type: other

jurisdiction: US

text: b'United States\nDepartment of\nAgriculture Office of\n Inspector General\nOffice of\nInspector\nGeneral\n\nNo. 50\n\nJanuary 2004 Semiannual Report\n to Congress\n FY 2003\xe2\x80\x94Second Half\n\x0cOn the cover: Graphic commemorating the 25th anniversary of the enactment of the Inspector General Act of 1978,\ncourtesy of the President\xe2\x80\x99s Council on Integrity and Efficiency/Executive Council on Integrity and Efficiency.\n\n\n\n\nThe U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national\norigin, sex, religion, age, disability, political beliefs, sexual orientation, or marital or family status. (Not all prohibited bases apply to all\nprograms.) Persons with disabilities who require alternative means for communication of program information (Braille, large print,\naudiotape, etc.) should contact USDA\xe2\x80\x99s TARGET Center at 202-720-2600 (voice and TDD).\n\nTo file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 1400 Independence\nAvenue, SW, Washington, D.C. 20250-9410 or call (202) 720-5964 (voice and TDD). USDA is an equal opportunity provider and\nemployer.\n\x0ci\n\x0cii\n\x0cOverview of USDA and OIG\n\n\nTo help the reader better understand the context in nutritional needs. The Food and Nutrition Service\nwhich we audit and investigate the programs and (FNS) works to reduce hunger by providing children\noperations of the Department, this section outlines the and low-income individuals with access to food, a\nmissions of USDA\xe2\x80\x99s agencies and the role OIG fulfills. healthy diet, and nutrition education.\nThe overriding USDA mission is to enhance the quality\nof life for the American people by supporting agriculture. \xe2\x80\xa2 USDA ensures that the Nation\xe2\x80\x99s commercial supply\nAt OIG, we perform a complementary function\xe2\x80\x94we take of meat, poultry, and egg products is safe,\nas our motto and our purpose, \xe2\x80\x9cEnsuring the Integrity of wholesome, and correctly labeled. The Food Safety\nAmerican Agriculture.\xe2\x80\x9d and Inspection Service (FSIS) sets standards for\n food safety; inspects meat, poultry, and egg\nThis Department plays a role of great breadth and products; and informs the public about food safety\nmagnitude in American life, both at home and abroad, issues. FSIS works with a number of national and\nwith hundreds of programs. While we at OIG do not international organizations including the Meat and\nmake policy or run programs, our auditors work to Poultry Advisory Committee Staff and National\nensure that both policy and programs are formulated Advisory Committee on Meat and Poultry Inspection,\nand carried out properly, and our investigators, as the the National Advisory Committee on Microbiological\nprimary law enforcement arm of the Department, Criteria for Foods, and the Codex Alimentarius\ninvestigate significant criminal activities involving USDA Commission, an international organization created by\nprograms, operations, and personnel. the United Nations to promote the health and\n economic interests of consumers.\nHIGHLIGHTS OF USDA AGENCIES\n \xe2\x80\xa2 USDA facilitates the domestic and international\nWhen President Abraham Lincoln signed the legislation marketing of U.S. agricultural products and ensures\ncreating USDA in 1862, he called it the \xe2\x80\x9cpeople\xe2\x80\x99s the health and care of animals and plants. The\nDepartment.\xe2\x80\x9d It touches all of our lives, every day, from Agricultural Marketing Service (AMS) facilitates the\ncity to suburb, and small town to farm. strategic marketing of agricultural products in\n domestic and international markets, while ensuring\n\xe2\x80\xa2 USDA helps keep America\xe2\x80\x99s farmers and ranchers in fair trading practices and promoting a competitive\n business as they face the uncertainties of weather and efficient marketplace. USDA agencies are active\n and markets. The Farm Service Agency (FSA) helps participants in setting international and national\n ensure the well-being of U.S. agriculture through the standards through international organizations and\n administration of farm commodity programs; farm Federal-State cooperation. For example, AMS\n operating, ownership, and emergency loans; provides services to promote the quality of U.S.\n conservation and environmental programs; agricultural products, including grading, quality\n emergency and disaster assistance; domestic and standards, and certification.\n international food assistance; and international export\n credit programs. The Foreign Agricultural Service The Animal and Plant Health Inspection Service\n (FAS) opens, expands, and maintains global market (APHIS) protects America\xe2\x80\x99s animal and plant\n opportunities through international trade, resources by safeguarding them from exotic invasive\n cooperation, and sustainable development activities. pests and diseases, monitoring and managing pests\n The Risk Management Agency (RMA) provides and diseases existing in the United States, resolving\n agricultural producers with the opportunity to achieve trade issues related to animal and plant health, and\n financial stability through effective risk management ensuring the humane care and treatment of animals.\n tools, such as crop insurance. The Grain Inspection, Packers and Stockyards\n Administration (GIPSA) facilitates the marketing of\n\xe2\x80\xa2 The Department works to harness the Nation\xe2\x80\x99s livestock, poultry, meat, cereals, oilseeds, and\n agricultural abundance with a goal of ending hunger related agricultural products, and promotes fair and\n and improving nutrition and health in the United competitive trading practices. GIPSA also provides\n States and in many other places around the world. It Federal grading standards and a national inspection\n administers the food stamp and other nutrition and weighing system for grain and oilseeds.\n assistance programs, and links scientific research to\n\n\n iii\n\x0c\xe2\x80\xa2 USDA provides help to farmers and ranchers to OIG\xe2\x80\x99S ROLE IN USDA\n promote the health of the land through conservation\n programs administered by the Natural Resources Helping to identify and correct questionable practices\n Conservation Service (NRCS) and FSA. NRCS and bring criminals to justice adds value to the\n provides national leadership in a partnership effort to Department\xe2\x80\x99s programs and operations. OIG conducts\n help people conserve, maintain, and improve and supervises audits and evaluations, as well as\n America\xe2\x80\x99s natural resources on the Nation\xe2\x80\x99s 1.6 investigations and law enforcement efforts relating to\n billion acres of private and other non-Federal land. USDA\xe2\x80\x99s programs, operations, and employees. OIG\xe2\x80\x99s\n Stewardship of 191 million acres of national forests goal is to promote economy, efficiency, and\n and grasslands rests with the Forest Service (FS), effectiveness. In addition, investigators concentrate on\n the largest USDA agency. preventing and detecting crimes, as well as assisting\n with the prosecution of criminal and civil cases. Auditors\n\xe2\x80\xa2 USDA provides research, analysis, and education to conduct financial and performance audits of USDA\xe2\x80\x99s\n assist individuals and communities, and improve programs and activities.\n agricultural products. The Agricultural Research\n Service (ARS) works to provide the scientific We perform an array of work that is as diverse as USDA\n knowledge and technologies needed to ensure the itself. Audit work might include visiting food stamp\n viability of American agriculture. The Cooperative retailers, reviewing crop insurance claims, reviewing\n State Research, Education, and Extension Service inspection controls at meat packing plants, and\n (CSREES) works with land-grant universities, analyzing financial statements and reports. We also\n historically black colleges and universities, Hispanic- audit programs to ensure that disaster assistance goes\n serving institutions, Native American institutions, and to producers who suffered losses and need help. As\n other universities and public and private Federal law enforcement officers, OIG special agents\n organizations to advance research and education in conduct a wide range of criminal investigations. Some\n the food, agricultural, and related sciences. The involve theft, smuggling, bribery, extortion,\n Economic Research Service (ERS) is USDA\xe2\x80\x99s embezzlement, food tampering, processing and sale of\n principal social science research agency. The adulterated food products, threats against the food\n National Agricultural Statistics Service (NASS) supply, false claims, misuse of loan funds, or other\n serves the basic agricultural and rural data needs of fraud against the Government. Others involve\n the country by providing statistical information and workplace violence, including threats, assaults, or\n services to farmers, ranchers, agribusinesses, public homicide of Departmental employees, while engaged in\n officials, and others. performance of official duties; and child pornography\n perpetrated by USDA employees using Government\n\xe2\x80\xa2 USDA helps rural communities, home to systems and equipment. OIG special agents are\n approximately 60 million Americans, develop, grow, authorized to make arrests, execute warrants, and carry\n and improve their quality of life by targeting financial firearms.\n and technical resources to areas of greatest need,\n through activities of greatest potential. The Rural Our activities better ensure the Department\xe2\x80\x99s protection\n Business-Cooperative Service (RBS) provides of production agriculture, the public, and USDA\n financing and technical assistance to help build employees, and we save the Government money.\n competitive businesses and establish and sustain Taxpayers expect and deserve to have their money\n agricultural cooperatives. The Rural Housing Service benefit those who are entitled. Funds for improperly\n (RHS) provides financing and technical help for implemented programs can be put to better use. Based\n needed community facilities and housing for very- on our audit work this reporting period, management\n low- to moderate-income areas. The Rural Utilities officials agreed to recover $17.8 million and put an\n Service (RUS) provides financial and technical additional $19 million to better use. Our investigative\n assistance so rural areas can have modern, efforts resulted in $24.1 million in recoveries/collections,\n affordable electricity, telecommunications, public fines, restitutions, claims established, cost avoidance,\n water, and waste removal services. and administrative penalties. Our investigations\n produced 244 indictments and 223 convictions. This\n report covers the period April 1 through September 30,\n 2003.\n\n iv\n\x0cMANAGEMENT CHALLENGES 9. USDA Faces Major Challenges in Implementing the\n 2002 Farm Bill and Disaster Assistance Legislation\nThe Reports Consolidation Act of 2000 requires OIG to\n 10. Integrity of the Federal Crop Insurance Programs\nidentify and report annually the most serious\n Policyholders\xe2\x80\x99 Database Must Be Strengthened\nmanagement challenges the Department and its\nagencies face. This year, we have summarized USDA\xe2\x80\x99s\n Agency-Specific Challenges\nmost serious management challenges by issue area,\nrather than by mission. USDA\xe2\x80\x99s major management 11. Strong Internal Control Structure Is Critical to the\nchallenges frequently cross organizational lines within Delivery of Forest Service Programs\nthe Department and should be addressed on a\n 12. Improvements and Safeguards Needed for Rural\ncoordinated basis. The management challenges OIG\n Multi-Family Housing Program\nidentified last year fall under one or more of the general\nissue areas we have identified this year. While progress\n STRATEGIC GOALS\nhas been made in each challenge facing USDA, more\ncan be done to strengthen management controls, to\n OIG\xe2\x80\x99s strategic plan reflects the work of all levels of the\nensure USDA benefits go to those intended, and to\n organization. It assesses our purpose, our future, and\nprotect the integrity of USDA\xe2\x80\x99s programs and activities.\n the needs we must meet to achieve our mission, realize\nAlso, we have identified three new emerging issues that\n our vision, and provide a worthy return on the U.S.\neither mandate new requirements or have not been\n taxpayers\xe2\x80\x99 investment. As part of our Strategic Plan for\neffectively addressed on a Department-wide\n Fiscal Years (FY) 2004-2008, we have developed four\ncoordinated basis. OIG has identified 10 Department-\n goals, which will be achieved by specific strategies and\nwide and 2 agency-specific challenges that we believe\n actions:\nare the most significant management issues facing\nUSDA. 1. Support USDA Management in the Identification and\n Reduction of Vulnerabilities in Benefits Programs\nDepartment-wide Challenges\n 2. Support USDA in the Enhancement of Safety and\n1. Homeland Security Considerations Should Be Security Measures To Protect Agricultural\n Incorporated Into Program Design and Resources and Related Public Health Concerns\n Implementation\n 3. Maximize USDA Effectiveness Through Increasing\n2. Increased Oversight and Monitoring of Food Safety the Efficiency With Which USDA Manages and\n Inspection Systems Are Needed To Meet Hazard Employs Public Assets and Resources\n Analysis and Critical Control Point (HACCP) Goals\n 4. Ensure OIG Readiness To Achieve Its Strategic\n3. Risk Must Be Examined and Improper Payments Business Goals\n Minimized Within USDA \xe2\x80\x93 Emerging Issue\n As we refocus our overall business planning efforts, one\n4. Financial Management \xe2\x80\x93 Improvements Made but\n byproduct is that we anticipate reformatting our\n Additional Actions Still Needed\n semiannual reports. For FY 2004, we will produce\n5. Information Technology Security \xe2\x80\x93 Much results-oriented semiannual documents, whereby our\n Accomplished, More Needed strategic plan will provide a framework against which we\n will report. Ultimately, our strategic plans, annual plans,\n6. Controls Over Germplasm Storage Material and\n budget requests, and semiannual reports will work in\n Genetically Engineered Organism Field Testing Are\n concert to present a unified view of historical trends, our\n Critical to U.S. Markets \xe2\x80\x93 Emerging Issue\n current situation, ongoing efforts, and future goals. This\n7. Civil Rights Complaints Processing Still a Concern at will achieve continuity among successive semiannual\n USDA reports, as well as other documents describing our\n work. In addition, our reporting will dovetail with the\n8. Research Misconduct Policy Not Consistently\n President\xe2\x80\x99s Management Agenda and the Department\xe2\x80\x99s\n Implemented \xe2\x80\x93 Emerging Issue\n strategic 5-year plan.