EEFORTS TO PREVENT FRAUD, WASTE AND MISMANAGEMENT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88G00186R001201540002-1
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 32
• Document Creation Date: December 27, 2016
• Document Release Date: May 5, 2011
• Sequence Number: 2
• Content Type: REPORT

Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
STAT
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1
EXECUTIVE SEC?_.,TA`:IAT
ROUTING SLIP
ACTION
INFO
DATE
INITIAL
1
DCI
2
DDCI
3
EXDIR
4
D/ICS
DDI
DDA
X
7
DDO
8
DDS&T
9
Chm/NIC
10
GC
11
IG
12
Compt
13
D/OLL
14
D/PAO
15
VC/NIC
16
17
18
19
20
21
22
STAT
tt~cufive Secretory
2 Oct 85
1 3637 (10-81)
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1
 I~ III I III I LILI I
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 20-1540002-1
Executive, Registry
Efforts to- Prevent
Fraud, Waste and
Mismanagement
&DIA k**01G3
President's Council
on Integrity and
Efficiency
A Progress Report
to the President
First Six, Months
Fiscal Year - 1985
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
Efforts to Prevent
Fraud, Waste and
Mismanagement
President's Council
on Integrity and
Efficiency
A Progress Report
to the President
First Six Months
Fiscal Year 1985
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 - - - 1 J
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
President's Council on Integrity and Efficiency
Foreword
Since I took office, I have made the elimination of waste and abuse of Federal
resources a high national priority. The President's Council on Integrity and
Efficiency (PCIE), which I created only two months into my first term, is one of the
shining stars of our Administration. Since 1981, $54 billion has been put to better
use as a result of the outstanding efforts of the PCIE, working with agency
management. The PCIE has. also supported our government-wide management
improvement program, Reform `88, proving that good management is the key to the
prevention of fraud, waste and abuse.
The Council has also become a respected vehicle for advancing traditional auditing
and investigative skills by applying modern automated technology to increase
government's capability to detect and prevent waste and abuse-whether it occurs
within the government or its many private contractors. This capability is exercised
by a cadre of professional employees who are extraordinarily dedicated, motivated,
and skilled. I share with them the conviction that integrity and efficiency can be, and
in fact are being, restored to the management of government resources.
We can all contribute toward stemming the drain of waste and abuse, and delivering
the best possible government to the citizens of the United States; a goal and
responsibility shared with the Legislative Branch. To continue the progress we have
made so far, my Administration will soon transmit to the Congress a series of
proposals to address systemic impediments to reducing fraud against the
government, and to further reduce the misdirection of Federal benefits payments
through error or fraud, which together waste billions of dollars each year.
The existence of fraud and waste in government and by some contractors is a
tenacious problem, but we are just as tenacious in fighting it. The American
taxpayer can be justifiably proud of the continuing fraud detection and prevention
efforts of the President's Council on Integrity and Efficiency. I know that I am.
ou-Jd.
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
TABLE OF CONTENTS
Introduction ............................................................................. v
Successful Civil and Criminal Prosecutions ................................................... 1
Investigative Recoveries ................................................................... 4
Administrative Sanctions ................................................................. 7
Management Commitments to Seek Recoveries ............................................... 9
Management Commitments to More Efficiently Use Funds ...................................... 12
Allegations of Fraud, Waste, or Mismanagement .............................................. 15
President's Council on Integrity and Efficiency --
Committees, Projects, and Activities .................................................... 17
Standing Council Committees .............................................. 17
Council Projects ......................................................... 19
Membership of the President's Council on Integrity
and Efficiency .......................................................................21
Offices of Inspectors General and Hotline Numbers ........................................... 22
PCIE Committees and Projects .............................................................24
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
INTRODUCTION
The President's Council on
Integrity and Efficiency
(PCIE)
Progress Report
October 1, 1984 - March 31, 1985
Four years ago, the President established the President's Coun-
cil on Integrity and Efficiency (PCIE) to improve the Federal
Government. The PCIE is chaired by the Deputy Director of the
Office of Management and Budget (OMB). Its members include
the Deputy Attorney General, the Director of the Office of Per-
sonnel Management, the Executive Assistant Director of In-
vestigations of the Federal Bureau of Investigation, all statutory
Inspectors General, and a designee of the Department of the
Treasury.
In January 1985, the PCIE presented a progress report to the
President covering the first four years of the Council's existence.
This report highlighted the accomplishments of the combined ef-
forts of the Inspectors General in working on Government-wide
anti-fraud and mismanagement programs. It also reflected on the
leadership of the PCIE and the Administration's continued com-
mitment to more effectively root out fraud, stop waste, and to
assure integrity and efficiency in Federal programs and
operations.
The PCIE mapped out two overall themes to guide its efforts over
the next four years. The first of these themes centered on manage-
ment improvement with an emphasis on holding managers ac-
countable for their decisions and actions. The second theme will
continue to focus on Government operations and activities that
will produce dollar savings with budgetary impact.
This is the ninth semiannual report issued by the PCIE. The report
highlights the accomplishments of the Inspectors General to hold
managers accountable for their programs and to achieve dollar
savings including:
? 1,882 successful prosecutions (Table 1);
? $81.2 million in investigative recoveries (Table 2);
? 538 debarments and suspensions of persons or firms
doing business with the Government (Table 3);
? 1,039 administrative sanctions against Federal and
contractor employees (Table 3);
? $706.2 million in management commitments to seek
recoveries of funds (Table 4);
? $4.7 billion in management commitments to use funds
more efficiently (Table 5);
? $2.6 billion in questionable costs sustained by con-
tracting officials resulting from audits by the Defense
Contract Audit Agency (Table 5); and
? 10,370 allegations of fraud, waste or mismanagement
received over IGs' hotlines from agency employees
and the public (Table 6).
The approximately $8 billion cited for this six-month period
brings the cumulative results of the Inspectors General, as
reported to the President's Council, to more than $54 billion in
improved use of funds since the Council was established.
The remainder of the report presents six statistical tables and
numerous case examples which further detail the results of the
PCIE for the six-month period ending March 31, 1985. The report
also contains narratives on the accomplishments of PCIE stan-
ding committees and projects during the reporting period.
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
1 II
R
The Inspectors General (IGs) conduct investigations of contrac-
tors, program participants, and Government employees, that can
lead to civil or criminal actions. These prosecutions result in
prison terms or judgments or convictions that require the defen-
dants to pay fees, penalties, settlements, or recoveries to the
Government.
During the last six months IGs, working independently or with
other Federal and non-Federal agencies, have obtained 1,882 suc-
cessful prosecutions. This total includes the number of individuals
who, as a result of Office of Inspector General (OIG) investiga-
tions, are either found guilty by the courts or are the subject of
pre-trial diversion. Over the past four years, the PCIE has been
responsible for 12,223 prosecutions.
Table 1
Successful Prosecutions
Agencies
Agency
Alone
With Other-L/
Federal Agencies
With Non- -!/
Federal Agencies
Total
Agriculture
237
N/A
N/A
237
Agency for International Development
3
0
2
5
Commerce
2
3
0
5
Defense 3 /
344
0
N/A
344
Education
32
43
5
80
Energy
0
0
0
0
Environmental Protection Agency
5
0
0
5
General Services Administration
32
9
0
41
Health and Human Services
403
25
104
532
Housing and Urban Development
109
12
N/A
121
Interior
9
1
4
14
Labor
246
59
21
326
National Aeronautics and Space
Administration
6
1
0
7
Small Business Administration
4
0
0
4
State
1
0
0
1
Transportation
35
2
0
37
Veterans Administration
107
14
123
Totals
1,575
169
1,882
J Joint investigations with other Federal agencies include cases in which an agency expended significant investigative resources working in cooperation with another Federal agency (e.g.,
another OIG, IRS, INS, Postal Service, FBI, etc.) The majority of these are with the FBI. The FBI reported that governmental fraud or bribery cases conducted independently or jointly
with the OIGs resulted in: 340 felony convictions; 25 pre-trial diversions; and 49 misdemeanor convictions.
_L/ Joint investigations with non-Federal agencies include cases in which an OIG actually expended significant investigative resources in working with State or local investigative agencies
which have concurrent jurisdiction.
