeled. FSIS\xe2\x80\x99 appropriation for FY 2000 totaled\napproximately $649 million. \xe2\x96\xa0 FSIS inspectors failed to respond to 24 percent\n of its Office of Public Health and Science\xe2\x80\x99s\nFood Safety Initiative (OPHS) requests for samples to be collected for\n laboratory testing.\nOIG initiated a series of audits to determine whether\nFSIS\xe2\x80\x99 meat and poultry inspection program remains \xe2\x80\xa2 FSIS\xe2\x80\x99 quality assurance activities over the\neffective under the science-based Hazard Analysis and laboratories need to be strengthened, particularly\nCritical Control Point (HACCP) System. We reviewed with regard to microbiological testing operations.\nHACCP, laboratory analyses, foreign imports, and the\ncompliance program that carried over from the previous \xe2\x80\xa2 FSIS generally agreed to correct the cited\nsystem. FSIS has taken positive steps, but more needs weaknesses through stronger procedures and\nto be done in all four areas reviewed. FSIS needs to controls.\ntake maximum advantage of the expanding role science\nnow plays as a control over the meat, poultry, and egg \xe2\x80\xa2 FSIS Documentation and Management Controls\nproducts that enter the marketplace. Moreover, FSIS Over the Import Inspection Program Need To Be\nhas reduced its oversight short of what is prudent and Enhanced\nnecessary for the protection of the consumer.\nHighlights of our major findings follow. You can access \xe2\x80\xa2 Assurance is lacking that, as required, foreign\nthe full report on our Web site at www.usda.gov/oig/ countries exporting meat and poultry to the United\nauditrpt/full_fsis.pdf. States maintain inspection systems equivalent to\n the U.S. inspection system.\n\xe2\x80\xa2 HACCP Verification and Oversight Should Be\n Strengthened \xe2\x80\xa2 FSIS did not adequately support its determinations\n that foreign countries importing meat and poultry\n \xe2\x80\xa2 FSIS must more aggressively assert its authorities products to the United States were eligible to do\n under the program and in the plants\xe2\x80\x99 testing so.\n programs.\n \xe2\x80\xa2 We made recommendations for imported meat\n \xe2\x80\xa2 FSIS concurred that it should: and poultry products leading to improvements in\n terms of:\n \xe2\x96\xa0 Strengthen controls to provide greater\n verification of and oversight over HACCP \xe2\x96\xa0 Safety;\n implementation, pathogen testing, and\n independent reviews of plant and inspection \xe2\x96\xa0 formal procedures; and\n activities;\n \xe2\x96\xa0 residue test plans, results, and certifications.\n \xe2\x96\xa0 expand language contained in its grant of\n inspection agreement to define FSIS oversight \xe2\x80\xa2 We also recommended that equivalency\n responsibilities; and determinations:\n\n \xe2\x96\xa0 set out the requirements of the establishments, \xe2\x96\xa0 Involve technical subject matter experts,\n including access to records regarding the\n plants\xe2\x80\x99 operations.\n\n 9\n\x0c \xe2\x96\xa0 are adequately documented and supported, and The president of the plant also pled guilty to failure to\n maintain accurate records, as required by Federal\n \xe2\x96\xa0 require onsite verification reviews before the HACCP regulations. The two corporate officials and the\n granting of equivalency status. corporation were each sentenced to 3 years\xe2\x80\x99 probation,\n each officer was fined $10,000, and the corporation was\n \xe2\x80\xa2 FSIS generally agreed but is still developing fined $90,000. Employees of the plant were adding soy\n corrective action to address the identified to ground beef as an extender to maximize profits,\n weaknesses in its control systems and oversight of creating serious health concerns for persons who are\n import operations. allergic to soy. The ground beef product was distributed\n to hospitals, nursing homes, restaurants, and hotels.\n\xe2\x80\xa2 FSIS Needs To Enhance Its Efforts To Improve Food Further investigation showed the plant was also\n Safety Compliance distributing ungraded meat as \xe2\x80\x9cchoice.\xe2\x80\x9d OIG was\n assisted by FSIS compliance officers.\n \xe2\x80\xa2 FSIS needs to enhance its existing compliance\n review plan to ensure industry compliance with Poultry Plant Employee Pleads Guilty to Product\n law. Tampering\n\n \xe2\x80\xa2 Compliance officers need to be more consistent in A poultry processing plant employee in Mississippi pled\n reviews and thorough in documenting results and guilty in Federal court to product tampering. The\n reporting violations. employee admitted throwing a bottle of black ink into a\n prechiller, contaminating 3,742 pounds of poultry. The\n \xe2\x80\xa2 FSIS does not have an effective system to motivation for this act was to shut the plant down,\n accurately track the number, status, and allowing employees to go home. Sentencing is\n disposition of consumer complaints. pending.\n\n \xe2\x80\xa2 FSIS enforcement actions consist only of a letter Texas Corporation Pleads Guilty to Adulteration of\n of warning, not fines. Meat and Poultry Products\n\n \xe2\x80\xa2 FSIS agreed with our recommendations A corporation in Brownsville, Texas, has pled guilty to a\n concerning the noted weaknesses, has initiated Federal indictment for the sale of adulterated meat and\n corrective actions, and continues to seek the poultry products. The corporation sold and shipped\n authority to levy fines. rodent- and maggot-contaminated meat and poultry\n products to several retail outlets in Texas. The\nMeat Processor, President, and Production Manager corporation has agreed to pay a $125,000 fine.\nPlead Guilty to Felonies\n\nAfter an investigation by OIG, a Miami meat processor\nand two of its corporate officials pled guilty to conspiring\nto adulterate and misbrand meat at a plant in Miami.\n\n\n\n\n10\n\x0cNatural Resources and Environment\n\n\n FOREST SERVICE (FS) Our most recent audit disclosed a pattern similar to\n practices described in an August 1998 audit report. FS\n staff let the private parties control many aspects of the\nFS has the responsibility for providing leadership in the exchanges. Consequently, the developers, the\nprotection, management, and use of the Nation\xe2\x80\x99s forest, landowners, and their advocates tried to maximize their\ngrassland, and aquatic ecosystems on public and acquisitions in Las Vegas by overvaluing their own land\nprivate lands. The FY 2000 budget for FS is projected to ensure the \xe2\x80\x9cequal\xe2\x80\x9d piece of Las Vegas property they\nat $3.5 billion, while receipts generated through timber received was of greater worth.\nsales and other activities are estimated at about\n$796 million. \xe2\x80\xa2 In the Deer Creek exchange, FS staff on the\n Humboldt-Toiyabe National Forest let an advocate\nPublic\xe2\x80\x99s Interests Not Always Protected During FS for the landowner override FS safeguards against\nLand Exchanges excessive valuations, resulting in a $5.9 million loss\n to the Government.\nOver the past several years, OIG has audited a number\nof land exchanges conducted by FS in the Western \xe2\x80\xa2 In the Mt. Rose exchange, FS staff on the Humboldt-\nStates. This reporting period, we completed our final Toiyabe allowed a private party to \xe2\x80\x9cpresell\xe2\x80\x9d FS land\nanalysis of the Zephyr Cove Land Exchange at Lake worth $6.5 million to private investors with FS to\nTahoe, which disclosed serious flaws in FS\xe2\x80\x99 receive other unspecified lands at some future date.\nadministration of the land exchange program, as had\nbeen indicated in a 1998 interim report. \xe2\x80\xa2 In the Galena Resort exchange on the Humboldt-\n Toiyabe, FS paid the landowner $2.1 million for water\nThe $38 million exchange failed to obtain clear title to a rights it did not plan to use. The landowner had\nunique lakeshore property, now fenced off, restricting acquired the water rights for the property being\npublic access. The $38 million cost to the Government exchanged with FS but did not inform FS that the\npotentially is double the land\xe2\x80\x99s actual value. We rights would lapse if not used.\nconcluded that the Zephyr Cove land exchange was\nseriously compromised by the inadequate actions of the In some cases, landowners would give FS land\nFS regional office and the local FS personnel working encumbered with deed reservations, encroachments, or\nthe exchange. Also, as a result of the sale of the maintenance problems in exchange for the\nmansion at Zephyr Cove, a third party threatened unencumbered Las Vegas property. However, one\nlitigation if FS did not issue it a special-use permit at a exchange\xe2\x80\x94the Thunderbird Lodge at Lake Tahoe,\nlow rate to operate a concession in the mansion and reported previously\xe2\x80\x94demonstrated the value of OIG\ndevelop the land around it. intervention. FS would have accepted a deed that did\n not clear the Government of liability for an aging\n structure that it could not afford to maintain. As a result\n of our recommendations, FS added terms to the deed\n that required the landowner to furnish a 10-year,\n $2.3 million performance bond to guarantee that the\n current owners of the lodge maintain it.\n\n Based on recommendations we have made in the\n issued reports, FS has agreed to implement additional\n controls over the land exchange process. Future\n reviews will evaluate the adequacy of these new\n controls.\n\n\n\nView of the mansion at Zephyr Cove. OIG Photo.\n\n\n\n\n 11\n\x0cWeaknesses Found in the Financial Disclosure\nReporting Systems at FS\n\nThe financial disclosure reporting system helps\nemployees avoid conflict-of-interest situations and is\nincreasingly important as FS expands the use of\ncollaborative ventures and partnerships with non-\nFederal entities (currently running in the hundreds of\nmillions of dollars annually). FS units were not updating\ntheir system to identify and track employees designated\nto file confidential financial disclosure reports. We\nidentified 272 designated filers (contract specialists,\nrealty specialists, etc.) not included in the system and\ntracked by FS, as well as 476 LEO\xe2\x80\x99s and criminal\ninvestigators, whose duties fell within the general\ndescription in the act.\n\nControls to ensure that designated filers actually filed\ntheir financial disclosure reports on time were also\ninadequate, and the reports were not thoroughly\nreviewed. Four FS employees were able to conceal\ntheir interests in non-Federal entities and either grant\nfavors to those entities or potentially receive favors from\nthem. Two other employees who disclosed their\ninterests had made decisions favorable to those\ninterests, but ethics officials had not adequately\nreviewed the disclosure forms to identify and take action\nto prevent the conflict situation from arising.\n\nWe recommended that FS require all LEO\xe2\x80\x99s and\ncriminal investigators to file financial disclosure reports\nand establish procedures to periodically review and\nupdate its tracking system, and that FS ethics officials\nadequately follow up on the nature and extent of outside\nemployment/activities reported.\n\n\n\n\n12\n\x0cFarm and Foreign Agricultural Services\n\n\n FARM SERVICE AGENCY (FSA) \xe2\x80\xa2 Further, we questioned about $8.8 million in CLDAP\n payments that were issued to producers who were\n ineligible for crop insurance.\nFSA supports American farmers, and ultimately\nconsumers, through commodity and disaster programs, \xe2\x80\xa2 As a result of the audit, OIG investigated two\nloans, conservation, and food assistance. The FY 2000 producers and one crop insurance agent for apparent\nbudget is estimated at over $7 billion in funds available misrepresentations on their disaster and/or crop\ndirectly to FSA. The Commodity Credit Corporation insurance claims.\n(CCC), a Government corporation, funds all other\nprogram operations at an estimated $32 billion. Overall, some procedural changes were needed.\n\nUpfront Review of CLDAP Delivery to Producers \xe2\x80\xa2 CLDAP neither prohibited payments in excess of\nForestalls Improper Payments producers\xe2\x80\x99 expected gross crop revenues (as did\n prior disaster programs) nor required adjustment of\nOIG places a high priority on reviewing programs early payments based on known inflated crop insurance\non to forestall potentially massive problems. OIG teams indemnities.\nfrequently assist agency personnel in an assortment of\nprograms intended to benefit farmers and help them \xe2\x80\xa2 The CLDAP contract did not include a liquidated\nrecover from natural disasters. We move quickly to damage clause for noncompliance with crop\nidentify weaknesses and set a direction for effectively insurance linkage provisions.\ndisbursing benefits to those entitled, while\nrecommending controls to identify wrongdoers and FSA generally agreed to collect cited overpayments and\ninstitute measures of deterrence. Work we do at one direct compliance reviews toward areas where most\nlocation often has implications for a much wider area. program errors occurred. FSA also agreed to grant\nIn a prime example, we reviewed the Crop Loss FSA county committees authority to correct erroneous\nDisaster Assistance Program (CLDAP), for the 1998 RMA data when RMA acknowledged such errors in\ncrop or for the 1994 to 1998 (multiyear) crops, in writing. However, unlike OIG, FSA believed that\ncooperation with FSA and the Risk Management sufficient safeguards were in place to limit future\nAgency (RMA). disaster program payments to producers\xe2\x80\x99 expected\n gross returns. FSA and RMA agreed to jointly develop\nWe identified improper payments on about 6.5 percent and implement a plan to improve compliance with crop\nof the more than 1,800 applications we reviewed in linkage requirements. RMA agreed to determine\n40 county FSA offices in 14 States. whether cited producers misrepresented their 1998 crop\n production to increase their crop insurance indemnities,\n\xe2\x80\xa2 Through our interim notification of program and recover any overpayments.