\n\n\n\n\n v\n\x0cvi\n\x0cContents\n\n\nMessage From the Inspector General .................................................................................................................. i\nOverview of USDA and OIG ................................................................................................................................... iii\n Highlights of USDA Agencies .............................................................................................................................. iii\n OIG\xe2\x80\x99s Role in USDA ............................................................................................................................................ iv\n Management Challenges ..................................................................................................................................... v\n Strategic Goals .................................................................................................................................................... v\nContents .................................................................................................................................................................. vii\nHomeland Security ................................................................................................................................................. 1\n Front-Line Vulnerabilities ..................................................................................................................................... 1\n Investigating Sabotage and Threats .................................................................................................................... 4\nInformation Technology ........................................................................................................................................ 5\nProtecting the U.S. Food Supply and Agriculture ............................................................................................... 7\n Food Safety ......................................................................................................................................................... 7\n Safety of Production Agriculture .......................................................................................................................... 11\nPublic Corruption ................................................................................................................................................... 12\nRural Development ................................................................................................................................................ 14\n Rural Business-Cooperative Service ................................................................................................................... 14\n Rural Housing Service ......................................................................................................................................... 16\n Rural Utilities Service ........................................................................................................................................... 17\nFeeding Programs .................................................................................................................................................. 19\n Food Stamp Program .......................................................................................................................................... 19\n Special Supplemental Nutrition Program for Women, Infants, and Children ....................................................... 19\nProgram Irregularities and Abuses ...................................................................................................................... 21\n Farm Programs .................................................................................................................................................... 21\n Farm Service Agency .......................................................................................................................................... 21\n Federal Crop Insurance ....................................................................................................................................... 22\n Risk Management Agency ................................................................................................................................... 23\nFinancial Management and Accountability ......................................................................................................... 24\n Departmental Administration/Office of the Chief Financial Officer ....................................................................... 24\nSummaries of Audit and Investigative Activities ................................................................................................ 26\nFull FY 2003 Results in Key Categories ............................................................................................................... 27\nStatistical Data ....................................................................................................................................................... 28\n Audits Without Management Decision ................................................................................................................. 28\n Indictments and Convictions ................................................................................................................................ 35\n Office of Inspector General Hotline ...................................................................................................................... 36\n Freedom of Information Act and Privacy Act Requests ....................................................................................... 37\nAppendix I: Inventory of Audit Reports\n With Questioned Costs and Loans .................................................................................................................. 38\nAppendix II: Inventory of Audit Reports\n With Recommendations That Funds Be Put to Better Use ............................................................................ 39\nAppendix III: Summary of Audit Reports Released From\n April 1 Through September 30, 2003 ............................................................................................................... 40\n\n\n\n\n vii\n\x0cviii\n\x0cHomeland Security\n\n\nThe events of September 11, 2001, and subsequent initiated a review of controls and procedures over\nheightened concern about potential terrorist attacks and chemicals and radioactive materials stored and used at\nthreats have added a new dimension to the USDA facilities. This review is pointing to the need for\nDepartment\xe2\x80\x99s missions and priorities. At issue are Department-wide policies and procedures on the\nUSDA\xe2\x80\x99s missions to ensure the safety and abundance accountability of hazardous chemicals. (2) We reviewed\nof the Nation\xe2\x80\x99s food supply, from the farm to the table, homeland security issues as they pertained to USDA\nand to protect the health of American agriculture from owned or controlled agricultural commodity inventories,\nthe introduction of foreign animal and plant pests and focusing on the actions taken by FSA and the\ndiseases. USDA must now readily identify its assets, Commodity Credit Corporation to minimize the risk to\nperform security risk assessments, and design and such commodities, and thus to the food and feed supply\nimplement appropriate safeguards to prevent or deter of the country. We will issue these reports soon. (3) We\ndeliberate acts to contaminate the food supply, disrupt are also reviewing APHIS\xe2\x80\x99 controls over pesticides,\nor destroy American agriculture, or harm U.S. citizens. drugs, and other hazardous materials used in protecting\nAt the same time, USDA must work in concert with the agriculture from animal predators. In the wrong hands,\nDepartment of Homeland Security (DHS) to continue to such chemicals could be harmful to people and animals\nstrengthen the current inspection and safeguard alike. Previously, we found that APHIS could not\nprocesses for the unintentional introduction of pests, account for material amounts of some of these\ndiseases, and contaminants on imported products. The chemicals.\nDepartment has been both proactive and responsive to\nspecific vulnerabilities identified by OIG. However, it\nmust continue its efforts to shift from a focus on safety For the second half of FY 2003, OIG issued three\ngoals to both safety and security in each of its mission audit reports relating to homeland security. For the\nareas; to foster effective coordination and full fiscal year, OIG issued seven audit reports.\ncommunication across jurisdictional lines to better OIG\xe2\x80\x99s investigations for the second half of FY\ndefine roles and responsibilities; and to increase 2003 yielded 10 indictments, 10 convictions, and\nDepartmental oversight of, and accountability by, USDA $2.1 million in monetary results. For the full fiscal\nagencies. year, OIG results totaled 17 indictments, 23\n convictions, and $2.5 million.\nThe Department, in response to our audit\nrecommendations, has taken significant steps to\nincorporate these approaches in restructuring some of\n FRONT-LINE VULNERABILITIES\nits mission activities. However, more needs to be done\nto provide assurance that established policies and\nprocedures are consistently implemented and that Government-wide Policies Are Needed To Establish\neffective inter- and intra-agency coordination and Security Standards for Federally Funded Research\ncommunication continue. at Non-Federal Institutions\n\nThis year, there was a significant transfer of As part of our effort to assist the Government in\nresponsibilities and personnel from USDA to DHS. A strengthening homeland security, we reviewed non-\nmajor challenge now faced by USDA is timely and Federal institutions that receive USDA funding to\neffective coordination and communication, not only conduct research into human, animal, and plant\nwithin USDA, but also with DHS. Prior audits disclosed diseases. We evaluated the controls these institutions\nmaterial weaknesses within USDA when certain exercise over biological agents and toxins, and\nfunctions were solely the responsibility of USDA. chemical and radioactive materials.\nTherefore, it is imperative that USDA continue to work\nwith DHS to help ensure appropriate control systems We visited 104 laboratories at 11 USDA-funded\nand processes. institutions and determined that although some of the\n institutions had implemented security standards on their\nCurrently, we have a number of ongoing reviews own, no Federal Government-wide or institution-wide\nevaluating the spectrum of USDA agencies\xe2\x80\x99 homeland standards provided security guidance to the\nsecurity initiatives and activities in response to the laboratories. Institutions that manifested a concern with\nheightened alert resulting from September 11. (1) We\n\n 1\n\x0csecurity were generally those whose laboratories had We recommended that the issues raised in our report\nexperienced break-ins or domestic terrorist attacks prior be elevated to the Department of Homeland Security\nto September 11, 2001. We found deficiencies in and to the Executive Office of the President\xe2\x80\x99s Homeland\ninventory controls over biological materials, physical Security Council, and that a Federal Government-wide\nsecurity at the laboratories, and access to research set of security standards be established. We\nareas. For example: recommended that these standards call for:\n\n\xe2\x80\xa2 Only 1 of the 11 institutions we visited had a \xe2\x80\xa2 A centralized database of all biological materials\n centralized database to maintain an institution-wide stored at an institution,\n summary-level inventory of the biological materials\n under their administration. \xe2\x80\xa2 written procedures concerning background checks\n for all individuals having access to CDC- and APHIS-\n\xe2\x80\xa2 Forty-three of the 104 laboratories we visited did not listed agents and toxins as well as a requirement to\n maintain detailed inventory records for their biological report missing pathogens, and\n agents stored in freezers, and only a few conducted\n periodic physical inventories. \xe2\x80\xa2 risk assessments of laboratories and security\n upgrades based on the risks assessed.\n\xe2\x80\xa2 Of the 104 laboratories visited, 39 laboratories at all\n 11 institutions used or stored pathogens on the The Department generally agreed with the findings and\n Centers for Disease Control and Prevention (CDC) recommendations and specifically agreed that a\n select list or the APHIS list of high-consequence consolidated set of security standards should apply to\n pathogens, and 20 laboratories at 10 of the federally funded research at all non-Federal institutions\n institutions did not have security that we regarded as handling various types of biohazardous material.\n being commensurate with the risk associated with Department officials have begun and plan to continue\n these pathogens. discussions with the Homeland Security Council for the\n Executive Office of the President regarding\n\xe2\x80\xa2 In an unsecured freezer at one institution, we biohazardous materials, including those issues\n discovered a CDC select agent for which no risk identified in our report. The Department has also\n assessment had been made. The agent, Yersinia provided guidance to USDA client organizations that is\n pestis, causes bubonic and pneumonic plague and based on Departmental Manual 9610-1, USDA Security\n requires strict containment. The freezer in which this Policies and Procedures for Biosafety Level-3 Facilities.\n agent was stored had not been inventoried since Additionally, the Cooperative State Research,\n 1994, when a box of unidentified pathogens was Education, and Extension Service (CSREES) plans to\n noted as missing. modify its \xe2\x80\x9cTerms and Conditions\xe2\x80\x9d for entities receiving\n USDA funding by February 1, 2004, to incorporate all\n\xe2\x80\xa2 A laboratory at a second institution claimed to have laws, regulations, and guidance regarding biosecurity\n stored in its freezer Actinobacillus pleuropneumoniae, governed by CDC and APHIS.\n a pathogen that causes a severe and often fatal\n contagious disease in swine. However, laboratory Improvements Needed in Security Over NRCS\n personnel had never inventoried the freezer Assets\n completely to identify how many vials or containers of\n the pleuropneumoniae pathogen it actually had and As part of our ongoing homeland security effort, which\n how much it ought to have had. includes identifying and protecting USDA resources, we\n evaluated the assets maintained by the Natural\n\xe2\x80\xa2 None of the sites we visited did background checks Resources Conservation Service (NRCS) and the\n on visitors. Only 2 of the 11 institutions we reviewed measures implemented by the agency to protect such\n performed limited background checks on the assets. We found that NRCS has not yet developed or\n custodians and maintenance employees in facilities applied effective homeland security policies to\n housing hazardous materials. adequately safeguard some assets such as aerial\n photography, dams, plant cultivars (cultivated varieties\n used by researchers to restart plantings in case of a\n\n\n\n2\n\x0cdisaster), and weapons. For example, although NRCS\ncarries out much of its work through partnering efforts, it\nhas not developed strategic action plans to protect and\nminimize damage to its agency-funded assets, including\ndams now maintained and owned by local sponsors, in\nthe event of an attack.