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
Government Contractor Cases
Contractors' Violation of Wage Laws
Results in 14 Convictions
A joint task force was established by the United States Attorney
in the Southern District of California to investigate allegations
that contractors on federally funded or insured projects were hir-
ing undocumented workers at substantially lower wages. After
an extensive 18-month investigation into potential violations of
Federal wage and hour laws, at least nine contractors and/or their
principal officers were indicted or had criminal informations fil-
ed against them. They have been cited for a total of $756,377
in unpaid wages due 219 employees, and charged with other viola-
tions of law including making false statements, kickbacks, aiding
and abetting, obstruction of justice, and conspiracy. To date, 14
convictions have been obtained (Department of Labor).
Construction Company Found Guilty on
75 Counts for Contract Fraud
The Naval Investigative Service, FBI, and IRS conducted a two-
year investigation of a construction company and its two prin-
cipal officers for violations involving five repair and rehabilita-
tion contracts on Government housing units valued at about $19
million. To keep the construction company from doing further
business with the Government during the investigation, the Navy
contracting officer recommended a preindictment suspension. A
jury trial resulted in guilty verdicts against the contractor and
its two officers on 75 counts for violations of the Racketeering,
Influence and Corrupt Organizations Act, false statements and
claims, mail fraud, income tax evasion, and false statements in
connection with income tax findings. The Office of Inspector
General, Department of Labor and Navy auditors assisted in the
investigation (Department of Defense).
Government Employee Cases
Federal Employee Engaged in Loan
Fraud Receives a Prison Sentence
As a result of an OIG investigation, an Air Force sergeant who
received a $65,000 SBA business loan to operate a sporting goods
store was indicted by a Federal grand jury and convicted of
transporting stolen property, making false statements, and con-
verting silk screen equipment and a computer that had been pledg-
ed as collateral on the loan. The defendant received a prison
sentence and was ordered to make restitution to SBA of $5,100
(Small Business Administration).
Budget Officer Diverts Government
Funds for Personal Use
An investigation by the OIG and the United States Attorney for
the Eastern District of Virginia resulted in a Foreign Service Of-
ficer being convicted for embezzling Federal funds and mail fraud
while serving as the Budget and Fiscal Officer at an overseas AID
Mission. The defendant diverted to a personal account more than
100 checks, worth over $25,000, that belonged to the Federal
Government. The defendant was sentenced to a prison term and
placed on probation (Agency for International Development).
Director of a Laboratory Receives Prison
Term and Fine for Engaging in Conflicts
of Interest
An OIG investigation disclosed that the director of a NASA
laboratory purchased equipment from, and entered into contracts
with, a company in which the official and the official's spouse
had a personal financial interest. After retiring from Government
service, the official pled guilty to making false statements on
financial disclosure documents and engaging in conflicts of in-
terest. The defendant was sentenced to serve 60 days in a Federal
penitentiary, pay a $50,000 fine, and serve two years of super-
vised probation (National Aeronautics and Space Administration).
GSA Official Convicted of Accepting
Bribes
The OIG and the FBI jointly investigated allegations that a GSA
Deputy Regional Administrator solicited and accepted approx-
imately $64,000 in bribes from a GSA contractor. FBI and OIG
agents arrested the Deputy Regional Administrator on August 9,
1984, after witnessing his acceptance of a $4,000 payoff. On
November 20, 1984, he pled guilty to charges of accepting bribes;
he resigned from GSA thereafter. On March 21, 1985, he was
sentenced to two years in prison and fined $30,000 (General Ser-
vices Administration).
Program Participant Cases
Family Members Receive Prison
Sentences for Loan Fraud
Five members of an extended family, 21 of whose members had
been indicted by a Federal grand jury on multiple counts of con-
spiracy, student financial assistance fraud, mail fraud, and
fraudulent use of social security numbers, were sentenced to
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
prison terms ranging from three to 15 years. The group had ap-
plied for dozens of Guaranteed Student Loans and Pell Grants
by using false identities. To date, 13 individuals have been
sentenced (Department of Education).
to allow a county welfare supervisor to use their social security
numbers to reactivate welfare payments. The scam is believed
to have cost Federal and State agencies more than $1.2 million.
To date, 50 persons have been prosecuted and found guilty
(Department of Health and Human Services).
Home Mortgage Fraud Results in
Suspension and Prison Terms for Real
Estate Officials
Three New Jersey real estate company officials were sentenced
on false statement, conspiracy, and mail fraud charges. The in-
dividuals originated false documents that borrowers used to ob-
tain over $1.5 million in fraudulent mortgages insured by HUD.
The defendants received prison sentences and have been suspend-
ed from doing business with HUD (Department of Housing and
Urban Development).
Major Welfare Scam in California
Uncovered
The OIG uncovered a major welfare scam in California involv-
ing more than 150 persons. Former benefit recipients had agreed
$3.5 Million Fraud by Mobile Home
Manufacturers
OIG investigations of VA's mobile home loan guaranty program
revealed that "invoice padding" frequently occurs in the mobile
home industry when manufacturers improperly include unit
rebates in the invoice price. Veterans were also charged for ac-
cessories that were not actually provided, and the manufacturers
included these items on invoices submitted to VA, which then
became part of the guaranteed amount. As a result, VA has lost
about $3.5 million on repossessed mobile homes. To date, three
manufacturers have pled guilty, were fined $65,000 and have paid
$490,000 to the VA. Two of these companies have been suspend-
ed for 90 days from participation in the program. Investigations
of other manufacturers are continuing (Veterans Administration).
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
Investigations conducted by the Offices of Inspector General often
result in the recovery of money or property for the Federal
Government. Such recoveries occur through legal actions in-
stituted as a result of Inspector General investigations. For this
reporting period, OIG investigations resulted in recoveries of
$81.2 million. This 37 percent increase over the previous six-
month period brings total investigative recoveries to $354 million
over the past three and one-half years. Investigative recoveries
include: (1) recoveries made during an investigation; (2) out-of-
court settlements; and (3) legally or administratively ordered
recoveries (e.g., fines, penalties, restitutions, judgments, set-
tlements, etc.).
Many of these recoveries resulted from investigations conducted
in cooperation with the FBI. During this reporting period, the
FBI reported recoveries from investigations conducted in-
dependently or jointly with the OIGs resulting in $2,385,049 in
fines; and $24,454,143 in recoveries, restitutions and court-
ordered forfeitures.
The agency totals on the table below do not necessarily reflect
the actual monetary recoveries by the Federal Government, but
they are the amounts determined to be owed to the Government.
Table 2
Investigative Recoveries
Agencies
Total Recoveries
Agriculture
$ 5,489,674
Agency for International Development
175,668
Commerce
1,169,788
Defense
37,284,953
Education
1,005,762
Energy
11,635
Environmental Protection Agency
897,272
General Services Administration
2,152,426
Health and Human Services
10,630,455
Housing and Urban Development
1,321,017
Interior
94,963
Labor
3,281,092
National Aeronautics and Space Administration
301,480
Small Business Administration
8,199,582
State
5,240
Transportation
6,857,471
Veterans Administration
2,300,000
Total
$ 81,178,478
- Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO0186R001201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
Government Contractor Cases
Government Employee Case
Bribery and False Statements Result in a
$154,000 Fine and a Court Ordered
Restitution of $7 Million
An investigation initiated by SBA's OIG and conducted in
cooperation with the FBI, IRS, Army Criminal Investigative
Command, and the Defense Contract Audit Agency resulted in
the conviction of two corporations and three of their officers for
conspiring to defraud the Government. In addition to bribing
Government officials and making false statements, the defendants
falsely certified that they were eligible to obtain $13 million in
government contracts set aside for small businesses. The defen-
dants were fined a total of $154,000, and were ordered to make
restitution of $7 million. The individual defendants were each
sentenced to a term of imprisonment (Small Business
Administration).
Bid Rigging Convictions Result in Civil
Recoveries
Two companies and two of their officials, who had been previous-
ly convicted of conspiring to submit collusive and noncompetitive
bids on a contract and sentenced to prison terms and fines total-
ing $50,000, entered into a settlement agreement in January 1985
on a related civil suit. As a result of OIG investigations, the defen-
dants agreed to pay the United States a total of $800,000 (En-
vironmental Protection Agency).
