type: other

jurisdiction: US

text: b'\x0cKey OIG Accomplishments in This Reporting Period\n\nRESULTS IN KEY CATEGORIES\n\nSUMMARY OF AUDIT ACTIVITIES\n\nReports Issued\n\n Number of Reports............................................................................................. 38\n\n Number of Recommendations..........................................................................172\n\nManagement Decisions Made\n\n Number of Reports............................................................................................. 25\n\n Number of Recommendations..........................................................................233\n\nTotal Dollar Impact (Millions)\n\nOf Management-Decided Reports.....................................................................$11.4\n\n Questioned/Unsupported Costs.................................................................... $11.3\n\n Funds To Be Put to Better Use........................................................................ $0.1\n\n\n\nSUMMARY OF INVESTIGATIVE ACTIVITIES\n\nReports Issued....................................................................................................155\n\nImpact of Investigations\n\n Indictments......................................................................................................171\n\n Convictions.......................................................................................................101\n\n Arrests..............................................................................................................453\n\nTotal Dollar Impact (Millions)...........................................................................$43.5\n\nAdministrative Sanctions....................................................................................... 58\n\n\n\nOIG MAJOR USDA MANAGEMENT CHALLENGES (August 2006)\n\n\xe2\x96\xa0\t Interagency Communications, Coordination, and Program Integration Need Improvement\n\t Related material can be found on pages 11 and 14.\n\xe2\x96\xa0\t Implementation of Strong, Integrated Management Control (Internal Control) Systems Still Needed\n\t Related material can be found on pages 5, 12\xe2\x80\x9314, and 16\xe2\x80\x9317.\n\xe2\x96\xa0\t Continuing Improvements Needed in Information Technology (IT) Security\n\t Related material can be found on pages 9 and 15.\n\xe2\x96\xa0\t \x07Implementation of Improper Payments Information Act Requirements Needs Improvement\n\t Related material can be found on page 16.\n\xe2\x96\xa0\t Departmental Efforts and Initiatives in Homeland Security Need To Be Maintained\n\t Related material can be found on pages 1\xe2\x80\x932.\n\xe2\x96\xa0\t Departmentwide Efforts and Initiatives on Genetically Engineered Organisms (GEO) Need To Be Strengthened\n\t Related work is ongoing in FY 2007; see page 4.\n\xe2\x96\xa0\t USDA\xe2\x80\x99s Response to the 2005 Hurricanes Needs Ongoing Oversight\n\t Related material can be found on pages 10\xe2\x80\x9311.\n\x0cMessage From the Inspector General\nI am pleased to provide the Semiannual Report to Congress for the Office of Inspector General\n(OIG), U.S. Department of Agriculture (USDA), for the 6-month period that ended March 31,\n2007. During this reporting period, we conducted successful investigations and audits that led to\n453 arrests, 101 convictions, $43.5 million in recoveries and restitutions, 142 program improvement\nrecommendations, and $11.4 million in financial recommendations. This report summarizes the\nmost significant OIG activities during the period by our three strategic goals:\n\n n\t Safety, Security, and Public Health \xe2\x80\x93 Our audit work determined that the Animal and Plant\n Health Inspection Service needed to strengthen its policy guidance over agricultural inspection\n activities and that USDA had successfully implemented key homeland security initiatives and\n directives. Our investigative work saw convictions or pleas and recoveries related to violations\n of the Federal Endangered Species Act and food safety laws.\n\n n\t Integrity of Benefits and Entitlements Programs \xe2\x80\x93 Our audit work found that indemnity\n payments of $2.3 million in a crop insurance pilot program were unsupported and that errors in\n loss adjustments on crop insurance indemnity payments were made on citrus crops in Florida.\n Our investigative work resulted in convictions and money recoveries for schemes to defraud the\n Food Stamp Program, National School Lunch Program, Child and Adult Care Food Program,\n Market Access Program, and farm and rural development loan programs.\n\n n\t Management of Public Resources \xe2\x80\x93 Our audit work found that Forest Service\xe2\x80\x99s escalating\n costs to fight wildfires were largely due to its efforts to protect property in the wildland urban\n interface and that the Foreign Agricultural Service needed to complete a Global Market Strategy\n to increase the Nation\xe2\x80\x99s agricultural exports. The USDA consolidated financial statements\n for FY 2006/2005 received an unqualified audit opinion for the fifth consecutive year. In\n the information technology area, the Office of the Chief Information Officer\xe2\x80\x99s Information\n Technology Services (ITS) received a qualified opinion on its internal control structure and its\n effectiveness. In our ongoing effort to determine USDA\xe2\x80\x99s compliance with Improper Payments\n Information Act of 2002 (IPIA) requirements, we found that implementation of IPIA needs\n improvement in two USDA agencies.\n\nWhile the Department has been a leader in providing support to the Gulf Coast region following the\n2005 hurricane season, such large and, by necessity, quick outlays of funds can be subject to increased\nrisk for fraud. In our 18 investigations in Mississippi and Louisiana concerning cases in which USDA\nagencies were defrauded by individuals to obtain disaster benefits, 37 individuals have been indicted,\n9 of whom have pled guilty and been sentenced. Our audits found that unnecessary housing assistance\nwas provided to hurricane victims and that USDA needs a response and recovery plan for future grain\ntransportation disruptions.\n\nThese results would not be possible without the strong interest and support of the Secretary, the\nDeputy Secretary, and the Congress. I speak for the entire OIG in expressing our appreciation for\ntheir work to improve the integrity and efficiency of the Department\xe2\x80\x99s programs and operations.\n\n\n\n\nPhyllis K. Fong\nInspector General\n\x0c\x0cContents\nSafety, Security, and Public Health. . . . . . . . . . . . . . . . . . . . . 1\n\nIntegrity of Benefits and Entitlements Programs . . . . . . . . . . . 5\n\nManagement of Public Resources. . . . . . . . . . . . . . . . . . . . . 9\n\nGauging the Impact of the OIG . . . . . . . . . . . . . . . . . . . . . . 22\n\nAbbreviations of Organizations . . . . . . . . . . . . . . . . . . . . . . 38\n\x0c\x0cSafety, Security, and Public Health\n\nOIG Strategic Goal 1: EXAMPLES OF AUDIT AND INVESTIGATIVE\n WORK FOR GOAL 1\nSupport USDA in the enhancement of safety Animal and Plant Health Inspection Service\nand security measures to protect USDA and (APHIS) Needs To Strengthen Its Policy\nagricultural resources and in related public Guidance Over U.S. Customs and Border\nhealth concerns Protection\xe2\x80\x99s (CBP) Agricultural Inspection\n Activities\nTo help USDA and the American people meet the\ncritical challenges in safety, security, and public health, USDA OIG teamed with the Department of Homeland\nit is our responsibility in OIG to provide independent, Security (DHS) OIG to evaluate the post-transition\nprofessional audits and investigations in these areas. Our effectiveness of APHIS and CBP in safeguarding U.S.\nwork addresses such issues as the ongoing challenges of agriculture from incursions by foreign pests and diseases.\nagricultural inspection activities, safety of the food supply, The audit disclosed that the two Departments had made\nand homeland security. progress in correcting the deficiencies noted in previous\n audits, resolving several outstanding recommendations.\n In the first half of fiscal year (FY) 2007, we devoted Based on issues identified in the new review, however,\n17.0 percent of our total audit and investigative direct DHS OIG issued several recommendations to CBP\nresources to Goal 1, with 95.0 percent of these resources to improve operational areas at the ports of entry. In\nassigned to critical/high-impact work. A total of 56.3 percent response to USDA OIG recommendations, APHIS agreed\nof our audit recommendations under Goal 1 resulted in to issue policy guidance to clarify CBP\xe2\x80\x99s responsibilities\nmanagement decision within 1 year, and 68.4 percent of for Transportation and Exportation permits that allow\nour investigative cases had criminal, civil, or administrative prohibited and restricted agricultural commodities to be\naction taken. OIG issued three audit reports under trans-shipped across the country to foreign destinations\nGoal 1 during this reporting period. OIG\xe2\x80\x99s investigations and for the handling of seized agricultural products at\nunder Goal 1 yielded 12 indictments, 12 convictions, and ports of entry. APHIS also agreed to develop a process\nabout $625,716 in monetary results during this reporting to allow both agencies to assess the risk of agricultural\nperiod. products entering the country by rail. In addition, we are\n\n\n\n\n Management Challenges Addressed Under Goal 1\n\n n\t Interagency Communications, Coordination, and Program Integration Need Improvement (also under Goals 2 and 3)\n\n n\t Continuing Improvements Needed in IT Security (also under Goal 3)\n\n n\t Departmental Efforts and Initiatives in Homeland Security Need To Be Maintained\n\n n\t Departmentwide Efforts and Initiatives on GEOs Need To Be Strengthened\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half \x18\n\x0c Goal 1\n\n\n\n\nworking to resolve the remaining recommendations from a fruit flies), and an inflated quality grade of stone fruit. The\nprevious audit of agricultural inspection activities. (Audit investigation resulted in two criminal convictions, four civil\nReport No. 33601-07-Ch, Review of CBP\xe2\x80\x99s Agriculture judgments, and asset forfeiture and fines totaling $95,225.\nInspection Activities)\n Meat Processing Plant Agrees To Pay More\nOwner and Corporation Plead Guilty Than $100,000 in a Civil Settlement for\nto Defrauding Bovine Spongiform Falsifying Fat Content in Sausage Products\nEncephalopathy (BSE) Surveillance Program\n In October 2006, a former federally inspected facility entered\nAn Arizona meat processing company and its owner pled into a settlement agreement with the U.S. Attorney\xe2\x80\x99s Office,\nguilty in February 2007 to charges of theft of Government District of Maine. The agreement required the firm to pay\nfunds, mail fraud, and wire fraud. The owner and his to the United States more than $100,000 for selling a variety\ncompany defrauded the BSE Surveillance Program when of meat products that exceeded Federal standards for fat\nthey falsified BSE Surveillance Data Collection Forms and content and for falsifying required test results. In April 2004,\nthen submitted payment requests to USDA for the services. a former quality assurance manager of the firm was found\nIn addition to the targeted sample population (those cattle guilty of obstruction of justice and was sentenced to serve a\nthat were more than 30 months old or had other risk factors prison term, followed by supervised release, and ordered to\nfor BSE), the owner submitted to USDA, or caused to be pay a $3,100 fine.\nsubmitted, BSE obex (brain stem) samples from healthy\nUSDA-inspected cattle. As a result, the owner fraudulently Texas Businessman Sentenced for Making\nreceived approximately $390,000. Sentencing is scheduled False Statements and Claims To Obtain USDA\nfor May 2007. Commodity Contracts for Nonfat Dry Milk\n Valued at More Than $1.5 Million\nInvestigation Uncovers $5.2 Million in\nIllegally Exported Fruit In November 2006, an El Paso, Texas, businessman and\n his company independently pled guilty to making false\nFrom April 2000 to November 2006, agents and investigators statements to USDA. The businessman, on behalf of his\nof OIG and APHIS\xe2\x80\x99 Investigative and Enforcement Services company, submitted false statements to USDA from October\nconducted an investigation into the illegal exportation of 2003 to November 2004 to obtain contracts to purchase over\napples and stone fruit into Mexico from the United States. 1.5 million pounds of nonfat dry milk from the Commodity\nIn a cooperative effort between the Governments of the Credit Corporation (CCC) at a reduced price of $511,686, a\nUnited States and Mexico, the investigation identified discount of more than $1 million. By failing to produce the\napproximately 480 truckloads of illegally exported fruit required product for human consumption, the businessman\nvalued at over $5.2 million. The investigation disclosed did not fulfill the contract requirements. The company falsely\nthat seven marketing firms and three freight-forwarding certified that the product was for human consumption and that\nfirms conspired to circumvent international treaties it was licensed to process products for human consumption.\nand minimum reference price requirements by using Instead, the milk was used in the production of animal feed.\ncounterfeit U.S. Government Phytosanitary Certificates. In January 2007, the businessman made the first installment\nThe counterfeit certificates were used to falsely certify ($50,000) of a $100,000 court-ordered forfeiture, and the\ninspections of the illegally exported fruit, the charging of businessman and his company were sentenced to 36 months\nthe minimum reference price on apples, the performance of probation. Based on its claim of insolvency, the company\nof cold treatment (cooling fruit to eliminate the risk of was assessed no fine or restitution.\n\n\n\n\n \x18 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Goal 1\n\n\n\n\nUSDA Implements Homeland Security Emergency Response Program\nInitiatives and Directives\n OIG\xe2\x80\x99s Emergency Response Program (ERP) consists of two\nOur review found that the Department had completed teams with unique missions, the Emergency Response Team\nits required actions in implementing sections 17 and (ERT) and the Wildland Fire Investigations Team (WFIT).\n8(b) of Homeland Security Presidential Directive-9. This ERT responds to and investigates threats or attacks against\ndirective established a national policy to protect the U.S. the Nation\xe2\x80\x99s food supply, agriculture infrastructure, or USDA\nagriculture and food system in the event of emergencies interests; and provides expertise to government agencies at all\nsuch as bioterrorist attacks or major disasters. Section levels. In December 2006, ERT attended AgTerror training in\n17 requires USDA to make recommendations to the Tennessee, sponsored by DHS in cooperation with Kirkwood\nPresident\xe2\x80\x99s Homeland Security Council about financial Community College. Members were certified by DHS to\nrisk management tools that encourage self-protection for conduct AgTerror awareness training. Also in December\nvulnerable agriculture and food enterprises, while section 2006, the team participated in advanced Crime Scene\n8(b) emphasizes the need for monitoring and surveillance Processing training, using agriculture-related scenarios.