\n\nIn addition, NRCS has not performed the required\nbackground checks for some headquarters and State\noffice personnel and allows many types of volunteers,\nstudents, and partners who have not had background\nchecks to access computer systems and data that may\ncontain sensitive information. We concluded that\nagency officials have critically assessed neither the\nvulnerability of NRCS assets to attack nor the A DC-6 air tanker undergoing heavy maintenance at a contractor\xe2\x80\x99s\n facility. OIG photo.\navailability of sensitive information that might assist a\nterrorist or terrorist groups.\n During our current audit, we inventoried all 42 existing\nWe recommended that NRCS review procedures for air tankers under FS contract and concluded that they\nrelease of sensitive information included in aerial were adequately secured at the time of our visits. The\nphotography, coordinate with local sponsors to mitigate majority of the air tankers at the facilities we visited\nrisks associated with NRCS-assisted dams, ensure were inoperable because they were undergoing heavy\nplant materials are stored at national seed laboratories, maintenance.\nand ensure authority is obtained prior to allowing\nfirearms for personal protection from dangerous wildlife We revisited the seven FS air tanker bases reviewed in\nor identify alternative methods of protection. In addition, our prior audit and found that only two of the bases had\nwe recommended that NRCS develop a plan of action added new security features since our last visit.\nto track the status of security clearances for each However, FS had made progress toward fulfilling the\ncurrent employee, including volunteers, stay-in-school recommendations of our audit. FS had completed its\nstaff, and partners. We also recommended that NRCS initial assessments of the air tanker bases to determine\nexpedite required clearances for personnel assigned to their security needs, and the agency was in the process\nthe National Headquarters office. NRCS staff concurred of finalizing its National Aviation Security Policy, which\nwith the findings and recommendations. will establish minimum security standards based on risk\n level.\nSubsequent Review Found Further Actions Needed\nTo Strengthen Security Over Aircraft and Aircraft Although FS has made progress in implementing our\nFacilities audit recommendations, our review identified additional\n issues that require further action.\nAs part of our ongoing review of departmental\nvulnerability to terrorism, we followed up on a prior audit \xe2\x80\xa2 FS had not established adequate controls to account\n(October 2001 through January 2002) to determine the for Federal Excess Personal Property (FEPP) aircraft\nstatus of the audit\xe2\x80\x99s recommendations and to ensure loaned to States for firefighting purposes. We noted\nthat all aircraft acquired or used by the Forest Service that 52 of the 276 FEPP aircraft currently on loan to\n(FS) for firefighting purposes were adequately States had tanks capable of dispersing biological or\naccounted for and secured. We had determined that air chemical weapons.\ntankers are vulnerable to theft and could be attractive to\nterrorists wishing to disperse biological or chemical \xe2\x80\xa2 FS does not require States with FEPP aircraft to\nweapons in the air. conduct security assessments at their aircraft\n facilities and to develop security plans that meet the\n FS\xe2\x80\x99 minimum standards.\n\n\n\n\n 3\n\x0c\xe2\x80\xa2 The FS draft National Aviation Security Policy does CSREES. The restitution represents salary paid to the\n not require FS\xe2\x80\x99 Washington Office to review and individual during the period he worked on CSREES-\n approve security-level determinations and security funded research at MSU developing a vaccine against\n plans made by air tanker base managers. Actinobacillus pleuropneumoniae (APP), which causes\n pneumonia in swine. During the investigation, the\n\xe2\x80\xa2 FS had not formally notified all appropriate Federal individual confessed to staging a break-in at the MSU\n agencies to monitor the use and security of air lab in September 2002 in an attempt to conceal APP\n tankers no longer under its jurisdiction and control, research findings he had fabricated over the previous 5\n including C-130A and PB4Y-2 air tankers that had years. The news media reported that samples of a\n been effectively grounded by FS due to safety highly virulent, genetically altered strain of APP had\n concerns. been stolen during the apparent break-in. Investigation\n by OIG, the FBI, and MSU police found that no theft had\nOIG has made a number of recommendations to occurred, and that the APP strain reported to be stolen\naddress the accountability and security of contactor and is no more virulent than naturally occurring APP. The\nFEPP aircraft and to increase FS internal controls over graduate student admitted, first in an interview with\nits security program. We have also recommended that agents and later in an FBI-administered polygraph\nFS notify the applicable Federal agencies, in writing, examination, that he had never mutated the trkH gene\nabout the PB4Y-2s and C-130As no longer under FS in APP bacteria, as he had claimed, which rendered\njurisdiction so that the use and security of these aircraft fraudulent all the lab\xe2\x80\x99s research that had been built on\nmay be appropriately monitored. FS officials generally the supposed mutation. He also stated that he did not\nagreed with our findings and recommendations. remove any APP samples from the lab. CSREES\nHowever, FS disagreed that it should assume continues to freeze funding for the current APP grant\nresponsibility to ensure the security of all C-130As until an ethics/misconduct investigation by MSU officials\nobtained through the Historic Aircraft Exchange can be completed following the criminal investigation.\nProgram during periods when the aircraft are not under\nFS control. FS has agreed to consult with USDA\xe2\x80\x99s Individual Sentenced for Mailing a Threatening\nOffice of the General Counsel (OGC) and the U.S. Anthrax Hoax Letter to USDA Employee\nDepartment of Justice on this issue.\n In June 2003, a Federal judge sentenced a Florida man\n to 3 years of probation, 150 hours of community service,\n INVESTIGATING SABOTAGE AND THREATS\n mental health treatment, and $824 in restitution for\n mailing a threatening letter allegedly tainted with\nGraduate Student Sentenced in Staged Laboratory anthrax to an NRCS District Conservationist in Deland,\nBreak-In Florida, in the fall of 2001. The county sent a full\n hazardous materials response team to the office when\nIn a new development to a case previously reported in the anthrax threat was discovered. The letter contained\nthe semiannual report for FY 2002\xe2\x80\x942nd half, a Federal a white powder, which was tested and found not to be\ndistrict judge sentenced a former graduate student at contaminated with anthrax. The defendant admitted that\nMichigan State University (MSU) to 10 months of he wrote the threatening letter, put a commercial\nincarceration, followed by 3 years of supervised release. headache powder in the envelope, and mailed it to\nThe judge also sentenced him to 120 hours of NRCS because he was upset that NRCS had denied his\ncommunity service and ordered him to pay $69,937 in request for financial assistance to dig a pond.\nrestitution for his role in falsifying research funded by\n\n\n\n\n4\n\x0cInformation Technology (IT)\n\n\nUSDA depends on information technology (IT) to\nefficiently and effectively deliver its programs and For the second half of FY 2003, OIG issued two\nprovide meaningful and reliable financial reporting. One audit reports relating to IT. For the full fiscal year,\nof the more significant dangers USDA faces is a OIG issued four audit reports. OIG\xe2\x80\x99s investigations\ncyberattack on its IT infrastructure, whether by terrorists for the second half of FY 2003 yielded one\nseeking to destroy unique databases or criminals indictment, three convictions, and $1,400 in\nseeking economic gains. While the Department and its monetary results. For the full fiscal year, OIG\nagencies continue to strive to improve the security over results totaled one indictment, four convictions,\nIT resources, significant progress is still needed toward and $2,911.\nestablishing an effective security program. Specifically,\nincreased management involvement and commitment at\nthe agency level is needed to effectively implement a The Department Is Improving Its IT Security, but\nstrong IT security program. Despite the efforts of OIG Further Actions Are Needed\nand the Office of the Chief Information Officer (OCIO)\nduring the past several years to heighten awareness of The Department and most of its agencies have taken\nsecurity issues, our reviews in 10 agencies during this numerous actions in the past few years to improve\nyear continue to show that the Department and its security over their IT resources; however, additional\nagencies are not yet in compliance with Office of actions are needed. Most critical is management\nManagement and Budget (OMB) Circular A-130 commitment and accountability for implementing the\n(Management of Federal Information Resources), requirements of OMB Circular A-130 and other federally\nAppendix III. This noncompliance includes preparing mandated security guidelines.\nsecurity plans for all major applications, conducting risk\nassessments, establishing disaster recovery plans, and Our recent audit work was comprehensive, as we\nimplementing a system certification/authorization reviewed the following nine agencies: FAS, FSIS,\nprocess. We also continue to find that agencies do not GIPSA, APHIS, RMA, ERS, NITC, the Office of Budget\nhave strong physical and logical access controls over IT and Program Analysis, and the Office of the Chief\nresources and have not yet effectively used the Economist. We found that the Department is not in\nvulnerability scanning tools provided by the Department compliance with the requirements of OMB Circular A-\nto identify and mitigate known security vulnerabilities in 130 in preparing all the required security plans,\ntheir systems. conducting risk assessments, preparing disaster\n recovery plans, providing security awareness training to\nIn FY 2004, we plan to perform a review of the National all employees, and performing system certifications and\nInformation Technology Center\xe2\x80\x99s (NITC) general accreditations. We also found physical and logical\ncontrols to assess whether they are in place and access control weaknesses in every agency we\noperating effectively. We will also perform a review of reviewed, hindering agencies\xe2\x80\x99 abilities to adequately\nsecurity over USDA IT resources as is mandated by the protect their critical IT resources. Further, most\nFederal Information Security Management Act (FISMA). agencies we reviewed did not have adequate controls in\nCurrently, electronic Government (e-Gov) initiatives are place to timely identify and correct potential system\nin place in 20 USDA programs. We will be performing a vulnerabilities that could compromise the confidentiality,\nreview of these initiatives to evaluate the security integrity, and availability of critical IT systems and data.\ncontrols in place, and to assess whether data integrity Finally, we found that not all agencies had adequate\nand confidentiality may be compromised. We will be controls in place to properly manage and test changes\nperforming a review of application controls on critical to their applications, leaving those applications\nUSDA systems to determine whether an effective level vulnerable to unauthorized and potentially malicious\nof security is built in to protect data integrity and changes.\nconfidentiality. We will also be performing a review to\nevaluate security controls and the overall management\nof IT assets at select agencies. Prior audits have\nidentified significant weaknesses in physical and logical\naccess controls, and a lack of adequate system\ndocumentation and contingency planning.\n\n\n 5\n\x0cWhat we found at FSIS and NITC was typical of our Two NRCS Employees Sentenced to Prison on Child\ncomprehensive review: Pornography Violations\n\n\xe2\x80\xa2 Our vulnerability scans of selected FSIS systems \xe2\x80\xa2 The former director of National Production Services\n disclosed weaknesses that may be exploited both for the Natural Resources Conservation Service\n internally and externally from the Internet. FSIS had (NRCS) in Fort Worth, Texas, pled guilty in Federal\n not adequately protected physical access to its court to possessing child pornography from about\n headquarters computer facility by limiting it to users June 2000 through May 2001 on his Government-\n who need access to perform their duties, and it had issued computer at a Government facility. On July 8,\n not completed all security plans required by OMB 2003, he was sentenced to 57 months of\n Circular A-130. FSIS database administrators were imprisonment to be followed by 3 years of supervised\n allowed to make changes to FSIS data without release.\n following up with appropriate personnel to verify the\n validity of the changes, and FSIS had not \xe2\x80\xa2 In fall 2001, a former Arkansas NRCS district\n implemented a standard system development life conservationist admitted that he had accessed and\n cycle process for managing its application downloaded pornography, including child\n development and change control process. pornography, on his Government computer while on\n duty, and later pled guilty to possession of child\n\xe2\x80\xa2 Significant improvements have been made since the pornography. In April 2003, he was sentenced to\n last general controls review at NITC, including the serve 27 months of confinement, ordered to\n implementation of password policies in accordance participate in a sex offender treatment program while\n with National Institute of Standards and Technology incarcerated, and ordered to pay a $1,000 fine. He\n guidance, reduction of users with special access was also ordered to serve 3 years of supervised\n privileges, completion of risk assessments, and release after incarceration and, as part of his\n completion of a mainframe security plan. However, probation, to participate in mental health counseling\n NITC needs to complete its disaster recovery and and to have no access or subscription to any Internet\n business resumption planning efforts, prepare sources. OIG conducted this investigation jointly with\n security plans for general support systems, certify the FBI.\n and accredit all critical systems, implement controls\n to periodically reconcile user identifications to current\n employee and contractor listings, finalize its change\n control management process, and finalize secure\n access from the Internet.\n\nOur comprehensive report fulfilled the requirements of\nFISMA for FY 2003. We made recommendations in\nindividual agency reports to correct the weaknesses we\nidentified; therefore, we made no additional\nrecommendations in this report.