Three Contractors and One Federal
Employee Receive Prison Terms for
Submitting Fraudulent Invoices
Investigation of a U.S. Coast Guard contractor who was award-
ed a $1.2 million oil pollution cleanup contract resulted in the
conviction of three corporate officials and a Federal employee.
All four individuals received prison terms ranging from three
months to three years and three of the four each received five
years probation. The corporation president was also ordered to
make restitution in the amount of $112,000 (Department of
Transportation).
Buildings Manager Agrees to Pay
$276,435 to Settle Civil Claims
On November 5, 1984, attorneys from the Justice Department
and the OIG reached a civil settlement agreement with a former
GSA buildings manager. Under the terms of the settlement, he
agreed to pay the Government $276,435. The civil claims arose
from a joint OIG and FBI investigation, which also resulted in
a criminal conviction, finding that the buildings manager receiv-
ed bribes and kickbacks of $614,000 in connection with rigging
contract bids and waiving the Government's right to performance
on repair and maintenance contracts (General Services
Administration).
Program Participant Cases
Doctor is Fined and Suspended for Three
Years for Submitting False Medicare
Claims
The HHS OIG often relies on the Civil Monetary Penalties Law
of 1981 to fight health care fraud, since it provides for the assess-
ment of large fines and penalties for each false item claimed by
a health care provider or practitioner. In one recent case, a der-
matologist submitted 91 claims for major surgery, involving 17
Medicare beneficiaries over a two-year period, when the doctor
had performed no surgery at all or very minor surgery. The over-
payment resulting from the false claims amounted to approximate-
ly $23,000. In a settlement agreement, the doctor agreed to pay
$311,500 in civil monetary penalties, assessments, and restitu-
tion. The doctor has also been suspended from participating in
the Medicare and Medicaid programs for three years (Depart-
ment of Health and Human Services).
Corporate Officials Make False
Statements to Obtain $1.4 Million Loan
The Economic Development Administration awarded a $1.4
million direct loan to a corporation to modernize a foundry that
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1
would manufacture railroad spikes and brake beams for rail cars.
When the corporation defaulted on the loan, an OIG investiga-
tion disclosed that two corporate officials had submitted false
claims to obtain the loan, and used the loan proceeds for per-
sonal benefit. One official pled guilty to conspiring to defraud
the Government and agreed to make restitution by repaying
$234,475, and the second official has been indicted (Department
of Commerce).
delivered $185,000 as partial payment on the funds owed the
Government (Department of Agriculture).
Vocational School Employee Receives
Prison Term for Embezzling Federal
Funds
Farmer Sells Livestock and Crops Pledg-
ed to Government
A farmer who had received seven Farmers Home Administra-
tion loans totaling over $493,000 unlawfully sold livestock and
crops mortgaged to the Government. The farmer obtained more
than $154,000 from the sale. After the matter was investigated
and scheduled to be presented to a Federal grand jury, the farmer
A former business office employee of a vocational school pled
guilty to charges of mail fraud. The employee prepared student
financial aid checks payable to currently enrolled students, forg-
ed the students' endorsements, and then personally endorsed and
negotiated the checks. When the cancelled checks were returned
to the school, the employee erased the personal endorsement,
leaving just the students' endorsements on the checks. The sub-
ject agreed to repay over $15,000 in embezzled Federal and State
funds, and was sentenced to a five-year suspended prison term
and five years probation (Department of Education).
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
Administrative sanctions continue to provide useful management Over the past six months, a total of 1,577 actions were levied,
tools for Federal agencies to take action against employees and including 538 debarments and suspensions against individuals/en-
contractors who have violated laws, rules, or regulations. These tities doing business with the Federal Government and 1,039 ad-
sanctions may be applied concurrently or separately from an ongo- ministrative actions against employees. A total of 12,260 ad-
ing civil or criminal proceeding. ministrative sanctions have been taken against Federal employees
and contractors over the past four years.
Table 3
Actions Against Federal Employees and Contractors
Individuals/Entities Doing Business With
Personnel
Actions
The Federal Government
Suspen-
Debar-
Repri-
Suspen-
Demo-
Termi-
Agencies
sions
ments
mands
sions
tions
nations
Total
Agriculture ? /
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Agency for International Development
0
0
5
1
0
11
17
Commerce
0
0
5
1
0
4
10
Defense
91
145
184
40
344
225
1,029
Education
0
0
0
1
0
0
1
Energy
0
1
3
0
0
0
4
Environmental Protection Agency
1
12
23
1
0
1
38
General Services Administration
2
12
33
22
3
21
93
Health and Human Services
0
-110
3
1
0
7
121
Housing and Urban Development
39
84
11
6
0
7
147
Interior
1
0
6
6
4
7
24
Labor
0
4
0
3
3
5
15
National Aeronautics and Space
Administration
0
4
5
4
1
2
16
Small Business Administration
4
3
4
1
0
2
14
State
0
0
1
0
0
3
4
Transportation
0
18
2
0
1
2
23
Veterans Administration
1
6
2
3
2
7
21
Totals
139
399
287
90
358
304
1,577
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
Government Contractor Case
Contractor Debarred for Mischarging
$140,000 in Labor Costs
Two corporate officers of a defense contractor mischarged over
$140,000 in labor costs by altering employee timecards to charge
labor incurred on commercial contracts to Army contracts. An
Army employee was also involved in the mischarging scheme.
The company and its officers were convicted and fined, and debar-
red from contracting with the Government. The Army employee
pled guilty to accepting gratuities, and was fined and placed on
probation (Department of Defense).
Government Employee Cases
Employees File False Unemployment In-
surance Claims
Joint OIG investigations disclosed that nine National Park Ser-
vice employees had filed false unemployment insurance compen-
sation claims while employed by the Government. The Depart-
ment of Interior terminated four individuals from employment,
demoted three others, and suspended two employees for 30 days.
In related criminal actions, two individuals have pled guilty
(Department of Labor).
Federal Police Officer Misuses Govern-
ment Credit Card
An investigation disclosed that a Federal police officer had used
a Government credit card to purchase large quantities of gasoline
and motor oil, as well as various items which were represented
on the credit card records as gasoline. The agency suspended the
employee for 30 days, and the individual reimbursed the Govern-
ment $2,400, which was the total amount attributed to misuse
of the card (Department of Interior).
Program Participant Case
Doctor Receives Seven Concurrent Prison
Terms and is Debarred for 20 Years
HHS uses administrative sanctions to protect Medicare and
Medicaid patients by barring health care practitioners and pro-
viders guilty of fraud and patient abuse from participating in the
programs. During this reporting period HHS debarred 110 per-
sons, including a California doctor who drew blood unnecessarily
from elderly patients, administered treatments using nonfunction-
ing equipment, inflated charges on 22 Medicare claims, and in-
correctly informed patients that they had serious heart problems.
As a result of the OIG investigation, the doctor has been barred
from participation for 20 years, fined $20,000, and has been
sentenced to seven concurrent prison terms (Department of Health
and Human Services).
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
W "IMINUM WIN ~1 I N
Z D) tl 1~
CONTRACTS
Inspectors General audits and investigations often discover funds,
which should be recovered by the Government. These audit and
investigative findings are then turned over to agency manage-
ment which is responsible for recovering these funds. During this
six-month period, agency managers have committed to seek
recovery of $706.2 million, which brings the cumulative total
to approximately $6.4 billion over the past four years. Manage-
ment can recover funds by collecting from the organizations or
individuals audited, offsetting against existing or future contracts
or grants, or negotiating reductions in contract costs or fees.
Management commitments to seek recoveries is a quantification
of agency action taken during the reporting period in response
to the Inspectors General recommendations (without regard to
when the recommendation was made) to recover and/or
reprogram expenditures, call loans and cancel guarantees, as well
as the voluntary restitution of funds.