\nprograms to track commodities.\n During this reporting period, members of ERT worked\n We also reviewed USDA\xe2\x80\x99s role in implementing a closely with and participated on the FBI\xe2\x80\x99s Joint Terrorism\nrequirement of the Public Health Security and Bioterrorism Task Forces, the FBI-sponsored Agro-Terrorism Working\nPreparedness Response Act of 2002 that would facilitate Groups, and the U.S. Attorney\xe2\x80\x99s Offices\xe2\x80\x99 Anti-Terrorism\nthe tracing of commodities to the original vendor/facility Advisory Councils. In addition, members of the ERT\nafter a disaster. Although the Act requires the Food and regularly participated in working groups with State and\nDrug Administration (FDA) to register and monitor such local law enforcement agencies and first responders to\nvendors/facilities, we suggested that the Department could educate and foster cooperation to ensure the safety of the\nplay a key role in strengthening the safety and security of Nation\xe2\x80\x99s crops and food supply. ERT members provided\nthis process by providing information to FDA on vendors/ presentations to task forces and working groups on its\nfacilities that conduct business with the Department but role in an agricultural event and participated in tabletop\nhave not registered. (Audit Report No. 50701-2-KC, USDA exercises to prepare for such an event.\nHomeland Security Initiatives and Directives)\n OIG is mandated by law to investigate any Forest Service\nCorporate Shareholder Sentenced for Illegal (FS) firefighter deaths caused by wildfire entrapment or\nSale of Ocelot burnover and report to Congress and the Secretary of\n Agriculture on the results. Participation on WFIT is a\nAs reported last period, in April 2006, an Oregon woman collateral duty for team members and requires a great deal of\nwas sentenced to 30 days in prison and ordered to make a commitment due to the unique training requirements of the\n$25,000 community service payment for illegally offering position. Members undergo extensive training that includes\nto sell an ocelot, which is protected under the Federal attending the Basic Fire Academy located in Boise, Idaho.\nEndangered Species Act. During this period, in January The Basic Fire Academy incorporates training in Incident\n2007, the shareholder of a California corporation that Command, Basic Wildfire Suppression Orientation,\nconducted business with the Oregon woman was sentenced Firefighter Training, and Introduction to Wildland Fire.\nafter an August 2006 guilty plea to illegally offering to In addition, WFIT members attend the National Wildfire\nsell ocelots. The corporate shareowner was sentenced to Investigation Training Program, conducted by the Federal\n24 months of supervised release and ordered to make a Law Enforcement Training Center, as well as the Bureau of\n$60,000 community service payment to the Oregon Zoo Land Management\xe2\x80\x99s Serious Accident Investigation Training.\nEndangered Species Justice Fund. In October 2006, the Esperanza Wildland Fire in California\n resulted in the deaths of five FS firefighters by entrapment or\n burnover. The WFIT investigation of these firefighter deaths\n is ongoing.\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half \x18\n\x0c Goal 1\n\n\n\n\nGOVERNMENTWIDE ACTIVITIES \xe2\x80\x93 GOAL 1\n\nParticipation on Committees, Working Groups, and Task Forces\n\nn\t\x07An OIG investigator is serving on the Maryland Agriculture to terrorist intelligence to OIG and other agencies and\n Working Group, sponsored by the Federal Bureau of offices within the Department.\n Investigation\xe2\x80\x99s (FBI) Weapons of Mass Destruction\n n\t\x07During the reporting period, the Inspector General (IG) and\n coordinator for the Baltimore Division. The group\n OIG staff participated in the President\xe2\x80\x99s Council on Integrity\n consists of law enforcement, emergency management,\n and Efficiency (PCIE) Homeland Security Roundtable. Since\n and public safety officials from Federal, State, and local\n June 2005, the roundtable, consisting of members from the\n governments within the FBI\xe2\x80\x99s Baltimore investigative\n inspector general community, has met to discuss a variety of\n jurisdiction (Maryland and Delaware). The group is writing\n matters related to homeland security. Ongoing OIG audit and\n a communications plan to assist in coordinating and\n investigative efforts related to Hurricane Katrina have been\n responding locally to a food and/or agriculture event of\n coordinated through the roundtable. We have benefited from\n significance.\n sharing information and identifying best practices, offered\nn\t\x07An OIG investigator is assigned to the FBI\xe2\x80\x99s National Joint suggestions for a revised roundtable charter, and nominated\n Terrorism Task Force (NJTTF). The agent attends the NJTTF several topics for future joint projects.\n threat briefings and provides a variety of products related\n\n\nONGOING AND PLANNED REVIEWS FOR GOAL 1\n\nTopics that will be covered in ongoing or planned reviews under Goal 1 include:\nn\t\x07Farm Service Agency\xe2\x80\x99s (FSA) port approval and inspection n\t\x07National Residue Program in cull cow plants (FSIS),\n process, n\t\x07Animal Care inspection of breeders (APHIS),\nn\t\x07Food Safety and Inspection Service (FSIS) meat, poultry, n\t\x07fresh product grading and certification (Agricultural\n and egg product inspections in Puerto Rico, Marketing Service (AMS)),\nn\t\x07egg processing inspection (FSIS), n\t\x07oversight of the National Organic Program (AMS),\nn\t\x07controls over APHIS pilot certifications, n\t\x07followup on APHIS licensing of animal exhibitors,\nn\t\x07controls over permits to import agricultural products n\t\x07\x07implementation of flood-control dam rehabilitation (Natural\n (APHIS), Resources Conservation Service (NRCS)),\nn\t\x07USDA\xe2\x80\x99s controls over the importation and movement of live n\t\x07USDA progress in enhancing agricultural biosecurity\n animals (APHIS), through diagnostic and reporting networks (APHIS, FSIS,\nn\t\x07USDA\xe2\x80\x99s implementation of the national strategy for and Cooperative State Research, Education, and Extension\n pandemic influenza (APHIS as lead), Service (CSREES)),\nn\t\x07avian influenza testing laboratories\xe2\x80\x99 compliance with n\t\x07USDA\xe2\x80\x99s role in the export of genetically engineered\n policies and procedures (APHIS), agricultural commodities (Foreign Agricultural Service\nn\t\x07soundness of BSE maintenance sampling (APHIS), (FAS), Grain Inspection, Packers and Stockyards\nn\t\x07determination of actionable (nonexistent or rare in the Administration (GIPSA), APHIS, and AMS), and\n United States) foreign pests (APHIS), n\t\x07USDA controls over genetically engineered animals/insect\nn\t\x07FSIS\xe2\x80\x99 Management Control System, research (APHIS and Agricultural Research Service (ARS).\nn\t\x07FSIS risk-based inspection,\nn\t\x07implementation of Performance-Based Inspection System\n enhancements for specified risk material (SRM) violations and\n improved inspection controls over SRMs (FSIS and APHIS),\n\n\nThe findings and recommendations from these efforts will be covered in future semiannual reports as the relevant audits and\ninvestigations are completed.\n\n\n\n \x18 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0cIntegrity of Benefits and Entitlements Programs\n\nOIG Strategic Goal 2: additional audits in this area that were ongoing during this\n period and should be issued in the next reporting period.\n OIG investigations under Goal 2 yielded 104 indictments,\nReduce program vulnerabilities and enhance 74 convictions, and about $41.5 million in monetary results\nintegrity in the delivery of benefits to individuals during the reporting period.\n\nOIG conducts audits and investigations to ensure or restore EXAMPLES OF AUDIT AND INVESTIGATIVE\nintegrity in the various benefits and entitlements programs WORK FOR GOAL 2\nof USDA, including a variety of programs that provide\npayments directly and indirectly to individuals or entities. Adjusted Gross Revenue (AGR) Program\nThe size of these programs is daunting: the Food Stamp Indemnity Payments of $2.3 Million\nProgram (FSP) alone accounts for nearly $32 billion in Unsupported\nbenefits annually, while over $20 billion annually is spent on\nUSDA farm programs. Their intended beneficiaries include The Risk Management Agency\xe2\x80\x99s (RMA) AGR Program is\nthe working poor, hurricane and other disaster victims, and a nontraditional crop insurance pilot program in which\nschoolchildren, as well as farmers and producers. These producers insure their farm revenue against losses caused\nprograms support nutrition, farm production, and rural by natural disasters and market fluctuations. During\ndevelopment. A good deal of our ongoing work in Goal 2 is insurance years 2002 and 2003, 9 insurance providers in\nexpected to come to fruition in the second half of FY 2007. 18 States paid AGR indemnities of about $24 million. We\n reviewed 11 claims paid by 5 providers and found that 4\n In the first half of FY 2007, we devoted 47.5 percent of the providers either had issued policies to producers\nof our total audit and investigative direct resources to whose eligibility was unsupported or paid indemnities\nGoal 2, with 87.1 percent of these resources assigned to for unsupported loss claims totaling $2.3 million. The\ncritical/high-impact work. A total of 91.9 percent of deficiencies were not noted or detected by the underwriting\nour audit recommendations under Goal 2 resulted in review, the loss adjustor review, or the providers\xe2\x80\x99 quality\nmanagement decision within 1 year, and 78.8 percent of control review prescribed by the Standard Reinsurance\nour investigative cases had criminal, civil, or administrative Agreement. Providers misunderstood, misinterpreted, or\naction taken. OIG issued 13 audit reports under Goal 2 overlooked requirements for obtaining required documents\nduring this reporting period. However, there are several or conducting adequate reviews.\n\n\n\n Management Challenges Addressed Under Goal 2\n\n\n n\t Interagency Communications, Coordination, and Program Integration Need Improvement (also under Goals 1 and 3)\n\n n\t Implementation of Strong, Integrated Management Control (Internal Control) Systems Still Needed (also under Goal 3)\n\n n\t USDA\xe2\x80\x99s Response to the 2005 Hurricanes Needs Ongoing Oversight (also under Goal 3)\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half \x18\n\x0c Goal 2\n\n\n\n\nFurthermore, RMA program managers were unaware of ordered to pay $4.9 million in restitution and forfeit\nthe deficiencies. In response to our audit, on February 15, $2.5 million in assets for food stamp trafficking. The\n2007, RMA issued a notice to advise insurance providers grocery store owner was barred from participation in FSP\nof the unacceptable documents that have been used and to for life. From January 1997 to August 2002, the grocery\nclarify what documents are acceptable for substantiating store owner and the store\xe2\x80\x99s manager were involved in a\nAGR policies and claims. RMA agreed to analyze and, if food stamp benefit trafficking scheme that resulted in a\nappropriate, seek recovery of the questioned indemnity potential loss to USDA of approximately $7 million.\npayments. RMA will also ensure that review of the\npolicyholder files for pilot programs will be included in its n\t\x07In October 2006, three individuals were ordered to pay\nNational Operations Reviews. (Audit Report No. 05601-4- a total of $1.1 million in restitution for their role in\nSF, RMA AGR Program) committing food stamp trafficking via the Electronic\n Benefit Transfer (EBT) system by discounting large\nLoss Adjustment Errors Made on Citrus Crops amounts of EBT benefits for cash at a Newark, New\nin Florida Jersey, grocery store. One individual received 21 months\n of incarceration and the other two received probation\nDuring 2004, Hurricanes Charley, Frances, and Jeanne for a term of 36 months each. This investigation was\nin Florida resulted in crop insurance indemnity payments worked jointly with the U.S. Secret Service (USSS).\ntotaling $50 million for 1,144 citrus claims. Of the\n21 citrus indemnity payments reviewed, totaling n\t \x07In November 2006, a Philadelphia man was\n$10.3 million, approved insurance providers who sentenced in U.S. District Court, Eastern District\nadministered the claims made loss adjustment errors on of Pennsylvania, to serve 36 months in prison and\n15 claims that resulted in $325,943 in overpayments and 36 months of probation, and was ordered to pay\n$89,767 in underpayments. Loss adjusters did not always $510,658 in restitution. The man and his family\n(1) verify crops\xe2\x80\x99 insurability, (2) verify the number of had made false statements to numerous Government\ntrees, (3) verify crops\xe2\x80\x99 risk class, (4) exclude production agencies to receive more than $500,000 in food stamps,\nfrom uninsured acres, (5) sample trees from all groves, cash assistance, and medical benefits from August 1998\n(6) appraise early and mid-season oranges separately, (7) through January 2006. This investigation was worked\ncompute claims correctly, or (8) use correct data when jointly with USSS, the U.S. Postal Inspection Service,\ncalculating claims. RMA agreed to review the erroneous loss and the Internal Revenue Service\xe2\x80\x99s (IRS) Criminal\nadjustment determinations and collect any monies owed Investigation (CI).\nfrom the responsible insurance provider. (Audit Report No.\n05099-27-At, Citrus Indemnity Determinations Made for n\t \x07In October 2006, two owners and an employee of a\n2004 Hurricane Damages in Florida) Houston grocery store were sentenced in U.S. District\n Court, Southern District of Texas, for food stamp\nFood Stamp Cases Yield Significant Jail Time trafficking. The two owners were sentenced to serve\nand Restitution 37 months of imprisonment and ordered to jointly pay\n $421,025 in restitution. The judge also signed Preliminary\nOIG concluded a number of food stamp trafficking Orders of Forfeiture for two sport utility vehicles valued\ncases this reporting period that resulted in significant jail at approximately $38,000. The store employee was\nsentences and restitution: sentenced to serve 15 months of imprisonment and\n ordered to pay $1,859 in restitution. The owners and\nn\t\x07In October 2006, the owner of a Chicago grocery store the employee had discounted EBT benefits for cash. This\n was sentenced in U.S. District Court, Northern District investigation was worked jointly with USSS.\n of Illinois, to serve 57 months of incarceration, and\n\n\n\n\n \x18 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Goal 2\n\n\n\n\nn\t\x07In January 2007, a Newark, New Jersey, food store Louisiana Department of Education for reimbursements in\n manager was sentenced to 33 months of imprisonment, connection with CACFP.\n to be followed by 24 months of supervised release,\n for food stamp trafficking. In February 2007, a store Two Pet Product Companies Agree To Pay\n employee was sentenced to 36 months of probation, $736,000 for Ineligible Receipt of Market\n to include 6 months of home confinement. They were Access Program (MAP) Funds\n ordered to pay restitution of $248,147 to USDA.