\n deficiencies, FSA was able to preclude issuance of\n nearly $458,000 in overpayments and correct about Early Work Enhances Program Controls for LDP\n $40,000 in underpayments before payments were Program\n disbursed.\n OIG performed early work to identify what could be\n\xe2\x80\xa2 We found that producers did not accurately report used to improve another large-dollar program. The\n qualifying data (such as acreage, production, and Federal Agriculture Improvement and Reform (FAIR)\n crop shares) and that county offices made technical Act of 1996 mandated a Loan Deficiency Payment\n errors, resulting in overpayments of about (LDP) program on 16 different commodities for the\n $1.1 million and in underpayments totaling 1996 through 2002 crop years. LDP\xe2\x80\x99s were intended to\n about $66,000. minimize the delivery of price support loan collateral to\n CCC by paying producers the difference between the\n\xe2\x80\xa2 We also identified about $150,000 in excessive RMA established price support loan rate and the settlement\n crop insurance indemnities and $2,400 in excessive prices received by producers. LDP activity exploded\n (FSA) loan deficiency payments resulting from into a $2.7 billion program for the 1998 crop year. (LDP\n problems identified during the audit. activity prior to 1998 was minimal because market\n prices were generally higher than loan rates.)\n\n 13\n\x0cWe found that county average (benchmark) yields where the grain is covered by sales or delayed pricing\nestablished by some FSA county committees hindered contracts that specify the loss of title at the time of\nreasonableness tests. Specifically, when yields claimed delivery. We also recommended recovery of the\nfor LDP benefits appeared to exceed county average monetary amounts cited in the report, as well as any\nyields, the committees were to determine the other applicable 1998 LDP amounts disbursed to\nreasonableness of the claimed yields. However, county producers with similar contracts, and FSA has begun\naverage yields were established inconsistently and/or recovery.\ndid not always reflect actual crop yields, which, coupled\nwith the absence of formal second-party reviews, OIG Confirms Suspicions, Finds Duplicated Claims\ncontributed to the disbursement of about $300,000 in and Overstated Losses\nerror to producers.\n Oklahoma State FSA officials called on OIG\xe2\x80\x99s expertise\nFSA generally concurred with our findings and to look at a questionable situation in one Oklahoma\nrecommendations to provide additional guidance and county. We responded to their requests, performed a\ndirection over the establishment of county average thorough review, and came up with significant findings.\nyields, develop and implement an automated\nreasonableness test, and scrutinize questionable We initiated an audit to determine whether (as indicated\nrequests. by internal FSA reviews) producers improperly claimed\n disaster benefits and an FSA employee improperly\nOIG Responds to Request, Finds Beneficial Interest made and/or serviced loans to family members. We\nRequirements Not Met reviewed 11 producers\xe2\x80\x99 disaster claims for hay and/or\n pasture losses in 1998 and 1999.\nProgram officials sometimes capitalize on our expertise\nby asking us to look at questionable situations. We \xe2\x80\xa2 In nine cases, producers had inaccurately self-\noften root out irregularities or provide guidance to clarify certified their disaster losses.\npolicies or enhance the efficiency and effectiveness of\nprocedures. In one instance, we performed an audit at \xe2\x80\xa2 In seven cases, the producers improperly claimed\nthe request of North Dakota State FSA officials to duplicate losses under the 1998 CLDAP and\ndetermine whether producers in a county met beneficial Livestock Assistance Program (LAP) and were\ninterest requirements for 1998 LDP\xe2\x80\x99s. Producers must overpaid almost $162,000.\nhave control of and title to a commodity, and risk of loss,\nat the time LDP benefits are requested. \xe2\x80\xa2 In five cases, the producers inaccurately reported\n disaster acreage, types of pasture losses, and/or\nWe reviewed 5 producers at each of 3 warehouses (to livestock on hand during the grazing period and were\nwhich a total of 652 county producers delivered ineligible for 1998 and/or 1999 disaster benefits\ncommodities claimed for LDP benefits). totaling almost $43,000.\n\n\xe2\x80\xa2 Four producers delivered grain to two warehouses \xe2\x80\xa2 An employee was involved in completing overstated\n under delayed pricing contracts (did not meet the disaster claims for two of the producers, who were\n beneficial interest requirements of the program), close relatives of the employee. The employee\n were ineligible for LDP\xe2\x80\x99s totaling about $22,000, and altered dates on the producers\xe2\x80\x99 livestock sales\n are subject to liquidated damages totaling about documents (used to determine livestock on hand)\n $5,400. and provided FSA with overstated disaster acreage\n information and incorrect descriptions of pasture\n\xe2\x80\xa2 One of the warehouses provided misleading cover. This matter was referred for investigation\n documentation to producers which showed grain because of the FSA employee\xe2\x80\x99s involvement.\n claimed for LDP benefits was in open storage when,\n in fact, it had been applied to existing sales contracts. Nothing came to our attention to indicate the employee\n made and/or serviced loans to family members, but\nWe recommended that FSA notify producers of the there was an appearance of a conflict of interest\nneed to request LDP benefits prior to delivery in cases between the employee and a farm loan borrower, who\n\n\n\n14\n\x0cwas both the employee\xe2\x80\x99s close relative and a business \xe2\x80\xa2 In summary, the corporation, which was also the joint\nassociate of the employee\xe2\x80\x99s spouse. The employee venture\xe2\x80\x99s landowner, provided all the major\nand borrower gave FSA required notice of their investments and assumed the risk for the outcome of\nrelationship and association, but FSA procedure did not the joint venture\xe2\x80\x99s operation.\nrequire the borrower\xe2\x80\x99s loan file to be assigned to\nanother county office. We concluded the producers used a scheme or device\n to evade payment limitation provisions, and\nWe recommended, and FSA agreed, to collect the recommended FSA recover $451,000 in program\nquestioned payments and review remaining applications payments made to the joint venture and corporation for\nin the county for duplicate benefits under CLDAP and 1997 through 1999. (Program payments for 1999 are\nLAP. Based on the outcome of the investigation, FSA subject to refund if the agency determines the\nwill consider whether the employee\xe2\x80\x99s conduct (with producers used a scheme or device for 1997 and 1998.)\nregard to completion of the overstated disaster claims Oklahoma State FSA officials agreed to make\nfor two producers) warrants action. FSA also decided to determinations based on information provided in the\ntransfer the borrower\xe2\x80\x99s loan to another county for audit and to notify the producers of the repayment\nservicing. required.\n\nActive Response Finds Payment Limitation Rules OIG Helps in Correcting SAA Data Base To\nViolated in Oklahoma Recapture Debt\n\nSome programs, by their nature, lend themselves to OIG reviewed shared appreciation agreements (SAA) to\ncontinuing problems at the hands of individuals assist FSA in getting better control over pertinent data\nattempting to circumvent the law. We step in quickly at and the associated recapture of certain Government\nthe first report of such irregularities. Our overall intent is debt. FSA implemented SAA\xe2\x80\x99s in 1989 to recapture part\nto ensure that farmers throughout the country are of the Government debt written down for Farm Loan\nadhering to established policies and following correct Program borrowers. A percentage of shared\nprocedures. At the request of the Oklahoma State FSA appreciation is due if the market value of the secured\nCommittee, we audited farming operations in an property has risen during the term of the agreement.\nOklahoma county to determine if producers violated Borrowers may request partial or complete suspension\nAgricultural Market Transition Act (AMTA) payment of repayment annually up to three times.\nlimitation provisions.\n The March 2000 SAA data base maintained by FSA\nWe found that an individual operating as a corporation showed that about 11,900 SAA\xe2\x80\x99s had been executed on\nused two corporate employees to establish a joint debt writedowns of over $1.7 billion.\nventure, which participated in AMTA as a separate\nproducer in 1997 and 1998. However, our reviews of \xe2\x80\xa2 The data base comprised 9,260 SAA\xe2\x80\x99s on real estate\nthe joint venture\xe2\x80\x99s and corporation\xe2\x80\x99s financial records debt writedowns, totaling $1.2 billion, and\nshowed the joint venture\xe2\x80\x99s operation was not separate\nand distinct from that of the corporation. \xe2\x80\xa2 over 2,600 agreements in writedowns for non-real\n estate loans (chattel). However, SAA\xe2\x80\x99s do not apply\n\xe2\x80\xa2 The corporation provided the joint venture\xe2\x80\x99s 1997 and to non-real estate loans.\n 1998 capital, land, equipment, and operating\n expenses. Also, when a borrower\xe2\x80\x99s shared appreciation due was\n approved for suspension, the information was tracked\n\xe2\x80\xa2 The joint venture did not maintain funds and manually, because suspended SAA\xe2\x80\x99s are not identified\n accounts separate from the corporation. Other than as such in the data base. As of May 2000, over 1,000\n a handwritten summary of revenue and expenses for suspended SAA\xe2\x80\x99s totaled about $45.5 million. In\n 1997 and 1998, the joint venture did not maintain any addition, although 272 SAA\xe2\x80\x99s showed no appreciation,\n records relating to expenses for equipment, notes, the data showed recapture amounts totaling over\n land lease payments, and other farming expenses. $5 million because of incorrect data entry for the market\n values.\n\n\n\n 15\n\x0cAll told, we reviewed 258 SAA\xe2\x80\x99s in 3 States, noted mortgaged property. The defendant, who had\ndiscrepancies in the data for 29, and concluded that the previously received two FSA operating loans to\nSAA data base contained significant erroneous data purchase cattle, mortgaged the cattle to FSA. Before\nthat could adversely affect management information. receiving the loans, the defendant presented false\n receipts to FSA regarding cattle purchases. The\nFSA agreed to: defendant also sold mortgaged cattle in other names\n and did not report the sales proceeds to FSA.\n\xe2\x80\xa2 Correct the erroneous information in the data base,\n RISK MANAGEMENT AGENCY (RMA)\n\xe2\x80\xa2 implement control procedures to better ensure the\n accuracy of the data, and\n RMA administers the Federal Crop Insurance\n\xe2\x80\xa2 remind all State and county office staffs that net sale Corporation (FCIC) and oversees all programs\n proceeds are to be applied first to the SAA and then authorized under the Federal Crop Insurance Act. FCIC\n to the outstanding debt. is a wholly owned Government corporation that offers\n subsidized multiple-peril and revenue crop insurance\nOIG Curtails Criminal Violations That Hurt People, through a private delivery system by means of reinsured\nPrograms companies. RMA\xe2\x80\x99s FY 2001 Government cost, net of\n producer-paid premiums of $968 million, is estimated at\nOIG brought to bear law enforcement efforts to counter $2.2 billion.\ncriminal violations and create a presence leading to\ndeterrence. One multimillion-dollar case affected more Proactive Evaluation of Crop Insurance Programs,\nthan a hundred cotton farmers. Two other cases Regulations, and Policies\nproduced sizable restitution and a prison sentence.\n As a part of a proactive approach and increased\n\xe2\x80\xa2 The owner of cotton warehouses in Georgia and coordination and communication with RMA that resulted\n South Carolina was sentenced to serve 35 months in from our joint agency roundtable, we devoted a large\n Federal prison for his scheme to defraud portion of our resources during this reporting period to\n approximately 140 cotton farmers out of their cotton several key areas.\n and sales proceeds worth more than $9 million, as\n detailed last period. The defendant pled guilty to 32 \xe2\x80\xa2 Workgroups: The three workgroups covered E-\n felony counts involving mail fraud, wire fraud, and Commerce, Written Agreements, and Manual\n money laundering. The defendant was ordered to 14\xe2\x80\x94Guidelines and Expectations for Delivery of the\n pay restitution of over $4 million, serve 3 years on Federal Crop Insurance Program. We expended\n probation after release from prison, and complete most of our efforts with the latter workgroup. Manual\n 200 hours of community service. 14 outlines the program review and reporting\n requirements for the reinsured companies, including\n\xe2\x80\xa2 As previously reported, two Texas businessmen pled RMA\xe2\x80\x99s quality control (QC) system in which our\n guilty in Federal court to conspiracy to submit false audits had reported major weaknesses. All three\n feed receipts under the Emergency Feed Program. workgroups are struggling with various issues, and\n Payments of about $172,000 were made based on we are continuing with our efforts and input.\n the false receipts submitted. One man was\n sentenced to prison for 18 months and ordered to \xe2\x80\xa2 Quality Control System: We have monitored RMA\xe2\x80\x99s\n make restitution of $90,000. The other was placed continuing implementation of a QC system that will\n on 5 years\xe2\x80\x99 probation and ordered to make restitution provide RMA and FCIC an accurate and meaningful\n of $12,000. error rate for the Federal crop insurance program.