Expenditures to be recovered and/or reprogrammed may include:
(1) sustained monetary recommendations management has com-
mitted to recover through billing the recipient organization or
Table 4
Management Commitments to Seek Recoveries
Agencies
Agency
Defense Contract
Audit Agency
Total
Agriculture
$24,186,094
$ 0
$24,186,094
Agency for International Development
513,567
288,229
801,796
Commerce
4,046,523
79,613
4,126,136
Defense
42,000,000
266,205,083? /
308,205,083
Education
24,600,000
0
24,600,000
Energy
3,755,141
1,112,027
4,867,168
Environmental Protection Agency
32,100,000
300,000
32,400,000
General Services Administration
2,345,813
0
2,345,813
Health and Human Services
77,670,396
0
77,670,396
Housing and Urban Development
44,527,895
654,688
45,182,583
Interior
42,945,108
93,507
43,038,615
Labor
67,275,685
0
67,275,685
National Aeronautics and Space
Administration
0
5,000,000
5,000,000
Small Business Administration
16,874,213
0
16,874,213
State
119,642
0
119,642
Transportation
17,650,757
66,853
17,717,610
Veterans Administration
31,762,557
0
31,762,557
Totals
$432,373,391
$273,800,000
$706,173,391
J These management commitments are related to audits of incurred costs, cost accounting standards and defective pricing performed by the Defense Contract Audit Agency and the U.S.
Army Corps of Engineers.
,il Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Ill II l l I ICI i j
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
individual, offsetting payments on existing and future grants and
contracts, dollar adjustment resulting from IG recommendations
related to interim or post-award work, or obtaining reimburse-
ment from third parties for use in furthering overall program
benefits; and (2) any additional revenue agency management has
committed to obtain because of IG recommendations (e.g.,
royalties, timber sales, franchise fees, etc.) and tangible goods
that management has committed to recover for the Government.
by the Act's cutoff date. The entire $1,084,558 was sustained
by management and declared ineligible for payment (Environmen-
tal Protection Agency).
Potential Recovery of Over
$42 Million for Sale of Aircraft Engines
Loans called and guarantees cancelled include: loan amounts
management has committed to call; and amounts of loan
guarantees, insurance, or bonds management has committed to
cancel.
Restitutions offered are amounts to be recovered as a result of
voluntary commitments to compensate the Government which oc-
cur during the course of an IG audit, investigation, or other
activity.
Examples
$1,555,000 Mortgage Insurance Recovery
A combined audit-investigative review of a Puerto Rican
mortgage company led to a court case against the company. As
a result, the company, its officers and affiliates, and a joint U.S.
and Puerto Rican company repaid $1,555,000 to the Government.
The company was withholding funds from the investors of
mortgage-backed securities. The repayment compensated the
Government National Mortgage Association for the largest single
loss that it has experienced in its Mortgage-Backed Securities
Program (Department of Housing and Urban Development).
$1,084,558 in Ineligible Expenses at
Hazardous Waste Site Referred for
Collection
The State of Minnesota claimed costs totaling $1,084,558 related
to the Reilly Tar hazardous waste site that were not allowable
under the Comprehensive Environmental Response, Compensa-
tion, and Liability Act of 1980 (CERCLA). The Act permits states
to receive credit toward their cost-sharing requirements for clean-
ing up hazardous waste sites. However, Minnesota claimed in-
eligible costs which included: street construction; salaries, in-
surance and other costs; amounts used as a matching share to
obtain funds from another Federal agency; and funds not obligated
Auditors reported that the Air Force had not determined the
amount of nonrecurring research, development, and production
(NRC) costs that should be recovered on the direct commercial
sale of the PW 1120 aircraft engine, derivative of the Air Force
F-100 engine. DOD policy calls for the recoupment of nonrecur-
ring costs on both Government-to-Government as well as direct
commercial sales of U.S. Government products and technology
to non-U.S. Government customers. The policy also requires that
the NRC costs shall be based on both the current and predecessor
models of an item or equipment. As a result, a per engine NRC
cost was determined for application to all future sales of the PW
1120 engine. Based on current production estimates the Govern-
ment will recover over $42 million of NRC costs from the sale
of these engines (Department of Defense).
Contractor Refunds $369,000
A postaward audit found that a contractor for tool storage cabinets
did not fully disclose its commercial discount practices when
negotiating for General Services Administration multiple award
schedule contracts. The Government purchased approximately
$19 million in merchandise under four contracts. After negotia-
tions with the contractor, management made a commitment to
recover $369,000 and during December 1984, the firm paid the
Treasury the full amount (General Services Administration).
Investment Company to Repay $7
Million
A Small Business Investment Company (SBIC) licensed by the
Small Business Administration to provide venture capital to small
businesses agreed to repay $7 million in Federal funds. The audits
disclosed that the licensee had a history of regulatory violations,
including conflicts of interest and use of excessive interest rates,
and that it may have made false statements and misrepresenta-
tions to the Agency. Based on this, the SBIC has remitted $5.5
million to the Treasury and has entered into an agreement to repay
the remaining $1.5 million (Small Business Administration).
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1
$1.8 Million Recovered During
a Three-Month Period
$5 Million Repaid to the Federal
Highway Administration
An inspection report questioned the pricing mechanisms for the
exchange of Naval Petroleum Reserve crude oil being transfer-
red to the Department of Defense. This complex issue took 32
months to resolve with management and resulted in an increase
in revenue to DOE of $1,895,000 in just a three-month period,
January-March 1985 (Department of Energy).
$5.6 Million Recovery for
Improper Labor Charges
A comprehensive Defense Contract Audit Agency review of a
contractor's labor charges on a spare parts proposal found that
significant labor costs were being diverted from an overrun pro-
duction contract to undefinitized spare parts orders. When the
contractor agreed to transfer the questioned labor charges and
improve internal controls, a $5.6 million savings to the Govern-
ment was achieved (Department of Defense).
Close Down of Program Results in
Recoveries
A review of the close down of the Comprehensive Employment
and Training Act (CETA) program resulted in recommendations
for the immediate recovery of $65.7 million in residual cash
balances or improper program charges. Improper charges in the
following areas were made to the Employment and Training Ad-
ministration (ETA), which administered the CETA pro-
gram: prime sponsor financial reports not reconciled with cash
balance records, receivables not turned over to the Government
at closeout, unliquidated and unrecorded payables, subgrantee
audit findings not addressed, indirect costs not charged to the
Government, and unreported or improperly reported CETA-
purchased property. Of $32.5 million in cost exceptions resolv-
ed by ETA, $18.8'million has been disallowed (Department of
Labor).
A review of ineligible construction engineering (CE) costs found
that the Federal Highway Administration's (FHWA) monitoring
efforts had not disclosed excessive and inaccurate costs included
in the computation of CE reimbursement rates. Recommenda-
tions were made to: obtain a refund of $5 million; assess in-
terest on any unpaid portion of the $5 million after a due date
for collection is established; and develop and uniformly apply
more specific formal guidance for review and approval of CE
rates. Management has agreed to implement the recommenda-
tions and $5 million has been refunded to the FHWA regional
office (Department of Transportation).
An Additional $39 Million Recommended
for Recovery
In Fiscal Year 1981, OIG and the Minerals Management Ser-
vice began a program to audit the top 25 oil and gas royalty payors
and, in Fiscal Year 1983, the program was expanded to include
the next 25 royalty payors. In the 27 OIG audit reports issued
so far, potential additional royalties of $103.5 million have been
identified. During this reporting period, management commit-
ted to recover an additional $39 million. To date commitments
have been obtained to recover $79 million (Department of
Interior).
California Agency to Repay $2.4 Million
The OIG discovered that the California Medicaid agency had fail-
ed to credit the Federal Government with interest earned on
$16 million of recovered overpayments. The Department Grant
Appeals Board had determined that interest earned on recoveries
from medicaid providers constitutes an overpayment and, in ac-
cordance with statute, the Federal share must be returned. The
total amount of such interest to be paid by the California agency
is around $2.4 million (Department of Health and Human
Services).
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1
 III II I I I 1; I I I 1 1
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
A
Management commitments to more efficiently use funds is a quan-
tification of management action in response to the Inspectors
General recommendations to prevent improper obligations for
expenditure of agency funds or to improve agency systems and
operations, and thereby avoid further unnecessary expenditures.
During the past six months, the departments and agencies sus-
tained Inspectors General recommendations to avoid spending
$7.3 billion. Over $47 billion in improved use of funds has been
achieved since the Council was established four years ago.