\n From May 1998 to June 1999, the store redeemed In December 2006, two pet product companies agreed\n more than $2.8 million in FSP benefits, most of which to a $736,000 civil settlement with the U.S. Attorney\xe2\x80\x99s\n were fraudulent. In 2004, the store manager and Office, Eastern District of Pennsylvania, after they received\n employee were indicted in the District of New Jersey approximately $600,000 in MAP funds for which they\n and charged with conspiracy to traffic in food stamp were not eligible. MAP funds are distributed by FAS to\n benefits. The manager then fled to the Dominican promote worldwide use and sale of agricultural products by\n Republic until mid-2005, when he was extradited to U.S. small businesses, and companies must meet the Small\n the United States to face the charges. Both subjects Business Administration\xe2\x80\x99s definitions of \xe2\x80\x9csmall business.\xe2\x80\x9d\n subsequently entered guilty pleas. In this case, the companies are affiliated, and the larger\n company employs more than 2,300 people with yearly\nNew Jersey School Agrees To Pay revenues approaching $1 billion, thereby making the first\n$1.3 Million for Committing National School company ineligible to receive MAP funds..\nLunch Program (NSLP) Fraud\n Georgia Producer Ordered To Pay $112,741\nIn October 2006, a civil settlement agreement was reached for Conversion of Mortgaged Property\nwith a Lakewood charter school and the U.S. Attorney\xe2\x80\x99s\nOffice, District of New Jersey. The school agreed not to In December 2006, a producer in Lenox, Georgia, was\nseek reimbursement for $895,550 in claims being held in a sentenced in U.S. District Court, Middle District of Georgia,\nsuspense account and agreed to pay an additional $400,000 to 18 months of imprisonment and ordered to pay $112,741\nfor losses to NSLP, a total of $1,295,550 altogether. in restitution for conversion of mortgaged property. In May\nFrom 1996 to 2000, the school had defrauded NSLP of 2002, the producer received a farm-operating loan from\napproximately $1.3 million by submitting numerous false FSA secured with the producer\xe2\x80\x99s cotton, grape, peanut, and\ncertifications to New Jersey\xe2\x80\x99s Bureau of Child Nutrition wheat crops. The producer harvested the crops and converted\nregarding student participation levels in NSLP. approximately $74,000 in sales proceeds to his own use.\n\nDay Care Facility Owner in Louisiana Oklahoma Man Sentenced to Prison, Ordered\nSentenced to Federal Prison, Ordered To Pay To Pay $3.8 Million in Restitution for Obtaining\n$617,057 in Restitution for Child and Adult Loans Using Falsified Documents\nCare Food Program (CACFP) Fraud\n In January 2007, a former chief financial officer for an\nIn November 2006, the owner of a daycare facility in Okemah manufacturing company was sentenced in\nMonroe, Louisiana, was sentenced in U.S. District Court, U.S. District Court, Northern District of Oklahoma, to\nWestern District of Louisiana, to 87 months in prison, 40 months of imprisonment and 60 months of supervised\nordered to pay $617,057 in restitution, and fined $4,700. release, and ordered to pay $3.8 million in restitution for\nIn July 2006, after pleading guilty to two counts of mail obtaining Rural Development (RD) loans using falsified\nfraud and one count of false statements, a manager of the documents. The individual fraudulently obtained a\nfacility had been sentenced to 60 months of probation, $2.9 million USDA-guaranteed loan and a $2 million\nordered to pay $142,143 in restitution, and fined $300. line of credit loan from a bank in Stillwater, Oklahoma, as\nFrom December 2003 through February 2004, the owner well as a loan from another bank in Nowata, Oklahoma,\nand the manager submitted three false claims to the for $275,000. In January 2005, USDA paid the bank in\n Stillwater $1.8 million as a result of the defaulted loans.\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half \x18\n\x0c Goal 2\n\n\n\n\nGOVERNMENTWIDE ACTIVITIES \xe2\x80\x93 GOAL 2\n\nParticipation on Committees, Working Groups, and Task Forces\n\nn\t\x07OIG continues to work with the PCIE and Department guilty pleas, and forfeitures of proceeds directly\n of Homeland Security (DHS) Working Groups to linked to trafficking in EBT and WIC benefits. The task\n coordinate investigative efforts related to Hurricanes force is expected to continue through FY 2008.\n Katrina and Rita. OIG investigators worked to\n n\t\x07An OIG investigator has been working with the FBI\xe2\x80\x99s Safe\n coordinate a request from the U.S. Department\n Streets Task Force in Indianapolis, Indiana, since 2000.\n of Housing and Urban Development (HUD) OIG to\n The mission of the task force is to deter street gang and\n enter into a computer-matching agreement with the\n drug-related violence, as well as seek the most significant\n Rural Housing Service (RHS) to identify improper\n fugitives wanted for crimes of violence through long-\n and fraudulent disaster assistance payments, similar\n term, proactive, and coordinated teams of Federal, State,\n to the agreement in place between HUD and DHS\xe2\x80\x99\n and local law enforcement officers and prosecutors.\n Federal Emergency Management Agency (FEMA).\n n\t\x07An OIG investigator is participating on the Ohio Organized\nn\t\x07OIG investigators are participating in a task force to\n Crime Investigations Commission (OOCIC) Task Force\n investigate criminal violations of FSP and the Special\n in Dayton. OOCIC provides assistance to local law\n Supplemental Nutrition Program for Women, Infants,\n enforcement agencies in the investigation of organized\n and Children (WIC). Members include the Michigan\n criminal activity. OIG investigators have participated\n State Police and IRS Criminal Investigation. The FBI\n in the OOCIC Dayton Task Force since 1996 and have\n and DHS\xe2\x80\x99 Immigration and Customs Enforcement have\n conducted investigations involving welfare recipients, food\n provided assistance during warrant operations. The\n stamp trafficking, mortgaged farm equipment stolen from\n initiative has resulted in numerous warrant operations,\n farmers, stolen property trafficking, and dog-fighting.\n\nONGOING AND PLANNED REVIEWS FOR GOAL 2\n\nTopics that will be covered in ongoing or planned reviews under Goal 2 include:\nn\t\x07continued monitoring of EBT implementation (Food and n\t\x07penalties assessed for inaccurate reporting of crop\n Nutrition Service (FNS)), insurance acreage (RMA),\nn\t\x07Summer Food Service Program (FNS), n\t\x07implementation of $500,000 claim decision process\nn\t\x07WIC in Puerto Rico (FNS), (RMA),\nn\t\x07Food Stamp Employment and Training Program (FNS), n\t\x07Citrus Canker Eradication Compensation and Insurance\nn\t\x07Child and Adult Care Food Program (FNS), Program (APHIS and RMA),\nn\t\x07food stamp retailer authorizations (FNS), n\t\x07implementation of the Tobacco Transition Payment\nn\t\x07FNS oversight of the National School Lunch Program, (Tobacco Buyout) Program (FSA),\nn\t\x07WIC vendor monitoring (FNS), n\t\x07programmatic treatment of crop base on land included in\nn\t\x07Disaster Food Stamp Program for Hurricanes Katrina, Rita, conservation easements (FSA and NRCS),\n and Wilma (FNS), n\t\x07interest assistance on guaranteed farm loans (FSA),\nn\t\x07crop loss and quality adjustments for aflatoxin-infected n\t\x07adjusted gross income limitation (NRCS),\n corn (RMA), n\t\x07emergency loan assistance (FSA),\nn\t\x07Asian soybean rust claims (RMA), n\t\x07effectiveness of status reviews in assessing producer\nn\t\x07group risk crop insurance (RMA), compliance with conservation provisions (NRCS and FSA),\nn\t\x07catastrophic crop underwriting (RMA), n\t\x07price support provisions for pulse crops (seeds of legumes\nn\t\x07prevented planting policy provisions (RMA), used as food) (FSA),\n n\t\x07Conservation Security Program (NRCS), and\n n\t\x07Farm and Ranch Lands Protection Program \xe2\x80\x93 nationwide\n selected nongovernmental organization (NRCS).\n\n\nThe findings and recommendations from these efforts will be covered in future semiannual reports as the relevant audits and\ninvestigations are completed.\n\n \x18 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0cManagement of Public Resources\n\nOIG Strategic Goal 3: Goal 3, with 96.9 percent of these resources assigned to\n critical/high-impact work. A total of 93.1 percent of\n our audit recommendations under Goal 3 resulted in\nIncrease the efficiency and effectiveness with management decision within 1 year, and 65.6 percent of\nwhich USDA manages and employs public our investigative cases had criminal, civil, or administrative\nassets and resources, including physical and action taken. OIG issued 22 audit reports under Goal 3\ninformation resources during this reporting period. OIG investigations under\n Goal 3 yielded 55 indictments, 15 convictions, and about\nOIG conducts audits and investigations that focus on, for $1.4 million in monetary results during the reporting\nexample, improved financial management and accountability, period.\nIT security and management, protection of public assets,\nemployee corruption, natural resources, research, and the EXAMPLES OF AUDIT AND INVESTIGATIVE WORK\nGovernment Performance and Results Act. Our work in FOR GOAL 3\nthis area is vital because the Department is entrusted with\n$128 billion in public resources annually and hundreds of FY 2006 Office of the Chief Information\nbillions of dollars more in fixed assets such as the 192 million Officer (OCIO) Information Technology\nacres of national forests and wetlands. The effectiveness and Services (ITS) General Controls Review\nefficiency with which USDA manages its assets are critical.\nUSDA depends on IT to efficiently and effectively deliver Our report contained a qualified opinion on the ITS internal\nits programs and provide meaningful and reliable financial control structure and its effectiveness, and we believe the\nreporting. One of the more significant dangers USDA faces findings constitute a material internal control weakness to\nis a cyberattack on its IT infrastructure, whether by terrorists be reported in the agencies\xe2\x80\x99 (FSA, NRCS, and RD) Federal\nseeking to destroy unique databases or criminals seeking Managers\xe2\x80\x99 Financial Integrity Act reports. ITS has begun to\neconomic gains. implement controls over the weaknesses we identified.\n\n In the first half of FY 2007, we devoted 35.5 percent We recommended that ITS ensure that security plans,\nof our total audit and investigative direct resources to risk assessments, contingency plans, and disaster recovery\n\n\n\n\n Management Challenges Addressed Under Goal 3\n\n n\t Interagency Communications, Coordination, and Program Integration Need Improvement (also under Goals 1 and 2)\n\n n\t Implementation of Strong, Integrated Management Control (Internal Control) Systems Still Needed (also under Goal 2)\n\n n\t Continuing Improvements Needed in IT Security (also under Goal 1)\n\n n\t Implementation of Improper Payments Information Act Requirements Needs Improvement\n\n n\t USDA\xe2\x80\x99s Response to the 2005 Hurricanes Needs Ongoing Oversight (also under Goal 2)\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half \x18\n\x0c Goal 3\n\n\n\n\nplans meet Office of Management and Budget (OMB), referrals from FSA and RD that involve larger monetary\nNational Institute of Standards and Technology (NIST), amounts of fraud or theft and more complex fraud\nand Departmental requirements and be updated after cases. To date, OIG has conducted 18 investigations\nmajor system changes. In addition, we recommended in Mississippi and Louisiana concerning cases in\nITS ensure that effective centralized change management, which FNS, FSA, and RD have been defrauded by\nbackup/recovery and vulnerability remediation, security individuals to obtain Hurricane Katrina disaster\nincident handling, physical security, and security clearance benefits. From October 1, 2006, through February 6,\nand hardware maintenance processes are in place and 2007, 37 individuals were indicted, 9 of whom have\noperational in accordance with OMB and NIST guidance. pled guilty and received sentences ranging from 24\nWe also recommended that inventory records be adequately months of probation to 12 months of incarceration.\nmaintained and Service Level Agreements contain all All of those sentenced were ordered to pay restitution,\ninformation required by NIST. Further, we recommended ranging from $2,000 to $13,400.\nthat ITS effectively test, monitor, and audit backup/recovery\nprocedures and ensure that automatic notification of backups n\t \x07In one fraud case, in January 2007, a woman was\nare turned on and reviewed weekly; develop interconnection sentenced in U.S. District Court, Southern District of\nsecurity agreements for all third-party connections to Illinois, to serve 48 months in Federal prison, followed by\nthe network that conform to NIST and OMB guidance; 36 months of supervised release, and was ordered to pay\nensure timely removal of separated employees as well as $23,982 in restitution and a $1,100 fine. The woman had\nthe creation, modification, and deletion of user accounts obtained $23,000 in Hurricane Katrina housing, food\ncommensurate with their job responsibilities; and update stamp, and cash assistance to which she was not entitled.\nall computer equipment with the latest security patches. She had also falsely claimed to have lost two children in\nThe agencies generally agreed with our recommendations Hurricane Katrina. The woman pled guilty in October\nand are taking corrective actions. (Audit Report No. 88501- 2006 to mail fraud and false statements.\n7-FM, General Controls Review \xe2\x80\x93 FY 2006 OCIO ITS)\n n\t \x07Unnecessary Housing Assistance Provided to\nOIG\xe2\x80\x99s Continuing Response to the Gulf Coast Hurricane Victims: In an audit focusing primarily\nRegion Hurricanes on the $54 million in loan and grant funds being\n disbursed to repair hurricane damage, we found that\nIn our last two semiannual reports, we have highlighted RHS and other Federal agencies had not coordinated\nOIG\xe2\x80\x99s continuing role with respect to Federal recovery activities to prevent the duplication of Government\nefforts in the Gulf Coast region after Hurricanes Katrina housing assistance to victims. In addition, RHS had\nand Rita. OIG auditors have several ongoing or planned not required victims to provide information about\nreviews related to the hurricanes (see the end of this section damage reimbursement from insurance companies\non Goal 3). OIG continues to work with the President\xe2\x80\x99s and assistance from charitable organizations, resulting\nCouncil on Integrity and Efficiency and DHS Working in some victims receiving assistance from both RHS\nGroups to coordinate investigative efforts, maximize and other sources.\nresources, and prevent duplicative work.\n Our review disclosed about $320,000 in emergency\nn\t \x07OIG special agents working Hurricane Katrina Fraud grant funds were awarded for non-disaster repairs;\n Task Force investigations continue to receive referrals almost $70,000 were provided to victims for repairs\n throughout the country on individuals who have and improvements not related to health, safety, or\n submitted false claims or provided false statements to handicap accessibility; and unlicensed contractors\n obtain Federal benefits. As hurricane reconstruction were employed to repair almost $210,000 in damage.