\n Such an error rate\xe2\x80\x94a potential indicator of program\n\xe2\x80\xa2 An Alabama farmer was sentenced to pay over abuse and errors\xe2\x80\x94has been a point of contention\n $90,000 in restitution and serve 6 months\xe2\x80\x99 home and concern for both OIG and RMA for a number of\n confinement and 5 years\xe2\x80\x99 probation after pleading years. Furthermore, such an error rate would also\n guilty to three counts of unauthorized sale of provide an effective tool to evaluate RMA\xe2\x80\x99s program\n\n\n\n16\n\x0c management. Also, the Agricultural Risk Protection\n Act (ARPA) of 2000 seems to indicate a desire for Bean Company President Causes False Crop\n this information for Congress. Insurance Claims\n\n RMA has proposed to accomplish this goal under its In July, the president of a Wisconsin bean processing\n Compliance Crop Insurance Contract Reviews, which company agreed to pay $139,300 as a civil settlement\n are conducted by the reinsurance companies. This is for causing false Multi-Peril Crop Insurance (MPCI)\n intended to be a statistically valid sample, with the claims. In 1995, most of Minnesota\xe2\x80\x99s dry edible bean\n results of each insurance provider supplied to FCIC crop sprouted in the pod prior to harvest because of\n in an Annual Summary Report. RMA compliance excessive rainfall during the growing season. The\n staff has completed its review of the reinsurance processing company falsely substantiated to MPCI\n companies\xe2\x80\x99 Compliance Crop Insurance Contract adjusters that sprout-damaged beans were worth only\n Reviews for the 1998 crop year. However, RMA\xe2\x80\x99s salvage value. The producers made MPCI claims and\n review did not result in a projectable error rate due to received indemnity payments, and at the same time\n inadequacies in the methodology and inadequacies received full market price for the damaged beans from\n or errors in the companies\xe2\x80\x99 reviews. We have had a the processor.\n number of meetings with RMA\xe2\x80\x99s Compliance and\n Insurance Services staff to review its plan and Two Found Guilty of Bankruptcy Fraud\n provided our comments. RMA has requested further\n assistance in monitoring and evaluating its QC In Minnesota, a husband and wife were found guilty of\n system; however, we have declined further joint 46 felony counts that included conspiracy, bankruptcy\n efforts until RMA has developed a formal plan of fraud, mail fraud, wire fraud, and false statements to\n action. obtain USDA program payments. The couple created\n and operated two farming corporations, and elicited the\n\xe2\x80\xa2 ARPA Implementation: We are currently working assistance of an elderly neighbor as the \xe2\x80\x9cstraw\xe2\x80\x9d\n closely with RMA and FSA in their implementation of president and sole shareholder of one of the\n ARPA legislation. We have attended implementation corporations. From 1990 through 1999, the couple\n meetings, provided comments when applicable, and illegally obtained over $250,000 in FSA program\n reviewed and provided comments on any regulations payments, $240,000 in CCC-stored loans, and\n as they were being drafted. Our primary role in this $450,000 in MPCI indemnity payments as a result of\n project is to assist both RMA and FSA to improve the their hidden interests in the two corporations and the\n QC system to assess maximum program integrity. unlawful planting of a converted wetland. During the\n Through this effort, we expect the policies that are course of their subsequent bankruptcy proceedings,\n implemented will decrease the recurrence of the they hid their interests and assets in the two\n types of program abuses we have identified in the corporations, thereby reducing their debt from\n past. approximately $1.9 million to $300,000.\n Sentencing is pending.\n30 Subjects Agree To Pay $1.9 Million in Crop\nInsurance Case Crop Insurance Agent Pleads Guilty to Fraud\n\nFollowing an investigation in Minnesota conducted A crop insurance agent in Clarksville, Texas, pled guilty\njointly with the Compliance Branch of RMA, to filing false reports regarding the identity of the\n11 insurance companies, 12 grain elevator companies, insured. She agreed to pay restitution of $591,800 and\nand 7 individuals agreed to pay nearly $1.9 million to voluntarily withdraw from all USDA programs, including\nsettle civil False Claim Act cases. In 1993, these the sale of crop insurance. This investigation involved\nentities conspired to improperly shift to FCIC the multiple co-conspirators who were on the Nonstandard\ncharges that grain elevators assessed to farmers in Classification System (NCS) list and had their crop\nsouthern Minnesota and northern Iowa to dry high- insurance entity changed during the period from crop\nmoisture corn. The conspiracy resulted in over 450 year 1993 through crop year 1997. The crop insurance\nfalse claims being submitted. agent admitted using her daughter\xe2\x80\x99s name, as well as\n other individuals\xe2\x80\x99 names, on crops in order to avoid the\n NCS listing. Sentencing is pending.\n\n 17\n\x0c FOREIGN AGRICULTURAL SERVICE (FAS)\n\n\nFAS represents the interest of U.S. farmers and the\nfood and agricultural sector abroad. Most notably, it\nseeks improved market access for U.S. products,\ncarries out food aid and market-related technical\nassistance programs, and mobilizes expertise for\nagriculturally led economic growth in developing\nnations.\n\nMost of $980,000 Stolen From Russian Bank\nAccount of PVO Recovered\n\nFAS and a U.S. Private Voluntary Organization (PVO)\nsigned an agreement to provide for 2,500 metric tons of\nbutter and 2,500 metric tons of butter oil, to be donated\nby CCC, for assistance in the Russian Federation. The\nagreement provided for half of the proceeds to be used\nfor humanitarian projects, with the other half designated\nfor investment in small and medium-sized Russian\nagribusinesses. In December 1998, $980,000 was\nfraudulently wire-transferred from the account of the\nPVO, through three U.S. banks, to a bank in Riga,\nLatvia, where the funds were immediately withdrawn.\nTo date, $966,000, or 98.6 percent of the stolen funds,\nhas been recovered and returned to the PVO.\nHowever, no recovered funds have been returned to\nUSDA for use in other U.S. food aid programs. This\ninvestigation was conducted jointly with the FBI.\n\n\n\n\n18\n\x0cFood, Nutrition, and Consumer Services\n\n\n FOOD AND NUTRITION SERVICE (FNS) \xe2\x80\xa2 The Dakotas\xe2\x80\x94North Dakota and South Dakota have\n a joint EBT system contract known as the Dakota\n EBT system. Both State agencies needed to\nFNS administers the Department\xe2\x80\x99s food assistance improve controls in some areas to strengthen EBT\nprograms, which include the Food Stamp Program administration and reduce the risk to FSP funds from\n(FSP); the Child Nutrition Programs (CNP); the Special waste, loss, unauthorized use, and misappropriation.\nSupplemental Nutrition Program for Women, Infants, We recommended that FNS require North Dakota to\nand Children (WIC); and the Food Donation Programs. establish and implement written procedures for\nFNS\xe2\x80\x99 funding for FY 2000 is $34 billion. Three FNS monitoring logon ID\xe2\x80\x99s, and require both North Dakota\nprograms receive the bulk of this funding: FSP and South Dakota to review user access permission\n($19.8 billion), CNP ($9.8 billion), and WIC ($4.1 billion). on a periodic basis and cancel logon ID\xe2\x80\x99s as\n appropriate.\n FOOD STAMP PROGRAM\n \xe2\x80\xa2 Florida\xe2\x80\x94The State agency did not have sufficient\n control over system access ID\xe2\x80\x99s. In addition, the\nOperation Talon Arrests Continue To Climb State agency did not (1) use expungement reports\n generated by the EBT system to identify accounts\nOperation Talon was designed and implemented by that became inactive or dormant, (2) maintain a\nOIG to locate and apprehend fugitives, many of them separation of duties between personnel who\nviolent offenders, who are current or former food stamp authorized replacement of expunged benefits and\nrecipients. As of September 30, 2000, Operation Talon those who reactivated the benefits in the EBT\nhad resulted in 6,733 arrests of fugitive felons during system, and (3) document expunged benefit\njoint OIG, State, and local law enforcement operations restoration transactions properly. These conditions\nthroughout the country. Serious crimes perpetrated by could result in denial to recipients of timely access to\nthose arrested included homicide-related offenses their food stamp benefits or permanent loss of\n(murder, attempted murder, manslaughter), sex benefits, misuse of benefits by ineligible individuals,\noffenses (child molestation, rape, attempted rape), and payment of excessive fees to the EBT processor.\nkidnapping/abduction, assault, robbery, and drug/ We made a series of recommendations to improve\nnarcotics violations. controls over system access ID\xe2\x80\x99s and inactive and\n dormant accounts.\nMonitoring of Electronic Benefits Transfer (EBT)\nSystem Continues During our review of the EBT development and\n implementation in each of these States, we also noted\nCurrently, 41 States and the District of Columbia use concerns over the need to include required monitoring\nEBT systems to deliver food stamp benefits. Thirty- visits for group living arrangements, as well as\nseven of the systems have been implemented improvements in other related controls involving the\nstatewide, including the District of Columbia. About participation of group homes. While the weakness is\n74 percent of all FSP benefits are being issued via EBT. not an EBT weakness, we believe that it requires\nDuring this semiannual period, we completed EBT attention in each of the States.\nsystems audit work in Utah, North Dakota, South\nDakota, and Florida. The EBT systems were Food Stamp Fraud Spawns Violent Criminals,\nsuccessfully implemented in all four States; however, Associated Activities\ncontrols needed to be strengthened in some areas.\n Increasingly, OIG has been encountering cases of food\n\xe2\x80\xa2 Utah\xe2\x80\x94We recommended that FNS require the State stamp fraud which extend into other, more violent areas\n to (1) develop procedures to improve the security and of criminal enterprise. While the advent of EBT has\n accountability over EBT cards returned through the provided additional means to uncover illegal activities,\n mail as undeliverable and (2) establish and often the fraud is massive, the perpetrators violent and\n implement written procedures for monitoring logon involved in more threatening pursuits directed against\n identifiers (ID), reviewing user access permission people, and the criminal organizations large. Three\n periodically, and canceling logon ID\xe2\x80\x99s no longer such examples involved kidnapping, large-scale criminal\n authorized.\n\n 19\n\x0cconspiracy, narcotics violations, and street crime, as approximately 50 foreign nationals from Pakistan,\nwell as widespread food stamp trafficking. INS marriage fraud, and visa fraud. During a joint\n arrest and search warrant operation, 36 of the\n\xe2\x80\xa2 A large food stamp trafficking and money laundering 38 indicted and 1 unindicted individual were arrested.\n case involved an individual also implicated in a In addition, 10 individuals were detained for INS\n kidnapping. As reported previously, a 4-year violations. All but five individuals have signed plea\n investigation in Philadelphia, Pennsylvania, agreements. Charges were dropped against one\n uncovered an elaborate scheme involving $15 million individual. Two subjects have fled the country and\n of food stamp trafficking and money laundering are fugitives. All individuals who participated in the\n through six bogus grocery stores. Owners of two marriage fraud scheme have been deported. The\n wholesale businesses and owners and employees of investigation is continuing.\n numerous Chinese takeout restaurants were indicted\n in the scheme. To date, two owners of one food \xe2\x80\xa2 An employee at a local tavern with a history of\n wholesaler and six owners of the six grocery stores narcotics violations and other vice crimes, who\n have been indicted on Federal money laundering and exchanged cocaine for food stamps, was implicated\n food stamp trafficking charges. Four of the grocery in an investigation along with 17 others. Twelve\n store owners have pled guilty and been sentenced. already have been convicted for trafficking in food\n stamps after a joint investigation with the Seattle\n This reporting period, the co-owner of one grocery Police Department, the Washington Department of\n store received two concurrent 6-year sentences for Revenue, the Washington Liquor Control Board, and\n money laundering $1.3 million. This defendant also the FBI. Street traffickers purchased over $269,000\n pled guilty in a separate case to one charge of in food stamps from undercover officers and sold\n kidnapping for his role in the abduction and detention them to FNS-authorized retailers in the Seattle area.\n of a Chinese female in New York City, holding her Warrants served on subjects\xe2\x80\x99 bank accounts resulted\n against her will until a smuggling fee to gain entrance in the seizure of over $120,000. Several local bars\n into the United States was paid by her relatives. and taverns also were closed down for Liquor Control\n Board violations. This investigation was initiated at\n In addition, a complaint for forfeiture was filed and an the request of the King County Executive and a\n arrest warrant was served on a residence purchased member of the Washington House of Repre-\n by an indicted owner of one of the grocery stores. sentatives after they had received numerous\n The owner had purchased the residence, valued at complaints from citizens and business owners about\n $65,000, for his girlfriend (now wife) with funds rampant food stamp trafficking in downtown Seattle\n derived from the trafficking of food stamps. An and the street crime associated with it.