The U.S. Department of Defense (DoD), Office of the Inspector General (OIG) recently issued a report highlighting its work conducted in Fiscal Year (FY) 2018. The report provides statistics on the number of audits, evaluations, and investigations completed in FY 2018, summarizes the DoD's top management challenges for FY 2019 and provides an outline of the OIG's planned activities in FY 2019.
Brief Overview of the DoD OIG
The DoD OIG has several roles and responsibilities, but in general provides oversight over DoD activities. It is an independent office within the DoD that conducts, supervises, monitors, initiates audits and evaluations, and investigations relating to programs and operations of the DoD. The OIG is headed by the Inspector General, who acts as the primary advisor to the Secretary of Defense in issues related to fraud, waste and abuse in DoD programs, and operations. The office also ensures Congress is informed of any problems within the agency.
FY 2018 Report Highlights
The FY 2018 report shows an increase in the number of audits conducted by the OIG, but a decrease in the number of recommendations issued in response to audits in comparison to its FY 2017 report. The FY 2018 report also displays a downward trend in the number of evaluations and recommendations issued in comparison to FY 2017. However, the OIG's distribution of efforts resulted in a higher return on investment—reporting a $4.086 billion return in FY 2018 as compared to a $3.77 billion return in FY 2017.
Criminal Investigation Results
The OIG reports recovered $1.17 billion in criminal recoveries in FY 2018. The department arrested 134 individuals and issued 336 criminal charges and 225 convictions. These investigations resulted in 94 suspensions and 166 debarments to government contractors.
OIG's criminal investigation component, Defense Criminal Investigative Service (DCIS), lists its current investigative priorities as: (1) procurement fraud, (2) product substitution, (3) health care fraud, (4) illegal technology transfer and (5) computer crimes. DCIS defines procurement fraud including, but not limited to, cost or labor mischarging, defective pricing, price fixing, bid rigging, and defective and counterfeit parts. Product substitution includes counterfeit, defective, substandard and substituted products that do not conform with the requirements of the contract. Healthcare fraud investigations focus on the TRICARE program, including in corruption or kickback schemes, overcharging for medical goods and services, marketing of drugs for uses not approved by the U.S. Food and Drug Administration (FDA) and approving unauthorized individuals to receive TRICARE healthcare benefits. DCIS has a particular focus on allegations of potential harm to DOD military members and their families.
A review of the press releases issued by DCIS in 2018 confirms their active focus on these areas of enforcement. In the most recent Semiannual Report to Congress, for the period ending Sept. 30, 2018, DCIS reported it had 1,572 open ongoing investigations.
Whistleblower Reprisal Investigations and Whistleblower Protection
The OIG fields several types of whistleblower reprisal complaints including those from military members, Title 5 civilians, intelligence community employees, employees from nonappropriated fund instrumentalities, and employees of defense contractors, subcontractors, grantees or subgrantees.
The OIG report discusses several initiatives related to whistleblower reprisal investigations and whistleblower protection. For example, in FY 2018 the OIG established an Alternative Dispute Resolution (ADR) Program and a full-time Whistleblower Protection Coordinator Position. ADR is a voluntary process in which parties use mediation or facilitated settlement negotiations to seek resolution of a complaint prior to an otherwise lengthy investigative process, or at any point during the handling of the complaint. OIG explains that the ADR process is facilitated by an ADR attorney, who assists the parties in resolving the complaint. If both parties in a complaint (the complainant and employer) agree to participate in ADR, the ADR attorney works with the parties to facilitate negotiations or a mediation. During this process, parties have the opportunity to explain their interests and concerns, explore possible solutions and negotiate a resolution. In its most recent Semiannual Report to Congress, OIG indicated that for the second half of 2018, of the 72 defense contractor reprisal complaints, over half of them were processed through the ADR program.
The statistics OIG chose to highlight emphasizes the department's focus on reducing open investigations and increasing the time in which investigations are completed. The OIG reduced the number of open investigations from over 100 in October 2017 to 39 in September of 2018. The OIG also reduced nearly 20 percent of the number of cases older than one year. Interestingly, the OIG did not emphasize the number of new cases brought in during FY 2018.
First DoD-Wide Financial Statement Audit
In FY 2018, the OIG completed its first ever DoD-wide financial statement audit. As a result of that audit, the OIG completed or oversaw the completion of 21 financial statement audits of the DoD and its components, resulting in 23 audit opinion reports. The OIG completed this large-scale audit by contracting with independent public accounting firms, which assigned over 1,000 auditors to perform audits of various DoD departments and components. These auditors, and their DoD OIG counterparts, visited over 600 DoD locations, sent over 40,000 requests for documentation and tested over 90,000 sample items for the audits of the DoD. The audit resulted in the identification of 21 material weaknesses. As a result, the OIG issued 2,500 notices of findings and recommendations to the DoD.
The OIG reports that based on its audits, it had a $4.086 billion return on investment. Of that $4.086 billion return on investment, the OIG reports that its audits identified the following categories:
- Questioned costs: $1.84 billion
- Investigative receivables and recoveries and assets seized: $1.21 billion
- Achieved monetary benefits (recovered funds as a result of actions taken on OIG recommendations): $637.6 million
- Funds put to better use: $292.8 million
- Monetary judgments and forfeitures: $108.3 million
These categories—and their corresponding numbers—serve to demonstrate the OIG's purpose in performing targeted audits. The OIG in particular seems most concerned with questioned costs—which of course includes costs associated with government contracts.
Looking Forward: the DoD OIG's Plans and Ongoing Projects for FY 2019
The OIG currently has 129 ongoing projects within the department, including 35 projects on improving financial management, 23 projects on acquisition and contract management and 19 projects on improving cyber security and cyber capabilities. The OIG has 11 ongoing projects concerning the improvement of DoD readiness and 11 focused on enhancing space-based operations, missile detection and response and nuclear deterrence.
Additionally, the report summarizes the DoD's top ten management challenges for the ongoing FY 2019 as being:
- Implementing DoD Reform Initiatives
- Countering China, Russia, Iran, and North Korea
- Countering Global Terrorism
- Improving Cyber Security and Cyber Capabilities
- Ensuring Ethical Conduct
- Enhancing Space-Based Operations, Missile Detection and Response, and Nuclear Deterrence
- Improving Readiness Throughout the DoD
- Providing Comprehensive and Cost‑Effective Health Care
- Financial Management: Implementing Timely and Effective Actions to Address Financial Management Weaknesses Identified During the First DoD-Wide Financial Statement Audit
- Acquisition and Contract Management: Ensuring that the DoD Gets What It Pays For On Time, at a Fair Price, and With the Right Capabilities
Finally, the report highlights several specific ongoing projects, including an audit of DoD's implementation of the Cybersecurity Information Sharing Act of 2015; an evaluation of the DoD and DoD Education Activity Response to incidents of serious student misconduct on military installations and an evaluation of lead paint in military family housing.