\n efforts proceed, OIG has begun receiving investigative Moreover, disaster funds were vulnerable to misuse at\n\n\n\n\n 10 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Goal 3\n\n\n\n\n some field offices because loan and grant applications disbursed. USDA incurred additional expenditures\n were received, reviewed, and approved by the same by awarding noncompetitive grants, even though a\n employee. Finally, RHS had not determined the substantial amount of the maximum available funds\n number of agency loan accounts in jeopardy of default, went unobligated.\n or the costs associated with uninhabitable properties\n that likely needed to be destroyed. In response to audit recommendations, the FSA\n Administrator agreed to coordinate with the Under\n We recommended that for future disasters RHS Secretary for Farm and Foreign Agricultural Services,\n coordinate assistance with other Federal agencies, industry stakeholders, and other involved USDA\n obtain a formal Office of the General Counsel (OGC) and Federal agencies to develop and formalize a\n opinion regarding the proper use of disaster funds response and recovery plan for disruptions to the grain\n before distribution, require applicants to disclose transportation and storage system. (Audit Reports\n assistance received from insurance companies and Nos. 03601-21-KC and 03601-22-KC, Hurricane\n charitable organizations, and monitor field activities Relief Initiatives: Barge Movement and Alternative\n immediately after a disaster. (Audit Report No. Storage Agreements)\n 04601-15-Ch, Controls Over Single Family Housing\n (SFH) Funds Provided for Hurricane Relief Efforts) Review of FY 2005 Congressional Earmarks\n\nn\t \x07USDA Needs Response and Recovery Plan for Future In response to a congressional request, our review\n Grain Transportation Disruptions: OIG found that determined that in FY 2005 the Department had 1,167\n USDA needed a response and recovery plan to relieve congressional earmarks (funds designated for specific\n disaster transportation congestion. After Hurricanes projects), totaling $1,338,873,451. We also found that the\n Rita and Katrina, USDA developed four initiatives to Department did not have a formal process for compiling\n alleviate transportation congestion on the Mississippi earmark fund totals and dollar amounts that are reported to\n River: providing grants for moving damaged corn the Secretary. Because OMB has recently issued guidance\n from New Orleans, promoting alternative warehouse concerning the treatment of earmark funds, we did not\n storage, moving agricultural commodities through make any recommendations. (Audit Report No. 50601-15-\n other regions, and encouraging the unloading of Te, Review of FY 2005 Congressional Earmarks)\n commodities that were left on barges in the New\n Orleans area. FSA implemented the initiatives and Saving the Chesapeake Bay Watershed\n provided monetary assistance through CCC. Requires Better Coordination of\n Environmental and Agricultural Resources\n Due to the urgency of the situation, USDA initially\n used ad hoc procedures to negotiate noncompetitive This joint U.S. Environmental Protection Agency (EPA)\n agreements, and awarded three noncompetitive grants OIG and USDA OIG review found that EPA must improve\n for alternative grain storage and barge movement its coordination and collaboration with its bay partners and\n projects to two companies. However, those verbal the agricultural community to better reduce nutrients and\n agreements lacked transparency and competition sediment entering the Chesapeake Bay watershed. USDA, a\n to minimize costs and ensure relief to all affected bay partner at the Federal level, could significantly assist EPA\n companies. The noncompetitive agreements had in implementing the needed conservation practices within the\n notably higher rates than those for similar services later agricultural community, given its many conservation programs,\n solicited through competitive bidding \xe2\x80\x93 the differences extensive field organization, and long experience working\n totaled $5.6 million. Of the $38.75 million USDA with the agricultural community. However, USDA has not\n authorized to fund the initiatives, $22.7 million was coordinated such a Departmentwide strategy or policy.\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 11\n\x0c Goal 3\n\n\n\n\n Responding expeditiously to our recommendations, Without Major Changes, Large-Fire\nUSDA assigned a senior-level official \xe2\x80\x93 the Under Secretary Suppression Costs Will Continue To Escalate\nfor Natural Resources and Environment \xe2\x80\x93 to coordinate\nwith EPA\xe2\x80\x99s Chesapeake Bay Program. He will direct and Our review concluded that FS\xe2\x80\x99s escalating costs to fight\ncoordinate goals and programs across USDA mission wildfires are largely due to its efforts to protect private\nareas and agencies. The Department also agreed to direct property in the wildland urban interface (WUI) where\nagencies to expedite the development and implementation private homes border FS lands. From FY 2000 to FY 2006,\nof outcome-based performance measurements to evaluate FS suppression costs averaged $900 million annually and\nthe effectiveness of their conservation efforts and programs. exceeded $1 billion in 4 of those years. In some years, FS\nFurther, the Secretary\xe2\x80\x99s announcement of USDA\xe2\x80\x99s 2007 borrowed funds from other programs to pay for its wildfire\nFarm Bill proposals included the creation of a new Regional suppression activities, adversely affecting FS\xe2\x80\x99 ability to\nWater Enhancement Program, focusing on cooperative accomplish work in other areas. Public expectations\napproaches to enhancing water quantity and/or quality and uncertainties among Federal, State, and local fire\non a regional scale, which we anticipate will explore the management agencies about roles and responsibilities\nfeasibility of targeting USDA funds geographically. (Audit compel FS to suppress fires aggressively and at great expense\nReport No. 50601-10-HQ, Saving the Chesapeake Bay when private property is at risk, even when there is little\nWatershed Requires Better Coordination of Environmental threat to National Forest System lands. Approximately 85\nand Agricultural Resources) percent of WUI acreage is on non-Federal lands, but FS\n bears the majority of WUI protection costs, thus incurring\n\n\n\n\n FPO\n\n\n\n\nA home in the WUI being threatened by wildfire. FS photo.\n\n\n\n\n 12 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Goal 3\n\n\n\n\n50 to 100 percent of its large wildfire expenditures. Efforts suited for the agency and will obtain the best prices for the\nto reduce these costs need to include more equitable property. FS agreed with our conclusions and agreed to take\nburden-sharing with State and local governments who have prompt corrective action. (Audit Report No. 08001-1-At,\nthe authority to regulate growth in WUI. Implementation of the Capital Improvement Program)\n\n In addition, FS needs to modify its policies that unduly FS\xe2\x80\x99 Controls Over Fleet Credit Cards Need\nrestrict the use of fire to reduce hazardous fuels (brush, Improvement\ndead trees) on FS land. The agency may also lack enough\nspecialized personnel needed to take advantage of such FS maintains USDA\xe2\x80\x99s largest vehicle fleet and assigns a fleet\nopportunities. Further, FS lacked effective cost-containment credit card to each vehicle. This card is used to fuel and (in\ncontrols: Managers\xe2\x80\x99 and incident commanders\xe2\x80\x99 decisions emergencies) maintain the vehicles. FS personnel charged\nand oversight were neither tracked nor evaluated, agency $48 million to these cards in FYs 2004 and 2005. We found\nperformance measures and reporting mechanisms did not that FS lacked adequate control over use of these cards and,\nadequately allow FS management to assess the effectiveness therefore, was unaware of approximately $3.7 million in\nof its wildfire suppression cost-containment efforts, and cost- unsupported charges.\ncontainment reviews had limited effectiveness. FS concurred\nand is implementing corrective actions. (Audit Report No. The agency relied on an automated control system, the\n08601-44-SF, FS Large-Fire Suppression Costs) Purchase Card Management System (PCMS). However,\n users of fleet credit cards were not required to keep receipts\nFS Needs To Improve How It Conveys Excess for non-fuel expenditures nor did they record odometer\nProperty readings when they purchased fuel, actions necessary to\n verify the appropriateness of the purchases. In addition,\nTo help FS reduce its deferred maintenance backlog, FS employees were not using many of the controls PCMS\nCongress authorized the agency to sell surplus properties. offered, such as establishing reasonable profiles on each credit\nWe found that (1) FS\xe2\x80\x99 process for identifying excess card to alert them of unusual transactions. Consequently,\nproperties and nominating them for sale was slow and users charged $2.5 million in non-fuel transactions, of which\ncould not ensure that all such properties were identified $1.3 million was categorized as \xe2\x80\x9cmiscellaneous,\xe2\x80\x9d \xe2\x80\x9cnull,\xe2\x80\x9d and\nand nominated for the conveyance program and (2) FS was \xe2\x80\x9cunassigned.\xe2\x80\x9d In addition, users purchasing prohibited\ntaking about 2 years to complete the conveyance process premium and mid-grade fuels spent an estimated $201,581\nonce sites were approved. Because properties with structures above the cost of regular unleaded fuel. Approximately\nare not being maintained during this time, they continue $2.1 million of the $3.7 million in unsupported charges\nto deteriorate and lose value. We concluded that FS could was charged to 1,871 fleet credit cards not assigned to a\nimprove its procedures for timely identifying, nominating, vehicle, violating USDA regulations and making it more\nand completing conveyance sales. Further, we found that difficult to assess the validity of expenditures.\nFS needed to evaluate its marketing practices because it\nlimited how it offered properties, both in terms of where FS agreed to (1) conduct management reviews of the fleet\nit advertised and how long it left properties on the market. credit card operations, (2) strengthen controls over fleet\nAs a result, the agency may have sold 8 of 38 properties credit cards and how PCMS is used to monitor those cards,\nfor a total of $648,497 beneath the estimated market and (3) require that receipts for non-fuel transactions be\nvalue of $5.2 million. In addition, FS did not determine submitted for verification. (Audit Report No. 08601-3-Te,\nthe most cost-effective marketing methods that are best Controls Over FS Vehicle Fuel and Maintenance Costs)\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 13\n\x0c Goal 3\n\n\n\n\nFAS Needs To Engineer a Global Market other strategic information; clarify its definitions for bulk,\nStrategy To Improve U.S. Competitiveness in high-value, and processed products; and adopt uniform\nWorld Agricultural Export Markets outcome-based performance measures and implement its\n food aid information system. (Audit Report No. 50601-\nOur review determined that FAS had timely implemented 12-At, Implementation of Trade Title of 2002 Farm Bill\n10 of the 13 provisions impacting international trade of and\xc2\xa0PMA)\nagricultural commodities contained in the 2002 Farm\nBill and improved the operation of its food aid programs FAS Trade Promotion Operations\nin accordance with the recommendations of the 2002\nPresident\xe2\x80\x99s Management Agenda (PMA). However, the In August 2006, three Members of Congress asked OIG to\nagency has not developed a business process to complete a perform an expedited review of the FAS programs designed\nGlobal Market Strategy to increase the Nation\xe2\x80\x99s agricultural to foster expanded agricultural trade, determine how trade\nexports. From 1990 to 2005, the dollar value of U.S. information is collected and disseminated to interested\nexports rose by 39 percent, but larger export gains by U.S. organizations, ascertain how FAS interacts with the\nforeign competitors eroded the United States\xe2\x80\x99 market share U.S. Trade Representative, discuss linkages between USDA\nof global exports by 32 percent. accomplishments for promoting exports with the National\n Export Strategy, and discuss the effectiveness of the Market\n In addition, FAS lacks a standardized definition to Access Program (MAP).\ndistinguish unprocessed bulk farm commodities from high-\nvalue and processed products, to ensure that the agency We found that FAS does not formally track its efforts\ntargets 35 percent of its export credit guarantee program to expand trade activities in exporting U.S. agricultural\nfunds to support exports of high-value and processed products, nor does it have a mechanism for summarizing\nproducts. Finally, FAS needs to complete outcome-oriented trade barrier information. The 2006 National Export\nperformance measures and its planned food aid information Strategy submitted to Congress by the Secretary of\nsystem to provide meaningful evaluation reports on the Commerce did not present USDA\xe2\x80\x99s annual accomplishments\nagency\xe2\x80\x99s efforts to achieve the legislated performance goals of for promoting the export of U.S. agricultural products,\nits food aid programs. We recommended that FAS develop nor did it relate information to USDA\xe2\x80\x99s Performance and\nbusiness processes to integrate agency reviews, analyses, and Accountability Report. Looking at the use of MAP funds in\n\n U.S. Exports and Share of Global Agricultural Markets\n (Millions of Dollars and Percentages)\n 90000 25.00%\n 80000\n 20.00%\n Percent of Globbal Market Share\n\n 70000\nDollar Value of U.S. Exports\n\n\n\n\n 60000\n 15.00%\n 50000\n 4,0000\n 10.00%\n 30000\n 20000 5.00%\n 10000\n 0.00%\n 1990 1995 2000 2005\n Trade Value Percent of Market Share\n Source: World Trade Organization International Trade Statistics and OIG Analysis\n\n\n 14 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Goal 3\n\n\n\n\nthe Philippines, we found that as of September 2006, three South Dakota Producer Pleads Guilty to\nparticipants in that country received more than $780,000 Threatening FSA Employee\nin MAP funds during FY 2005 and requested more than\n$609,000 for FY 2006. However, program evaluations, as In September 2006, a Rapid City producer pled guilty in\nprescribed by the MAP regulations, were not done. U.S. District Court, District of South Dakota, to verbally\n threatening an FSA employee and making false statements to\n FAS generally agreed with our five recommendations, but FSA. In January 2007, the producer was sentenced to serve\nprovided specific information on how it would implement 24 months of probation and fined $500. The producer had\nonly two of them. We will continue to work with the made false statements on applications to obtain loans totaling\nagency on the remaining recommendations. (Audit Report $200,000. When confronted with the false information, the\nNo. 07601-1-Hy, FAS Trade Promotion Operations) producer threatened to assault the FSA loan manager.