El
Lyr~ 10M
The amounts shown represent funds or resources that will be
used more efficiently as a result of management's commitment
to implement IG recommendations, including:
? Deobligation of funds as a result of IG review of agency
programs or operations;
? Costs proposed in contract or grant agreements which will
not be incurred as a result of management's concurrence
with pre-award recommendations (recorded based on the
Table 5
Management Commitments to More
Efficiently Use Funds
Agencies
Agency
Defense Contract
Audit Agency
Total
Agriculture
$63,309,635
$ 0
$63,309,635
Agency for International Development
7,342,049
0
7,342,049
Commerce
5,395,884
0
5,395,884
Defense
922,900,000
2,361,931,958-L/
3,284,831,958
Education
z/
z/
2/
Energy
2,417,649
0
2,417,649
Environmental Protection Agency
N/A
2,000,000
2,000,000
General Services Administration
107,201,531
6,831,025
114,032,556
Health and Human Services
2,989,500,000
0
2,989,500,000
Housing and Urban Development
22,776,209
0
22,776,209
Interior
409,287
0
409,287
Labor
9,219,184
0
9,219,184
National Aeronautics and Space
Administration
11,736,531
214,300,000
226,036,531
Small Business Administration
2,989,500
413,268
3,402,768
State
117,954
54,004
171,958
Transportation
413,679,217
0
413,679,217
Veterans Administration
196,378,416
3,869,745
200,248,161
Totals
$4,755,373,046
$2,589,400,000
$7,344,773,046
/ These management commitments are related to audits of forward pricing proposals performed by the Defense Contract Audit Agency and U.S. Army Corps of Engineers.
_L/ Although ED-OIG is unable to provide data reflecting management commitments to more efficiently use funds, DIG this period identified potential cost avoidances of approximately
$7.9 million, including $2.7 million associated with preaward review of cost proposals.
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO0186R001201540002-1 -
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
negotiation and award of the contract or agreement). Ad-
ditionally, amounts reported may include costs proposed
on agreements not awarded specifically due to IG findings
or recommendations. The largest amount of these costs are
the result of Defense Contract Audit Agency work as shown
in a separate column in Table 5;
? Estimated costs associated with agency operations and
systems which will not be incurred as a result of manage-
ment's commitment to implement recommended
improvements;
? Estimated costs associated with a contractor's or grantee's
operations paid for with Federal funds which will not be
incurred as a result of management's commitment to re-
quire recommended improvements; and
? The Federal portion of interest subsidy costs on loans or
loan guarantees, insurance, or bonds management has com-
mitted not to make based on IG recommendations.
The amounts also include the dollar value of loans or guarantees
(including insurance and bonds) which management has commit-
ted not to make based on the IG recommendations.
funds at least equal to the amount that it spent in specified base
years (level-of-effort). As a result of an audit of the implementa-
tion of the Act, EPA regional offices agreed to work with states
to increase their state expenditures to make up for past deficien-
cies. These actions should account for over $10 million in im-
proved efficiency of grant funds (Environmental Protection
Agency).
Past Adjustments and Reduc-
tions in Subcontractor Costs
Save $10 Million
A Defense Contract Audit Agency audit of an $85.2 million spare
parts proposal resulted in the discovery that a contractor had pro-
posed engineering labor at pay grades higher than were required
to do the work. The auditors also found areas where significant
reductions in subcontract costs could be made because of an-
ticipated vendor price reductions. Because of the audit, the
Government saved $10 million (Department of Defense).
Examples
Segregation of Radioactive Waste
Material Will Save $1.6 to $2.1 Million a
Year
An audit on segregation of transuranic waste (TRU waste) disclos-
ed the opportunity to segregate this highly radioactive waste
material from low-level waste products and reduce overall
disposal costs. Disposal of low-level waste costs about
$740/drum, whereas disposal of TRU waste costs from $2,367
to $2,873/drum. It was found that all waste was being classified
as suspect TRU because the proper certification equipment was
not available, although it was projected to be available later in
the fiscal year. Management's commitment to determine cost-
effective measures needed for reducing TRU waste generation
and disposal will conservatively produce savings of $1.6 to $2.1
million each year (Department of Energy).
Improved Management of Clean Water
Act Grants
Ten state agencies received about $88 million of Clean Water
Act grant funds to control water pollution between FY 1981 and
FY 1983 without EPA adequately ensuring that grant financial
requirements were met. This occurred because the policies and
procedures in certain regions were insufficient to ensure that
grants were properly awarded. To earn these grants, the Act and
its regulations require a state to spend a portion of its non-Federal
Alternative to Coronary Bypass Surgery
Will Save $60 Million Yearly
A review of the new Prospective Payment System for Medicare
resulted in a recommended change to the reimbursement level
for a procedure, Percutaneous Transmittal Coronary Angioplas-
ty (PICA), an alternative to coronary bypass surgery which is
generally performed in the catheterization laboratory as oppos-
ed to the operating room. This procedure is currently included
in a Diagnosis Related Group (DRG) that represents major open-
heart procedures which require significantly more resources than
PTCA. The Health Care Financing Administration will issue in-
structions to intermediaries to reassign PICA to a lower-paying
DRG category. This change in reimbursement level will save
more than $60 million a year (Department of Health and Human
Services).
Cost Avoidance of $6.8 Million Realized
on Construction Contracts
A contractor as a result of a joint NASA/FBI investigation, pled
guilty in 1983 to making false statements during performance on
five construction contracts valued at approximately $23 million.
This amount included additional claims of $7,050,424 for addi-
tional work, engineering, overhead, acceleration, and loss of ef-
ficiency. NASA rejected the additional claims, because of suspi-
cions of irregularity, collusion, and fraud. After extensive litiga-
tion, including 22 appeals by the contractor to the NASA Board
of Contract Appeals, an agreement was reached in January 1985,
under which the contractor withdrew all claims against NASA
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
in exchange for NASA's paying the contractor $238,000 retain-
ed during contract performance, netting a cost avoidance of
$6,812,424 ($7,050,424 minus $238,000) (National Aeronautics
and Space Administration).
Local Realtors Finders Fees Eliminated
One post in South America was paying finders fees to local
realtors for identifying houses suitable for American employees
to rent. The auditors determined that an incoming U.S. employee,
with nominal assistance from Embassy service personnel, could
easily locate and rent housing without the aid of local realtors.
The Embassy agreed to stop using realtors to locate suitable hous-
ing, thus saving the Government an average of $33,000 a year
(Department of State).
Grantee Violations to Result in Savings
of $14.7 Million
The Economic Development Administration (EDA) received $100
million under the Emergency Jobs Act of 1983 to create new job
opportunities for the unemployed and under employed. OIG
auditors have been reviewing EDA's implementation of this pro-
gram. By the end of March 1985, 82 projects had been review-
ed. Reports on 22 of these projects recommended termination
of the award or partial deobligation of funds because of grantee
violations of law, regulations, or provisions of the grants. As of
March 31, 1985, EDA had closed out seven of the projects
reviewed, saving $2.7 million. Total savings from IG- recom-
mended actions will add to more than $14.7 million (Department
of Commerce).
Improved Management Could Reduce
FECA Program Costs by $93 Million
A review of the Federal Employees' Compensation Act (FECA)
job-related injury compensation program disclosed that the pro-
gram was not effectively managed. Program costs and caseload
had increased at rates significantly higher than the agency's salary
costs and staffing levels. Cost containment efforts such as con-
testing questionable injury claims and monitoring claimant's
recovery, varied greatly among the medical centers reviewed due
to the lack of agency-wide guidance. In addition, no official or
organizational element had overall responsibility for management
and oversight of the program. Program cost reductions totaling
as much as $93 million over the next five years could be achiev-
ed based on management's commitment to develop specific
guidance and assign responsibility for the program to a designated
official (Veterans Administration).
Management Agrees to Use $40.8 Million
More Efficiently
A preaward audit of a pricing proposal for ADP equipment and
software found that the firm's initial offer did not clearly por-
tray the pricing concessions it gave to its non-GSA customers.
Using the information developed through audit, management
negotiated lower contract prices and better discount rates that
equated to savings of $40.8 million, based on estimated sales of
$519.5 million. Total pricing concessions of $62.3 million were
reflected in the awarded contract (General Services
Administration).