\n additional $175,000 in seized cash is pending final\n disposition. This investigation was worked jointly Retailers Sentenced to Prison in Massive Food\n with the U.S. Secret Service. The investigation is Stamp Fraud Conspiracy\n continuing with additional charges expected.\n A bookkeeper and two retail firm owners in Los Angeles\n\xe2\x80\xa2 In another case, food stamp trafficking financed have pled guilty to various tax and/or food stamp fraud\n further crime. In Rochester, New York, 36 individuals charges following an investigation ongoing since 1995.\n were indicted and arrested on food stamp trafficking One of the retailers was sentenced to 27 months in\n and Immigration and Naturalization Service (INS) prison, 3 years\xe2\x80\x99 supervised release, and $3 million in\n charges. Our joint investigation with INS uncovered restitution; while the second retailer was sentenced to\n a complex criminal conspiracy. Food stamps were 9 months in prison, 1 month of home detention, 3 years\xe2\x80\x99\n discounted\xe2\x80\x94and exchanged for cash and a vehicle\xe2\x80\x94 probation, and restitution of $4.1 million.\n with the owners or employees of three authorized\n stores. The food stamps were laundered through In 1995, we began an investigation of 12 FNS-\n approximately 20 other authorized grocery stores in authorized retailers in the Los Angeles metropolitan\n the Rochester area. The proceeds from the food area that were identified as having redeemed unusually\n stamp trafficking conspiracy facilitated other criminal large quantities of food stamps. We linked several of\n activity, including the smuggling and illegal entry of those retailers, as well as more than 100 other FNS\n\n\n\n20\n\x0cauthorized retailers, to the same bookkeeper, who was investigation, permanently disqualified the former\nfurnishing contradictory information to FNS on the store owner from participation in FSP. IRS agents\nbehalf of many of them on application forms. We and Baltimore City police officers also assisted OIG.\nserved a search warrant on the bookkeeper\xe2\x80\x99s office in\nApril 1997. Records seized there substantiated that he \xe2\x80\xa2 Two owners of a store in Atlanta have pled guilty to\nwas inflating the authorized retailers\xe2\x80\x99 gross food sales in food stamp and EBT trafficking charges and have\ndocuments submitted to FNS in order to avoid detection been sentenced to serve 18 months in prison,\nof the retailers\xe2\x80\x99 high redemption of food stamps, while at followed by 3 years\xe2\x80\x99 supervised release, as well as\nthe same time understating the client retailers\xe2\x80\x99 gross pay restitution of $278,000. The pleas came after an\nsales to the California Board of Equalization and the 11-month investigation, during which OIG made\nIRS. We suspect that illegally obtained food stamp several undercover transactions with the owners and\ncoupons worth in excess of $50 million were redeemed also monitored the store\xe2\x80\x99s cash register terminal for\nfrom 1994 to 1997 by the 24 firms targeted for EBT activity. Recipients who appeared to have sold\ninvestigation following the review of records seized from their benefits were identified and interviewed.\nthe bookkeeper. The IRS and INS joined our Several recipients admitted to selling benefits for\ninvestigation in 1998. cash at the store. In addition, a few recipients\n reported handing their EBT cards and personal\nEBT Plays Large Role in Food Stamp Trafficking identification numbers to a street merchant, who then\nCases contacted the store using a cellular telephone. The\n store owners used the information provided by the\nAs noted above, EBT investigations are playing an ever- street merchant over the telephone to conduct\ngreater role in our law enforcement efforts to counter manual transactions to remove benefits from the\ncriminal violations in the food stamp area. Here are recipients\xe2\x80\x99 EBT accounts. Several recipients had\nthree representative cases. their cases heard before an administrative law judge\n in a program violation hearing. All the cases were\n\xe2\x80\xa2 As previously reported, the husband and wife owners upheld, and each recipient was disqualified from FSP\n of a medium-sized grocery store in Baltimore City, for 1 year.\n Maryland, pled guilty in Federal court to access\n device fraud, via the EBT system. They have now Grocer and Silent Partner Charged in $7 Million\n been ordered to make restitution of $500,000 each, Food Stamp Fraud Scheme\n to total $1 million. The husband was also sentenced\n to 21 months in jail, followed by 3 years of supervised A Chicago grocery store owner and his silent partner\n probation. The wife has been sentenced to 5 months were charged and pled guilty to an indictment involving\n in jail, followed by 3 years of supervised probation. conspiracy and aiding and abetting in a $7 million food\n While this store was under investigation by OIG, it stamp fraud scheme that occurred from 1992 to 1996.\n was the largest redeemer of food stamp benefits in The individuals used the money to purchase three\n Maryland. apartment buildings and a luxury automobile that the\n defendants have agreed to turn over through forfeiture.\n\xe2\x80\xa2 An anonymous Hotline complaint set off a 2-year This case was worked jointly with the IRS.\n investigation by OIG into fraud by the owner of a\n small Baltimore market. The market owner Texas Retailer Forfeits Property\n conducted all EBT trafficking transactions personally\n and only through a known \xe2\x80\x9crunner,\xe2\x80\x9d or trusted go- As a result of a criminal investigation for food stamp\n between who for a small fee obtains EBT cards from trafficking, the owner of a Texas authorized retailer was\n recipients and insulates the store owner. OIG agents convicted in State court. Further financial analysis\n were able to secure the services of a runner, who showed over $400,000 in fraudulent food stamp\n then trafficked EBT benefits monitored by OIG. The deposits. This resulted in a civil forfeiture action being\n owner was sentenced to 18 months in prison and filed in Federal court. The Federal judge ordered that\n 3 years of supervised probation. In addition, she was three pieces of property, which included the store itself,\n ordered to pay $478,000 in restitution. FNS, which be forfeited to the Government. The property is\n provided extensive assistance during the appraised at $500,000.\n\n\n\n 21\n\x0c CHILD NUTRITION PROGRAMS \xe2\x80\xa2 Based on the results of audits conducted in past\n reporting periods, a sponsor in Arizona and another\n in California were terminated from participating in\nOperation \xe2\x80\x9cKiddie Care\xe2\x80\x9d Continues To Identify CACFP for being seriously deficient in their\nProgram Abuses administration of the program.\n\nOperation \xe2\x80\x9cKiddie Care,\xe2\x80\x9d our nationwide initiative to \xe2\x80\xa2 In Georgia, another sponsor was terminated from\nidentify, remove, and prosecute unscrupulous Child and CACFP because the director appeared to have\nAdult Care Food Program (CACFP) sponsoring inflated meal counts and created fictitious children.\norganizations (sponsors), continued to be successful.\nOIG worked closely with FNS concerning needed \xe2\x80\xa2 We previously reported that the owner of a\nregulatory and legislative changes recommended in our multicenter day care operation in Michigan had been\nAugust 1999 audit report. In June 2000, Public Law sentenced to 9 years in prison, followed by 3 years\xe2\x80\x99\n106-224 was enacted, which included provisions to supervised release, and was ordered to pay more\nrestore program integrity to CACFP. FNS is working on than $23.5 million in combined fines and restitution,\nregulatory changes to implement these provisions. as well as forfeit over $1.1 million in cash and three\n properties. A second individual, her assistant, has\nTo date, 47 CACFP sponsors, who were receiving now pled guilty to conspiracy to commit program\nabout $82.7 million annually, have been found seriously fraud and was sentenced to 15 months in prison and\ndeficient in their operation of the program. FNS took $13.5 million in restitution. This assistant, along with\naction to terminate 29 of these sponsors, who received the owner of the operation, defrauded USDA of\nabout $52.9 million annually, because the sponsors did approximately $27 million in CACFP funds.\nnot take sufficient action to correct the deficiencies.\nSixty-four individuals were indicted or named in criminal \xe2\x80\xa2 A mother and her daughter pled guilty to embezzling\ninformation documents for defrauding CACFP, and CACFP funds from their New York corporation. The\n51 individuals pled guilty or have been convicted. mother was executive director and her daughter was\nAudits and investigations continued to yield results. a corporate officer in their business, which provided\n meal service for day care centers in Brooklyn,\n\xe2\x80\xa2 We found that a sponsor in New York needed to Queens, and Nassau County, New York. From 1995\n improve accountability over administrative costs and through 1997, the corporation received $1.6 million in\n meal counts, and monitoring of meal service activities CACFP funds from USDA. During that time, the\n needed improvement. Sponsor employees were paid subjects transferred $75,000 in grant money from a\n approximately $115,000 without required time and business account to personal savings and checking\n attendance reports. When such reports were accounts. The money was used for travel, including\n prepared, we identified approximately $7,000 in a Hawaiian vacation, clothing, jewelry, gifts, and\n overpayments because employees were paid for other personal uses. Sentencing is pending.\n more hours worked than documented. Receipts or\n invoices did not support expenditures totaling\n approximately $2,500, and expenditures of\n approximately $17,000 were made for unallowable\n program costs.\n\n\n\n\n22\n\x0cMarketing and Regulatory Programs\n\n\n AGRICULTURAL MARKETING SERVICE Owner of Coffee Company Sentenced\n (AMS)\n The owner of a Bridgeport, Connecticut, coffee\n company has been sentenced to 5 years\xe2\x80\x99 probation and\nAMS enhances the marketing and distribution of ordered to pay a $21,000 fine in a case in which he had\nagricultural products by collecting and disseminating previously pled guilty to one count of wire fraud. The\ninformation about commodity markets, administering company bid on eight contracts, worth about $400,000,\nmarketing orders, establishing grading standards, and with a food distributor in Illinois to manufacture and ship\nproviding inspection and grading services. AMS\xe2\x80\x99 coffee. The contracts required official inspection and\nfunding level for FY 2000 is approximately $274 million. certification by USDA, because the coffee product was\n to be used in Illinois public institutions. The company\nAMS Needs To Strengthen Controls Over obtained the contracts by submitting the lowest bid; but\nInspections at Terminal Markets in order to make a profit on the contracts, the company\n never obtained USDA inspections and provided falsified\nThe AMS Administrator requested that we evaluate documentation.\ncontrols over inspection activities at terminal markets\nafter nine fruit and vegetable inspectors were arrested\nand charged with accepting bribes for downgrading ANIMAL AND PLANT HEALTH INSPECTION\nloads of produce so that wholesalers could negotiate SERVICE (APHIS)\nlower prices with shippers. AMS had developed a\nmanagement action plan to strengthen inspection Through inspection, APHIS protects the Nation\xe2\x80\x99s\nprocedures and reduce the risk of further fraudulent livestock and crops against diseases and pests and\nactivities, which we assessed along with AMS\xe2\x80\x99 preserves the marketability of U.S. agricultural products\napplicable policies and operating procedures. at home and abroad. APHIS\xe2\x80\x99 available funding for\n FY 2000 is estimated at about $573 million.\nWe concluded that no single modification to AMS\xe2\x80\x99\nprocedures would eliminate the risk of fraudulent Smugglers Sentenced in Government Official\nactivities at terminal markets. However, we did identify Bribery Case\nareas where improvements to AMS\xe2\x80\x99 existing or\nproposed management controls could deter or detect A previously reported multiagency operation in San\nfraudulent activities in the future. Some of our Francisco netted three importers who tried to bribe a\nobservations and conclusions are that AMS supervision Food and Drug Administration (FDA) official in order to\nand oversight at terminal markets need to be expanded, expedite the entry of their food shipments from Hong\nformalized ethics and fraud awareness training should Kong into the United States without regulatory\nbe provided to inspectors, and a rotation schedule for inspections. The subjects submitted false entry\ninspectors within and between markets should be documents that omitted the smuggled items. The\nconsidered. We also saw a need for AMS\xe2\x80\x99 data base importers had previously been convicted of criminal\ncapabilities/functions to be augmented to support trend charges including bribery, money laundering,\nanalyses of inspections conducted, along with the use smuggling, entry of adulterated foodstuffs, and\nof digital imaging to record the condition of inspected conspiracy.