\n\nFSA Has Adequate Controls To Minimize and Michigan Farming Operation Found Liable\nRecover Overpayment for Advanced Counter- Regarding Crop Insurance Fraud\nCyclical Payments\n In November 2006, a Federal judge in the Eastern District\nFSA\xe2\x80\x99s Direct and Counter-Cyclical Payment Program of Michigan found a Bay City family farming operation\nprotects agricultural producers from low market prices by civilly liable on three counts of filing false multi-peril crop\nissuing counter-cyclical payments \xe2\x80\x93 often in advance \xe2\x80\x93 up insurance claims. The judge ordered the farming operation\nto the commodity\xe2\x80\x99s target price (statutory benchmark) in a to repay treble damages, totaling more than $2.1 million,\ngiven crop year (CY). If a commodity\xe2\x80\x99s effective price (the for False Claims Act violations. The judge also fined the\nhigher of the national average market price or crop loan farming operation $15,000. The farming operation had\nrate, plus the direct (fixed) payment rate) for a given year is concealed production from RMA to increase fraudulent\nless than its target price, producers are paid the difference, crop insurance claims.\nknown as a counter-cyclical payment. Producers must\nreturn the amount, if any, by which the advance payment\n Former RD Employee Sentenced for Assault\nexceeds the actual counter-cyclical payment.\n on Former Supervisor\n For CYs 2003 and 2004, FSA made counter-cyclical\n In November 2006, a former RD employee was sentenced\npayments totaling about $1 billion and $4.4 billion,\n in Grand Traverse County, Michigan, Circuit Court to serve\nrespectively, including overpaying in advance $477.4\n 9 months of probation and 14 days of community service,\nand $174.2 million, respectively. Of the $652 million\n fined $495, and ordered to attend numerous counseling\nin advance overpayments made for CYs 2003 and 2004,\n programs for drunk and disorderly conduct after assaulting\n$651 million (99.9 percent) was recovered as of July 10,\n a former supervisor. In September 2006, the former RD\n2006. The overpayments was primarily recovered through\n employee assaulted the former supervisor when she attended\noffset of future Direct and Counter-Cyclical Payment\n an agency-sponsored conference in Traverse City, Michigan.\nProgram payments, which is the established procedure. We\n The former employee claimed to have been too intoxicated\nfound that FSA has adequate controls in place to minimize\n on the night in question to recall the assault.\nand recover advanced counter-cyclical overpayments and,\naccordingly, made no recommendations. (Audit Report No.\n03008-1-At, Advanced Counter-Cyclical Overpayments\nand Recovery)\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 15\n\x0c Goal 3\n\n\n\n\nImprovements Needed in RD\xe2\x80\x99s Dedicated Office of Procurement and Property\nLoan Origination and Servicing System Management (OPPM) Review of Acquisition\n(DLOS) Security and Application Controls Planning and Processing\n\nDLOS is used to originate and service SFH loans totaling USDA\xe2\x80\x99s Integrated Acquisition System (IAS) is intended\nmore than $13 billion. Our audit found that RD had not to provide a single enterprise-wide acquisition system. We\nestablished an effective security program, had not conducted found that IAS had the potential to aid in meeting control\na thorough certification and accreditation (C&A), and objectives; however, it does not provide control over all\nhad not appropriately established interconnection security areas and by itself cannot ensure that all control objectives\nagreements. Further, RD did not adequately monitor of the acquisition process are met. In addition, we found\ncontractor compliance with OMB and NIST guidance when that OPPM had not implemented procedures to confirm\nthe contractors prepared the documentation supporting the that component agencies comply with requirements not\ncertification of the system. As a result, critical loan portfolio controlled by IAS, specifically, issuing solicitations and\ninformation was unnecessarily jeopardized. monitoring contractor performance. In addition, the\n Automated Workforce Tracking System (AWTS) did\n We recommended that RD ensure that the DLOS security not have sufficient storage capacity to handle records for\nplan accurately reference ITS and National Information all acquisition workforce personnel. In response to our\nTechnology Center (NITC) documents, and that adequate recommendations, OPPM agreed that additional controls\ndocumentation be maintained to verify that all controls through process reviews and increased IAS functionality\nin the security plan were implemented; perform a C&A would strengthen oversight of component agency activities.\nthat fulfills the requirements of full system accreditation; OPPM plans to issue additional policy to component\nand ensure that the C&A includes adequate Security agencies to increase the number of contract review boards\nTesting and Evaluation testing and appropriate supporting specifically addressing solicitation review and proposal\ndocumentation. We also recommended that RD establish evaluation, strengthen component agency acquisition\nagreements with all entities with systems connecting with strategy planning, stress the importance of monitoring\nDLOS, NITC, and ITS general support systems that contractor performance, require agencies to periodically\ninclude rules of behavior and controls; establish controls to report to OPPM the results of their reviews, and expand\nensure staff and contractors do not exceed assigned levels the capabilities of AWTS or a replacement system. (Audit\nof authority; ensure all testing of dataset rules is completed Report No. 89017-1-Hy, OPPM Review of Acquisition\nwithin the test libraries; and establish controls to ensure Planning and Processing)\nsystem software changes are properly authorized, tested,\nand documented before migration to the production NRCS Oversight of Contract Administration\nenvironment. RD generally agreed, with the exception of Needs Improvement\nthe recommendation to revise its disaster recovery plan,\nstating that mainframe recovery is more crucial to restoring We determined that NRCS\xe2\x80\x99 administration of its\noperations and the mainframe component can be used procurement activity was conducted in accordance with\nin lieu of the Web-based component to collect loan data. Federal, Departmental, and agency regulations. However,\n(Audit Report No. 85501-1-FM, Security and Application NRCS\xe2\x80\x99 system of internal controls over its procurement\nControls \xe2\x80\x93 RD\xe2\x80\x99s DLOS) activities needed to be strengthened. Specifically, NRCS\n did not complete a sufficient number of planned oversight\n reviews to ensure that procurement activities totaling\n more than $170 million were consistently performed in\n an appropriate manner, and lacked other compensating\n controls. Firm-fixed-price contracts were increased without\n\n\n\n\n 16 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Goal 3\n\n\n\n\njustification, and sealed bids were opened and reviewed by USDA FY 2006/2005 Consolidated Financial\nonly one individual. NRCS also had not fully implemented Statements \xe2\x80\x93 Unqualified Opinion\nIAS. We recommended that NRCS develop and implement\ncontrol techniques to ensure that a sufficient number of The USDA consolidated financial statements for\nprocurement oversight reviews are performed to detect FY 2006/2005 received an unqualified audit opinion. In\nand resolve identified deficiencies, implement a strategy to our report on internal controls over financial reporting,\nresolve resource-related impacts on its management controls we identified three reportable conditions, of which two\nover contracting, and implement policies and procedures rose to the level of material weakness: improvements\non how the agency will use and monitor IAS. The agency needed in overall financial management across USDA, and\nconcurred with our recommendations and has begun to improvements needed in IT security and controls. The third\nimplement corrective actions. (Audit Report No. 10001- reportable item was related to improvements needed in\n01-Hy, Review of Contract Administration at NRCS) certain financial management practices and processes. We\n also reported three instances of noncompliance relating to the\nUSDA Implementation of the Improper Federal Financial Management Improvement Act of 1996\nPayments Information Act of 2002 (IPIA) (FFMIA), IPIA, and managerial cost accounting practices.\nNeeds Improvement In addition, the Department reported two potential Anti-\n Deficiency Act (ADA) violations in its FY 2006 Statement\nThe Office of the Chief Financial Officer (OCFO), the lead of Assurance relating to FS and CCC. The Department is\nagency for coordinating and reporting the Department\xe2\x80\x99s working with the agencies and OGC to determine whether\nefforts to implement IPIA, has designated compliance with the potential ADA violations actually occurred. OCFO\nIPIA as a top priority for FY 2007. In our ongoing effort generally agreed with the recommendations and plans to\nto evaluate USDA\xe2\x80\x99s compliance with IPIA requirements, develop corrective actions.\nOIG audited the FS and RHS processes for determining\nimproper payments that were reported in the FY 2006 The stand-alone agencies of CCC, FS, RD, FNS, the\nPerformance and Accountability Report. Our audits found Federal Crop Insurance Corporation (FCIC), and the Rural\nthat 1) valid statistical samples had not been performed, Telephone Bank (RTB) also received unqualified opinions.\n2) improper payments reported in FY 2005 were not\nproperly calculated, 3) RHS oversight of corrective actions The audit of CCC identified three material weaknesses\nwas not sufficient to ensure they were effective, and 4) FS related to improvements needed in information security\ndid not have a process in place for recovering improper controls, financial systems functionality and funds control,\npayments and RHS overstated the amount recovered. We and financial accounting and reporting policies and\nrecommended that the agencies develop and implement procedures. Two reportable conditions were identified\ncontrols to ensure that the identification and reporting related to improvements needed in producer monitoring\nof improper payments, including statistical sampling procedures and management\xe2\x80\x99s review procedures related to\nprocesses, comply with all OMB and OCFO requirements. the development, implementation, and maintenance of credit\nThe agencies concurred with our recommendations and reform cashflow models. Two instances of noncompliance\nare using the results of our work to improve the FY 2007 were identified related to the Federal Information Security\nprocess. (Audit Reports Nos. 04601-14-Ch and 08601- Management Act (FISMA) and FFMIA.\n47-SF; respectively, RHS\xe2\x80\x99 and FS\xe2\x80\x99 Progress To Implement\nIPIA)\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 17\n\x0c GoalHeading\n Section 3\n\n\n\n\n The audit of FS identified two material weaknesses related identified no material weaknesses, reportable conditions, or\nto improvements needed in FS\xe2\x80\x99 financial management and noncompliance with laws and regulations. (Audit Reports\nreporting process and general controls environment. Eleven Nos. 50401-59-FM, 06401-21-FM, 27401-31-Hy, 08401-\nreportable conditions were identified related to various 07-FM, 05401-15-FM, 85401-13-FM, and 15401-07-FM;\nfinancial and management issues, and two instances of respectively, USDA\xe2\x80\x99s, CCC\xe2\x80\x99s, FNS\xe2\x80\x99, FS\xe2\x80\x99, FCIC\xe2\x80\x99s, RD\xe2\x80\x99s, and\nnoncompliance were identified related to appropriations RTB\xe2\x80\x99s Financial Statements for FY 2006/2005)\nlaw and FFMIA.\n USDA Receives Clean Opinion on FY 2006\n The audit of RD identified one material weakness related Special Purpose Financial Statements\nto IT; three reportable conditions related to the credit reform\nquality control process, the Rural Telecommunications USDA received an unqualified opinion on its FY 2006\nProgram unliquidated obligations certification process, special purpose financial statements. We found no material\nand RD\xe2\x80\x99s liquidating methodology and subsidy allowance weaknesses in internal controls over the financial reporting\ncalculations; and one instance of noncompliance with process and our tests of compliance with Treasury Financial\nFFMIA. Manual Chapter 4700 requirements disclosed no instances\n of noncompliance that are required to be reported under\n The audit of FNS identified the agency was not in U.S. Government Auditing Standards and OMB Bulletin\nfull compliance with IPIA. The audits of FCIC and RTB No. 06-03, as amended. (Audit Report No. 50401-61-FM,\n Audit of USDA\xe2\x80\x99s Closing Package for FY 2006)\n\n\n\n\n 18 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Goal\n Section\n 3 Heading\n\n\n\n\nGOVERNMENTWIDE ACTIVITIES \xe2\x80\x93 GOAL 3\n\n\nReview of Legislation, Regulations, Directives, Participation on Committees, Working Groups,\nand Memoranda and Task Forces\n\nn\t\x07As part of its continuing efforts to strengthen conflict- n\t \x07In January, the USDA IG was elected to serve as the\n of-interest policies and procedures for the approved Chair of the PCIE\xe2\x80\x99s Legislation Committee. The\n insurance providers (AIP) and their agents and loss Legislation Committee ensures that the PCIE is kept\n adjustors involved in the Federal crop insurance abreast of matters in the congressional arena of interest\n program, RMA requested OIG auditors\xe2\x80\x99 comments to the Inspector General community. The committee\n and feedback on its draft policies and procedures. also develops, coordinates, and represents the official\n These continuing efforts, which began with the 2005 PCIE positions on legislative issues. Committee\n Standard Reinsurance Agreements with the AIPs, were activities during this reporting period included\n partly prompted by OIG auditors\xe2\x80\x99 recommendations reviewing pending legislation that would amend the IG\n in previous audit reports. Specifically, RMA had sought Act and preparing comments on Federal Acquisition\n our comments and feedback on a draft disclosure of Regulation changes related to OIG hotlines.\n the conflict-of-interest form to be used by the AIPs\n and their agents and loss adjustors. We commented n\t \x07The IG completed her third year as a member of\n both on the draft form and the accompanying draft the Comptroller General\xe2\x80\x99s Advisory Council on\n question-and-answer document. Government Auditing Standards. Sponsored by the\n Government Accountability Office, the Advisory\nn\t\x07OIG commented on the proposed rule to amend Council offers advice to the Comptroller General of\n regulations that govern the selection and functions the United States. The Council updated and issued\n of FSA State and county committees, published at 71 the Government Auditing Standards (Yellow Book) in\n Fed. Reg. 68,755 (Nov. 28, 2006). OIG noted that January 2007.