\n\n\n\n\n6\n\x0cProtecting the U.S. Food Supply\nand Agriculture\n\nProtecting the food supply and agriculture within the and performance measurements for pathogen testing\nDepartment includes those activities designed to ensure programs; and better supervision and oversight of field\nthat the food the consumer eats is safe and properly inspection processes. Also, FSIS must reassess its\nlabeled and graded, and that the Nation\xe2\x80\x99s plant and recall process, including traceback policies, to identify\nanimal resources are safeguarded. These activities are the product source, and improve monitoring to ensure\nperformed by the Food Safety and Inspection Service timely notification of the recall and maximum recovery of\n(FSIS); the Agricultural Marketing Service (AMS); the the product. While FSIS has generally been responsive\nAnimal and Plant Health Inspection Service (APHIS); to these issues and has made some changes to its\nand the Grain Inspection, Packers and Stockyards inspection policies and procedures, complete corrective\nAdministration (GIPSA). The activities include actions and estimated timeframes for addressing these\ninspecting all domestic establishments that prepare weaknesses are not yet known.\nmeat and poultry products for sale or distribution;\nreviewing foreign inspection systems and For FY 2004, we plan to audit controls over APHIS\xe2\x80\x99\nestablishments; inspecting and quarantining animals Emergency Pest Eradication and Control Programs and\nand plants at U.S. ports-of-entry; controlling agricultural evaluate agency memoranda of understanding with\nlosses caused by predatory animals; developing DHS. Under our ongoing food safety efforts we will audit\nstandards for licensing and testing veterinary biologics; FSIS\xe2\x80\x99 food safety automated information systems and\nestablishing grading standards for eggs, tobacco, continue to monitor implementation of the HACCP\nlivestock, dairy products, poultry, fruits, vegetables, and regulation along with evaluating very small meat and\ngrain; and performing weighing and inspection services poultry establishments\xe2\x80\x99 compliance with HACCP\nto ensure the standards are met. requirements. In addition, we will conduct work to\n review the egg processing inspection activity.\nIn 1998, the Department, through FSIS, implemented a\nmajor change to its food safety system and created a\nnew regulatory system for meat and poultry safety For the second half of FY 2003, OIG issued one\nwithin the meat and poultry plants it regulates. The audit report relating to protecting the U.S. food\nPathogen Reduction and Hazard Analysis and Critical supply and agriculture. For the full fiscal year, OIG\nControl Point (HACCP) rule is the centerpiece of the issued three audit reports. OIG\xe2\x80\x99s investigations for\nnew regulatory approach because it mandates HACCP, the second half of FY 2003 yielded 12 indictments,\nsets certain food safety performance standards, 10 convictions, and $4.5 million in monetary\nestablishes testing programs to ensure those standards results. For the full fiscal year, OIG results totaled\nare met, and assigns new tasks to inspectors to enable 18 indictments, 15 convictions, and $4.5 million.\nthem to ensure regulatory performance standards are\nmet. In 2000, OIG reported on FSIS\xe2\x80\x99 implementation of\nHACCP, concluding that while FSIS had taken positive\n FOOD SAFETY\nsteps in its implementation of the science-based\nHACCP system, HACCP plans were not always\ncomplete; FSIS needed to place greater emphasis on ConAgra Recall Exposed Weaknesses in FSIS\npathogen testing; and it needed to define its oversight Recall Operations\nrole in the HACCP system, and hold plants accountable\nfor noncompliance. During 2002, USDA experienced At the request of the Senate Committee on Agriculture,\nsome of the largest recalls in its history. OIG\xe2\x80\x99s reviews Nutrition, and Forestry, we performed an audit of the\nof two of these recalls in the past year indicate that Food Safety and Inspection Service\xe2\x80\x99s (FSIS) oversight\nFSIS still faces significant challenges to ensure the of the recall by the ConAgra Beef Company (ConAgra)\nsuccessful implementation of HACCP. Most critical to of 18 million pounds of ground beef and beef products\nthis process are FSIS\xe2\x80\x99 assessment of plant HACCP suspected of being contaminated with Escherichia coli\nplans and resolution of any deficiencies; establishment (E. coli) O157:H7. Beginning in mid-June 2002, at least\nof management controls to accumulate and analyze 46 people in 16 States became ill from contaminated\ndata to monitor and assess the adequacy of food safety meat. About 1 month earlier, FSIS\xe2\x80\x99 microbiological tests\nsystems; establishment of criteria to initiate enforcement of ground beef at a meat grinder that used product\nactions; baseline studies to define the goals, objectives, supplied by ConAgra identified the presence of E. coli\n\n\n 7\n\x0cO157:H7. ConAgra officials agreed to an initial voluntary and did not review other test results that were\nrecall of about 354,000 pounds of ground beef produced available to them. Under FSIS policy, plants like\nin late May of that year. A subsequent FSIS review of ConAgra that performed their own pathogen tests as\nConAgra records showed that beef product from that a part of HACCP were exempt from FSIS testing, and\nplant had been testing positive for E. coli O157:H7 as those tests ConAgra performed apart from HACCP\nearly as April 12 and as late as July 11. The recall was were not directly presented to FSIS for review. None\nconsequently expanded to include about 18 million of the tests taken by ConAgra for HACCP purposes\npounds of beef product. in 2001 and 2002 showed the presence of E. coli\n O157:H7, while at least 63 of the tests taken for non-\nWe evaluated the effectiveness of USDA\xe2\x80\x99s management HACCP purposes in 2002 did. FSIS inspectors did\nand oversight of the recall of ConAgra product. We also not pursue the non-HACCP test results because they\ndetermined whether FSIS was aware of potential determined FSIS had no clear authority to review\nproblems at ConAgra prior to the recall and whether non-Government tests even though they knew those\nFSIS and ConAgra operated in accordance with tests showed the presence of the E. coli pathogen.\nHACCP requirements. Our audit found that neither On April 18, 2003, FSIS issued a notice that\nConAgra nor FSIS effectively fulfilled their instructed inspection personnel to collect raw ground\nresponsibilities under the Hazard Analysis and Critical beef samples whenever they received a request, and\nControl Point (HACCP) system. ConAgra did not design the notice no longer permitted plants exemptions\nor reassess its food safety system to ensure it operated from sampling for E. coli based on plants conducting\nin compliance with sanitation standard operating their own tests.\nprocedures (SSOP) and HACCP requirements. Data\nwas available to both ConAgra and FSIS in the period \xe2\x80\xa2 Reanalysis of Hazards Was Lacking. In designing its\nprior to the recall that indicated E. coli O157:H7 HACCP system, ConAgra management assumed\ncontamination was becoming a continuous problem at that E. coli O157:H7 contamination was not likely.\nConAgra. FSIS inspectors did not recognize and/or Consequently, the ConAgra HACCP system was\nrespond to these indicators but instead followed FSIS unprepared to respond to the actual hazards that\npolicies that effectively limited the documents the could and did present themselves. FSIS regulations\ninspectors could review and the enforcement actions require that a plant reassess its HACCP system\nthey were allowed to take. when food safety hazards are found in the finished\n product.\nFSIS needs to be more proactive in its oversight by\nseeking access to available sources of data and ConAgra did not perform a reassessment of its\nanalyzing, on an ongoing basis, the data\xe2\x80\x99s importance HACCP system, even though its tests were showing\nas indicators of problems that could impact food safety. an increasing presence of E. coli O157:H7\nAlso, FSIS needs to reassess its management and contamination. FSIS plant inspectors were aware of\noversight of the recall process. The recall was some of ConAgra\xe2\x80\x99s tests, but they believed that\nineffective and inefficient because adequate controls because the tests were not part of the HACCP\nand processes were not in place to timely identify the program, they could not use the test results to force\nsource (establishment) of the contaminated product or ConAgra to reassess its HACCP system.\nprovide reasonable assurance that recovery of the\nrecalled product was maximized or enforcement actions \xe2\x80\xa2 Enforcement Actions Were Indecisive. Before the\ntaken, as necessary. As of the end of January 2003, recall, FSIS issued multiple noncompliance\nonly about 3 million pounds of the 18 million pounds of notifications to ConAgra for fecal contamination of\nrecalled product had been recovered. The majority of product (the source of E. coli), but it took no decisive\nthe beef was not returned or accounted for. enforcement action. Instead, it continually allowed\n ConAgra to introduce superficial stopgap measures,\n\xe2\x80\xa2 Pre-Recall Indicators Showed Problems. The Hazard such as increasing supervision or retraining an\n Analysis and Critical Control Point (HACCP) program employee. The actions taken by ConAgra did not\n generally requires FSIS to test for E. coli O157:H7 at provide assurance that the physical and biological\n plants producing ground beef. We found that FSIS hazards to the production process had been\n inspectors at ConAgra did not perform their own tests identified and controlled. The inspectors continued to\n\n\n\n8\n\x0c issue citations because FSIS has not established acid in ground beef may raise the cooking\n criteria for determining when repeat violations temperature necessary to destroy the E. coli\n warrant taking additional enforcement action or O157:H7 contaminant.\n require a plant to reassess its HACCP plan.\n \xe2\x80\xa2 Monitoring Needs To Be Proactive. The recall of\n\xe2\x80\xa2 Both FSIS and Beef Processors Were Unprepared ConAgra beef products might have progressed more\n for a Recall. Although FSIS encourages all effectively if FSIS had provided closer monitoring of\n establishments to prepare recall plans, HACCP plans ConAgra and the establishments that processed its\n for two of the grinders using ConAgra beef did not beef. Primarily, FSIS needed to ensure the\n address recall procedures. One of these grinders establishments\xe2\x80\x99 HACCP plans were technically\n was unable to readily determine from its records sufficient to ensure compliance with HACCP and\n which of its customers received the recalled product. Standard Sanitation Operating Procedure\n requirements. HACCP plans at all three of the plants\n FSIS policies added to the inefficiency of the recall by we reviewed for this audit did not adequately address\n impeding the inspectors\xe2\x80\x99 ability to trace a all food safety hazards.\n contaminant from the grinder\xe2\x80\x99s establishment back to\n the supplier. Concurrences needed before traceback FSIS officials stated that the FSIS in-plant personnel\n samples could be tested contributed to a 7-day delay performing most of the reviews of HACCP plans were\n in the recall and added to the quantity of beef product not sufficiently trained and, therefore, not technically\n recalled. competent to make accurate assessments of the\n plans. In 2000, FSIS started a program to hire and\n \xe2\x80\xa2 FSIS had imposed no specific requirement that train a staff of technically competent personnel, and\n plants keep production or distribution records. by the end of 2002, it had about 105 individuals\n Poor records at the establishments that used available to review the more than 5,000 HACCP\n ConAgra beef increased the difficulty FSIS had in plans at federally inspected plants. However, even\n tracking the further distribution of the ground meat. with the program in place, FSIS does not want or\n plan to have approval authority over establishment\n \xe2\x80\xa2 Reviews designed by FSIS to determine the HACCP plans.\n effectiveness of the recall (whether distributors\n were notified and distribution was stopped) were FSIS oversight needed strengthening in other key\n not used to exercise control over the recall areas:\n process because they were performed too late\n and problems found received limited management \xe2\x80\xa2 FSIS guidance to reinspect carcasses when fecal\n attention. contamination is observed is not clearly announced\n in FSIS\xe2\x80\x99 written policy, but rather is expressed\n \xe2\x80\xa2 Even though 67 of the 490 effectiveness checks obscurely in the model generic Beef Slaughter\n we reviewed indicated that distributors and others HACCP plan. We noted at least 1 case where\n in the distribution chain had not been notified of 175 beef carcasses at ConAgra may have been\n the recall, FSIS district managers determined the contaminated with fecal matter and were not\n recall was a success because, to their knowledge, reinspected.\n no one consuming the unrecovered product\n became ill. \xe2\x80\xa2 FSIS\xe2\x80\x99 current random nationwide sampling of plants\n for the presence of E. coli O157:H7 does not verify\n During the recall, ConAgra altered its HACCP the effectiveness of HACCP systems and does not\n process by introducing lactic acid into the production measure the extent of a hazard. We concluded that\n of ground beef to control the E. coli O157:H7 the sampling should be based on the risk posed by\n contaminant. FSIS approved the use of the acid but individual plants.\n did not adequately document how it determined that\n lactic acid was an appropriate antimicrobial \xe2\x80\xa2 FSIS has no written procedures that require FSIS\n intervention in ground beef. We found scientific personnel to take control of or monitor beef that has\n evidence in two ARS studies that the use of lactic\n\n\n 9\n\x0c tested positive for E. coli O157:H7. FSIS allowed oversight to ensure a safe and wholesome food supply.\n ConAgra to resell contaminated beef without verifying These actions are consistent with the Department\xe2\x80\x99s\n that the buyers would not reuse it as raw ground vision statement, issued in July 2003, that set out its\n product. core goals to improve the safety of U.S. meat, poultry,\n and egg products and to better protect public health.\nWe concluded that two conditions were material internal These goals are (1) improve the management and\ncontrol weaknesses: (1) FSIS lacked a process to effectiveness of regulatory programs; (2) ensure that\naccumulate, review, and analyze all data available to policy decisions are based on science; (3) improve\nassess the adequacy of food safety systems; and coordination of food safety activities with other public\n(2) accurate assessments of HACCP plans had not health agencies; (4) enhance public education efforts;\nbeen made because FSIS lacked sufficient, competent and (5) protect meat, poultry, and egg products against\nstaff to make those assessments. intentional contamination.