14
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
The Inspectors General maintain telephone hotlines and other General Accounting Office. During the past six months, Inspec-
mechanisms for receiving allegations of fraud, waste, or tors General received 10,370 allegations of fraud, waste or
mismanagement from agency employees and the public. Allega- mismanagement. A total of 77,257 allegations have been receiv-
tions are usually made directly over the IG hotlines or are refer- ed over the past four years.
red by the Congress, other Executive Branch agencies, and the
Table 6
Allegations of Fraud, Waste, or Mismanagement
Reported to Inspectors General
Agencies
Total Allegations
Received
Agriculture
606
Agency for International Development
124
Commerce
186
Defense
3,941
Education
97
Energy
100
Environmental Protection Agency
46
General Services Administration
186
Health and Human Services
1,853
Housing and Urban Development
186
Interior
135
Labor
1,496
National Aeronautics and Space
Administration
149
Small Business Administration
466
State
110
Transportation
338
Veterans Administration
351
Total
10,370
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
Examples
Mail Theft Scheme Uncovered
Financial Statements Misleading and
Incorrect
An investigation was initiated based on allegations that a portion
of U.S. Fish and Wildlife Service (FWS) Fiscal Year 1983 obliga-
tions were withheld from agency accounting records. The in-
vestigation disclosed that certifications by FWS to the Treasury
and OMB regarding the financial status of the FWS at the close
of Fiscal Year 1983 were incorrect and misleading. In addition,
it was determined that misconduct by a FWS official contributed
to the incorrect certifications and resulted in a concealment of
the actual financial status. Several actions have been or will be
taken by FWS such as: reporting violations to OMB; revising
performance standards of regional directors and program
managers to provide more specific critical elements addressing
responsible financial management; and initiating a monthly recon-
ciliation certification process, adjusting the obligation cut-off date
and describing penalties for various violations of internal con-
trols related to financial management (Department of Interior).
Overpriced Plug
A complainant alleged that a plug assembly was overpriced at
$206. The part, described as a 4" x 8" piece of wood with a
small metal handle, could be constructed for $3 to $6. A Defense
Logistics Agency (DLA) inquiry revealed that the $206 price
reflected a 1982 sole source procurement cost. The contractor
later made an in-house review and reduced the price to $101.32
per item because of the large quantity ordered. DLA found a new
supply source for the item and the cost was further reduced to
$29.62. Based on the lower pricing data, a price reduction in two
contracts with sole source contractors was negotiated. This
resulted in a reduction of $57,810.92 in one contract and a re-
fund of $69,838.58 in the second (Department of Defense).
Kickbacks and Bribes Result in a Four-
Year Prison Term
A Hotline letter alleged that a contractor and a Government
employee were involved in the payment of kickbacks and bribes.
The investigation disclosed that the contractor had created a shell
company to give the illusion of contract competition. The con-
tractor provided kickbacks to buyers from other DOD prime con-
tractors. As a result of the inquiry, the firm and the owner were
suspended from doing business with the Government until 1987.
The company's owner, found guilty of 10 charges of bribery and
nine charges of mail fraud, was sentenced to four years in prison
and fined $208,000. The company was ordered to pay $159,000
in fines. The DOD employee pled guilty to one charge of receiv-
ing illegal gratuities and one charge of conspiracy, and was
sentenced to a year and a day in prison (Department of Defense).
Based on allegations that a SBA mail clerk was stealing money
from the mail, an investigation was opened in cooperation with
the U.S. Postal Inspection Service. As part of the investigation,
marked bills which were placed in several wrongly addressed let-
ters and sent to the SBA office were not returned to the Post Of-
fice from which they originated. While under surveillance, the
suspect was later observed purchasing lottery tickets with the
marked money. After the employee was arrested and additional
marked bills were found in the subject's possession, the clerk
admitted to taking money from the mail. In addition, two other
mail clerks admitted that they had knowledge of the thefts, and
that they had also accepted stolen money from the suspect. The
suspect was subsequently convicted and received a two-year
suspended sentence, placed on probation and ordered to make
restitution. The Agency then took administrative action against
the other two mail clerks by officially reprimanding them and
transferring them to other work areas (Small Business
Administration).
Contractor Debarred for Three Years for
Inflating Construction Costs
A complainant alleged that the owner of a general contracting
firm inflated labor charges on a HUD contract for renovating
an apartment complex. An investigation disclosed that the con-
tractor inflated construction costs by falsifying labor charges, pad-
ding the number of employees and hours actually worked for
payroll reporting purposes, and altering or forging lien waivers
which enabled the contractor to retain money owed to various
subcontractors. The contractor pled guilty to submitting false
statements and was sentenced to 30 days in a work release pro-
gram, placed on five years probation and debarred from further
participation in HUD programs for three years (Department of
Housing and Urban Development).
Nurse Falsifies Licensing and Injury
Records
An investigation of a VA nurse who received compensation for
six on-the-job injuries disclosed she had submitted falsified and
forged documents to support her injury claims. In addition, the
investigation determined she had fraudulently obtained a
Registered Nurse (RN) certification, upon which her employment
was based. The subject pled guilty and agreed to repay over
$106,000 in Federal funds, and was sentenced to five years in
prison (Veterans Administration).
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
PRESIDENT'S COUNCIL ON INTEGRITY AND EFFICIENCY
COMMITTEES, PROJECTS, AND ACTIVITIES
The President's Council on Integrity and Efficiency (PCIE) pro-
vides leadership for Government-wide activities to reduce waste
and abuse in Federal programs and operations. Since it was
established by Executive Order in March 1981, the Council has
coordinated interagency efforts through standing committees and
projects chaired by its members. The Committees comprise an
integral part of the IG community. By sharing past experiences
and applying new ideas, the Inspectors General are able to develop
useful material for application throughout the Government.
Assisting the PCIE in its interagency efforts are the following
standing Committees:
? Accounting and Auditing Standards Committee
? Computer Committee
? Investigation/Law Enforcement Committee
? Legislation Committee
? Performance Evaluation Committee
? Prevention Committee
? Project Selection Committee
? Single Audit Coordinating Committee
? Training Committee
? Paul R. Boucher Memorial Award Committee
Accounting and Auditing Standards
Committee
The Committee works to assure that IGs as a group have input
into formulating standards which affect them.
Computer Committee
During this reporting period, the Computer Committee completed
and distributed to all Inspectors General MICROCOMPUTER
AUDIT GUIDELINES. This document highlights those new
aspects of the audit management process that result when con-
sidering the use of microcomputers.
In order to obtain a more current status of the overall microcom-
puter program, the committee initiated a study to gather data on
planned microcomputer procurements and projected training re-
quirements. The Committee will use this information to complete
existing projects and evaluate future efforts.
The Committee has initiated a new project to evaluate Generalized
Audit Software packages in a continuing effort to increase pro-
ductivity through automated technology.
Investigation/Law Enforcement
Committee
The Investigation/Law Enforcement Committee began work on
a project to determine whether the Offices of the Inspector General
encounter difficulties in obtaining timely and appropriate refer-
ral of cases for criminal, civil or administrative action. The pro-
ject will also determine the difficulty in obtaining appropriate ad-
ministrative action by agencies after the Department of Justice
declines cases referred by the Inspectors General. Also during
the period, the Committee was assigned a project dealing with
civil fraud referrals to the Department of Justice as a result of
Inspector General investigations. This project will examine tech-
niques for achieving better results through parallel administrative,
contractual, or civil proceedings, in conjunction with a criminal
investigation.
Legislation Committee
The Legislation Committee reviews and monitors all legislation
impacting on Inspector General activities. The Committee makes
an active effort to increase IG participation in the legislative pro-
cess by working with the Office of Management and Budget and
appropriate Members and Committees of Congress.
During the last six months, the Committee put together a package
of legislative initiatives, programs, or modifications to existing
law that, if adopted, should enhance the operations of all IG of-
fices. Items in this package included Government-wide Civil
Monetary Penalty Legislation, an expanded Computer Crime Bill,
the IG Technical Amendments, and Amendments to the Federal
Torts Claims Acts.
The Committee staff also distributed an analysis and summariza-
tion of the Comprehensive Crime Control Act of 1984 to PCIE
members.
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1
Performance Evaluation Committee
Interim standards were issued to the PCIE in September 1984.
These standards are providing a qualitative method for measur-
ing the management operation and conduct of the Offices of In-
spector General. The standards are being used by the IG com-
munity on a trial basis before being issued in final form.
Prevention Committee
The PCIE is continuing to focus on preventive measures and ex-
panded use of current technology to further lessen Federal pro-
grams and operations' vulnerability to fraud, waste, and abuse.