\n the proposed regulation may not comply with FSA\xe2\x80\x99s\n Uniform Guidelines for Conducting FSA County n\t \x07The IG serves on the PCIE Audit Committee, which\n Committee Elections (see 70 Fed. Reg. 2837 (Jan. 18, provides leadership and guidance to the Federal audit\n 2005)) in terms of (1) balloting methods and (2) filing community by sponsoring audits of Governmentwide\n election reports. In addition, the proposed regulation issues and developing and maintaining professional\n may not sufficiently clarify the selection and function of standards for OIG audit activities. Committee\n area committees, as distinct from county committees. activities during this period included providing\n The proposed regulation also states that even if an oversight for the Inspector General Auditor Training\n eligible voter has an interest in land located in more Institute, supporting the Government Accountability\n than one local administrative area in a single county, Office in updating the Government Auditing Standards,\n the voter is still entitled to only one vote in one local approving the FISMA framework, and leading a review\n administrative area in the county (see 71 Fed. Reg. on the quality of audits performed under the Single\n 68,758). However, the regulation is not clear on how Audit Act.\n to determine exactly where the individual is eligible to\n vote. OIG recommended that the proposed rule clarify\n all the above issues.\n\n\n\n\n USDA\n USDAOIG\n OIGSEMIANNUAL\n SEMIANNUALREPORT\n REPORTTO\n TOCONGRESS\n CONGRESSFY\n FY2007\n 20071st\n 1stHalf\n Half 19\n 19\n\x0c Section Heading\n Goal 3\n\n\n\n\n GOVERNMENTWIDE ACTIVITIES \xe2\x80\x93 GOAL 3\n\nn\t \x07The PCIE IT Round Table established the Digital private property \xe2\x80\x93 as opposed to National Forest\n Forensic Working Group, consisting of 19 PCIE and System land \xe2\x80\x93 in the wildland urban interface (WUI).\n Executive Council on Integrity and Efficiency (ECIE) OIG recommended that FS managers evaluate their\n agencies, including the U.S. Department of Justice\xe2\x80\x99s agreements with State and local governments to ensure\n Computer Crime and Intellectual Property Section. that the costs of protecting the WUI are appropriately\n In October 2006, the working group was convened apportioned, since agency fire-suppression costs\n to establish Computer Forensic Standards for the could be significantly reduced \xe2\x80\x93 and firefighter\n OIG community, similar to the Government Auditing safety improved \xe2\x80\x93 if the Federal Government could\n Standards and the Investigative Standards for GS-1811s. proactively work with State and local governments\n The group determined that the best way to establish regarding prudent \xe2\x80\x9cFirewise\xe2\x80\x9d zoning and building\n these standards was to incorporate them in the Quality codes. OIG recommended that FS reduce the buildup\n Assurance Review (QAR) process, and developed of hazardous fuels, increase the number of qualified\n questions for the QAR consistent with the Quality personnel, and expand Wildland Fire Use to help\n Standards for Investigations (QSI), which are specific control future fire costs.\n to computer forensics. The Director of OIG\xe2\x80\x99s National\n Computer Forensic Division (NCFD) continues to n\t \x07Phyllis Fong Testifies Before the House Committee on\n participate in the development of questions for the Appropriations\xe2\x80\x99 Subcommittee on Agriculture, Rural\n QAR. NCFD has also provided copies of its policies Development, and Related Agencies, Regarding OIG\xe2\x80\x99s FY\n and procedures to members of the round table as 2008 Budget Request. On March 1, 2007, the IG and\n examples for OIG forensic units that are developing OIG senior managers presented testimony in support of\n policies and procedures for their labs. the President\xe2\x80\x99s FY 2008 budget request for OIG. Their\n testimony provided an overview of OIG\xe2\x80\x99s significant\nTestimony Delivered audit and investigative work in the prior 12 months\n and noted important work now underway or planned\nn\t\x07IG Testifies Before the Senate Committee on Energy and for 2007. The IG\xe2\x80\x99s testimony emphasized OIG\xe2\x80\x99s\n Natural Resources, Regarding Wildland Fire Issues. On work involving food safety, the security of USDA\xe2\x80\x99s\n January 30, 2007, the IG presented testimony on IT systems, food stamp and WIC investigations,\n the major findings and recommendations from OIG the extensive OIG oversight response to Gulf Coast\n audits regarding FS\xe2\x80\x99 Healthy Forests Initiative and hurricanes, and reviews of improper payment issues at\n large-fire suppression costs. The IG testified that FS\xe2\x80\x99 USDA agencies. The testimony also discussed OIG\xe2\x80\x99s\n wildfire suppression costs exceeded $1 billion in 4 of work assessing the Department\xe2\x80\x99s response to avian\n the past 7 years, and that the majority of FS\xe2\x80\x99 large- influenza and several audits involving FAS and USDA\n fire suppression costs are directly linked to protecting farm programs.\n\n\n\n\n 20\n 20 USDA\n USDAOIG\n OIGSEMIANNUAL\n SEMIANNUALREPORT\n REPORTTO\n TOCONGRESS\n CONGRESSFY\n FY2007\n 20071st\n 1stHalf\n Half\n\x0c Goal\n Section\n 3 Heading\n\n\n\n\nONGOING AND PLANNED REVIEWS FOR GOAL 3\n\nTopics that will be covered in ongoing or planned reviews under Goal 3 include:\n\nHurricane Relief Initiatives: n\t\x07Rural Utilities Service (RUS) controls over Water\n and Waste Disposal Loan and Grant Program,\nn\t\x07Emergency Watershed Protection Program and\n n\t\x07the Department and stand-alone agencies\xe2\x80\x99 financial\n Dead Animal Debris Disposal Project (NRCS),\n statements for FYs 2006 and 2007 (OCFO),\nn\t\x07Emergency Conservation Program (FSA),\n n\t\x07agreed-upon procedures: retirement, health, and life\nn\t\x07Section 32 disaster programs including the Feed,\n insurance withholdings/contribution and supplemental\n Hurricane (crop), Livestock, and Tree Indemnity\n headcount report submitted to Office of Personnel\n Programs and aquaculture grants (FSA and CCC),\n Management (OPM) for FYs 2006 and 2007 (OCFO),\nn\t\x07Emergency Forestry Conservation Reserve Program (FSA).\n n\t\x07continuing reviews of improper payments including\n the risk assessment process and monitoring the\nOther Goal 3 Work: progress of corrective actions (FSA and RHS),\nn\t\x07USDA employee civil rights complaints\n n\t\x07application control review of the Store Tracking\n (Office of Civil Rights (CR)),\n and Redemption Subsystem II (FNS),\nn\t\x07controls over producers disqualified\n n\t\x07management and security over USDA\n from farm programs (FSA),\n wireless connections (OCIO),\nn\t\x07financial management controls over\n n\t\x07FY 2007 National Finance Center (NFC) general controls,\n reinsured companies (RMA),\n n\t\x07FISMA \xe2\x80\x93 FY 2007 (OCIO),\nn\t\x07RMA compliance activities,\n n\t\x07e-Gov security (OCIO),\nn\t\x07contracting for services under the Agricultural\n n\t\x07contract administration at NRCS,\n Risk Protection Act of 2000 (RMA),\n n\t\x07monitoring of USDA implementation of\nn\t\x07RMA\xe2\x80\x99s 2005 emergency hurricane relief efforts in Florida,\n Cost Accounting System (OCFO),\nn\t\x07FS Air Safety Program,\n n\t\x07ITS general controls \xe2\x80\x93 FY 2007 (OCIO),\nn\t\x07FS controls over documenting and reporting\n n\t\x07minimum security requirements in USDA\n its hurricane relief expenditures to FEMA,\n information systems (OCIO),\nn\t\x07FS Stewardship Contracting Program,\n n\t\x07NITC FY 2007 general controls (OCIO),\nn\t\x07FS Invasive Species Program,\n n\t\x07management over Time & Attendance data\nn\t\x07management of FS Forest Legacy Program,\n processing by TIME at NFC (OCFO),\nn\t\x07replacement plan for firefighting aerial resources (FS),\n n\t\x07controls over e-payments at OCFO/NFC,\nn\t\x07FS\xe2\x80\x99 use of contracted labor,\n n\t\x07IT \xe2\x80\x93 stolen computer equipment containing\nn\t\x07oversight and control of FS activities,\n sensitive information (OCIO),\nn\t\x07effectiveness and enforcement of debarment\n n\t\x07followup on the Packers and\n and suspension regulations in USDA,\n Stockyards Programs (GIPSA),\nn\t\x07implementation of renewable energy programs in USDA,\n n\t\x07effective use of satellite imagery by\nn\t\x07security and application controls in RD\xe2\x80\x99s DLOS (RHS),\n USDA agencies (FSA and NRCS),\nn\t\x07RBS\xe2\x80\x99 Intermediary Relending Program,\n n\t\x07Wetlands Reserve Program restoration\nn\t\x07Business and Industry guaranteed lenders\n compliance (NRCS),\n with loans in default (RBS),\n n\t\x07contract administration at NRCS,\nn\t\x07origination practices for the SFH Section\n n\t\x07grants to Tribal Land Grant Institutions (CSREES),\n 502 Direct Loan Program (RHS),\n n\t\x07National Research Initiative\nn\t\x07Rural Rental Housing (RRH) construction costs (RHS),\n Competitive Grants (CSREES),\nn\t\x07guaranteed loan losses (RHS),\n n\t\x07international trade policy and procedures (FAS),\nn\t\x07RHS force-placed hazard insurance,\n n\t\x07Trade Adjustment Assistance for Farmers (FAS), and\nn\t\x07selected Section 538 project (RHS),\n n\t\x07ARS research agreement monitoring.\nn\t\x07servicing of lenders\xe2\x80\x99 guaranteed loans (RHS),\nn\t\x07Oklahoma RRH Management Company (RHS),\n\n\nThe findings and recommendations from these efforts will be covered in future semiannual reports as the relevant audits and\ninvestigations are completed.\n\n\n USDA\n USDA OIG\n OIG SEMIANNUAL\n SEMIANNUAL REPORT\n REPORT TO\n TO CONGRESS\n CONGRESS FY\n FY 2007\n 2007 1st\n 1st Half\n Half 21\n\x0c Gauging the Impact of the OIG\n\n PROGRESS AGAINST THE OIG STRATEGIC PLAN 1978, as amended. The following pages present a statistical\n overview of the OIG\xe2\x80\x99s accomplishments this period.\n The first way we gauged our impact was by measuring the\n extent to which our work focused on the key issues under For audits we show\n our three strategic goals: n\t\x07reports issued\n\n n\t\x07management decisions made (number\n of reports and recommendations)\n n\t\x07Support USDA in the enhancement of safety and\n security measures to protect USDA and agricultural n\t\x07total dollar impact of management-decided reports\n resources and in related public health concerns. (questioned costs and funds to be put to better use)\n\n n\t\x07Reduce program vulnerabilities and enhance n\t\x07program improvement recommendations\n integrity in the delivery of benefits to individuals n\t\x07audits without management decision\n n\t\x07Increase the efficiency and effectiveness with which\n For investigations we show\n USDA manages and employs public assets and resources,\n including physical and information resources. n\t\x07indictments\n\n n\t\x07convictions\n IMPACT OF OIG AUDIT AND INVESTIGATIVE WORK n\t\x07arrests\n ON DEPARTMENT PROGRAMS\n n\t\x07total dollar impact (recoveries, restitutions, fines)\n\n A second way we gauge our impact is by tracking the n\t\x07administrative sanctions\n outcomes of our audits and investigations. Many of these n\t\x07OIG Hotline complaints\n measures are codified in the Inspector General Act of\n\n\n\n\n PERFORMANCE RESULTS TOTALS UNDER OUR STRATEGIC GOALS\n\n\n FY 2006 FY 2007\n Performance Measures Baseline Target FY 2007 1st Half Actual\n\n\n Audit/Investigative resources dedicated to critical/high-impact work 91.8% 90% 92.0%\n\n\n\n\n Audit recommendations resulting in management decision within 1 year 89.5% 85% 87.6%\n\n\n\n Investigative cases where criminal, civil, or administrative action is taken in\n 77.4% 65% 74.7%\n response to OIG reports\n\n\n\n\n22 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Impact of the OIG\n\n\n\n\n SUMMARY OF AUDIT ACTIVITIES\n OCTOBER 2006 \xe2\x80\x93 MARCH 2007\n\n Reports Issued 38\n Audits Performed by OIG 29\n Evaluations Performed by OIG 0\n Audits Performed Under the Single Audit Act 0\n Audits Performed by Others 9\n Management Decisions Made\n Number of Reports 25\n Number of Recommendations 233\n\n Total Dollar Impact (Millions) of Management-Decided Reports $11.4\n Questioned/Unsupported Costs $11.3 ab\n\n Recommended for Recovery $0.9\n Not Recommended for Recovery $10.3\n Funds To Be Put to Better Use $0.1\na\n \x07 T\x07 hese were the amounts the auditees agreed to at the time of management decision.\nb\n \x07The recoveries realized could change as the auditees implement the agreed upon corrective action plan and seek recovery of amounts recorded as debts due the Department.\n\n\n\n\n SUMMARY OF INVESTIGATIVE ACTIVITIES\n OCTOBER 2006 \xe2\x80\x93 MARCH 2007\n\n Reports Issued 155\n\n Cases Opened 209\n\n Cases Closed 167\n\n Cases Referred for Prosecution 107\n\n Impact of Investigations\n Indictments 171\n\n Convictions 101a\n\n Searches 69\n\n Arrests 453\n\n Total Dollar Impact (Millions) $43.5\n Recoveries/Collections $7.9 b\n\n\n\n Restitutions $23.4c\n\n Fines $2.4d\n\n Claims Established $8.8e\n\n Cost Avoidance $0.5f\n\n Administrative Penalties $0.5g\n\n Administrative Sanctions 58\n Employees 17\n\n Businesses/Persons 41\na\n \x07Includes convictions and pretrial diversions. Also, the period of time to obtain court action on an indictment varies widely; therefore, the 117 convictions do not necessarily relate to the 133 indictments.\nb\n \x07 I\x07ncludes money received by USDA or other Government agencies as a result of OIG investigations.\nc\n \x07 \x07Restitutions are court-ordered repayments of money lost through a crime or program abuse.\nd\n \x07 Fines are court-ordered penalties.\ne\n \x07Claims established are agency demands for repayment of USDA benefits.\nf\n \x07Consists of loans or benefits not granted as the result of an OIG investigation.\ng\n I\x07ncludes monetary fines or penalties authorized by law and imposed through an administrative process as a result of OIG findings.\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 23\n\x0c Impact of the OIG\n\n\n\n\n INVENTORY OF AUDIT REPORTS\n WITH RECOMMENDATIONS THAT\n FUNDS BE PUT TO BETTER USE\n FROM OCTOBER 1, 2006, THROUGH MARCH 31, 2007\n\n\n NUMBER DOLLAR VALUE\n\n\n FOR WHICH NO MANAGEMENT DECISION HAD BEEN MADE BY\n A. 9 $323,696,063\n OCTOBER 1, 2006\n\n\n\n\n B. WHICH WERE ISSUED DURING THE REPORTING PERIOD 3 $5,988,842\n\n\n\n\n TOTALS 12 $329,684,905\n\n\n\n\n FOR WHICH A MANAGEMENT DECISION WAS MADE DURING THE\n C. 1\n REPORTING PERIOD\n\n\n\n\n (1) \x07DOLLAR VALUE OF DISALLOWED COSTS $115,878\n\n\n\n\n (2) \x07DOLLAR VALUE OF COSTS NOT DISALLOWED $0\n\n\n\n\n FOR WHICH NO MANAGEMENT DECISION HAS BEEN MADE BY THE END\n D. 11 $329,569,027\n OF\xc2\xa0THE REPORTING PERIOD\n\n\n\n\n REPORTS FOR WHICH NO MANAGEMENT DECISION WAS MADE WITHIN\n 7 $323,455,788\n 6\xc2\xa0MONTHS OF ISSUANCE\xe2\x80\x8a\n\n\n\n\n24 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Impact of the OIG\n\n\n\n\n INVENTORY OF AUDIT REPORTS WITH\n QUESTIONED COSTS AND LOANS\n FROM OCTOBER 1, 2006, THROUGH MARCH 31, 2007\n\n\n\n DOLLAR VALUES\n\n\n QUESTIONED UNSUPPORTEDa\n COSTS AND COSTS AND\n NUMBER LOANS LOANS\n\nA.\n FOR WHICH NO MANAGEMENT DECISION HAD BEEN MADE BY 21 $109,749,010 $49,055,663\n OCTOBER 1, 2006\n\n\nB. WHICH WERE ISSUED DURING THIS REPORTING PERIOD 5 $6,505,601 $2,370,789\n\n\n\nTOTALS 26 $116,254,611 $51,426,452\n\n\n\nC.\n FOR WHICH A MANAGEMENT DECISION WAS MADE DURING 8\n THIS REPORTING PERIOD\n\n\n (1) \x07DOLLAR VALUE OF DISALLOWED COSTS\n\n\n RECOMMENDED FOR RECOVERY $935,459 $285,211\n\n\n\n NOT RECOMMENDED FOR RECOVERY $10,328,657 $87,592\n\n\n\n (2) \x07DOLLAR VALUE OF COSTS NOT DISALLOWED $1,475,768\n\n\n\nD.