\n\nWe recommended that FSIS 1) provide clear authority Supermarket Employee Poisons Meat\nto ensure that it has access to all plant pathogen and\nmicrobial testing results; 2) make recall activities more On September 19, 2003, a former meat cutter in\neffective by ensuring that ground beef is readily Michigan was sentenced in Federal court to 9 years in\ntraceable from manufacturing to point-of-sale; 3) issue prison, followed by 3 years of supervised release, and\nregulations to provide clear directions on traceback ordered to pay $12,161 in restitution. As previously\nsamples; 4) establish a management control process to reported, a Federal grand jury indicted the meat cutter\naccumulate, review, and analyze all data available to in February 2003, charging him with poisoning meat\nthe agency; 5) increase supervision and oversight of with an insecticide and poisoning meat to seriously\nConAgra until the plant demonstrates it is capable of injure a business. The charges stem from an\nsanitary and wholesome production; 6) ensure that investigation conducted by OIG, the FBI, and local\ninspectors acceptably apply HACCP requirements; 7) health authorities after approximately 130 consumers\ndefine the goals, objectives, and methods of its E. coli returned product or complained of sickness after eating\nO157:H7 testing program and ensure that the program ground beef purchased from a supermarket in Michigan\nis risk-based and includes performance measures; and in early January 2003. Ninety-two people who ate the\n8) instruct FSIS inspection personnel to take control of contaminated hamburger reported acute symptoms\nE. coli O157:H7 adulterated product and verify that including burning in the mouth and lips,\nproduct is properly processed or destroyed. lightheadedness, dizziness, nausea, and vomiting.\n Preliminary lab results indicated the contaminant to be\nDuring the recall and audit, FSIS took a number of nicotine, and meat tampering was suspected. Further\nactions to strengthen its inspection procedures. In investigation disclosed that the meat cutter\nOctober 2002, FSIS informed establishments producing contaminated approximately 250 pounds of ground beef\nraw beef products of the need to reassess their HACCP with Black Leaf 40, a pesticide containing nicotine,\nplans, based on the assumption that E. coli O157:H7 is because of ongoing disagreements with co-workers in\na hazard reasonably likely to occur at all stages of the the meat department at the store. He said he had hoped\nprocess. FSIS has also begun comprehensive food that his action would result in his co-workers being\nsafety assessments to evaluate the adequacy of disciplined or fired.\nHACCP plans and food safety systems. These\nassessments are critical to the success of HACCP. Meat Firm and Officers Plead Guilty to Selling Rat-\n Infested Meat\nIn response to the audit, FSIS stated that the agency\nhad already recognized many of the issues reported A Los Angeles corporation, its president, and its\nand is committed to making cost-effective improvements warehouse manager were placed on probation and\nin its inspection programs. FSIS will continue to were fined more than $105,000 after they pled guilty to\nstrengthen its programs with updated policy and selling and offering to sell adulterated meat food\nguidance, base policy decisions on science, provide products for human consumption. Our joint investigation\nsupplemental training for field personnel, increase with FSIS Compliance disclosed that the company,\naccountability, and provide better supervision and which was engaged in the business of purchasing,\n\n\n\n10\n\x0cstoring, and selling meat and poultry products in Two Illegal Cockfighting Rings in Bronx, New York,\ncommerce to retail customers, had sold adulterated Raided\nmeat and poultry product that had been gnawed by and\notherwise contaminated by rodents. In January 2003, OIG special agents, law enforcement\n officers of the New York City Police Department, and\n agents of the American Society for the Prevention of\n SAFETY OF PRODUCTION AGRICULTURE\n Cruelty to Animals jointly raided a cockfighting operation\n in progress in the Bronx, New York. Approximately 137\nPrompted by an outbreak of Exotic Newcastle Disease people were either arrested or summoned, and 38\n(END) in the Southwestern United States, OIG began fighting cocks were seized. We conducted another raid\nan initiative to investigate criminal activity that could operation in April 2003 in which 84 people were either\ncontribute to further outbreaks and spread of END, one arrested or summoned and 144 fighting cocks were\nof the most infectious poultry diseases. OIG\xe2\x80\x99s initiative seized.\nemployed a two-prong approach to target (1) actual\ncockfighting activities and (2) the smuggling of fighting\ncocks into the United States. Smuggling in turn can\nresult in the introduction of dangerous diseases into the\nUnited States, because the animals being smuggled are\nnot inspected or quarantined to guarantee their health.\nDetails of several of our recent cockfighting cases\nfollow.\n\nMore than 4,700 Fighting Cocks Seized in Northern\nCalifornia; 24 Subjects Arrested\n\nAn OIG special agent, working undercover, developed\nthe probable cause for the issuance of 3 search\nwarrants that resulted in law enforcement agents\nseizing more than 4,700 fighting cocks in 3 raids in\nnorthern California in 2003. Also as a result of these\nsearch warrants, California state criminal charges were Dozens of dead fighting cocks. OIG photo.\nfiled against 24 individuals for \xe2\x80\x9cowning, keeping, or\ntraining animal(s) for fighting.\xe2\x80\x9d Seven of the charged New Mexico Man Caught Smuggling Five Fighting\nindividuals have been sentenced, 2 are fugitives, and Cocks Into United States From Mexico\nthe remaining 15 subjects are awaiting trials. Also\nseized during the searches were several firearms and a On January 14, 2003, a New Mexico man tried to\nlarge quantity of cockfighting paraphernalia. Most of the smuggle five live fighting roosters from Mexico into the\nfighting birds have since been destroyed. This joint law United States near the Columbus, New Mexico, port-of-\nenforcement operation also involved Napa County, entry. An accomplice handed the roosters over from the\nCalifornia, sheriff\xe2\x80\x99s deputies, as well as sheriff\xe2\x80\x99s Mexican side of the fence to him. He placed the crate of\ndeputies and animal control officers from several other roosters in his truck and was driving toward his home\nCalifornia counties. The Humane Society of the United when he was stopped by Border Patrol agents and\nStates helped coordinate the operation. This operation interviewed. He confessed that he had smuggled the\nwas particularly significant because fighting cocks roosters into the United States because he knew it was\ncontributed greatly to the spread of END in southern illegal to bring in live birds. He also stated that he was\nCalifornia and other Southwestern States in late 2002 bringing the roosters into New Mexico for fighting\nand early 2003. purposes. The man later pled guilty to failure to obtain\n an import permit and was ordered to pay a $475 fine.\n\n\n\n\n 11\n\x0cPublic Corruption\n\n\nA continuing priority for OIG is the investigation of Visa Fraud Ring Involving USDA Employee\nalleged criminal acts by USDA employees involving Uncovered\nUSDA programs and operations. The percentage of\nwrongdoers is small, but to maintain the public trust, A former Senior Agricultural Economist for the USDA\nthose who commit crimes must be brought to justice. Economic Research Service has pled guilty to charges\nDescriptions of some recent investigations follow. of conspiracy to commit visa fraud and has agreed, as\n part of the plea agreement, to remit to the Government\n approximately $82,000 that he obtained as a result of\n During the past 6 months, public corruption his role in the scheme. This economist, working with\n investigations resulted in 10 convictions of current others, arranged for Chinese nationals to fraudulently\n or former USDA employees and 31 personnel obtain visas to illegally enter and remain in the United\n actions. OIG\xe2\x80\x99s investigations for the second half of States. Although they were not agricultural specialists,\n FY 2003 also yielded 14 indictments and $209,980 the Chinese nationals received letters of invitation on\n in monetary results. For the full fiscal year, OIG USDA letterhead to enter the United States as part of a\n results totaled 26 indictments, 21 convictions, and Government delegation of agricultural specialists. Each\n $3.2 million. immigrant paid $10,000 for costs associated with\n obtaining the visas. As a result of the scheme, from late\n 1999 through April 2002, 99 Chinese immigrants\nFormer RD State Director Sentenced to Prison Term improperly entered and remained in the United States.\nfor Bribery The U.S. Embassy in Beijing, China, denied\n approximately 150 other applicants\xe2\x80\x99 visas when the\nIn June 2003, the former State Director of Rural scheme was discovered. Two co-conspirators have also\nDevelopment (RD) in Virginia was sentenced to serve been criminally charged and have entered guilty pleas.\n27 months in Federal prison and ordered to pay a fine of This was a joint investigation with the State Department.\n$49,000 after he pled guilty to bribery. OIG\xe2\x80\x99s\ninvestigation revealed that, almost immediately after Three USDA Employees Sentenced in\ntaking office, he began accepting cash payments and Embezzlement Schemes\nother financial assistance from real estate developers\nwho had encouraged him to apply to become State \xe2\x80\xa2 In Minnesota, a former Animal and Plant Health\nDirector. During his tenure as State Director, he Inspection Service (APHIS) accounting clerk pled\naccepted more than $60,000 from various real estate guilty in Federal court to embezzling $48,599 in\ndevelopers doing business with USDA and gave them APHIS program payments and was sentenced to\nfavorable treatment in return. He was indicted in serve 16 months in prison, followed by 3 years of\nDecember 2002 on one bribery count for accepting probation. The subject used identification cards that\n$32,000 from the president of a Texas development he obtained from homeless people to create fake\ncompany in August 1999. In return, the former State veterinarians in the APHIS computer system and\nDirector allowed the company to continue to manage then authorized the issuance of payments to the fake\nUSDA-financed housing projects, even though a 1995 veterinarians for nonexistent services. He retrieved\nOIG audit had shown that the company had skimmed the fraudulent APHIS program checks from a post\nfunds from numerous projects. The developer skimmed office box that he opened as part of the scheme. In\nan additional several hundred thousand dollars from his addition to the prison sentence, he was ordered to\nVirginia housing projects after the audit. (The developer pay a $100 special assessment fee and restitution of\ndied before the investigation uncovered his involvement $48,599.\nin the bribery scheme.) This case was worked jointly\nwith the FBI.\n\n\n\n\n12\n\x0c\xe2\x80\xa2 In June 2003, a former Forest Service\n telecommunications specialist in Arkansas was\n sentenced to 6 months of home detention and 5\n years of probation, and ordered to pay $12,500 in\n restitution and a $20,000 fine. He had pled guilty to\n charges of theft of Government money and making\n false statements in conjunction with the unauthorized\n use of his Government-issued credit card. From late\n 1998 to about April 2001, the employee was\n responsible for purchasing radio equipment for the\n FS. However, he purchased approximately $70,000\n in items not related to his job, including a digital\n camera and computers.\n\n\xe2\x80\xa2 Also in June 2003, a Farm Service Agency (FSA)\n Acting County Executive Director in Maine pled guilty\n to converting to her own use $22,150 in FSA funds.\n She was subsequently fired, and in August 2003 was\n sentenced to home confinement, 5 years of\n probation, and restitution of $22,150.\n\n\n\n\n 13\n\x0cRural Development (RD)\n\n\nOne of our agency-specific management challenges determine whether there is any pattern or substance to\naddresses the fact that improvements and safeguards the numerous hotline complaints that OIG-Investigations\nare needed for the Multi-Family Housing (MFH) has received concerning allegations of inaccuracies and\nprogram, which comes under the purview of the Rural improprieties involving CSC servicing actions.\nHousing Service in the Rural Development mission\narea. A substantial portion of RHS\xe2\x80\x99 current Rural Rental Finally, we will again audit RD\xe2\x80\x99s FY 2004 financial\nHousing (RRH) loan portfolio involves properties over statements and continue to monitor the contracted audit\n20 years old. RHS faces a major challenge to maintain work for the Rural Telephone Bank financial statements.\nits portfolio in good repair so that it will continue to\nprovide safe, decent, and affordable housing for low- to\nmoderate-income rural residents. RHS needs to For the second half of FY 2003, OIG issued 11\naddress several challenges in its management of the audit reports relating to Rural Development. For\nMFH program. RHS needs to inspect and repair its the full fiscal year, OIG issued 20 audit reports.\naging portfolio; accurately report to Congress the units OIG\xe2\x80\x99s investigations for the second half of FY\nbuilt in its guaranteed MFH program; plan for future 2003 yielded four indictments, six convictions, and\nincreases in rental assistance costs; implement wage- $523,977 in monetary results. For the full fiscal\nmatching to identify excessive rental assistance costs; year, OIG results totaled 17 indictments, 16\nfairly use equity incentives to keep RRH projects in the convictions, and $21.6 million.\nprogram; and continue to implement regulatory and\nother internal controls to address deficiencies that have\nbeen identified in the program.\n RURAL BUSINESS-COOPERATIVE\n SERVICE (RBS)\nFor FY 2004, we will continue to review the RHS MFH\nprogram. We plan to audit RHS\xe2\x80\x99 management\noperations of the MFH program to determine if RHS RBS Needs To Take Action To Reduce Losses in the\nimplemented corrective actions to identify unauthorized, B&I Loan Program\nineligible, or fictitious project expenses, particularly\nthose that involve identity-of-interest companies. We After OIG\xe2\x80\x99s comprehensive review, we issued an audit\nalso plan to audit RRH construction and rehabilitation report that summarized the results of 21 audits\ncosts to ensure that the costs were actually incurred performed in 16 States to disclose recurring issues that\nand were for authorized purposes. Both audits will need to be addressed by the RBS\xe2\x80\x99 national office in the\nfollow up on previous nationwide reviews of the MFH Business and Industry (B&I) loan program. We\nprogram. examined 38 guaranteed loans totaling over $125\n million and 18 direct loans totaling over $14 million. We\nMore work is scheduled for the MFH program involving questioned $58 million in guaranteed loans and $5.8\nexpansion of the RRH tenant certification audit in million in direct B&I loans.