\ncommodity shipments. We further believe that\nimproved communication with and between producers/ In July 2000, one of the importers was sentenced to\nshippers and the wholesale industry, along with 7 years and 3 months in prison and 3 years\xe2\x80\x99 probation\nindependent, unannounced inspections by AMS at with a $12,500 fine. The court found that he was the\nterminal markets, would help to deter abuse and leader and organizer of the criminal conduct and had\npromote uniformity of inspections nationwide. obstructed justice by providing false testimony at his\n trial. In addition, the judge granted the Government\xe2\x80\x99s\nAMS plans to implement its management action plan motion for upward departure from sentencing guidelines\nand incorporate our suggestions to improve its based on the serious risk to public health and safety\nmanagement controls. caused by the smuggling of salmonella-laden seafood\n into the country. The second importer was sentenced to\n\n\n\n 23\n\x0c5 years\xe2\x80\x99 probation and fined $3,000, while the third was\nsentenced to 8 months in prison, 3 years of supervised\nrelease, and a $3,000 fine.\n\nThis case resulted from work initiated by the San\nFrancisco Interagency Import Task Force, which has\nbeen targeting firms involved in illegally importing plants\nand animals that may present a threat to America\xe2\x80\x99s food\nsupply. OIG agents have been working with\nrepresentatives from FDA, APHIS, the U.S. Customs\nService, the U.S. National Marine Fisheries Service, the\nU.S. Fish and Wildlife Service, the IRS, and the\nCalifornia Department of Food and Agriculture at the\ndirection of the U.S. Attorney for the Northern District of\nCalifornia.\n\nIndictments for Conspiracy To Smuggle\nCommercial Agricultural Products\n\nFollowing notification by the California Department of\nFood and Agriculture that a Los Angeles agricultural\nproducts import firm may have smuggled tons of\nMexican sweet limes into the United States in the fall of\n1999, we initiated a joint criminal investigation with the\nU.S. Customs Service. In June, a 27-count indictment\nwas filed, charging three individuals and two firms with\nconspiracy, smuggling, and aiding and abetting.\n\nTwo of the three indicted subjects have been arrested\nand are awaiting trial on charges relating to the\ntransport of various agricultural products, including\nMexican sweet limes, into California from Mexico.\nEvidence was developed that a substantial portion of\nthe illegally imported Mexican sweet limes was infested\nwith Mexican fruit fly larvae.\n\n\n\n\n24\n\x0cRural Development\n\n\n RURAL HOUSING SERVICE (RHS) In addition, by not properly filing insurance claims, the\n realty company increased profits of the IOI firm. For\n several projects reviewed, losses totaling about\nRHS is responsible for making available decent, safe, $374,000 were not properly reported. In several cases,\nsanitary, and affordable housing and community the realty company used operating and reserve funds\nfacilities through loans and grants for rural single-family for repairs instead of filing insurance claims against the\nhousing, apartment complexes, fire stations, libraries, IOI firm. Further, the realty company and the IOI\nhospitals, and clinics. For FY 2000, program funding for reinsurance firm started an insurance loss control\nRHS loans and grants totaled $5.8 billion. program that provided management company personnel\n with incentives, which were inconsistent with their\nRRH Nationwide Initiative Finds Problems in fiduciary responsibilities to projects. Also, an officer of\nMissouri the realty company and the IOI firm used part of the IOI\n firm\xe2\x80\x99s assets as collateral for personal credit.\nA realty company and an identity of interest (IOI)\nreinsurance firm set in motion an insurance program Moreover, the realty company charged nearly $109,000\nwhich did not meet requirements of RHS regulations in questionable costs to projects for central office\nand did not comply with national office directions. From administrative and supply costs in 1996 and 1997. The\nJuly 1992 through July 1998, the realty company realty company charged projects an onsite labor markup\nwithdrew insurance premiums, totaling about rate without the knowledge and consent of servicing\n$4.3 million, from project accounts without providing officials and did not always properly record and report\nsatisfactory protection for projects securing RHS loans. payroll charges. For 29 projects, the realty company\nWhile the realty company originally told RHS the IOI delayed payment of vendor invoices, resulting in\nfirm would save money, projects were actually charged unnecessary project charges totaling about $3,300. We\nexcessive premiums. For example, annual insurance referred this case for investigation during our fieldwork.\ncosts for the realty company\xe2\x80\x99s Missouri projects\nexceeded the State average by about $113,000. The We recommended that RHS (1) debar or replace the\nrealty company and the IOI firm did not respond to realty company as a management agent, (2) require\nrepeated agency directions to reduce insurance costs. development of satisfactory plans to bring the physical\nIn addition, the realty company and the IOI firm condition of all projects up to minimum RHS\narranged outside financing, costing an estimated $3,500 requirements, and (3) instruct the realty company that\nannually in interest, to pay insurance premiums for the current property and liability insurance policy was\n55 projects. not to be renewed. We also recommended that, after\n completion of any investigations, RHS instruct the realty\n company to refund to the projects the full premium paid\n to the IOI firm for insurance and the improper project\n expenses.\n\n Farm Labor Housing Program Borrowers in Three\n States Overcharged $475,000\n\n We reviewed 11 projects of RHS\xe2\x80\x99 Farm Labor Housing\n Program (designed to foster affordable rental housing)\n in California, Florida, and Washington. We identified\n over $475,000 in unallowable costs charged by\n borrowers to their projects and overpayments they\n received, and recommended that about $78,000 of that\n amount be collected.\nDecaying siding is representative of conditions found in apartment\ncomplexes managed by the realty company. OIG photo. In Washington, we found that one housing authority\n overcharged its three projects almost $397,000 in\n management fees between 1996 and 1998. It had\n\n\n\n 25\n\x0ccharged fees equal to about 32 percent of rents, Rural Housing Contractor Pleads Guilty to Fraud\nalthough a State office directive limited management\nfees to no more than 10 percent. We concluded that An Oregon building contractor who had committed fraud\nthese overcharges likely resulted in excessive rental pled guilty in Federal District Court to failure to provide\nassistance costs to the Government. The housing information to the IRS. He also pled guilty on behalf of\nauthority also obtained compilations instead of the his corporation to providing a false document to Rural\nrequired annual audits, and, as a result, had less Development. Sentencing in the criminal case is\nassurance that program funds were being properly pending.\nexpended. Another Washington State housing authority\nalso overcharged its project more than $6,000 in In a settlement of a civil action stemming from evidence\nmanagement fees, exceeding the State office directive. developed during our criminal investigation, the\n contractor agreed to permanent exclusion from future\nShoddy Construction and Unauthorized Use of Loan Rural Development housing construction or operation of\nFunds housing projects financed or guaranteed by RHS. As\n part of the civil settlement, the contractor agreed to pay\nAt the request of the Oklahoma State Rural the Federal Government $80,000 in fines and\nDevelopment Office, we reviewed loan and grant restitution. This case was worked jointly with the IRS.\nactivities under the section 504 program at the local\nfield office in Antlers, Oklahoma. The request was Ohio Contractor Guilty of Theft\nmade because of numerous borrower complaints about\nshoddy repair work to their homes. Section 504 rural An Ohio contractor was indicted and pled guilty to State\nhousing loans and grants are intended to provide very- charges resulting from an OIG investigation into the\nlow-income rural homeowners an opportunity to make misuse of Rural Development loan funds and forgery of\nessential repairs to their homes when they cannot checks. The contractor pled guilty to grand theft, was\nobtain credit otherwise. sentenced to 5 years\xe2\x80\x99 probation, and was ordered to\n pay $3,000 restitution.\nWe found that in 6 of 10 cases reviewed, loan and grant\nfunds were released to contractors before work was\n RURAL BUSINESS-COOPERATIVE SERVICE\ncompleted or before releases were authorized under\n (RBS)\nterms of the construction contracts. In all but one case,\nthe work was eventually completed, although in five\ncases we found construction defects that should have RBS enhances the quality of life for rural residents\nbeen corrected before final payments were made. We through grants or loans to rural-based cooperatives and\nalso found that about $7,000 in loan funds was used to businesses and through partnerships with rural\nfinance an outside storage building and add a third communities. RBS national staff and Rural\nbedroom with bath. None of these improvements are Development State office staff promote stable business\nauthorized under the program. environments in rural America through financial\n assistance, business promotion, and technical\nWe recommended that Rural Development monitor the assistance, as well as research, education, and\nfuture release of loan funds under the 504 program to information.\nensure that sufficient materials are in place and/or labor\nis completed to justify fund releases. We also\nrecommended that the cited construction defects be\ncorrected and that future construction work be better\nmonitored to ensure defects are corrected and funds\nare used for authorized purposes.\n\n\n\n\n26\n\x0cLender Did Not Obtain Sufficient Collateral To the equipment was in good condition or even if the\nSecure B&I Loan equipment existed. In addition, this \xe2\x80\x9cdesktop appraisal\xe2\x80\x9d\n could not be used to accurately value a company\xe2\x80\x99s\nAt the request of the Pennsylvania Rural Development equipment, because the equipment is never viewed and\nState Office, we audited a $7 million Business and total reliance is placed on the information provided by\nIndustry (B&I) guaranteed loan. The borrower had the company. Consequently, the lender had no\ndefaulted on the loan, and subsequent appraisals of the assurance that the appraisal document provided by the\nborrower\xe2\x80\x99s machinery and equipment showed a large borrower was prepared by a qualified appraiser or that\ndiscrepancy in the original machinery and equipment the appraisal represented market values.\nappraisal.\n Rural Development personnel agreed that the lender did\nThe lender did not meet its responsibilities in processing not meet program requirements for obtaining an\nthe loan, because it: appraisal on the borrower\xe2\x80\x99s collateral for the loan. We\n recommended that the agency take appropriate action\n\xe2\x80\xa2 Allowed the borrower to obtain and submit an to void the loan note guarantee of $4.2 million, in\n appraisal of the borrower\xe2\x80\x99s machinery and equipment consultation with the Office of the General Counsel\n to be used as security for the loan and (OGC). Rural Development officials agreed with the\n findings and recommendations and are working with\n\xe2\x80\xa2 did not follow up with the appraiser to request a OGC to recover the loss.\n certification that the work was prepared by him and\n that the values reflected were true and correct. Misclassifications Result in Grant to Business in\n Ineligible Urban Area\nAffidavits the lender later obtained from individuals\nnoted that the appraiser did not prepare the appraisal Prompted by a Hotline complaint, we found that Puerto\ndocument submitted by the borrower. In one affidavit, it Rico State Office misclassifications had resulted in a\nwas stated that the individual was asked to help create Rural Business Enterprise Grant (RBEG) of $850,000 to\nan appraisal document valuing the company\xe2\x80\x99s assets, a nonprofit corporation in an ineligible area. The State\nspecifically to retype information furnished by an Office\xe2\x80\x99s methodology used to classify areas as rural\nappraisal company. Moreover, the borrower requested and, as such, eligible for RBEG funding, was flawed.\nadditional appraisal information be added to the State Office officials classified 165.9 of 3,426.5 square\ndocument. miles in Puerto Rico as nonrural areas ineligible for\n RBEG funding; we identified approximately 1,666\nThe appraiser told us that the appraisal was completed square miles of ineligible territory, including the area in\nin the office based on listings of equipment provided by question.\nthe borrower. The appraiser did not determine whether\n\n\n\n\n 27\n\x0cResearch, Education, and Economics\n\n\n AGRICULTURAL RESEARCH SERVICE (ARS)\n\n\nCorporate President Convicted for $5.6 Million\nContract Fraud\n\nA corporation, its president, and its vice president were\nindicted for contract fraud involving a renovation project\nat an ARS research station in Pennsylvania and\nrenovation work for the U.S. Navy. The contracts\ntotaled over $5.6 million, with $4.5 million slated to\noverhaul the USDA Research Station and the remainder\nto remove asbestos and lead-based paint as well as\nrenovate a minimart for the U.S. Navy. The corporation\nused subcontractors to complete the necessary\nrenovation work and then failed to pay 16 of them,\nresulting in construction delays and subcontractors\nwalking off the job until they received payment. The\npresident of the corporation has pled guilty to the\ncharges and is awaiting sentencing. Trial is pending for\nthe vice president and corporation. Other agencies that\nworked jointly on this investigation included the Naval\nCriminal Investigative Service, the Small Business\nAdministration OIG, and the Department of Labor OIG.