\n FOR WHICH NO MANAGEMENT DECISION HAS BEEN MADE 18 $103,750,430 $50,357,412\n BY\xc2\xa0THE END OF THIS REPORTING PERIOD\n\n\n REPORTS FOR WHICH NO MANAGEMENT DECISION WAS 14 $97,337,682 $48,074,215\n MADE WITHIN 6 MONTHS OF ISSUANCE\n\na\n Unsupported values are included in questioned values.\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 25\n\x0c Impact of the OIG\n\n\n\n\n PROGRAM IMPROVEMENT RECOMMENDATIONS n\t\x07USDA agreed to assign a senior-level official to coordinate\n with EPA\xe2\x80\x99s Chesapeake Bay Program, and to direct agencies\n A significant number of our audit recommendations carry no to expedite the development and implementation of\n outcome-based performance measurements to evaluate\n monetary value per se, but their impact can be immeasurable\n the effectiveness of their conservation efforts and\n in terms of safety, security, and public health. They can also\n programs.\n contribute considerably toward economy, efficiency, and\n effectiveness in USDA\xe2\x80\x99s programs and operations. During n\t\x07FS agreed to modify its policies that unduly restrict the\n this reporting period, we issued 144 program improvement use of fire to reduce hazardous fuels (brush, dead trees)\n recommendations, and management agreed to implement a on FS land.\n total of 142 program improvement recommendations that n\t\x07FS agreed to determine the most cost-effective marketing\n were issued this period or earlier. Examples of the program methods for surplus properties that are best suited for the\n improvement recommendations issued this period (see the agency and will obtain the best prices for the property.\n main text of this report for a summary of the audits that n\t\x07FS agreed to (1) conduct management reviews of the\n prompted these program improvement recommendations) fleet credit card operations and (2) strengthen controls\n include the following: over fleet credit cards and how PCMS is used to monitor\n those cards.\n n\t\x07APHIS agreed to issue policy to clarify CBP\xe2\x80\x99s responsibilities\n n\t\x07RD agreed to ensure that adequate documentation is\n for Transportation and Exportation permits that allow\n maintained to verify that all controls in the DLOS security\n prohibited and restricted agricultural commodities to be\n plan were implemented; perform a C&A that fulfills the\n trans-shipped across the country to foreign destinations,\n requirements of full system accreditation; and ensure that\n and for the handling of seized agricultural products at\n the C&A includes adequate Security Testing and Evaluation\n ports of entry. APHIS also agreed to develop a process\n testing and appropriate supporting documentation.\n to allow both agencies to assess the risk of agricultural\n products entering the country by rail. n\t\x07FS and RHS agreed to develop and implement controls to\n ensure that the identification and reporting of improper\n n\t\x07RMA agreed to issue a notice to advise insurance providers\n payments, including statistical sampling processes,\n of the unacceptable documents that have been used and to\n comply with all OMB and OCFO requirements.\n clarify what documents are acceptable for substantiating\n AGR policies and claims.\n\n\n\n\n26 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Impact of the OIG\n\n\n\n\n SUMMARY OF AUDIT REPORTS RELEASED FROM\n OCTOBER 1, 2006, THROUGH MARCH 31, 2007\n DURING THE 6-MONTH PERIOD FROM OCTOBER 1, 2006, THROUGH MARCH 31, 2007, THE OFFICE\n OF INSPECTOR GENERAL ISSUED 38 AUDIT REPORTS, INCLUDING 9 PERFORMED BY OTHERS.\n THE FOLLOWING IS A SUMMARY OF THOSE AUDITS BY AGENCY:\n\n\n QUESTIONED UNSUPPORTEDa FUNDS BE PUT\n AUDITS COSTS AND COSTS AND TO BETTER\nAGENCY RELEASED LOANS LOANS USE\nAGRICULTURAL RESEARCH SERVICE 1\n\nANIMAL AND PLANT HEALTH INSPECTION SERVICE 1\n\nOFFICE OF THE CHIEF INFORMATION OFFICER 1\n\nCOMMODITY CREDIT CORPORATION 1\n\nFARM SERVICE AGENCY 3 $5,600,000\n\nFOOD AND NUTRITION SERVICE 1\n\nFOREIGN AGRICULTURAL SERVICE 1\n\nFOREST SERVICE 10 $3,783,205 $87,592\n\nMULTIAGENCY 8\n\nNATURAL RESOURCES CONSERVATION SERVICE 1\n\nOFFICE OF PROCUREMENT AND PROPERTY MANAGEMENT 1\n\nRISK MANAGEMENT AGENCY 3 $2,722,396 $2,283,197\n\nRURAL BUSINESS-COOPERATIVE SERVICE (RBS) 1\n\nRURAL DEVELOPMENT 2\n\nRURAL HOUSING SERVICE 2 $388,842\n\nRURAL TELEPHONE BANK 1\n\n\nTOTALS 38 $6,505,601 $2,370,789 $5,988,842\n\nTOTAL COMPLETED:\n SINGLE AGENCY AUDIT 30\n MULTIAGENCY AUDIT 8\n SINGLE AGENCY EVALUATION 0\n MULTIAGENCY EVALUATION 0\n TOTAL RELEASED NATIONWIDE 38\n TOTAL COMPLETED UNDER CONTRACTb 9\n TOTAL SINGLE AUDIT ISSUED c\n 0\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 - -Continued\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 27\n\x0c Impact of the OIG\n\n\n\n\n AUDIT REPORTS RELEASED AND ASSOCIATED MONETARY VALUES\n FROM OCTOBER 1, 2006, THROUGH MARCH 31, 2007\n\n QUESTIONED UNSUPPORTED\n RELEASE COSTS AND COSTS AND FUNDS BE PUT\n AUDIT NUMBER DATE TITLE LOANS LOANS TO BETTER USE\n\n\n Agricultural Research Service\n DCAA Audit of International\n Science and Technology\n Center\xe2\x80\x99s and Science and\n 020170006HQ 2006/10/30\n Technology Center in\n Ukraine\xe2\x80\x99s Internal Controls\n Funded by ARS\n Total: Agricultural Research Service 1\n\n\n\n Animal and Plant Health Inspection Service\n Review of Customs and Border\n 336010007CH 2007/02/21 Protection\xe2\x80\x99s Agricultural\n Inspection Activities\n Total: Animal and Plant Health Inspection Service 1\n\n\n\n Office of the Chief Information Officer\n Information Technology\n 885010007FM 2007/03/16 Service\xe2\x80\x99s General Controls\n \xe2\x80\x93 Fiscal Year 2006\n Total: Office of the Chief Information Officer 1\n\n\n\n Commodity Credit Corporation\n Audit of CCC\xe2\x80\x99s FY 2006\n 064010021FM 2006/11/13\n Financial Statements\n Total: Commodity Credit Corporation 1\n\n\n\n Farm Service Agency\n FSA\xe2\x80\x99s Efforts to Identify and\n 030080001AT 2006/12/12 Recover Overpayments in the\n Counter-Cyclical Program\n Hurricane Relief Initiatives:\n Barge Movement and\n 036010021KC 2007/03/20 $3,400,000\n Transportation Differential\n Agreements\n Hurricane Relief Initiatives:\n 036010022KC 2007/03/20 Emergency and Alternative $2,200,000\n Grain Storage\n Total: Farm Service Agency 3 $5,600,000\n\n\n\n\n28 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Impact of the OIG\n\n\n\n\n AUDIT REPORTS RELEASED AND ASSOCIATED MONETARY VALUES\n FROM OCTOBER 1, 2006, THROUGH MARCH 31, 2007\n\n QUESTIONED UNSUPPORTED\n RELEASE COSTS AND COSTS AND FUNDS BE PUT\n AUDIT NUMBER DATE TITLE LOANS LOANS TO BETTER USE\n\n\nFood and Nutrition Service\n FY 2006 FNS Financial\n274010031HY 2006/11/08\n Statements\nTotal: Food and Nutrition Service 1\n\n\n\nForeign Agricultural Service\n076010001HY 2007/02/22 Trade Promotion Operations\nTotal: Foreign Agricultural Service 1\n\n\n\nForest Service\n080010001AT 2006/11/03 Capital Improvement Program\n DCAA Audit of Reserve\n080170008HQ 2006/10/26 America Termination for\n Convenience\n DCAA Audit of Minden Air\n080170009HQ 2007/01/19 Corporation\xe2\x80\x99s Termination\n Proposal Funded by FS\n DCAA Audit of Warden\n080170010HQ 2007/02/21 Associates, Inc. Cost $19,422\n Verification\n DCAA Audit of National\n Fire Protection Association\xe2\x80\x99s\n080170011HQ 2007/02/26\n December 31, 2005, Indirect\n Rates\n Audit of FY 2006 Forest\n084010007FM 2006/11/13\n Service Financial Statements\n Controls Over Forest Service\n086010003TE 2007/03/30 Vehicle Fuel and Maintenance $3,670,930\n Costs\n FS Large Fire Suppression\n086010044SF 2006/11/20\n Costs\n086010046SF 2006/11/07 FS Hurricane Relief Efforts\n Improper Payments\n \xe2\x80\x93 Monitoring the Progress of\n086010047SF 2007/02/01 $92,853 $87,592\n Corrective Actions for High\n Risk Programs in FS\nTotal: Forest Service 10 $3,783,205 $87,592\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 29\n\x0c Impact of the OIG\n\n\n\n\n AUDIT REPORTS RELEASED AND ASSOCIATED MONETARY VALUES\n FROM OCTOBER 1, 2006, THROUGH MARCH 31, 2007\n\n QUESTIONED UNSUPPORTED\n RELEASE COSTS AND COSTS AND FUNDS BE PUT\n AUDIT NUMBER DATE TITLE LOANS LOANS TO BETTER USE\n\n\nMulti-Agency\n500990051KC 2007/03/28 Zero Acreage Reporting Abuse\n Fiscal Year 2006 USDA\n504010059FM 2006/11/14\n Financial Statements\n Fiscal Year 2006 Audit of\n504010061FM 2006/11/17\n USDA\xe2\x80\x99s Closing Package\n Information Technology \xe2\x80\x93 Lost\n505010008FM 2007/02/27 or Stolen Items Containing\n Sensitive Information\n Chesapeake Bay Program\n506010010HQ 2006/11/20\n \xe2\x80\x93 Joint Review\n Implementation of Trade\n Title of 2002 Farm Bill and\n506010012AT 2007/03/28\n President\xe2\x80\x99s Management\n Agenda\n Review of FY 2005\n506010015TE 2007/03/12\n Congressional Earmarks\n USDA Homeland Security\n507010002KC 2007/03/12\n Initiatives\nTotal: Multi-Agency 8\n\n\n\nNatural Resources Conservation Service\n Review of Contract\n100010001HY 2007/03/20 Administration at the Natural\n Resources Conservation Service\nTotal: Natural Resources Conservation Service 1\n\n\n\nOffice of Procurement and Property Management\n Review of Acquisition\n890170001HY 2007/02/09\n Planning and Processing\nTotal: Office of Procurement and Property Management 1\n\n\n\nRisk Management Agency\n Evaluation of RMA Indemnity\n050990027AT 2007/03/28 Payments for 2004 Florida $415,710\n Hurricanes\n Audit of Fiscal Year 2006\n054010015FM 2006/11/08\n FCIC Financial Statements\n Adjusted Gross Revenue\n056010004SF 2007/01/23 $2,306,686 $2,283,197\n Program\nTotal: Risk Management Agency 3 $2,722,396 $2,283,197\n\n\n\n\n 30 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Impact of the OIG\n\n\n\n\n AUDIT REPORTS RELEASED AND ASSOCIATED MONETARY VALUES\n FROM OCTOBER 1, 2006, THROUGH MARCH 31, 2007\n\n QUESTIONED UNSUPPORTED\n RELEASE COSTS AND COSTS AND FUNDS BE PUT\n AUDIT NUMBER DATE TITLE LOANS LOANS TO BETTER USE\n\n\nRural Business-Cooperative Service\n Business and Industry Loan for\n340040008HY 2007/01/31 Lehigh Coal and Navigation\n Company\nTotal: Rural Business-Cooperative Service 1\n\n\n\nRural Development\n Rural Development FY 2006\n854010013FM 2006/11/09\n Financial Statements\n Rural Development\xe2\x80\x99s\n Dedicated Loan\n855010001FM 2007/02/12\n Origination and Servicing\n System\nTotal: Rural Development 1\n\n\n\nRural Housing Service\n Improper Payments\n \xe2\x80\x93 Monitoring the Progress\n046010014CH 2007/03/20 of Corrective Action for\n High Risk Programs in Rural\n Housing Service\n Controls Over Single Family\n046010015CH 2007/03/30 Housing Provided for $388,842\n Hurricane Relief Efforts\nTotal: Rural Development 2 $388,842\n\n\n\nRural Telephone Bank\n Rural Telephone Bank FY\n154010007FM 2006/11/09\n 2006 Financial Statements\nTotal: Rural Telephone Bank 1\n\nGrand Total: 38 $6,505,601 $2,370,789 $5,988,842\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 31\n\x0c Section\n Impact\n Heading\n of the OIG\n\n\n\n\n AUDITS WITHOUT MANAGEMENT DECISION\n The Inspector General Act has a number of reporting requirements, among them tracking audits without management decision. The following\n audits did not have management decisions made within the 6-month limit imposed by Congress. Narratives for new entries follow this table.\n An asterisk (*) indicates that an audit is pending judicial, legal, or investigative proceedings that must be completed before the agency can act to\n complete management decisions.\n Total Value at Issuance Amount With No Mgmt.\n Agency Date Issued Title of Report (in dollars) Decision (in dollars)\n\n\n\n NEW SINCE LAST REPORTING PERIOD\n 1. \x07Management and Security Over the Universal\n OCIO 08/07/06\n Telecommunications Network (88501-6-FM)\n\n\n FSIS 09/19/06 2. FSIS State-Operated Inspection Programs (24005-1-At) 1,598,783\n\n\n 3. \x07Single-Family Housing, Borrower Income Verification\n RHS 08/14/06\n Procedures (04099-341-At)\n 4. \x07Controls Over Multi-Family Housing Funds Provided\n 09/28/06 160,557\n for Hurricane Relief Efforts (04601-13-Ch)\n\n PREVIOUSLY REPORTED BUT NOT YET RESOLVED\n These audits are still pending agency action or are under judicial, legal, or investigative proceedings. Details on the recommendations where\n management decisions had not been reached have been reported in previous Semiannual Reports to Congress. Agencies have been informed of\n actions that must be taken to reach management decision, but for various reasons the actions have not been completed. The appropriate Under and\n Assistant Secretaries have been notified of those audits without management decisions.\n 5. \x07Safeguards To Prevent Entry of Prohibited Pests and\n APHIS 02/20/03\n Diseases Into the United States (33601-3-Ch)\n 6. \x07Wildlife Services \xe2\x80\x93 Aerial Acquisition Procedures\n 09/30/04 25,208 25,208\n (33099-1-KC)\n 7. \x07APHIS Animal Care Program Inspection and\n 09/30/05 689,354 291,000\n Enforcement Activities (33002-3-SF)\n 8. \x07Monitoring the Audit of CCC\xe2\x80\x99s FY 2005 Financial\n CCC 11/09/05\n Statements (06401-20-FM)\n 9. \x07Private Voluntary Organization (PVO) Grant Fund\n FAS 03/15/06\n Accountability (07016-1-At)\n 2,175,876\n\n 10. \x07NSLP \xe2\x80\x93 Food Service Management Companies\n FNS 09/06/01\n (FSMC) Midwest Region (27601-24-Ch)\n 3,537,912 236,749\n\n 11/21/01 11. \x07CACFP \xe2\x80\x93 Wildwood, Inc. Phase II (27010-6-KC) 36,895,611 36,895,611\n 12. \x07NSLP Cost-Reimbursable Company (27601-13-KC)\n 12/09/05 6,126,830 6,126,830\n Contracts With FSMCs (27601-15-KC)\n FSA 09/30/05 13. \x07FSA Compliance Activities (03601-12-Ch) 3,741,157 3,741,157\n 14. \x07Implementation of the Hazard Analysis and Critical\n FSIS 06/21/00\n Control Point (HACCP) System (24001-3-At)\n 15. \x07Oversight of Production Process and Recall at ConAgra\n 09/30/03\n Plant (Establishment 969) (24601-2-KC)\n 16. \x07HACCP \xe2\x80\x93 Compliance by Very Small Plants\n 06/24/05\n (24601-5-At)\n 17. \x07Implementation of Agricultural Risk Protection Act\n Multiagency 09/30/03\n (50099-12-KC)\n 18. \x07Homeland Security Issues for USDA Grain and\n 02/23/04\n Commodities Inventory (50099-13-KC)\n 19. \x07Controls Over APHIS Issuance of Genetically\n 12/08/05\n Engineered Organisms Release Permits (50601-8-Te)\n\n\n\n\n32 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c ImpactSection\n of the OIG\n Heading\n\n\n\n\n Total Value at Issuance Amount With No Mgmt.\n Agency Date Issued Title of Report (in dollars) Decision (in dollars)\n 20. \x07Lender Servicing of B&I Guaranteed Loans, Florida\nRBS 01/28/02\n (34601-3-At)\n 1,536,060 1,536,060\n\n 21. \x07Lender Servicing of B&I Guaranteed Loans in Georgia\n 01/10/03 3,766,908 3,706,908\n (34601-4-At)\n 22. \x07RD \xe2\x80\x93 Lender Servicing of B&I Guaranteed Loans in\n 08/27/03 9,145,549 224,951\n Georgia (34601-5-At)\n 23. \x07Request Audit of B&I Guaranteed Loan in Arkansas\n 09/29/05 2,502,954\n (34099-7-Te)\n 24. \x07RRH Program Insurance Expenses, Phase II\nRHS 09/28/01\n (04601-4-KC)\n 596,665 79,442\n\n 25. \x07RD, RRH Program, Tenant Income Verification\n 06/26/03 7,781,635 3,183,305\n \xe2\x80\x93 Gainesville, FL (04004-3-At)\n 09/30/04 26. \x07RRH Project Costs, Cairo, IL (04099-143-Ch)* 164,000 164,000\n 27. \x07Subsidy Payment Accuracy In Multi-Family Housing\n 03/23/05\n Programs (04099-339-At)\n 28. \x07Monitoring of RMA\xe2\x80\x99s Implementation of Manual 14\nRMA 03/15/02 Reviews/Quality Control Review System\n (05099-14-KC)\n 11/09/05 29. \x07RMA Prevented Planting Claims (05099-11-SF) 96,489 96,489\n\nRUS 09/30/05 30. \x07Broadband Grant and Loan Programs (09601-4-Te) 340,376,319 30,377,069\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 33\n\x0c Section\n Impact\n Heading\n of the OIG\n\n\n\n\nAUDITS WITHOUT MANAGEMENT DECISION \xe2\x80\x93 borrower renewals. CSC incorrectly limited the QC universe\nNARRATIVE FOR NEW ENTRIES to only renewals that had previously received a supervisory\n review. The overall payment subsidy error rate calculated\n from this limited sample may not necessarily correspond to\n1. Management and Security Over the the true rate of error for the entire SFH loan subsidy program.