During the reporting period, the Prevention Committee completed
work on the following three projects:
Legislative and Regulatory Review Procedures. This pro-
ject examined the experiences of the Inspector General com-
munity in reviewing proposed legislation and regulations.
A survey was made to identify common elements, re-
quirements, and best practices. The survey results, in-
cluding comments on the ability of the Inspectors General
to have direct access to the Office of Management and
Budget and to the Congress, were reported to the
Committee.
? Inspection Activities of the Inspector General. This pro-
ject inventoried existing inspection activities of the Inspec-
tors General and evaluated them for wider application
within the IG community.
? Cooperative Efforts with Federal Contractors. This pro-
ject identified joint efforts between Federal contractors and
the Inspectors General for use by contractor employees to
prevent and detect fraud. A 34-minute videotape entitled
"Integrity in Government Contracting" and an accompa-
nying pamphlet were approved by the Committee and sub-
mitted to the PCIE chairman.
The Prevention Committee initiated the following three projects
during this reporting period:
? Implementation of the Model Prevention Plan. This pro-
ject will determine the progress made by departments and
agencies in using the plan as an assessment tool and in adop-
ting a comprehensive, planned strategy for preventing
fraud, waste, abuse and mismanagement.
? Computer Fraud, Waste, and Abuse Handbook. This
project will develop a handbook that can be used to assist
in training mid-level Federal managers to recognize in-
dicators of fraud and abuse in computer operations.
? Use of Technical Experts by the IG Community. This
project will identify opportunities for joint efforts by In-
spector General organizations to provide for the sharing
of technical expertise and information, and advanced over-
sight techniques.
Project Selection Committee
The Project Selection Committee solicits and coordinates the sug-
gestions for projects to be undertaken by the Council during the
current fiscal year. Each member of the PCIE was requested to
suggest and describe projects for consideration, and identify
potential benefits, resources required, and members most likely
to participate.
The projects receiving the most interest included:
? A study of audit software packages;
? Computer security/data base integrity;
? Telephone review to assist in setting Federal telephone pro-
curement standards;
? Development of standard procedures for conducting parallel
proceedings (criminal/civil);
? Use of Internal Revenue Service data to assist audit and
investigative efforts;
? Development of common training programs; and
? Development of a concise set of budget reporting re-
quirements for the Offices of Inspector General.
Several of these projects have been initiated and are reported upon
in this report.
Single Audit Coordinating Committee
This Committee addresses issues concerning IG single audit
responsibilities and provides authoritative interpretations and
answers to questions concerning single audit requirements. Since
passage of the Single Audit Act, the Committee has worked close-
ly with OMB in its development of an implementing circular.
Training Committee
The PCIE Training Committee consists of four subcommittees:
Auditor Training, Investigator Training, Executive Development
Training, and Support Activities Training. Representatives from
various Government departments and agencies participate in sub-
committee activities. The objective of the Training Committee
is to identify, develop, and implement training programs that are
responsive to the needs of all Offices of Inspector General.
Some of the major training efforts accomplished by the Com-
mittee during this reporting period were:
? developing and presenting the first four in a series of six
FY 1985 half-day seminars for OIG executives;
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1 --------- - - -
 1 1 --
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
? sponsoring a Federal Managers' Accountability Seminar for
attendees of the 7-week Executive Leadership Program at
the Federal Executive Institute;
? publishing a Compendium of Executive Level Courses for
OIG personnel;
? continuing to sponsor, in cooperation with the Department
of the Army, the attendance of OIG personnel at the Ar-
my's Personnel Management for Executives Course;
? developing a draft Guide for Allocating Audit Resources
Through Operations Risk Analysis; and
? establishing a fourth subcommittee on Support Activities
Training to deal with this important facet of Inspector
General operations.
The PCIE subsequently revised its recommendation to accept
OPM's centralized register approach for a one year trial.
A questionnaire was developed to collect data/statistics for future
analysis in such areas as timeliness, quality of applicants refer-
red, numbers of women/minorities certified,, declination rates,
etc. OPM has agreed to attach a copy of this form to each IG
Certificate issued since May 1984 at the GS-5/7 levels. The work
group has compiled two quarterly statistical summaries from these
questionnaires. An evaluation and final report is projected to be
completed in September 1985.
Long-Term Computer Matching Project
Paul R. Boucher Memorial Award
Committee
The Paul R. Boucher Memorial Award was established in
memory of Paul R. Boucher, former Inspector General of the
Small Business Administration, to honor outstanding contribu-
tions of an employee of a PCIE member. The Committee reviews
nominees for the annual award.
Additional PCIE Projects in Progress
(those not under control of a standing
committee)
In addition to standing Committee work, the Council has initiated
several projects which examine issues transcending traditional
agency boundaries or exceed the capability or jurisdiction of an
individual agency. Some of these Government-wide issues
include:
Evaluation of Centralized Register for
Entry Level Hiring
The PCIE undertook this project as part of an overall effort to
improve the ability of IG organizations to attract and hire well-
qualified entry level employees.
Based on the work of the group, the PCIE asked the Office of
Personnel Management (OPM) to implement changes in its cur-
rent staffing practices and require certifying officers nationwide
to issue recruitment bulletins for all GS-5/7 audit and criminal
investigator vacancies, rather than using the traditional standing
register approved in such areas. In addition, the PCIE recom-
mended that OPM take a more aggressive role in targeting staff-
ing efforts toward college graduates. In the interim, OPM pro-
posed using a nationwide centralized register for GS-5/7 auditors.
The Long-Term Computer Matching Project promotes the
development and improvement of computer matching techniques
at Federal and State levels. This project includes: (1) the applica-
tion of computer technology to screening of benefit and similar
direct payment claims; (2) front-end ADP systems evaluation
techniques; and. (3) the expanded use of microcomputer
technology.
? Income and Eligibility Verification. Almost all of the
recommendations made by the Computer Matching Pro-
ject over the last two years were implemented in the Deficit
Reduction Act of 1984, P.L. 98-369. The Project's recom-
mendations regarding front-end automated eligibility
screening and verification, wage reporting, and standard
data exchange formats were implemented by the Congress
in the Omnibus Bill. The project staff is playing a key role
on the Task Force the Office of Management and Budget
created to coordinate implementation of the new statutory
requirements.
? Federal Matching Inventory. During this reporting period,
the Computer Matching Project developed a supplement
to the "Inventory of Federal Computer Applications to
Detect/Prevent Fraud, Waste and Mismanagement." The
supplement contains synopses of over 200 Inspector General
and program agency applications and will be available for
distribution in June 1985.
? Standard Formats. The eight-State test of the Computer
Matching Standardized Formats was extended through
September 1985. A draft of the revised formats has been
developed based on preliminary test results. Final formats
and instructions will be sent to Federal, State, and local
agencies in August 1985. Evaluation and cost/benefit
reports will be issued when State tests are completed.
? Front-End Eligibility Verification. The Front-End
Eligibility Verification Systems work group was established
to stimulate technology transfers among the States and to
prevent erroneous benefit payments. To accomplish these
goals, the work group surveyed States about front-end use
of computer applications to verify eligibility for Aid for
Dependent Children, Food Stamps, Medicaid, and
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 1 III II 1 1 t I. .I 11 I. I I II 11 1
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1
Unemployment Insurance. Preliminary results revealed that
front-end verification usually focuses on verifying income
data or verifying that an applicant does not receive duplicate
benefits. Survey findings have been compiled in a catalog
and made available to State officials for comment. The final
catalog is due in the summer of 1985.
Computer Security Project
The Computer Security Project, initiated in 1982, provides the
PCIE with a perspective on the nature and scope of computer-
related fraud and abuse in Government agencies and the need
for increased expertise in computer auditing and security within
the IG community. The project's report, "Computer-Related
Fraud and Abuse in Government Agencies," outlined survey find-
ings and made recommendations to increase training and
awareness, increase scrutiny of automated systems controls, and
perform further survey work. The project has accomplished the
following:
? Perpetrator Interviews. The project work group has in-
terviewed perpetrators from fraud cases in the original
study, plus subsequent cases. A total of 28 perpetrators from
the original study and 17 from new cases were interview-
ed. The final report should be issued in May 1985.