\n\n\n\n\n28\n\x0cFinancial, Administrative, and Information\nTechnology\n\n FINANCIAL MANAGEMENT The agency has agreed to:\n\n \xe2\x80\xa2 Develop a regulatory work plan for the approval of\nThe Chief Financial Officers Act and the Government the Under Secretary for Farm and Foreign\nManagement Reform Act require USDA to prepare and Agricultural Services to amend FLP regulations to\naudit financial statements. Financial statements are establish future final loss claim payments on\ngenerated from six separate systems operated by FSA-guaranteed loans as debts due the Federal\nvarious USDA agencies. Government and\n\nOIG Works To Establish Defaulted Guaranteed Loan \xe2\x80\xa2 establish procedures for referral of such accounts to\nLosses as Government Debt, Presently a Treasury for collection under DCIA.\nMultimillion-Dollar Shortcoming\n Financial Statement Audits\nOIG assisted FSA in a critical area that is unnecessarily\ncosting the Government many millions of dollars. As Commodity Credit Corporation\xe2\x80\x99s FY 1999 Financial\npart of its mission, FSA guarantees loans to farmers Statement: Qualified Opinion\nwho otherwise cannot obtain financing in the private\nsector. The Debt Collection Improvement Act (DCIA) of For the second consecutive year, we have been unable\n1996 specifies that: to issue a clean opinion on CCC\xe2\x80\x99s financial statements.\n Although CCC had reported that it had taken actions to\n\xe2\x80\xa2 Losses on guaranteed loans are to be established as correct some of the problems we noted in our FY 1998\n Government debt and report, we found, in fact, that the problems related to\n CCC foreign accounting operations had seriously\n\xe2\x80\xa2 Government debt delinquent for 180 days or more be worsened. For FY 1999, our opinion changed from a\n submitted to the U.S. Department of the Treasury disclaimer to a qualification because substantial time\n (Treasury) for collection. was taken by CCC after the deadline established by the\n Department had passed to provide us the FY 1999\nOur review of loan guarantees to Farm Loan Program financial statements. Unless meaningful corrective\n(FLP) borrowers revealed that FSA did not establish actions are taken, achieving the reforms required by\nlosses paid on defaulted guaranteed loans as debts to recent financial management legislation will not be\nthe Government. As a result, losses in excess of accomplished. With assets of over $13.6 billion and\n$200 million were not reported to Treasury during costs of about $24.3 billion, it is essential that CCC\nFY\xe2\x80\x99s 1997 through 2000 for collection in accordance make reforms.\nwith DCIA.\n Our internal control report described numerous control\nIn a March 2000 opinion, USDA\xe2\x80\x99s OGC determined that weaknesses, and our report on CCC\xe2\x80\x99s compliance with\nFSA did not have the express statutory authority to treat laws and regulations described its noncompliance with\nlosses paid to lenders as debts owed to the the Federal Financial Management Improvement Act\nGovernment. OGC determined that, because the lender (FFMIA) of 1996 and provisions of DCIA.\ncould not use DCIA to collect the debt, neither could\nFSA. However, OGC provided the steps necessary for We recommended a comprehensive review be\nFSA to fulfill DCIA (which we recommended FSA take): performed, in consultation with the Office of the Chief\n Financial Officer (OCFO), of the problems we noted in\n\xe2\x80\xa2 Revise FSA regulations by proposed rule to state that our audit and that effective and meaningful actions be\n if FSA purchases the guaranteed portion from the taken by CCC officials to resolve these weaknesses.\n holder of the note or pays a loss claim on the loan to We also recommended that CCC reorganize its financial\n the lender, FSA will use all remedies available to it, accounting and reporting functions, improve the\n including DCIA, to recover the Federal debt directly timeliness and accuracy of its financial information, and\n from the borrower and strengthen supervisory management oversight over\n financial account reconciliation, accounting entries, and\n\xe2\x80\xa2 require the borrower to sign a form stating the same. adjustments.\n\n\n\n 29\n\x0cCCC recognizes the need for improvement and has FAS officials indicated CFR 3019 was not implemented\ninitiated actions to address the reported problems because it did not apply to its grants and they had\nrelated to accounting for credit reform operations. CCC OGC\xe2\x80\x99s concurrence. This was not in the form of a\nhas developed project plans to address its foreign written legal opinion. Nevertheless, Departmental\naccounting operations and has hired a contractor who is Regulation 2120-0001 and Title 31, U.S. Code 3335,\nlooking into specified credit reform issues. also impose cash management controls that apply to\n FAS, and FAS did not comply.\nFederal Financial Management Improvement Act\n We recommended that OCFO develop and implement a\nCurrently not in compliance with FFMIA requirements, strategy to ensure USDA agencies comply with CFR\nUSDA, as required by law, has developed a remediation 3019 and that Departmental Regulation 2120-0001 be\nplan, with detailed remediation plans for CCC, Rural updated. We also recommended that $74,000 in\nDevelopment, FS, and the National Finance Center. interest be returned to Treasury and that efforts be\nThe Department has made progress and is generally on made with Treasury to reduce agencies\xe2\x80\x99 appropriations\ntrack with intermediate dates, but the plan is long-term by about $335,000 for the increased borrowing costs.\nin nature. Implementation of the Department\xe2\x80\x99s new Further, we recommended that USDA agencies be\naccounting system has an estimated completion date of directed to review existing advances to recover earned\nOctober 1, 2002, and Rural Development\xe2\x80\x99s individual interest not returned to Treasury, ensure advances are\nremediation plan has target dates that extend to put in interest-bearing accounts, and that recipients\nSeptember 2003. promptly disburse advances.\n\nControls Over Fund Advances Need Improvement OCFO agreed with the facts presented but disagreed\n with our contention that OCFO is responsible for\nWe evaluated OCFO and agency controls over fund assuring agency compliance.\nadvances to nonprofit organizations (NPO) and found\nthat management of cash advances by USDA agencies\n INFORMATION TECHNOLOGY\nto NPO\xe2\x80\x99s needed improvement. Three agencies\nreviewed (FAS, RHS, and RUS), representing $283.5\nmillion (87 percent) of the grants reviewed, had not PCIE Critical Infrastructure Protection Review\nincorporated Title 7, Code of Federal Regulations (CFR)\n3019, into their grant agreements with NPO\xe2\x80\x99s. Another The President\xe2\x80\x99s Council on Integrity and Efficiency\nagency (APHIS), representing $4.8 million (1 percent) of (PCIE) Audit Committee began a review of the Nation\xe2\x80\x99s\nthe grants, had incorporated the regulation but had not critical infrastructure assurance program. As part of this\nfully implemented the provisions. OCFO had not review, we audited the Department\xe2\x80\x99s implementation of\nassured compliance with departmental regulations over Presidential Decision Directive (PDD) 63, \xe2\x80\x9cPolicy on\ncash management by USDA agencies. Critical Infrastructure Protection.\xe2\x80\x9d The Department has\n neither fully identified its mission-essential infrastructure\nUSDA advances to NPO\xe2\x80\x99s resulted in profits to grant nor performed the necessary assessments to identify\nrecipients, increased interest expense resulting from the threats, vulnerabilities, and potential magnitude of\npremature borrowing needs, and the potential of having harm that could result from an attack. Also, the planned\nagency administrative appropriations reduced by the formation of a Critical Infrastructure Assurance Council,\nincreased borrowing needs of Treasury. For example, composed of agency management representatives to\nfor the 26 grants reviewed with $81.6 million in ensure cyber infrastructure security and PDD 63\nadvances, we found almost $74,000 in interest that had compliance, was never established.\nbeen earned on cash advances and not returned to\nTreasury, about $126,000 in interest lost to the We recommended that the Office of the Chief\nGovernment for not putting advanced funds in interest- Information Officer (OCIO) revise its Critical\nbearing accounts, and about $407,000 in unneeded Infrastructure Assurance Plan to update the timeframes\ninterest expense to the Government to advance the for compliance with PDD 63 and establish an\nfunds. aggressive strategy to implement the plan. We also\n recommended that OCIO seek additional funding to\n\n\n\n30\n\x0censure adequate resources and staff with the necessary We recommended that FS develop and implement a\nskills to carry out the provisions of PDD 63 and its plan. comprehensive strategy to ensure the collection and\nThe establishment of the OCIO-proposed Executive reporting of accurate, complete, and meaningful\nCouncil and Critical Infrastructure Assurance Council to performance data that include effective internal controls.\nensure senior management involvement in cyber We recommended that the agency continue the process\nsecurity was also recommended. OCIO agreed with all of establishing, publishing, and ensuring adequate\nour recommendations and has initiated corrective written guidance defining each performance measure\nactions. and setting forth the documentation needed to support\n reported accomplishments. Until the agency can\n provide reasonable assurance of the quality of its\n GOVERNMENT PERFORMANCE AND\n Annual Performance Reports, FS should report the lack\n RESULTS ACT (GPRA) OF 1993\n of an effective system of internal controls over\n performance reporting as a material weakness in the\nFS Had Not Effectively Implemented GPRA Federal Managers\xe2\x80\x99 Financial Integrity Act report.\n\nFS\xe2\x80\x99 FY 1999 Annual Performance Report was based on\nflawed data and assumptions to such an extent that the\nreport did not provide reliable information about actual\nperformance or the agency\xe2\x80\x99s progress in meeting its\ngoals and objectives. Because these conditions had not\nbeen corrected, it is unlikely that a useful or reliable\nreport will be produced for FY 2000.\n\nErrors and omissions occurred because performance\nreporting was not incorporated into FS\xe2\x80\x99 business\nprocesses and field-level employees did not understand\nthe need for or value of accurate performance reporting.\nReported data was garnered through a patchwork of\ninformation systems that lacked such basic internal\n As an example of the misreporting of performance, this road was\ncontrols as programmatic reviews, documentation of improperly reported to be a stream. OIG photo.\nreported results, and clearly written guidance. FS\nexpended scarce resources to develop a report of If the agency cannot ensure the FY 2000 report\ndubious usefulness to decision makers, likely reinforcing provides accurate and meaningful performance data,\nthe public perception that the agency lacks credibility. we recommended that FS seek a waiver, report only\nInternal controls over performance reporting were those measures in which the agency has a reasonable\ninadequate as designed and implemented. Further, for degree of confidence, or issue a report without\nsome performance measures, written policy guidance quantitative data that candidly describes problems and\ndid not adequately describe reporting requirements. plans.\n\n\n\n\n 31\n\x0cStatistical Data\n\n\n AUDITS WITHOUT MANAGEMENT DECISION\nThe following audits did not have management decisions made within the 6-month limit imposed by Congress.\nNarratives for new entries follow this table. An asterisk (*) indicates that an audit is pending judicial, legal, or\ninvestigative proceedings which must be completed before the agency can act to complete management decisions.\n\n\n New Since Last Reporting Period\n\n\n Amount With\n Total Value No Mgmt.\n at Issuance Decision\nAgency Date Issued Title of Report (in dollars) (in dollars)\n\nAPHIS 03/07/00 1. Plant Protection and 2,851 2,851\n Quarantine Activities in\n Florida (33004-1-At)\n\nCR 03/10/00 2. Evaluation Report for the 0 0\n Secretary on Civil\n Rights Issues \xe2\x80\x93 Phase 7\n (60801-3-HQ)\n\n 03/10/00 3. Status of Recommendations 0 0\n Made in Prior Evaluations\n of Program Complaints\n (60801-4-HQ)\n\nFNS 03/22/00 4. CACFP - National 319,279 319,279\n Initiative To Identify\n Problem Sponsors -\n Wildwood (27010-3-KC)\n\nFSA 03/31/00 5. Emergency Conservation 2,952,472 2,952,472\n Program\n (03601-15-KC)\n\nRural 02/22/00 6. Rural Development\xe2\x80\x99s 0 0\nDevelopment Consolidated Financial\n Statements for\n FY 1999 (85401-1-FM)\n\nRUS 02/11/00 7. Telephone Loan Program 2,476,838,023 2,476,838,023\n Policies and Procedures\n (09016-1-Te)\n\nRMA 03/30/00 8. FY 1999 FCIC Financial 0 0\n Statements Report on\n Management Issues\n (05401-8-FM)\n\n\n32\n\x0c Amount With\n Total Value No Mgmt.\n at Issuance Decision\nAgency Date Issued Title of Report (in dollars) (in dollars)\n\n 03/31/00 9. Standard Reinsurance 5,971,666 5,971,666\n Agreement (SRA)\n Reporting Requirements\n (05099-8-KC)\n\nNRCS 03/31/00 10. NRCS Contracting, 784,562 473,368\n Procurement, and\n Disbursement Activities,\n Fort Worth, TX (10601-1-Te)*\n\n\n Previously Reported but Not Yet Resolved\n\n\nThese audits are still pending agency action or are under judicial, legal, or investigative proceedings. Details on the\nrecommendations where management decisions had not been reached have been reported in previous Semiannual\nReports to Congress. Agencies have been informed of actions that must be taken to reach management decision, but\nfor various reasons the actions have not been completed. The appropriate Under and Assistant Secretaries have\nbeen notified of those audits without management decisions.