\nFlorida to a nationwide review of the accuracy and\neligibility of RRH tenant subsidies. In our reviews of the We identified instances where RD had guaranteed\nMFH program, we will utilize our increasing expertise questionable loans, failed to identify lender negligence\nwith RHS\xe2\x80\x99 database systems to identify potential in servicing existing loans, and honored guarantees in\nproblems and trends that may indicate fraud, waste, or situations where lenders had not fulfilled loan\nabuse. obligations. We attributed these conditions to\n inappropriate appraisal methods used to determine the\nIn late 2003, we also initiated a review of RHS\xe2\x80\x99 servicing value of loan collateral, and to inadequate lender\nof its Single Family Housing Program and accuracy of assessments of borrowers\xe2\x80\x99 financial conditions when\nborrowers accounts, which is conducted at the loans were guaranteed and on an annual basis\nCentralized Servicing Center (CSC) in St. Louis, thereafter. Rural Development also lacked effective\nMissouri. The ongoing work will include an assessment procedures to enforce compliance when lenders failed\nof CSC\xe2\x80\x99s servicing actions and how the automated to meet agency requirements. In addition, RD officials\nsystems support these functions. We also plan to had not always verified that lenders complied with\n agency requirements prior to honoring loan guarantees.\n\n\n\n14\n\x0cAs a result, agency officials were unaware of lender RBS disagreed with the report recommendations, with\nnegligence until our review. the exception of using State loan committees to review\n liquidated loss loans, and the need for implementation\nRural Development and OIG have identified conditions of improvements to the accuracy of annual performance\nin the past that are similar to those disclosed during our reports. We are in the process of responding to their\ncurrent review. Since 1980, OIG has issued 46 such concerns.\naudit reports with monetary findings of over $224\nmillion. With more than $4.7 billion in loan guarantees, Lender Misrepresents Use of Loan Proceeds and\nRD needs to ensure that lenders are making sound Provides Negligent Servicing of B&I Loan\nloans and properly monitoring borrower financial\nconditions to reduce the risk of significant losses to the At the request of the RBS national office, we conducted\nGovernment. However, the results of our review may a review of a guaranteed B&I loan made to a tomato\nnot accurately indicate the extent of problems in the B&I cooperative in Arkansas. This audit was conducted after\nGuaranteed Loan Program because 55 percent of the the completion of our national audit of the B&I program.\nloans we reviewed were delinquent. We found that the lender misrepresented key financial\n information and inadequately serviced nine loans\nRural Development\xe2\x80\x99s annual performance reports also totaling over $9.6 million for the cooperative. The\ninaccurately depicted the number of jobs created and borrower defaulted, resulting in a potential liability to\nsaved by the B&I Guaranteed Loan Program. The RBS of over $7.4 million (about $7 million remaining\nagency reported program results based on borrower guarantee plus about $448,000 accrued interest). The\nprojections, rather than the actual number of jobs lender has filed a loss claim.\ncreated and saved by the program. In addition, the\nagency\xe2\x80\x99s data collection and input controls did not Our audit found that the lender processed guaranteed\nensure the accuracy of reported results. loans to an ineligible borrower, improperly allowed the\n borrower to use guaranteed funds to pay delinquent\nWe found that RD lacked effective measures to enforce Federal debt, allowed the borrower to use guaranteed\nborrower compliance with agency requirements, such loan funds for unauthorized purposes, and failed to\nas borrowers providing current financial statements and adequately supervise construction of facilities financed\ninsurance coverage. We also found weaknesses in with loan proceeds. As a result, the borrower built\ncollateral appraisals, procedures to verify the existence facilities that did not conform to plans approved by RBS.\nof collateral, and procedures to file required legal The lender falsely represented to RBS that these\ndocuments. However, since the B&I Direct Loan conditions did not exist. In addition, the lender allowed\nProgram is no longer being funded, we did not the borrower to divert $6 million in working capital away\nrecommend any corrective action for direct loanmaking. from the cooperative for personal use. These conditions\n eventually led to the failure of the cooperative.\nWe recommended that RD establish guidelines to\n(1) better identify the most appropriate appraisal We recommended that RBS, after consultation with\nmethods used to value collateral, (2) verify that lenders OGC, take actions to contest the guarantees, or\nuse the most appropriate appraisal method, (3) require substantially reduce the remaining balance of the loan\nthat lenders use audited financial statements to perform note guarantees. RBS agreed with our recommendation\nfinancial analyses of borrowers, (4) enforce lender and on August 29, 2003, notified the lender that it will\ncompliance with critical agency oversight controls, (5) not honor loan note guarantees totaling over\nrequire annual lender visits for all new and delinquent $6.9 million of principal and $448,000 of interest.\nborrowers, and biennial lender visits for current\nborrowers, and (6) define deficiencies that classify loans RBS Should Improve Controls To Minimize\nin significant nonmonetary default and require Liquidation Losses on Guaranteed B&I Loans\nacceleration of all loans in that classification. We also\nrecommended that the agency require that the loss We conducted a review of the process used by RBS to\nclaims be evaluated by State loan committees. Further, liquidate defaulted B&I loans. We reviewed the files for\nwe recommended specific procedures that would 10 judgmentally selected (highest dollar loss) liquidated\nimprove the accuracy of RD\xe2\x80\x99s annual performance loans with final loss payments in fiscal year 2001. We\nreport.\n\n 15\n\x0cconducted our review at 7 RBS State offices and at 10 The State had not implemented wage and benefit match\nlenders\xe2\x80\x99 offices. The loans accounted for about $13.1 provisions, and supervisory reviews were generally not\nmillion out of $25.5 million in total final losses for 2001. of sufficient depth to detect the material problems\nWe found no material weaknesses in RBS\xe2\x80\x99 controls over identified by the audit. We statistically estimated that\nB&I loan liquidation. tenant certifications for 2,583 (20.8 percent) of the\n 14,705 units contained errors in households (including\nNevertheless, about $818,000 could have been saved if those of apparent illegal aliens) receiving improper\nRBS had improved controls. For four loans, lenders rental subsidies totaling about $4.7 million\neither did not file estimated loss claims or filed them (overpayments of $4.4 million and underpayments of\nlate, resulting in almost $582,000 in excess interest about $271,000). The primary cause for the improper\ncosts to the Government. For three loans, RBS subsidies was that tenants did not accurately report\nimproperly authorized about $199,000 in protective their incomes at certifications or they did not notify the\nadvances (for security, maintenance, etc., to protect the project managers of subsequent changes. The project\ncollateral at liquidation), resulting in excessive interest managers did not have an independent source, such as\nexpenses of about $16,000. RBS approved final loss wage and benefit matching, to verify household income,\nclaims that contained errors for two loans reviewed and RD had not fully implemented controls over the\neither because agency procedures were inadequate or tenant certification process to monitor and improve the\nstaff did not follow established procedures, resulting in quality of certifications.\nexcess final loss payments of about $45,000. For one\nloan, the lender did not provide supporting We made a series of recommendations regarding the\ndocumentation for about $194,000 worth of protective SO\xe2\x80\x99s oversight and monitoring of the tenant certification\nadvances plus accrued interest. Since the Government process, including substantially expanding the use of\nguaranteed 90 percent of this loan, the final excess loss wage and benefit matching and more substantive\nclaim totaled almost $175,000. supervisory reviews. In addition, we recommended that\n the SO (1) establish a claim and collect the\nWe recommended that RBS (1) establish a control to overpayments from the households in our sample who\nensure that lenders timely submit estimated loss claims received excess benefits and (2) review the tenant\nafter RBS approves their liquidation plans, (2) clarify certifications for all 80 units at 1 project where the\nwhen State office staff should authorize protective manager failed to follow RD certification procedures,\nadvances, (3) direct State office staff to recover about determine the amount of overpayments, and recover\n$45,000 from lenders for errors on final loss claims, (4) them.\ndirect State office staff to recover about $175,000 for\nunsupported protective advances after consulting with The SO generally agreed with four of the report\xe2\x80\x99s seven\nOGC, and (5) direct State office staff to obtain and recommendations. These recommendations addressed\nreview supporting documentation when claimed (1) reviewing and recovering overpayments questioned\nliquidation expenses and protective advances surpass a in the report, (2) working with the Florida Department of\npredetermined amount. The agency concurred with our Law Enforcement and the Florida Department of Labor\nfindings and recommendations. and Employment Security to permit wage and benefit\n matching information sharing with project managers,\n and (3) developing procedures for project managers\xe2\x80\x99\n RURAL HOUSING SERVICE (RHS)\n verification of applicants\xe2\x80\x99 citizenship or legal alien\n status.\nRental Subsidy Payment Errors Exceeded $4.7\nMillion in Florida\xe2\x80\x99s RRH Program The SO disagreed with the other three\n recommendations. They addressed (1) requiring wage\nWe evaluated the Florida State Office\xe2\x80\x99s (SO) controls matches on all households at both initial certifications\nover the tenant eligibility determination process in the and annual recertifications, (2) developing additional\nRural Rental Housing (RRH) Program and accuracy of procedures and guidelines for (a) RD staff to follow\nrental subsidy payments to borrowers on behalf of low- when conducting supervisory reviews and (b) project\nincome tenants. As of April 2002, RRH provided rental managers to follow when forecasting tenants\xe2\x80\x99 annual\nsubsidies to 327 projects with 14,705 rental units of incomes.\nwhich 10,326 units received rental assistance.\n\n16\n\x0cWe evaluated the SO comments on the three\n RURAL UTILITIES SERVICE (RUS)\nrecommendations, and our basic position remains\nunchanged.\n RUS Did Not Maximize Leverage of Limited Water\nLouisiana Developer and Four Associates Forfeit and Waste Grant Funds With Private Sector\nGold Coins, Sentenced for Equity Skimming\n RUS did not leverage limited grant and loan funds for\nA major real estate developer has been sentenced to maximum benefit to proposed water and waste projects\nserve 5 years in Federal prison and ordered to pay fines in rural areas. For example, RUS did not limit grant\nand restitution of $3.7 million. The developer and his subsidies to only the most needy applicants. As a result,\nassociates devised a scheme to skim several million we statistically estimated that, during a 4-year period,\ndollars from RRH and U.S. Department of Housing and grant funds totaling about $85.5 million were provided\nUrban Development (HUD) properties owned by the unnecessarily to 97 projects. In addition, we estimated\nsubject and others by having contractors submit inflated that RUS made concurrent loans totaling about $97.9\ninvoices for work done at the properties. The subject million to projects that could have been financed with\nobtained the funds paid for the inflated costs from the private credit. RUS procedures did not allow private\ncontractors and converted those funds, which had been lender funding for the loan portion of projects where the\n\xe2\x80\x9cskimmed\xe2\x80\x9d from the equity of the property, into gold agency determined grants were a necessary part of\ncoins. During the investigation, we seized 1,599 gold project funding. We estimated that 169 grant recipients\ncoins valued at nearly $600,000, as well as an received RUS loan funding, totaling about $163.3\ninvestment account totaling $1.288 million. The gold million, which could have been financed by commercial\ncoins and investment account were forfeited to the lenders if RUS procedures allowed decoupling of grant\nGovernment. The associates and one of the developer\xe2\x80\x99s and loan funding. In addition, we projected that\ncorporations also have been sentenced. The sentences inadequate tests for other credit were completed for\nranged from probation to 5 months in Federal prison, 286 projects receiving grants totaling about $325.4\nwith fines and restitution totaling over $700,000. million.\n\n We recommended that RUS discontinue its current\n policy of making grants contingent on RUS loans being\n used to finance the balance of project costs and that\n RUS work with private creditors. In addition, we\n recommended that RUS revise current policy and\n require proposals from nationwide investment lenders to\n be solicited and analyzed before it considers each\n future grant obligation. Also, we recommended that\n RUS establish Government Performance and Results\n Act-specific goals for successful referrals of grant\n applicants to private credit and/or participation in joint\n financing with the private sector.\n\n RUS officials generally concurred with the audit\n recommendations and plan to publish a directive in\n support of maximizing use of grant funding.\nGold coins seized by the Government. OIG photo.\n\n\n\n\n 17\n\x0cTwo Water Association Circuit Riders Plead Guilty\nin False Travel Claim Scam\n\nIn April 2001, the National Rural Water Association\n(NRWA) informed RD officials that the Executive\nDirector and wastewater circuit rider for the Nevada\nRural Water Association had resigned, following\ndiscovery of evidence that he had falsified work and\ntravel claims. (NRWA contracts with local and State\nassociations to provide technical assistance on water,\nwastewater, and solid waste issues for operators and\nboard members of rural utility systems. USDA, through\nRUS, reimburses NRWA for official time and travel\nexpense claims.) After discussions with RD officials,\nOIG conducted an investigation and found that the\nformer Nevada wastewater circuit rider had submitted\nfalse documentation and claims from 1998 until his\nrequested resignation in 2001, resulting in improper\npayments to him of more than $50,000. The Nevada\nwater circuit rider (a separate employee) had also\nsubmitted false documentation and claims that resulted\nin payments to him in excess of $15,000. The former\nwastewater circuit rider pled guilty to mail fraud and was\nsentenced to 6 months of home confinement and\n5 years of probation, and ordered to pay restitution of\nmore than $37,000. The water circuit rider, who also\nresigned from his position, has pled guilty to one felony\ncharge of false statements and was sentenced to 120\nhours of community service and placed on probation for\n3 years.