\nUniversal Telecommunications Network Second, CSC does not obtain documents to independently\n(88501-6-FM), Issued August 7, 2006 verify Federal income tax information borrowers submit as\n part of their subsidy renewals. Thus, CSC\xe2\x80\x99s QC reviews do\nWe found that OCIO had not conducted required failover not provide management with a reliable means of estimating\ntesting, security control testing, and certification and payment subsidy errors and overall program effectiveness. We\naccreditation of the Universal Telecommunications Network have agreed to assist CSC officials by providing them with an\n(UTN) before implementation. OCIO agreed with all example of a valid sampling plan for them to use as guidance\nfive recommendations, and we have reached management in developing their own sampling plan. CSC has also agreed\ndecision on two of them. For the remaining three, OCIO to obtain and use the Federal income tax information when\nneeds to ensure that controls are in place to capture total performing their QC review. Of seven recommendations, six\ncosts of a system, conduct a full and comprehensive failover remain without management decision.\ntest, and have an independent third-party review of security\ncontrols over UTN, according to detailed, time-phased 4. Controls Over Multi-Family Housing Funds\nplans with completion dates. Provided for Hurricane Relief Efforts (04601-\n 13-Ch), Issued September 28, 2006\n2. FSIS State-Operated Inspection Programs,\n(24005-1-At), Issued September 19, 2006 RHS\xe2\x80\x99 quick response in placing victims into RRH units won\n praise in the Administration\xe2\x80\x99s report, The Federal Response to\nFSIS was not providing timely oversight of State Meat and Hurricane Katrina: Lessons Learned. However, in focusing\nPoultry Inspection (MPI) programs. From October 2003 on quickly placing victims into RRH units, agency officials\nthrough June 2005, FSIS had conducted only 8 initial overlooked some basic management controls needed to\nonsite reviews of the 28 State MPI programs. FSIS had not ensure that the appropriate amount of housing assistance\nperformed timely onsite fiscal reviews and reviews of new was provided to victims, and that only victims received\nprograms, and did not timely implement its yearend grant assistance. We concluded that much of the $2.6 million\ncloseout procedures to ensure that State MPI programs in emergency rental assistance (as of March 31, 2006) that\npromptly returned any excess Federal funds. Of the RHS provided to disaster victims was unnecessary. (This\n12 recommendations, management decision has been amount may actually be higher because RHS\xe2\x80\x99 data system\nreached on 10, and we are awaiting a response from FSIS to did not include all hurricane relief information.)\naddress the remaining 2. The funds noted in the total value\nat issuance were related to the Texas MPI program, which is In the absence of any formal written emergency\ncurrent as of FY 2005 as to monies owed to FSIS. procedures to address a disaster of this magnitude, RHS\n officials provided guidance following the hurricanes in the\n3. Single-Family Housing, Borrower Income form of five unnumbered letters, four of which were issued\nVerification Procedures (04099-341-At), in September 2005. While this guidance generally answered\nIssued August 14, 2006 immediately pressing questions for field staff, it did not\n address some major control issues. Thus, in light of the\nAlthough RHS\xe2\x80\x99 Centralized Servicing Center (CSC) regularly problems that occurred after the Gulf Coast disaster, and\nconducts quality control (QC) reviews to ascertain the the likelihood that other disasters will occur in the future,\naccuracy of single-family housing (SFH) loan payments agency officials should develop and implement controls\nsubsidies, we found two procedural errors compromising their before the next disaster to ensure that rental assistance is\nvalidity. First, CSC\xe2\x80\x99s QC review was not properly designed to properly spent. We are awaiting a response from the agency\nproduce statistically valid conclusions for the entire universe of to address our recommendations.\n\n\n\n\n 34 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Impact of the OIG\n\n\n\n\nINDICTMENTS AND CONVICTIONS therefore, the 101 convictions do not necessarily relate to the\n 171 indictments. Fines, recoveries/collections, restitutions,\nFrom October 1, 2006, through March 31, 2007, OIG claims established, cost avoidance, and administrative\ncompleted 155 investigations. We referred 107 cases to penalties resulting from our investigations totaled about\nFederal, State, and local prosecutors for their decision. $43.5 million.\n\n During the reporting period, our investigations led to The following is a breakdown, by agency, of indictments\n171 indictments and 101 convictions. The period of time and convictions for the reporting period.\nto obtain court action on an indictment varies widely;\n\n\n\n Indictments and Convictions\n October 1, 2006 \xe2\x80\x93 March 31, 2007\n\n Agency Indictments Convictions*\n APHIS 7 8\n ARS 1 0\n FAS 0 1\n FNS 123 56\n FS 2 1\n FSA 14 21\n FSIS 4 4\n NRCS 0 1\n OCFO 1 0\n OIG** 1 1\n RBS 1 1\n RHS 6 4\n RMA 7 0\n RUS 3 2\n SEC 1 1\n Totals 171 101\n\n *This category includes pretrial diversions.\n **An individual impersonated an OIG special agent and was found guilty.\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 35\n\x0c Impact of the OIG\n\n\n\n\n OFFICE OF INSPECTOR GENERAL HOTLINE reporting period, the OIG Hotline received 684 complaints,\n which included allegations of participant fraud, employee\n The OIG Hotline serves as a national receiving point for misconduct, and mismanagement, as well as opinions\n reports from both employees and the general public of about USDA programs. Figure 1 displays the volume and\n suspected incidents of fraud, waste, mismanagement, and type of the complaints we received, and figure 2 displays the\n abuse in USDA programs and operations. During this disposition of those complaints.\n\n\n\n\n Figure 1. Volume and Type of Complaints Received\n Reprisal (1) Bribery (1)\n\n Waste/Mismanagement (83)\n\n\n\n\n Employee Misconduct (117)\n Participant Fraud (376)\n\n\n\n\n Opinion/Information (97)\n Health/Safety (9)\n\n\n\n\n Figure 2. Disposition of Complaints Received\n\n Referred to FNS for Tracking (227)\n Referred to USDA or Other Agencies for\n Information \xe2\x80\x93 No Response Needed (102)\n\n\n Referred to OIG Audit or Investigations\n for Review (32)\n Filed Without Referral \xe2\x80\x93\n Insufficient Information (53)\n\n Referred to State Agency (4) Referred to USDA Agencies\n for Response (266)\n\n\n\n\n36 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Impact of the OIG\n\n\n\n\n FREEDOM OF INFORMATION ACT (FOIA) AND PRIVACY ACT (PA)\n REQUESTS FOR THE PERIOD OCTOBER 1, 2006,\n TO MARCH 31, 2007\n\n\nNumber of FOIA/PA Requests Received 69\nNumber of FOIA/PA Requests Processed 73\n Number Granted 17\n Number Partially Granted 32\n Number Not Granted 25\nReasons for Denial\n No Records Available 6\n Referred to Other Agencies 1\n Requests Denied in Full (Exemption 5) 1\n Requests Denied in Full (Exemption 7A) 6\n Requests Denied in Full (Exemption 7C) 2\n Request Withdrawn 2\n Fee-Related 0\n Not a Proper FOIA Request 3\n Not an Agency Record 1\n Duplicate Request 2\n Other 1\nRequests for OIG Reports From Congress and Other Government Agencies\n Received 15\n Processed 15\nAppeals Received 5\nAppeals Processed 7\n Appeals Completely Upheld 4\n Appeals Partially Reversed 3\n Appeals Completely Reversed 0\n Appeals Requests Withdrawn 0\n Other 1\nNumber of OIG Reports/Documents Released in Response to Requests 32\n\nNOTE 1: A request may involve more than one report.\nNOTE 2: \x07During this 6-month period, 31 audit reports were posted to the Internet at the OIG Web site:\n http://www.usda.gov/oig\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 37\n\x0c Abbreviations\n\n\n\n\n Abbreviations of Organizations\n AMS Agricultural Marketing Service\n APHIS Animal and Plant Health Inspection Service\n ARS Agricultural Research Service\n CBP U.S. Customs and Border Protection\n CCC Commodity Credit Corporation\n CI Criminal Investigation\n CR Office of Civil Rights\n CSC Centralized Service Center\n CSREES Cooperative State Research, Education, and Extension Service\n DHS U.S. Department of Homeland Security\n ECIE Executive Council on Integrity and Efficiency\n EPA U.S. Environmental Protection Agency\n ERT Emergency Response Team\n FAS Foreign Agricultural Service\n FBI Federal Bureau of Investigation\n FCIC Federal Crop Insurance Corporation\n FDA Food and Drug Administration\n FEMA Federal Emergency Management Agency\n FNS Food and Nutrition Service\n FS Forest Service\n FSA Farm Service Agency\n FSIS Food Safety and Inspection Service\n GIPSA Grain Inspection, Packers and Stockyards Administration\n HUD U.S. Department of Housing and Urban Development\n IRS Internal Revenue Service\n ITS Information Technology Services\n NJTTF National Joint Terrorism Task Force\n NFC National Finance Center\n NIST National Institute of Standards and Technology\n NITC National Information Technology Center\n\n\n\n38 USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half\n\x0c Abbreviations\n\n\n\n\n Abbreviations of Organizations\nNRCS Natural Resources Conservation Service\nOOCIC Ohio Organized Crime Investigations Commission\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\nOMB Office of Management and Budget\nOPM Office of Personnel Management\nOPPM Office of Procurement and Property Management\nPCIE President\xe2\x80\x99s Council on Integrity and Efficiency\nRBS Rural Business-Cooperative Service\nRD Rural Development\nRHS Rural Housing Service\nRMA Risk Management Agency\nRUS Rural Utilities Service\nSEC Office of the Secretary\nUSDA U.S. Department of Agriculture\nUSSS U.S. Secret Service\nWFIT Wildland Fire Investigations Team\n\n\n\n\n USDA OIG SEMIANNUAL REPORT TO CONGRESS FY 2007 1st Half 39\n\x0c\x0cEXAMPLES OF PROGRAM IMPROVEMENT RECOMMENDATIONS MANAGEMENT AGREED TO DURING THIS\nREPORTING PERIOD (142 TOTAL)\nn\t\x07APHIS agreed to issue policy to clarify CBP\xe2\x80\x99s n\t\x07FS agreed to determine the most cost-effective\n responsibilities for Transportation and Exportation marketing methods for surplus properties\n permits that allow prohibited and restricted agricultural that are best suited for the agency and will\n commodities to be trans-shipped across the country obtain the best prices for the property.\n to foreign destinations, and for the handling of seized\n n\t\x07FS agreed to (1) conduct management reviews\n agricultural products at ports of entry. APHIS also agreed\n of the fleet credit card operations and\n to develop a process to allow both agencies to assess the\n (2) strengthen controls over fleet credit cards and\n risk of agricultural products entering the country by rail.\n how PCMS is used to monitor those cards.\nn\t\x07RMA agreed to issue a notice to advise insurance\n n\t\x07RD agreed to ensure that adequate documentation\n providers of the unacceptable documents that have\n is maintained to verify that all controls in the\n been used and to clarify what documents are acceptable\n DLOS security plan were implemented; perform a\n for substantiating AGR policies and claims.\n C&A that fulfills the requirements of full system\nn\t\x07USDA agreed to assign a senior-level official to accreditation; and ensure that the C&A includes\n coordinate with EPA\xe2\x80\x99s Chesapeake Bay Program, adequate Security Testing and Evaluation testing\n and to direct agencies to expedite the development and appropriate supporting documentation.\n and implementation of outcome-based performance\n n\t\x07FS and RHS agreed to develop and implement controls to\n measurements to evaluate the effectiveness of\n ensure that the identification and reporting of improper\n their conservation efforts and programs.\n payments, including statistical sampling processes,\nn\t\x07FS agreed to modify its policies that unduly comply with all OMB and OCFO requirements.\n restrict the use of fire to reduce hazardous\n fuels (brush, dead trees) on FS land.\n\n\n\nMISSION OF OIG\nOIG assists USDA by promoting effectiveness and integrity in the hundreds of programs of the Department.\nThese programs encompass a broad spectrum, involving such areas as consumer protection, nutrition, animal\nand plant health, agricultural production, agricultural product inspection and marketing, rural development,\nresearch, conservation, and forestry. They affect our citizens, our communities, and our economy.\n\n\n\n\nOIG STRATEGIC GOALS\nWe have focused nearly all of our audit and investigative direct resources on our three strategic goals:\n\nSupport USDA in the enhancement of safety and security measures to protect\nUSDA and agricultural resources and in related public health concerns.\n\nReduce program vulnerabilities and enhance integrity in the delivery of benefits to individuals.\n\nIncrease the efficiency and effectiveness with which USDA manages and employs\npublic assets and resources, including physical and information resources.\n\x0c To learn more about OIG, visit our Web site at www.usda.gov/oig/home.htm\n\n How To Report Suspected Wrongdoing in USDA Programs\n\n Fraud, Waste, and Abuse\n\n In Washington, DC: 202.690.1622\n Outside DC: 800.424.9121\n TDD (Call Collect): 202.690.1202\n\n Bribes or Gratuities\n\n 202.720.7257 (24 hours)\n 888-620-4185 (24 hours)\n\n OIG Hotline Through the Web\n\n www.usda.gov/oig/hotline.htm\n\n\n\n\nUnited States\nDepartment of Agriculture\n\nOffice of the Inspector General\n\nThe U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs\nand activities on the basis of race, color, national origin, age, disability, and where\napplicable, sex, marital status, familial status, parental status, religion, sexual\norientation, genetic information, political beliefs, reprisal, or because all or part of an\nindividual\xe2\x80\x99s income is derived from any public assistance program. (Not all prohibited\nbases apply to all programs.) Persons with disabilities who require alternative means\nfor communication of program information (Braille, large print, audiotape, etc.)\nshould contact USDA\xe2\x80\x99s TARGET Center at (202) 720-2600 (voice and TDD).\nTo file a complaint of discrimination, write to USDA, Director, Office of Civil\nRights, 1400 Independence Avenue, S.W., Washington, D.C. 20250-9410, or call\n(800) 795-3272 (voice) or (202) 720-6382 (TDD). USDA is an equal opportunity\nprovider and employer.\n\nMay 2007\n\x0c'