\n\n\nARS 02/08/99 11. J.A. Jones Management 160,233 160,233\n Services CY\xe2\x80\x99s 1994 and\n 1995 Incurred Costs\n (02017-4-At)\n\nCR 09/30/98 12. Evaluation of CR Efforts 0 0\n To Reduce Complaints\n Backlog (60801-1-HQ)\n\n 03/24/99 13. Evaluation of CR Management 0 0\n of Settlement Agreements\n (60801-2-HQ)\n\nCSREES 03/27/97 14. Use of 4-H Program Funds - 5,633 0\n University of Illinois\n (13011-1-Ch)\n\n 03/31/98 15. National Research Initiative 32,757,862 32,757,862\n Competitive Grants Program\n (13601-1-At)\n\nFNS 09/22/97 16. Child and Adult Care Food 56,296 56,296\n Program \xe2\x80\x93 Sponsor Abuses\n (27601-7-KC)*\n\n 12/07/98 17. CACFP \xe2\x80\x93 Family Day Care 338,100 338,100\n Services, Inc. \xe2\x80\x93 West Palm\n Beach, FL (27601-7-At)*\n 33\n\x0c Amount With\n Total Value No Mgmt.\n at Issuance Decision\nAgency Date Issued Title of Report (in dollars) (in dollars)\n\n 07/29/99 18. FSP \xe2\x80\x93 Cross-State Match 394,025 394,025\n (27601-9-KC)*\n\n 08/23/99 19. Child and Adult Care Food 34,551,576 34,551,576\n Program, National Report\n on Program Abuse\n (27601-7-SF)\n\nFS 07/18/96 20. FS Financial 1,150,183,750 1,150,183,750\n Statements\n (08401-4-At)\n\n 09/30/96 21. Real and Personal 0 0\n Property Issues\n (08801-3-At)\n\n 03/31/97 22. Research Cooperative 468,547 468,547\n and Cost Reimbursable\n Agreements\n (08601-18-SF)*\n\n 07/13/98 23. FY 1997 FS Financial 0 0\n Statements (08401-7-At)\n\n 02/23/99 24. FY 1998 FS Financial 0 0\n Statements (08401-8-At)\n\n 02/25/00 25. FY 1999 FS Financial 0 0\n Statements (08401-9-At)\n\nFSA 09/30/93 26. Disaster Program, 5,273,795 1,482,759\n Nonprogram Crops,\n Mitchell County, GA\n (03097-2-At)*\n\n 09/19/95 27. Management of the 75,175,410 909,437\n Dade County, FL, FSA\n Office (03006-1-At)*\n\n 09/28/95 28. Disaster Assistance 1,805,828 1,805,828\n Payments, Lauderdale,\n TN (03006-4-At)*\n\n 01/02/96 29. 1993 Crop Disaster 2,469,829 2,418,167\n Payments Brooks/\n Jim Hogg, TX\n (03006-1-Te)*\n\n\n34\n\x0c Amount With\n Total Value No Mgmt.\n at Issuance Decision\nAgency Date Issued Title of Report (in dollars) (in dollars)\n\n 05/02/96 30. Disaster Assistance 2,177,640 2,145,533\n Program\xe2\x80\x931994, Thomas\n County, GA\n (03006-13-At)*\n\n 09/18/96 31. Emergency Feed Program in 626,182 115,425\n Texas (03601-7-Te)*\n\n 09/30/96 32. 1994 Disaster Assistance 2,666,383 1,714,249\n Program, ME (03601-1-Hy)\n\n 04/30/98 33. Reeves County Office 1,365,640 421,152\n Operations, Pecos, TX\n (03801-36-Te)\n\n 09/30/98 34. Wool and Mohair Payment 2,432,112 2,432,112\n Limitation, Val Verde\n County, TX (03099-20-Te)*\n\n 03/30/99 35. Payment Limitation \xe2\x80\x93 881,924 881,924\n Mitchell County, GA\n (03006-20-At)\n\nMultiagency 09/30/98 36. CSREES Managing Facilities 3,824,211 3,281,534\n Construction Grants\n (50601-5-At)\n\n 03/31/99 37. PVO Grant Fund 18,629,558 18,501,064\n Accountability (50801-6-At)\n\nRBS 10/01/99 38. B&I Loan \xe2\x80\x93 Indiana Farms 595,511 595,511\n (34099-3-Ch)\n\nRural 02/01/99 39. FY 1998 Rural Development 0 0\nDevelopment Financial Statements\n (50401-28-FM)\n\nRHS 08/10/98 40. Self-Help Housing Program - 0 0\n Grizzly Hollow Project, Gatt,\n CA (04801-2-SF)*\n\n 01/08/99 41. RRH Program \xe2\x80\x93 Dujardin 195,694 195,694\n Property Management, Inc.,\n Everett, WA (04801-5-SF)*\n\n 02/13/99 42. RRH \xe2\x80\x93 Initiative in North 109,653 109,653\n Carolina (04801-7-At)\n\n\n 35\n\x0c Amount With\n Total Value No Mgmt.\n at Issuance Decision\nAgency Date Issued Title of Report (in dollars) (in dollars)\n\n 03/25/99 43. Guaranteed Rural Housing 139,220,122 215,030\n Loan Program (04601-2-At)\n\n 03/31/99 44. RRH \xe2\x80\x93 Nationwide Initiative 233,958 233,958\n in NE \xe2\x80\x93 Bosley Management,\n Inc., Sheridan, WY\n (04801-3-KC)\n\n 04/20/99 45. RRH Program \xe2\x80\x93 Owner/ 346,685 346,685\n Manager, Olympia, WA\n (04801-6-SF)\n\n 06/03/99 46. RRH Program \xe2\x80\x93 Medlock 78,865 73,865\n Southwest Management\n Corporation (04099-7-Te)\n\n 09/23/99 47. RRH Initiative \xe2\x80\x93 Calhoun 12,931,081 0\n Property Management\n (04801-11-Te)\n\nRMA 01/31/94 48. Tobacco Indemnity 88,631 88,631\n Payments, Mitchell\n County, GA (05099-22-At)\n\n 09/30/97 49. Crop Insurance on Fresh 15,082,744 0\n Market Tomatoes\n (05099-1-At)\n\n 03/03/98 50. Transfer of CAT 0 0\n Policies to Reinsured\n Companies\n (05099-1-KC)\n\n 04/10/98 51. Crop Insurance Claims 126,787 0\n (05601-1-KC)\n\n 12/16/98 52. Crop Insurance on 3,963,468 3,963,468\n Nurseries (05099-2-At)\n\n 09/30/99 53. Servicing of CAT 0 0\n Policies\n (05099-6-KC)\n\n\n\n\n36\n\x0c Audits Without Management Decision - Narrative for New Entries\n\n\n\n\n1. Plant Protection and Quarantine (PPQ) Activities 3. Status of Recommendations Made in Prior\n in Florida, Issued March 7, 2000 Evaluations of Program Complaints, Issued\n March 10, 2000\nOur audit identified vulnerabilities and weaknesses in\nPPQ practices for inspecting air and ship cargos and OIG concluded that CR remained inefficient in\npassengers in the Miami and Fort Lauderdale ports, processing program complaints. While the original\nwhich increased the risk of prohibited agricultural backlog of 1,088 cases had been reduced to 35,\nproducts entering the United States. Of 16 recom- another 646 were stalled in CR\xe2\x80\x99s \xe2\x80\x9cintend-to-file\xe2\x80\x9d\nmendations to improve and strengthen controls over the category, and 216 cases accepted since November\nPPQ inspection process, we were able to reach 1997 may not be receiving due care. Including this\nmanagement decision on 4. For the remaining 12, current audit, 28 recommendations remain without\nAPHIS officials must provide us with the results of their management decision. Some of the more significant\nanalysis and reevaluation of their risk assessment matters to be addressed are preparing and distributing\nprogram, as well as specific timeframes for aging reports on cases in process, finalizing plans to\nimplementing corrective actions. evaluate civil rights compliance in 15 USDA agencies,\n developing a case management system, locating\n2. Evaluation Report for the Secretary on Civil missing files, referring cases of discrimination for\n Rights Issues \xe2\x80\x93 Phase 7, Issued March 10, 2000 disciplinary consideration, and reevaluating cases that\n were improperly closed.\nThe audit reported that the Office of Civil Rights\xe2\x80\x99 (CR)\nEqual Employment Opportunity (EEO) data base 4. Child and Adult Care Food Program - National\ncontained unreliable information and the condition of the Initiative To Identify Problem Sponsors -\ncase files was such that an accurate picture of a case\xe2\x80\x99s Wildwood, Issued March 22, 2000\nstatus could not be determined. CR was found to be\ninefficient in processing EEO complaints, and data The report had 22 recommendations, and management\nfurnished the Secretary on processing times was not decision has been reached on 8. To achieve\naccurate. We recommended that CR run routine management decision on the remaining recom-\nsearches for anomalies in its data base and reconcile its mendations, OIG needs to be informed of the\ndata with that of USDA agencies and the Equal timeframes for corrective actions and provided evidence\nEmployment Opportunity Commission (EEOC) to bring of billing for disallowed costs.\nintegrity to CR\xe2\x80\x99s data base. We also recommended that\nCR locate missing case files and perform a document- 5. Emergency Conservation Program (ECP),\nby-document sweep of its case files to account for Issued March 31, 2000\ndocumentation, and provide full disclosure on its\nmethodology for reporting its civil rights activities. Of The audit found that while FSA payments were\nthe 21 recommendations, 10 remain without generally correct and were issued to rehabilitate\nmanagement decision, as CR must still address making farmland and rebuild conservation practices, not all\na sweep of case files, performing reconciliations, and payments were proper and FSA\xe2\x80\x99s spot-checks did not\ndeveloping plans and procedures to increase its always include steps to identify the impropriety. We\noperation efficiency. also found that FSA should review those cases where\n there was a maintenance default to determine whether\n producers should be required to make repayments with\n\n\n\n\n 37\n\x0cinterest and/or penalty. We recommended that the FSA financial assistance, and evaluate the financial condition\nnational office finalize updating the ECP Handbook and of all borrowers and require those borrowers in strong\ndevelop training material that could be used to train key financial condition to graduate their outstanding direct\npersonnel whenever ECP is authorized. Management loan balances to other credit sources. We also\ndecision has not been reached on any of the 16 recommended that RUS implement procedures to\nrecommendations. FSA indicated that a draft ECP evaluate telephone loans annually to determine if the\nproposed rule was in the clearance process and, after purposes for which the loans were made have been\nthe final rule has been published, the ECP Handbook accomplished and deobligate all unused funds that are\nrecommendation would have management decision. not needed. The agency disagreed to initiate action on\nFSA also agreed to review the questioned payments. the recommendations, and we elevated the\nFSA needs to advise OIG of the publication dates of the management decision process to the Under Secretary\nECP rule, revised ECP Handbook, or notice(s) that were for Rural Development. We continue to work with\ncited in the response to the audit report. Although FSA Department officials to reach management decision on\nresponded to many of the questionable payments, it the recommendations.\nneeds to advise OIG of all determinations made and/or\nactions taken, including claims established, funds 8. FY 1999 FCIC Financial Statements Report on\ncollected, or additional cost shares approved, for the Management Issues, Issued March 30, 2000\nother questioned payments.\n Two recommendations remain unresolved. Before we\n6. Rural Development\xe2\x80\x99s Consolidated Financial can accept management decision for one, we need to\n Statements for FY 1999, Issued February 22, be provided a date for implementation of the planned\n 2000 Hot Site. For another, we need to be provided dates for\n accomplishing implementation of the cited software\nRural Development agrees that it needs to work with the package and company data transmission using a\nDepartment\xe2\x80\x99s Chief Financial Officer to develop a long- secure Web server.\nrange plan to consolidate, reengineer, and integrate\nfinancial/administrative systems. Rural Development is 9. Standard Reinsurance Agreement (SRA)\nin the process of converting to the Department\xe2\x80\x99s Reporting Requirements, Issued March 31, 2000\nFoundation Financial Information System to account for\nits salary and administrative expenses. Rural We reported that fund designation changes were not\nDevelopment agrees to participate in any departmental controlled, centralized approval for fund changes was\ninitiatives to review other systems. However, we cannot needed, and controls over yields needed to be\nreach management decision until OCFO begins to plan improved. In its written comments to the report dated\nthe reviews and provides a timeframe for accomplishing March 31, 2000, and in its response dated June 2,\nthe contemplated actions. 2000, RMA provided sufficient information to reach\n management decision on six of the eight\n7. Telephone Loan Program Policies and recommendations. On June 16, 2000, we requested\n Procedures, Issued February 11, 2000 that RMA provide additional information for\n recommendation Nos. 1 and 2. For recommendation\nWe recommended that the Rural Utilities Service (RUS) No. 1, RMA requested OGC to provide written\nwork with Congress to clarify RUS policy for the documentation showing that RMA could not be\nTelephone Loan Program regarding loan graduation successful in its efforts to collect amounts (about\nand requiring financially strong borrowers to obtain $6 million) improperly collected by the Rain and Hail\ncredit from commercial sources. If Congress Insurance Service. OGC has not provided the\ndetermines that RUS should graduate financially strong documentation to date. For recommendation No. 2,\nborrowers to commercial credit sources and require RMA stated that reports would be generated to compare\nsuch borrowers to obtain credit from other sources, we previously approved and accepted fund designations to\nrecommended that RUS develop a strategy to establish any changes in fund designations approved after the\na loan graduation program, require borrowers to be cutoff dates. However, the response did not provide a\ndenied commercial credit as a condition for RUS timeframe for implementation of the reports.\n\n\n\n\n38\n\x0c10. NRCS Contracting, Procurement, and\n Disbursement Activities, Fort Worth, TX,\n Issued March 31, 2000\n\nOIG quantified funds misused by certain NRCS\npersonnel at NRCS\xe2\x80\x99 National Business Management\nCenter. We recommended that NRCS officials take\nappropriate administrative action. Regarding the\nunauthorized information technology procurement, we\nrecommended that NRCS determine whether the funds\ncould be recovered and whether additional funds were\ndue the contractor. We also recommended that NRCS\ninform the General Services Administration\xe2\x80\x99s contracting\nofficials of the contractor\xe2\x80\x99s unauthorized actions and\ninitiate debarment. These matters have been referred\nto the U.S. attorney, following whose decisions\nadministrative actions will be determined.\n\n\n\n\n 39\n\x0c Indictments and Convictions\n\nBetween April 1 and September 30, 2000, OIG com- Indictments and Convictions\npleted 300 investigations. We referred 205 cases to April 1 - September 30, 2000\nFederal, State, and local prosecutors for their decision.