\n\n\n\n\n18\n\x0cFeeding Programs\n\n\nThe Food and Nutrition Service (FNS) administers the Operator Ordered To Pay $1 Million in Restitution\nDepartment\xe2\x80\x99s food assistance programs, which include\nthe Food Stamp Program (FSP); the Child Nutrition The former operator of a disqualified Chicago retail\nPrograms (CNP); and the Special Supplemental store was sentenced to 27 months of incarceration and\nNutrition Program for Women, Infants, and Children 3 years of supervised release. The individual also was\n(WIC). These three major entitlement programs will ordered to pay $1 million in restitution to USDA. The\naccount for approximately $42 billion in estimated individual pled guilty to wire fraud for participation in a\nexpenditures in FY 2004. food stamp benefit trafficking scheme that occurred\n from January 1996 through September 1997.\nSince FNS programs have large cash outlays, the\npotential exists for fraud and large dollar losses. In FY Indiana Needs To Improve Controls and Oversight\n2004, we will emphasize audits of FNS programs, Over FSP Costs\nparticularly FSP, to ensure that critical internal control\nchecks are in place to guarantee efficiency, Our review of the accuracy and allowability of FSP\neffectiveness, and economy. We will continue to monitor administrative costs claimed in Indiana identified\nElectronic Benefits Transfer (EBT) systems as they are unsupported administrative costs of $1.8 million for FY\nimplemented. Additionally, our plan calls for audits of 2000. The State agency did not have controls in place\nFNS\xe2\x80\x99 implementation of revised WIC vendor regulations, to properly process FSP costs in a consistent and\ncontrols over eligibility for the National School Lunch accurate manner. The State agency did not provide\nProgram, and analyses of EBT databases. adequate oversight over its local office operations, and\n had not performed a management evaluation review of\n its two largest counties in 7 years. The State agency\n For the second half of FY 2003, OIG issued 13 also did not comply with its approved cost allocation\n audit reports relating to feeding programs. For the plan. We identified numerous weaknesses with its\n full fiscal year, OIG issued 22 audit reports. OIG\xe2\x80\x99s methodology to allocate indirect costs through its\n investigations for the second half of FY 2003 random moment sampling time study. Based on the\n yielded 127 indictments, 163 convictions, and results of our testing, we questioned whether the $79\n $9.3 million in monetary results. For the full fiscal million charged for FY 2002 FSP expenditures correctly\n year, OIG results totaled 300 indictments, 290 represented actual FSP activity.\n convictions, and $23 million.\n We made recommendations to recover the unsupported\n costs and for the State agency to improve controls over\n the reimbursement and claiming of FSP administrative\n FOOD STAMP PROGRAM (FSP)\n costs. FNS generally agreed with our findings.\n\nPhiladelphia Investigation Nets Seven Convictions,\n SPECIAL SUPPLEMENTAL NUTRITION\n$3.3 Million Restitution Order\n PROGRAM FOR WOMEN, INFANTS,\n AND CHILDREN (WIC)\nOIG special agents have investigated three grocery\nstores in the Philadelphia area that fraudulently\nredeemed over $3.4 million in paper food stamps and Husband and Wife Sentenced in WIC-Related\nfood stamp benefits issued via the EBT system. Seven Counterfeit Manufacturer Coupon Scam\nowners, employees, or associates of these markets\nhave now been convicted on charges of trafficking in On March 12, 2003, the primary subject of this\nfood stamp benefits, money laundering, and conspiracy. investigation was sentenced to 22 months of\nAn eighth individual is a fugitive and is believed to have imprisonment followed by 3 years of probation for his\nleft the United States. The seven convicted individuals role in counterfeiting manufacturer discount coupons for\nreceived sentences ranging from probation to 46 the only kind of infant formula approved for use by WIC\nmonths in prison and were ordered to pay more than recipients in Ohio. He then used these fake coupons to\n$3.3 million in restitution to USDA. The IRS participated purchase the formula throughout Ohio, Kentucky, and\nin one of these investigations.\n\n\n 19\n\x0cother areas in the Midwest, and resold it at a profit. After\nhis sentencing, the defendant was immediately\nremanded to the custody of the U.S. Marshal. The\nsubject\xe2\x80\x99s wife was sentenced to 3 years of probation\nand ordered to pay $27,000 in restitution and a $1,000\nfine for defrauding FSP and WIC from June 1996 to\nSeptember 1998. The subject and his wife were\ncharged with welfare and WIC fraud conspiracy. The\nsubject was also charged with income tax evasion and\nillegally transporting money out of the United States.\nThe producer of the infant formula had projected that\nthe redemption value of discount coupons for the infant\nformula would approximate $175,000. With the\ncounterfeit coupons included, the redemption value for\nall coupons exceeded $415,000.\n\nWIC Fraud Conspiracy in Phoenix, Arizona, Involves\nMaricopa County Employee\n\nFrom at least March 2002 through February 2003, an\nemployee of Maricopa County, Arizona, prepared\nfraudulent applications and WIC checks for many\nfictitious clients. She and three accomplices pretended\nto be those clients in order to obtain infant formula and\nother food products from local grocery stores. Another\naccomplice resold the formula at a profit. All five\nparticipants in the scheme shared in the proceeds from\nthe resales. The Maricopa County employee was\nsentenced to 15 months of imprisonment, followed by 3\nyears of supervised release, and ordered to pay\n$83,049 in restitution. Two of the accomplices have pled\nguilty to conspiracy and await sentencing. The third\naccomplice, who was indicted on one count of\nconspiracy and eight counts of theft from the WIC\nprogram, is a fugitive from justice.\n\n\n\n\n20\n\x0cProgram Irregularities and Abuses\n\n\n FARM PROGRAMS For the second half of FY 2003, OIG issued five\n audit reports relating to farm programs. For the full\nOIG\xe2\x80\x99s Farm Programs work encompasses a variety of fiscal year, OIG issued six audit reports. For farm-\nfarm commodity, farm credit, and conservation related programs (RMA/FSA), OIG\xe2\x80\x99s investigations\nprograms administered by the Farm Service Agency. for the second half of FY 2003 yielded 38\nThe programs are funded primarily through the indictments, 20 convictions, and $8.1 million in\nCommodity Credit Corporation, a Government entity for monetary results. For the full fiscal year, OIG\nwhich FSA provides operating personnel. results totaled 68 indictments, 72 convictions, and\n $12.8 million.\nSince the new Farm Bill\xe2\x80\x94the Farm Security and Rural\nInvestment Act of 2002 (the 2002 FSRIA)\xe2\x80\x94was\nenacted in May 2002, market conditions have improved, FARM SERVICE AGENCY (FSA)\nand the only major disaster assistance authorized is the\n$3.1 billion provided in the Agricultural Assistance Act of\n2003 (2003 AAA). The 2002 FSRIA mandated Peanut Quota Buyout Program Generally Well\nsubstantial changes in farm program and conservation Managed\npayments; we have been monitoring the effects of those\nchanges. Total FSA outlays are projected to be about On May 13, 2002, the Farm Bill eliminated the long-\n$19.4 billion in 2003 and $18.2 billion in 2004. FSA\xe2\x80\x99s standing peanut quota system and enacted the Peanut\n2004 budgeted program level is more than 27 percent of Quota Buyout Program (QBOP) to compensate quota\nthe Department\xe2\x80\x99s total. holders $0.55 per pound of quota for the loss of asset\n value. For the 16 States with peanut quotas, QBOP\nIn FY 2004, we will continue monitoring implementation payments were expected to cost approximately\nof the 2002 FSRIA and the 2003 AAA and intend to $1.3 billion. QBOP payments for the States we\nconduct reviews of affected farm programs including the reviewed, Georgia and Florida, were $535 million and\nMilk Income Loss Contract Program, 2001/2002 Crop $55 million respectively. We selected the two largest\nDisaster Program, and Sugar Beet Disaster Program. payment counties in each State for review. The\nAlso, as Congress continues to challenge Government payments in the four counties totaled about\nagencies to \xe2\x80\x9cdo more with less,\xe2\x80\x9d we plan to systemically $96.3 million.\nassess the efficiency of certain comprehensive\nprocesses and initiatives administered or undertaken by QBOP procedures allowed payments to producers who\nFSA. Specifically, we will look at FSA\xe2\x80\x99s internal end-of- were quota holders as of May 13, 2002. At the 4 county\nyear payment limitation review process, program offices reviewed, we identified 1,365 payments totaling\ncompliance activities, and compliance with the Improper about $9 million made to parties other than the quota\nPayments Information Act of 2002. Our more systemic holders/owners of record reflected in FSA\xe2\x80\x99s farm\napproach to work for FY 2004 corresponds with the records system as of May 13, 2002. This generally was\nDepartment\xe2\x80\x99s comprehensive Human Capital Plan, due to producers not reporting changes in ownership to\nwhich includes implementing management initiatives FSA.\nboth within the agencies and from a corporate\nperspective in support of the President\xe2\x80\x99s Management However, of the 102 payments tested, we questioned\nAgenda. 4 payments totaling almost $153,000, made by\n 3 service centers, because the payees could not\n provide sufficient proof of ownership. One service\n center generally did not obtain sufficient documentation\n to support payments to parties other than the owners of\n record. The service center made 184 payments totaling\n about $1.4 million to the other parties.\n\n\n\n\n 21\n\x0cWe recommended that FSA evaluate the four audit findings; the expansion (i.e., new types of\nquestioned payments for eligibility and recovery, as insurance) and revision of major insurance programs;\nappropriate, and have all county offices that made the reliance placed upon the Federal Crop Insurance\nQBOP payments review and certify that they have Programs by Congress to be the \xe2\x80\x9csafety net\xe2\x80\x9d for\nadequate documentation that payees were eligible American farmers; and the mandated changes under\nquota holders. FSA generally agreed with the the Agricultural Risk Protection Act (ARPA).\nrecommendations.\n As last reported, our FY 2003 audits continued to\nNorth Dakota Insurance Agent/Farmer Sentenced in disclose problems with RMA\xe2\x80\x99s administration of the\n$14 Million Fraud Scheme FCIC programs in the areas of crop loss claims\n (preparation and loss adjustment), producers\xe2\x80\x99 reporting\nIn an update from our last semiannual report, a North of production, conflicts of interest within the reinsured\nDakota insurance agent/farmer and two of his farming companies and/or representatives, and establishment of\nentities were convicted for their roles in a scheme to a reliable quality control system.\ndefraud USDA and the IRS of more than $14 million.\nFrom 1988 to 2000, the insurance agent created false One of the initiatives under the President\xe2\x80\x99s Management\nfarming entities and filed false applications and claims Agenda is to improve financial performance in\nfor FSA and RMA benefits. In June 2003, the insurance Government programs. This initiative includes\nagent was sentenced to serve 60 months in prison and determining agencies\xe2\x80\x99 efforts to determine and reduce\nordered to forfeit $5.9 million to the United States. Both erroneous payment rates, including actual and targeted\nof the farming entities were placed on probation for 5 rates, where available, for benefits and assistance\nyears. The identification and seizure of assets is programs over $2 billion. Based on prior and ongoing\ncurrently being conducted. reviews involving RMA, we have identified this initiative\n as a management challenge. To address these\n concerns, major audits of RMA planned for FY 2004\n FEDERAL CROP INSURANCE\n include audits to assess the distribution of insurance\n policies by the insurance companies within the three\nOur risk management work encompasses a variety of insurance pools provided for within the Standard\nFederal Crop Insurance Corporation (FCIC) programs Reinsurance Agreement (SRA), the extent of improper\nadministered by the Risk Management Agency (RMA). payments made within the insurance programs, RMA\xe2\x80\x99s\nFCIC receives funds from four main sources: capital renegotiation of its SRA with the insurance companies,\nstock subscriptions from the U.S. Treasury, premium and RMA\xe2\x80\x99s implementation of significant selected ARPA\nincome from producers purchasing insurance policies, provisions.\nadministrative fees paid by producers purchasing\ncatastrophic risk protection insurance, and\nappropriations for Federal premium subsidies and For the second half of FY 2003, OIG issued two\noperating expenses. audit reports relating to risk management. For the\n full fiscal year, OIG issued three audit reports. For\nOur work is designed to ensure overall program farm-related programs (RMA/FSA), OIG\xe2\x80\x99s\nintegrity, prevent and detect program/ insurance losses, investigations for the second half of FY 2003\nprovide a visible audit presence, ensure program yielded 38 indictments, 20 convictions, and\nobjectives are being accomplished, and assist program $8.1 million in monetary results. For the full fiscal\nmanagers to find solutions for known or potential year, OIG results totaled 68 indictments, 72\nprogram weaknesses. Emphasis on crop insurance convictions, and $12.8 million.\nprograms is needed because of the significance of prior\n\n\n\n\n22\n\x0c common information collection system. In addition, we\n RISK MANAGEMENT AGENCY (RMA)\n recommended that the agencies develop strategies to\n address each of the conditions cited. We also\nImprovements Needed in the Data Reconciliation recommended that RMA obtain written legal opinions as\nProcess to whether (1) reinsured companies can be required to\n participate in the data reconciliation process and to\nOur review of the Department\xe2\x80\x99s implementation of the clarify their role and responsibilities in resolving\nAgricultural Risk Protection Act of 2000 (ARPA) identified discrepancies and (2) the limited sampling\nconcluded that the Risk Management Agency (RMA) plan being used to address and resolve the\nand Farm Service Agency (FSA) initiated reasonable discrepancies identified during the 2001 reconciliation\nactions to implement 19 of 30 significant ARPA meets the requirements of ARPA.\nprovisions we identified. For 10 of the remaining 11\nprovisions, we concluded that the agencies\xe2\x80\x99 actions The RMA Administrator agreed to obtain the opinions\nwere not developed enough to adequately assess their from OGC. However, at this time these opinions have\nprogress. The remaining ARPA provision required the not been provided to OIG. RMA generally concurred\nSecretary of Agriculture, through RMA and FSA, to with the audit findings and recommendations.