? Front-End EDP Systems Review and Security. To im-
prove audit involvement and effectiveness during the
design, development, implementation or major modifica-
tion of automated information systems, this work group
prepared a functional matrix and critical documentation
guide for the life cycle stages of an automated information
system. In March 1985, the project cosponsored with the
National Bureau of Standards, a three-day invitational
workshop on prioritization of EDP audits during an
automated information system's life cycle. The functional
matrix and workshop synthesis product will become part
of an audit guide which is being developed under contract.
Productivity Data Collection Formats
The PCIE's Productivity Data Collection Format Project was
undertaken in December 1984 to develop uniform OIG produc-
tivity factors and promote the use of recurring productivity
analysis. The project reflects the PCIE's emphasis on produc-
tivity and desire to do more with available resources.
Review of Federal Telecommunications
System (FTS) Utilization
There have been recent indications that significant management
improvements are needed to reduce Government telecommunica-
tion costs. The primary objective of the review is to evaluate the
utilization of telecommunications resources and to identify ways
of reducing costs by more effectively and efficiently managing
the consumption of such resources. The review will be conducted
in two phases.
Phase I of the review deals with agency telecommunications
management and will evaluate agency controls over ordering,
receipt, and verification of telecommunication services. The pur-
pose of these internal controls is to minimize agency telecom-
munication costs by ensuring that (1) only needed services are
procured, (2) billings are accurate, and (3) existing services are
being effectively utilized.
Phase II of the review deals with unauthorized use of telecom-
munications resources and will evaluate agency internal controls
for effectively managing telephone usage.
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
MEMBERSHIP OF THE PRESIDENT'S COUNCIL ON
INTEGRITY AND EFFICIENCY
Office of Management and Budget
Joseph R. Wright, Jr.
Deputy Director and Chairman of the Council
Department of Agriculture
John V. Graziano
Inspector General
447-8001
U.S. Agency for International Development
Herbert L. Beckington
Inspector General
632-7844
Department of Commerce
Sherman M. Funk
Inspector General
377-4661
Department of Defense
Joseph H. Sherick
Inspector General
695-4249
Department of Education
James B. Thomas, Jr.
Inspector General
453-4041
Department of Energy
James R. Richards
Inspector General and Vice Chairman of the Council
252-4393
Environmental Protection Agency
John C. Martin
Inspector General
382-3137
General Services Administration
Charles R. Gillum
Acting Inspector General
566-0450
Department of Health and Human Services
Richard P. Kusserow
Inspector General
472-3148
Department of Housing and Urban Development
Paul A. Adams
Inspector General
755-6430
Department of the Interior
Robert W. Beuley
Acting Inspector General
343-5745
Department of Justice
D. Lowell Jensen
Deputy Attorney General
633-2101
Department of Justice
Federal Bureau of Investigation
Oliver B. Revell
Assistant Director, Criminal Investigative Division
324-4260
Department of Labor
J. Brian Hyland
Inspector General
523-7296
National Aeronautics and Space Administration
Bill D. Colvin
Acting Inspector General
453-1220
Office of Personnel Management
Loretta Cornelius, Acting Director
632-6106
Small Business Administration
Mary F. Wieseman
Inspector General
653-6597
Department of State
William C. Harrop
Inspector General
632-8842
Department of Transportation
Joseph P. Welsch
Inspector General
426-8584
Department of Treasury
John C. Layton
Inspector General
566-6900
Veterans Administration
Frank S. Sato
Inspector General
389-2636
A
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 1 III II I I I I I I I III.
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
OFFICES OF INSPECTOR GENERAL
AND HOTLINE NUMBERS
Department of Agriculture
(800)
424-9121
Room 247E, Administration Building
Washington, DC 20520
U.S. Agency for International Development
(FTS)
235-3528
21st and Virginia Avenue
Room 5644, New State Building
Washington, DC 20523
Department of Commerce
(800)
424-5197
14th and Constitution Avenue, N.W.
(202)
377-2495
Room 7898-C
Washington, DC 20230
Department of Defense
(800)
424-9098
The Pentagon, Room IE-482
(202)
693-5080
Washington, D.C. 20310
(Autovon)
223-5080
Department of Education
(800)
646-8005
330 C Street, S.W.
(202)
755-2770
Room 4006, Switzer Bldg.
Washington, D.C. 20202
Department of Energy
(FTS)
252-4073
1000 Independence Avenue, S.W.
(202)
252-4073
Room 5D-039, Forrestal Bldg.
Washington, D.C. 20585
Environmental Protection Agency
(800)
424-4000
401 M Street, S.W., Room 2714
(202)
382-4977
Washington, D.C. 20460
General Services Administration
(800)
424-5210
18th and F Streets, N.W., Room 5340
(FTS)
566-1780
Washington, D.C. 20405
(202)
566-1780
Department of Health and Human Services
(800)
368-5779
330 Independence Avenue, S.W.
(800)
638-3986 (MD. Only)
Room 5250, North Building
(301)
597-0724
Washington, D.C. 20201
Department of Housing and Urban Development
(FTS) 472-4200
451 7th Street, S.W., Room 8256
[phone]
Washington, D.C. 20410
Department of Interior
[phone]
18th & C Streets, N.W., Room 5239
[phone]
Washington, D.C. 20240
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
Department of Justice
Counsel, Office of Professional Responsibility
Room 4306, Main Justice Building
Washington, D.C. 20530
Deputy Assistant Attorney General
Room 1111, Main Justice Building
Washington, D.C. 20530
Department of Labor
200 Constitution Avenue, N.W., Room S1303
Washington, D.C. 20210
National Aeronautics and Space Administration
400 Maryland Avenue, S.W., Room 6075
Washington, D.C. 20546
Office of Personnel Management
1900 E Street, N.W., Room 7558
Washington, D.C. 20416
Small Business Administration
1441 L Street, N.W., Room 1018
Washington, D.C. 20416
Department of State
2201 C Street, N.W.
Room 6821, New State Building
Washington, D.C. 20520
Department of Transportation
400 7th Street, S.W., Room 92110
Washington, D.C. 20590
Department of Treasury
15th & Pennsylvania Avenue, N.W., Room 2412
Washington, D.C. 20220
Veterans Administration
1425 K Street, N.W.
Room 1100, McPherson Building
Washington, D.C. 20420
OTHER AGENCY HOTLINE NUMBERS
General Accounting Office
Merit Systems Protection Board
[phone]
[phone]
[phone]
[phone]
(FTS) 632-4423
[phone]
(FTS) 653-7557
[phone]
[phone]
[phone]
[phone]
(FTS) 389-5394
[phone]
[phone]
[phone]
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 1, IIi I I I I I I I I I l I I I I
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
PCIE COMMITTEES AND PROJECTS
Committees
Accounting and Auditing Standards
Computer
Investigation/Law Enforcement
Legislative
Chair
James B. Thomas, Jr.,
Inspector General, ED
Bill D. Colvin, Acting
Inspector General, NASA
Oliver B. Revell,
Assistant Director, Criminal
Investigative Division, FBI
Richard P. Kusserow,
Inspector General, HHS
Sherman M. Funk,
Inspector General,
Commerce
Prevention Joseph H. Sherick,
Inspector General, DOD
Project Selection John C. Martin,
Inspector General, EPA
Single Audit James B. Thomas, Jr.,
Inspector General, ED
Training Frank S. Sato,
Inspector General, VA
Paul R. Boucher Memorial Award Paul A. Adams,
Inspector General, HUD
Herbert L. Beckington,
Inspector General, AID
Mary F. Wieseman,
Inspector General, SBA
Projects Chair
Entry Level Hiring
Joseph P. Welsch,
Inspector General, DOT
Long-Term Computer Matching
Computer Security
Productivity Data Collection
Richard P. Kusserow,
Inspector General, HHS
J. Brian Hyland,
Inspector General, DOL
Richard P. Kusserow,
Inspector General, HHS
Charles R. Gillum, Acting
Inspector General, GSA
Review of Federal Telecommunications Charles R. Gillum, Acting
System (FTS) Utilization Inspector General, GSA
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88GO01 86RO01 201540002-1
 Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1
CONTACT
You Can Help
Report: Fraud, Waste or Mismanagement
? Information is Confidential
? Caller Can Remain Anonymous
See pages 22 and 23 for listing of Offices of Inspector General and Hotline Numbers.
Sanitized Copy Approved for Release 2011/05/05: CIA-RDP88G00186R001201540002-1