\n Agency Indictments Convictions*\nDuring the reporting period, our investigations led to\n240 indictments and 251 convictions. The period of time AMS 0 5\nto obtain court action on an indictment varies widely; APHIS 10 4\ntherefore, the 251 convictions do not necessarily relate ARS 3 1\nto the 240 indictments. Fines, recoveries/collections, CSREES 1 0\nrestitutions, claims established, and cost avoidance FNS 179 185\nresulting from our investigations totaled about FSA 24 29\n$50.5 million. FSIS 4 5\n FS 11 3\nThe following is a breakdown, by agency, of indictments GIPSA 0 1\nand convictions for the reporting period. NRCS 1 4\n OCIO 0 1\n OIG 0 1\n RHS 4 6\n RMA 2 3\n RUS 0 1\n SEC 1 2\n ___ ___\n Totals 240 251\n\n * This category includes pretrial diversions.\n\n\n\n\n40\n\x0c Office of Inspector General Hotline\n\nThe OIG Hotline serves as a national receiving point for\nreports from both employees and the general public of\nsuspected incidents of fraud, waste, mismanagement,\nand abuse in USDA programs and operations. During\nthis reporting period, the OIG Hotline received\n1,134 complaints, which included allegations of\nparticipant fraud, employee misconduct, and\nmismanagement, as well as opinions about USDA\nprograms. Figure 1 displays the volume and type of the\ncomplaints we received, and figure 2 displays the\ndisposition of those complaints.\n\n\n\n\n Figure 1 Figure 2\n\n Hotline Complaints Disposition of Complaints\n April 1 to September 30, 2000 April 1 to September 30, 2000\n (Total = 1,134)\n Referred to\n Reprisal Referred to USDA Agencies\n 0 Bribery FNS for Tracking for Response Referred to\n Participant 1 286 584 State Agency\n Fraud 32\n 734\n\n\n\n\n Waste/\n Health/\nMismanagement\n Opinion/ Safety Referred to\n 90 Employee Information 21 USDA or Other Referred to\n Misconduct 111 Agencies for Filed Without Referred to Other Law\n 177\n Information- Referral- OIG Audit or Enforcement\n No Response Insufficient Investigations Agencies\n Needed Information for Review 6\n 152 45 29\n\n\n\n\n 41\n\x0c Freedom of Information Act (FOIA) and Privacy Act (PA) Requests\n for the Period April 1 to September 30, 2000\n\n\nNumber of FOIA/PA Requests Received 327\n\nNumber of FOIA/PA Requests Processed: 328\n\n Number of Requests Granted in Full 205\n Number of Requests Granted in Part 54\n Number of Requests Not Granted 53\n\nReasons for Denial:\n\n No Records Available 20\n Requests Denied in Full 25\n Referrals to Other Agencies 12\n\n\nRequests for OIG Reports From Congress\nand Other Government Agencies\n\n Received 102\n Processed 103\n\n\nAppeals Processed 7\n\n Appeals Completely Upheld 7\n Appeals Partially Reversed 0\n Appeals Completely Reversed 0\n\n\nNumber of OIG Reports/Documents 473\nReleased in Response to Requests\n\nNOTE: A request may involve more than one report.\n\n\n\n\n42\n\x0cAppendix I\n\n\n INVENTORY OF AUDIT REPORTS ISSUED\n WITH QUESTIONED COSTS AND LOANS\n\n DOLLAR VALUES\n a\n QUESTIONED UNSUPPORTED\n NUMBER COSTS AND LOANS COSTS AND LOANS\n\nA. FOR WHICH NO MANAGEMENT 57 $2,115,282,363 $87,171,085\n DECISION HAD BEEN MADE\n BY APRIL 1, 2000\n\nB. WHICH WERE ISSUED DURING 22 37,867,401 1,367,079\n THIS REPORTING PERIOD\n\n TOTALS 79 $2,153,149,764 $88,538,164\n\nC. FOR WHICH A MANAGEMENT 22\n DECISION WAS MADE DURING\n THIS REPORTING PERIOD\n\n (1) DOLLAR VALUE OF\n DISALLOWED COSTS\n\n RECOMMENDED FOR RECOVERY $10,163,877 $3,235,799\n\n NOT RECOMMENDED FOR RECOVERY $15,858,816 $11,910,369\n\n (2) DOLLAR VALUE OF 25,360,088 11,187,907\n COSTS NOT DISALLOWED\n\nD. FOR WHICH NO MANAGEMENT 57 2,101,833,748 62,204,089\n DECISION HAS BEEN MADE BY\n THE END OF THIS REPORTING\n PERIOD\n\n REPORTS FOR WHICH NO 40 2,067,022,207 62,073,971\n MANAGEMENT DECISION WAS\n MADE WITHIN 6 MONTHS\n OF ISSUANCE\n\na\n Unsupported values are included in questioned values.\n\n\n\n\n 43\n\x0cAppendix II\n\n\n INVENTORY OF AUDIT REPORTS ISSUED\n WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE\n\n NUMBER DOLLAR VALUE\n\nA. FOR WHICH NO MANAGEMENT 22 $812,502,999\n DECISION HAD BEEN MADE\n BY APRIL 1, 2000\n\nB. WHICH WERE ISSUED DURING 6 224,437,802\n THE REPORTING PERIOD\n\n TOTALS 28 $1,036,940,801\n\nC. FOR WHICH A MANAGEMENT 10\n DECISION WAS MADE DURING\n THE REPORTING PERIOD\n\n (1) DOLLAR VALUE OF $232,365,352\n DISALLOWED COSTS\n\n (2) DOLLAR VALUE OF 70,000\n COSTS NOT DISALLOWED\n\nD. FOR WHICH NO MANAGEMENT 18 808,846,056\n DECISION HAS BEEN MADE BY\n THE END OF THE REPORTING\n PERIOD\n\n REPORTS FOR WHICH NO 14 808,357,054\n MANAGEMENT DECISION WAS\n MADE WITHIN 6 MONTHS\n OF ISSUANCE\n\n\n\n\n44\n\x0cAppendix III\n\n\n SUMMARY OF AUDIT REPORTS RELEASED\n BETWEEN APRIL 1 AND SEPTEMBER 30, 2000\n\nDURING THE 6-MONTH PERIOD BETWEEN APRIL 1 AND SEPTEMBER 30, 2000, THE OFFICE OF INSPECTOR\nGENERAL ISSUED 51 AUDIT REPORTS, INCLUDING 2 PERFORMED BY OTHERS.\n\nTHE FOLLOWING IS A SUMMARY OF THOSE AUDITS BY AGENCY:\n\n QUESTIONED UNSUPPORTEDa FUNDS BE\n AUDITS COSTS COSTS PUT TO\nAGENCY RELEASED AND LOANS AND LOANS BETTER USE\n\nAGRICULTURAL MARKETING SERVICE 1\nAGRICULTURAL RESEARCH SERVICE 1\nFARM SERVICE AGENCY 6 $1,020,885 $12,710 $205,250,781\nRURAL HOUSING SERVICE 5 $5,287,669 $115,878\nRISK MANAGEMENT AGENCY 1\nCOMMODITY CREDIT CORPORATION 1\nFOREIGN AGRICULTURAL SERVICE 1\nFOREST SERVICE 4 $1,350,000 $18,796,596\nRURAL UTILITIES SERVICE 1\nNATURAL RESOURCES CONSERVATION\n SERVICE 1\nOFFICE OF THE CHIEF FINANCIAL OFFICER 1\nFOOD SAFETY AND INSPECTION SERVICE 4\nFOOD AND NUTRITION SERVICE 6 $200,137 $117,408\nRURAL BUSINESS-COOPERATIVE SERVICE 2 $5,820,256\nMULTIAGENCY 16 $24,188,454 $1,236,961 $274,547\n\nTOTALS 51 $37,867,401 $1,367,079 $224,437,802\n\nTOTAL COMPLETED:\n SINGLE AGENCY AUDIT 31\n MULTIAGENCY AUDIT 14\n SINGLE AGENCY EVALUATION 4\n MULTIAGENCY EVALUATION 2\n\nTOTAL RELEASED NATIONWIDE 51\n\nTOTAL COMPLETED UNDER CONTRACTb 2\n\nTOTAL SINGLE AUDIT ISSUEDc 13\na\n Unsupported values are included in questioned values.\nb\n Indicates audits performed by others.\nc\n Indicates audits completed as Single Audit.\n\n\n\n\n 45\n\x0c AUDIT REPORTS RELEASED AND ASSOCIATED MONETARY VALUES\n BETWEEN APRIL 1 AND SEPTEMBER 30, 2000\n\n QUESTIONED UNSUPPORTED FUNDS BE\nAUDIT NUMBER COSTS COSTS PUT TO\nRELEASE DATE TITLE AND LOANS AND LOANS BETTER USE\n\n\nAGRICULTURAL MARKETING SERVICE\n\n 01-601-0003-CH EVALUATION OF GRADING ACTIVITIES AT TERMINAL\n 2000/08/14\n\n TOTAL: AGRICULTURAL MARKETING SERVICE 1\n\nAGRICULTURAL RESEARCH SERVICE\n\n 02-017-0003-SF INCURRED COST AUDIT - GLOBAL ASSOCIATES,\n 2000/05/03 OAKLAND, CA\n\n TOTAL: AGRICULTURAL RESEARCH SERVICE 1\n\nFARM SERVICE AGENCY\n\n 03-006-0020-TE LAFLORE COUNTY FSA OFFICE DISASTER PROGRAMS $226,785 $1,981\n 2000/08/22\n 03-099-0026-TE PAYMENT LIMITATION IN BRYAN COUNTY, OK $450,887\n 2000/06/23\n 03-099-0040-KC 1998 LOAN DEFICIENCY PAYMENTS IN CASS COUNTY, $27,089\n 2000/09/25 ND\n 03-601-0017-KC 1998 CROP LOAN DEFICIENCY PAYMENT ACTIVITIES $316,124 $12,710\n 2000/09/29\n 03-601-0036-TE FARM LOAN PROGRAM GUARANTEED LOANS $205,248,800\n 2000/06/08\n 03-601-0037-TE RECAPTURE UNDER SHARED APPRECIATION\n 2000/08/07 AGREEMENTS\n\n TOTAL: FARM SERVICE AGENCY 6 $1,020,885 $12,710 $205,250,781\n\nRURAL HOUSING SERVICE\n\n 04-005-0001-TE USE OF RHS LOAN FUNDS AT THE LOCAL FIELD $6,814\n 2000/08/09 OFFICE IN ANTLERS, OK\n 04-601-0006-SF FARM LABOR HOUSING PROGRAM - STATE OF $54,152\n 2000/08/16 CALIFORNIA\n 04-601-0007-SF FARM LABOR HOUSING PROGRAM - STATE OF FLORIDA $16,745\n 2000/08/03\n 04-601-0008-SF FARM LABOR HOUSING PROGRAM - STATE OF $402,957\n 2000/05/12 WASHINGTON\n 04-801-0002-KC RRH - NATIONWIDE INITIATIVE IN MO - LOCKWOOD $4,807,001 $115,878\n 2000/05/25 MANAGEMENT CO., ST. LOUIS, MO\n\n TOTAL: RURAL HOUSING SERVICE 5 $5,287,669 $115,878\n\nRISK MANAGEMENT AGENCY\n\n 05-001-0003-TE RATES AND YIELDS FOR CROP INSURANCE PILOT\n 2000/04/05 PROGRAMS\n\n TOTAL: RISK MANAGEMENT AGENCY 1\n\nCOMMODITY CREDIT CORPORATION\n\n 06-401-0011-FM FISCAL YEAR 1999 CCC FINANCIAL STATEMENTS\n 2000/07/13\n\n TOTAL: COMMODITY CREDIT CORPORATION 1\n\n\n\n\n46\n\x0c AUDIT REPORTS RELEASED AND ASSOCIATED MONETARY VALUES\n BETWEEN APRIL 1 AND SEPTEMBER 30, 2000\n\n QUESTIONED UNSUPPORTED FUNDS BE\nAUDIT NUMBER COSTS COSTS PUT TO\nRELEASE DATE TITLE AND LOANS AND LOANS BETTER USE\n\n\nFOREIGN AGRICULTURAL SERVICE\n\n 07-001-0001-CH REVIEW OF THE DAIRY EXPORT INCENTIVE PROGRAM\n 2000/05/26\n\n TOTAL: FOREIGN AGRICULTURAL SERVICE 1\n\nFOREST SERVICE\n\n 08-001-0001-HQ FOREST SERVICE IMPLEMENTATION OF GPRA\n 2000/06/28\n 08-003-0006-SF ZEPHYR COVE LAND EXCHANGE, LAKE TAHOE BASIN $1,350,000 $18,700,000\n 2000/07/14 MANAGEMENT UNIT, SOUTH LAKE TAHOE, CA\n 08-017-0013-SF EQUITABLE ADJUSTMENT CLAIM - ENVIRONMENTAL $96,596\n 2000/09/19 CONSULTING, PLANNING AND DESIGN, MT. SHASTA, CA\n 08-801-0003-SF FINANCIAL DISCLOSURE AND OUTSIDE EMPLOYMENT\n 2000/06/16 REPORTING REQUIREMENTS\n\n TOTAL: FOREST SERVICE 4 $1,350,000 $18,796,596\n\nRURAL UTILITIES SERVICE\n\n 09-099-0001-TE GRANTS FOR DOMESTIC WATER AND WASTEWATER\n 2000/05/17 PROJECTS\n\n TOTAL: RURAL UTILITIES SERVICE 1\n\nNATURAL RESOURCES CONSERVATION SERVICE\n\n 10-099-0002-CH EVALUATION OF REGIONAL AND STATE OFFICE\n 2000/04/19 OVERSIGHT ACTIVITIES\n\n TOTAL: NATURAL RESOURCES CONSERVATION SERVICE 1\n\nOFFICE OF THE CHIEF FINANCIAL OFFICER\n\n 11-099-0014-FM VALIDATION OF CAS RECONCILIATION PROCESS\n 2000/09/18\n\n TOTAL: OFFICE OF THE CHIEF FINANCIAL OFFICER 1\n\nFOOD SAFETY AND INSPECTION SERVICE\n\n 24-001-0003-AT HACCP-IMPLEMENTATION AND COMPLIANCE\n 2000/06/21\n 24-099-0003-HY FSIS IMPORTED MEAT AND POULTRY INSPECTION\n 2000/06/21 PROCESS\n 24-601-0001-CH LABORATORY TESTING OF MEAT AND POULTRY\n 2000/06/21 PRODUCTS\n 24-601-0004-AT FOOD SAFETY AND INSPECTION SERVICE COMPLIANCE\n 2000/06/21 PROGRAM\n\n TOTAL: FOOD SAFETY AND INSPECTION SERVICE 4\n\nFOOD AND NUTRITION SERVICE\n\n 27-010-0029-HY CACFP - STERNHOLD RESOURCES, INC. $141,484 $117,408\n 2000/09/27\n 27-099-0009-AT CONTINUED MONITORING OF EBT SYSTEM\n 2000/09/29 DEVELOPMENT IN FLORIDA\n 27-099-0020-CH FOOD STAMP PROGRAM ADMINISTRATIVE COSTS - OHIO $52,111\n 2000/09/05\n\n\n\n\n 47\n\x0c AUDIT REPORTS RELEASED AND ASSOCIATED MONETARY VALUES\n BETWEEN APRIL 1 AND SEPTEMBER 30, 2000\n\n QUESTIONED UNSUPPORTED FUNDS BE\nAUDIT NUMBER COSTS COSTS PUT TO\nRELEASE DATE TITLE AND LOANS AND LOANS BETTER USE\n\n\n 27-601-0007-TE CHILD AND ADULT CARE FOOD PROGRAM $6,542\n 2000/05/17\n 27-801-0005-KC STRATEGIC MONITORING OF THE UTAH EBT SYSTEM\n 2000/06/09 DEVELOPMENT, PHASE IV\n 27-801-0006-KC STRATEGIC MONITORING OF THE NORTH DAKOTA EBT\n 2000/08/17 SYSTEM DEVELOPMENT, PHASE IV\n\n TOTAL: FOOD & NUTRITION SERVICE 6 $200,137 $117,408\n\nRURAL BUSINESS-COOPERATIVE SERVICE\n\n 34-004-0004-HY RURAL BUSINESS ENTERPRISE GRANT TO VIVERO $1,620,256\n 2000/07/11 CAIMITO\n 34-004-0006-HY RURAL DEVELOPMENT, BUSINESS AND INDUSTRY LOAN, $4,200,000\n 2000/09/27 OTTMAN CUSTOM PROCESSORS\n\n TOTAL: RURAL BUSINESS\xe2\x80\x93COOPERATIVE SERVICE 2 $5,820,256\n\nMULTIAGENCY\n\n 50-018-0007-CH SINGLE AUDIT OF THE IL DEPT OF AGRICULTURE $140,300\n 2000/04/17\n 50-018-0008-CH SINGLE AUDIT OF THE MI DEPT OF AGRICULTURE\n 2000/05/18\n 50-018-0009-CH SINGLE AUDIT OF THE MI DEPT OF COMMUNITY HEALTH $5,148,538\n 2000/05/18\n 50-018-0009-HY COMMONWEALTH OF PUERTO RICO-DEPARTMENT OF $6,893,792\n 2000/09/05 AGRICULTURE, A-128, 6/30/95 & 6/30/94\n 50-018-0010-CH SINGLE AUDIT OF THE STATE OF MINNESOTA - 1998\n 2000/07/07\n 50-020-0067-SF A-128 AUDIT OF PUBLIC SCHOOL SYSTEM OF COMMON-\n 2000/05/15 WEALTH OF NORTHERN MARIANAS, FYE 9/30/95\n 50-020-0068-SF A-128 OF PUBLIC SCHOOL SYSTEM OF THE COMMON-\n 2000/05/15 WEALTH OF NORTHERN MARIANAS FOR FYE 9/30/96\n 50-020-0069-SF A-128 - AMERICAN SAMOA GOVERNMENT, 9/30/94 $1,289,547 $1,236,961\n 2000/07/05\n 50-020-0074-HY COMMONWEALTH OF PUERTO RICO \xe2\x80\x93 DEPARTMENT\n 2000/08/02 OF FAMILY, A-128, 6/30/96\n 50-020-0075-HY COMMONWEALTH OF PR-DEPARTMENT OF EDUCATION, $664\n 2000/07/11 A-128, 6/30/96\n 50-021-0001-HY COMMONWEALTH OF PENNSYLVANIA, A-133, 6/30/99\n 2000/09/05\n 50-021-0002-SF A-133 AUDIT- HAWAII STATE DEPARTMENT OF\n 2000/07/05 AGRICULTURE\n 50-021-0003-SF A-133 AUDIT - CITY OF SAN JOSE FOR THE FISCAL\n 2000/07/24 YEAR ENDED JUNE 30, 1999\n 50-099-0028-FM PCIE/ECIE CRITICAL INFRASTRUCTURE PROTECTION\n 2000/07/18 REVIEW - PHASE 1 AND 2\n 50-801-0003-KC CROP LOSS DISASTER ASSISTANCE PROGRAM $10,318,505 $274,547\n 2000/09/28\n 50-801-0011-TE ADVANCES TO NONPROFIT ORGANIZATIONS FOR $397,108\n GRANTS/COOPERATIVE AGREEMENTS\n\n TOTAL: MULTIAGENCY 16 $24,188,454 $1,236,961 $274,547\n\n\n TOTAL: RELEASE - NATIONWIDE 51 $37,867,401 $1,367,079 $224,437,802\n\n\n\n\n48\n\x0cAbbreviations of Organizations\nAMS Agricultural Marketing Service\nAPHIS Animal and Plant Health Inspection Service\nARS Agricultural Research Service\nCCC Commodity Credit Corporation\nCDFA California Department of Food and Agriculture\nCR Office of Civil Rights\nCSREES Cooperative State Research, Education, and Extension Service\nEEOC Equal Employment Opportunity Commission\nFAS Foreign Agricultural Service\nFBI Federal Bureau of Investigation\nFCIC Federal Crop Insurance Corporation\nFDA U.S. Food and Drug Administration\nFNS Food and Nutrition Service\nFS Forest Service\nFSA Farm Service Agency\nFSIS Food Safety and Inspection Service\nGIPSA Grain Inspection, Packers, and Stockyard Administration\nINS Immigration and Naturalization Service\nIRS Internal Revenue Service\nNBMC National Business Management Center\nNFC National Finance Center\nNRCS Natural Resources Conservation Service\nOCFO Office of the Chief Financial Officer\nOCIO Office of the Chief Information Officer\nOGC Office of the General Counsel\nOIG Office of Inspector General\nOPHS Office of Public Health and Safety\nPCIE President\xe2\x80\x99s Council on Integrity and Efficiency\nRBS Rural Business-Cooperative Service\nRHS Rural Housing Service\nRMA Risk Management Agency\nRUS Rural Utilities Service\nSEC Office of the Secretary\nTreasury U.S. Department of the Treasury\nUSDA U.S. Department of Agriculture\n\x0cU.S. DEPARTMENT OF AGRICULTURE\nOFFICE OF INSPECTOR GENERAL\nSTOP 2309\n1400 INDEPENDENCE AVE. SW.\nWASHINGTON, DC 20250-2309\n\n\n\n\n www.usda.gov/oig\n\x0c'