\nreconcile at least annually, beginning with the 2001 crop\nyear, all relevant information received from producers RMA officials conditionally concurred with the\nwho obtained crop insurance coverage. recommendation to develop strategies for addressing\n each of the 10 conditions cited, including promptly\nWe determined that the Department had not timely or completing the 2001 crop year reconciliation and any\neffectively performed data reconciliation efforts for associated corrective actions for all identified\nproducers that carried crop insurance on their 2001 discrepancies, and to require RMA and FSA to take\ncrops. A number of factors, including differences in immediate action to address the methodology to be\nagency program definitions and weaknesses in planning implemented for reconciling and resolving 2002 crop\nand coordinating the referral of errors among the year data. RMA officials stated in their response to the\nagencies and reinsured companies, contributed to this audit report that RMA is in the process of analyzing the\ncondition. As a result, effectiveness of the reconciliation conditions cited and the 10 factors outlined in the draft\nas a tool to enhance program integrity has been report, and that they plan to meet with FSA to determine\ncompromised and the reconciliation process, as it is the appropriate actions necessary to address each one.\npresently being conducted, may not be in compliance RMA officials stated in their response, dated September\nwith legislative requirements. We continue to stress that 10, 2003, that they expect to complete this review and\nunless a common information system is developed and provide their response to the recommendation within 60\nimplemented, the inefficient use of RMA and FSA days.\nresources to meet this legal requirement will remain.\n RMA officials also conditionally concurred with the\nWe recommended that RMA and FSA, in consultation recommendation to include the issues identified by the\nwith the Under Secretary for Farm and Foreign report, as well as any corrective actions taken or\nAgricultural Services, establish an executive-level task contemplated to address OIG\xe2\x80\x99s recommendations, in\nforce to develop plans for reengineering the RMA\xe2\x80\x99s next annual report to Congress. RMA officials\nDepartment\xe2\x80\x99s data reporting for each producer, stated in their response to the audit report that RMA\nlandowner, and policyholder under an integrated plans to include a discussion on the Data Reconciliation\n Process in its next annual report to Congress.\n\n\n\n\n 23\n\x0cFinancial Management and Accountability\n\n\nIn FY 2003, we performed audits or provided oversight\n DEPARTMENTAL ADMINISTRATION\nof audits of the FY 2002 financial statements for CCC,\n (DA)/OFFICE OF THE CHIEF FINANCIAL\nFCIC, FNS, FS, and the RD mission area, including the\n OFFICER (OCFO)\nRural Telephone Bank (RTB), as well as the FY 2002\nconsolidated USDA financial statements. All entities\nreceived an unqualified opinion. An audit of the FY 2001 Controls Over the Travel Card Program Needed\nbalance sheet for the Department\xe2\x80\x99s working capital fund Strengthening\nwas also completed under contract. An unqualified\nopinion was issued within this abbreviated scope. Internal controls over the individually billed travel card\n account (IBA) program needed to be strengthened at\nIn addition to financial statement audits, OIG\xe2\x80\x99s work the time of our audit (issued June 2003). Methods and\nencompasses USDA\xe2\x80\x99s implementation of the Improper measures, such as establishing uniform and consistent\nPayments Information Act of 2002. The act requires the review and monitoring processes, had not been formally\nhead of each Federal agency with estimated improper prescribed. The current management of the Office of the\npayments in excess of $10 million to report on actions Chief Financial Officer (OCFO) is working toward\ntaken to reduce them. OMB defines improper payments implementing measures to minimize misuse. However,\nas payments that should not have been made or that the conditions we noted stemmed from ineffective\nwere made in incorrect amounts under statutory, controls despite certifications from previous\ncontractual, administration, or other legally applicable management that those controls had been instituted in\nrequirements. In FY 2003, we initiated a review of FNS\xe2\x80\x99 response to our prior recommendations in this area. In\nadherence with OMB requirements regarding improper the absence of adequate controls, we found evidence\npayments in FSP, WIC, and NSLP. that IBA was used improperly.\n\nIn FY 2004, we will examine the myriad of USDA Although we did not identify any significant monetary\npayment programs and develop an approach that will loss to the Department, we estimated that total misuse,\ndetermine whether USDA has controls in place to to include not using the card when required, totaled\nidentify and prevent improper payments. For example, more than $7.7 million. Further, we estimated that more\nwe will examine RMA\xe2\x80\x99s error rate over crop insurance than $5.8 million of the nearly $78.5 million charged\nclaims and conduct an audit of the use of purchase during the period involved transactions for other than\ncards in USDA. In addition, we will review the bona fide travel-related charges. The most egregious\nimplementation of the new law from the departmental activity we noted was use of the travel card when\nperspective. Our audit efforts help determine whether employees were not on authorized travel.\nUSDA\xe2\x80\x99s financial systems provide accurate and timely\ninformation to the Department\xe2\x80\x99s management. These We also identified a number of obvious cases of misuse\nefforts also determine whether USDA has taken at various types of vendors, such as a $6,000 purchase\nadequate actions to reduce improper payments made of an automobile and enrollment in a bartending college.\nby its programs. Our analysis of 25 individuals who obtained the most in\n cash advances from automated teller machines (ATMs)\n during the scope of the review disclosed that in every\n For the second half of FY 2003, OIG issued one case they repeatedly abused their IBA privileges by\n audit report relating to financial management and obtaining excessive cash advances for travel, or when\n accountability. For the full fiscal year, OIG issued not on travel. Twelve of the twenty-five individuals never\n 12 such audit reports. traveled for official Government purposes, yet their card\n usage amounted to almost $196,000 during the review\n period. Several individuals acknowledged using the\n withdrawn funds first to pay personal debts and then to\n repay the bank, thereby paying for unauthorized\n withdrawals with subsequent unauthorized withdrawals\n and creating a kiting scheme.\n\n\n\n\n24\n\x0cAs a result, improper charges, if unpaid, could\nnegatively impact the Department in the form of lost\nrebates from the contractor bank. We also found that\nagencies took inconsistent disciplinary actions when\nthey identified misuse; this was traceable to the lack of\nspecific travel card policy/guidance issued by DA.\n\nOCFO and various agencies took action to improve the\ntravel card program in response to our interim\ndisclosures. We recommended that OCFO officials\nformally promulgate the interim measures that they\nhave enacted to ensure permanent and lasting\ncorrective action. OCFO issued departmental guidance\nthat established a \xe2\x80\x9czero-tolerance\xe2\x80\x9d policy for card\nmisuse, lowered ATM cash advance limits, standardized\nlower credit limits on USDA travel cards, deactivated or\ncanceled travel cards of infrequent travelers, and\nblocked transactions from non-travel-related merchants.\nFurther, OFCO officials have stated that they have\nprovided additional training to employees on travel card\nregulations. In addition, DA should establish policy/\nguidance for fair, equitable, and consistent treatment of\nall employees when misuse is identified. OCFO\ngenerally agreed with the findings and\nrecommendations, as did the Assistant Secretary for\nAdministration.\n\n\n\n\n 25\n\x0c Summary of Audit Activities\xe2\x80\x94April 2003-September 2003\nReports Issued ................................................................................................................................................. 40\n Audits Performed by OIG .................................................................................... 39\n Evaluations Performed by OIG ........................................................................... 0\n Audits Performed Under the Single Audit Act ..................................................... 0\n Audits Performed by Others ................................................................................ 1\n\nManagement Decisions Made\n Number of Reports ........................................................................................................................................ 38\n Number of Recommendations ....................................................................................................................... 283\n\nTotal Dollar Impact (Millions) .......................................................................................................................... $41.2\n Questioned/Unsupported Costs .......................................................................................... $22.2ab\n Recommended for Recovery .......................................................................... $17.8\n Not Recommended for Recovery ................................................................... $ 4.4\n Funds To Be Put to Better Use ............................................................................................ $19.0\na These were the amounts the auditees agreed to at the time of management decision.\nb The recoveries realized could change as the auditees implement the agreed-upon corrective action plan and seek recovery of amounts recorded\n as debts due the Department.\n\n\n\n\n Summary of Investigative Activities\xe2\x80\x94April 2003-September 2003\nReports Issued ................................................................................................................................................... 268\nCases Opened ................................................................................................................................................... 202\nCases Closed ..................................................................................................................................................... 323\nCases Referred for Prosecution ......................................................................................................................... 173\n\nImpact of Investigations\n Indictments .................................................................................................................................................... 244\n Convictions .................................................................................................................................................... 223a\n Searches ........................................................................................................................................................ 46\n Arrests ........................................................................................................................................................... 190\n\nTotal Dollar Impact (Millions) .......................................................................................................................... $24.1\n Recoveries/Collections ........................................................................................................ $ 8.5b\n Restitutions .......................................................................................................................... $13.2c\n Fines .................................................................................................................................... $ 0.6d\n Claims Established .............................................................................................................. $ 0.1e\n Cost Avoidance .................................................................................................................... $ 0.5f\n Administrative Penalties ....................................................................................................... $ 1.2f\n\nAdministrative Sanctions ................................................................................................................................ 123\n Employees ........................................................................................................................... 31\n Businesses/Persons ............................................................................................................ 92\na\n Includes convictions and pretrial diversions. Also, the period of time to obtain court action on an indictment varies widely;\n therefore, the 223 convictions do not necessarily relate to the 244 indictments.\nb\n Includes money received by USDA or other Government agencies as a result of OIG investigations.\nc\n Restitutions are court-ordered repayments of money lost through a crime or program abuse.\nd\n Fines are court-ordered penalties.\ne\n Claims established are agency demands for repayment of USDA benefits.\nf\n Consists of loans or benefits not granted as the result of an OIG investigation.\ng\n Includes monetary fines or penalties authorized by law and imposed through an administrative process as a result of OIG findings.\n\n\n\n\n26\n\x0c Full FY 2003 Results in Key Categories\nOCTOBER 2002-SEPTEMBER 2003\n\nSummary of Audit Activities\n\nReports Issued ................................................................................................................................................... 71\n\nTotal Dollar Impact (Millions) .............................................................................................................................. $74.1\n Questioned/Unsupported Costs ........................................................................................... $25.1\n Funds To Be Put to Better Use ............................................................................................ $49.0\n\n\nSummary of Investigative Activities\n\nReports Issued ................................................................................................................................................... 461\n\nImpact of Investigations\n Indictments .................................................................................................................................................... 491\n Convictions .................................................................................................................................................... 435\n\nTotal Dollar Impact (Millions) .............................................................................................................................. $68.5\n\nAdministrative Sanctions .................................................................................................................................... 405\n\n\n\n\n 27\n\x0cStatistical Data\n\n\n AUDITS WITHOUT MANAGEMENT DECISION\nThe following audits did not have management decisions made within the 6-month limit imposed by Congress.\nNarratives for new entries follow this table. An asterisk (*) indicates that an audit is pending judicial, legal, or\ninvestigative proceedings, which must be completed before the agency can act to complete management decisions.\n\n\n NEW SINCE LAST REPORTING PERIOD\n\n\n Amount With\n Total Value No Mgmt.\n at Issuance Decision\nAgency Date Issued Title of Report (in dollars) (in dollars)\n\nAPHIS 02/20/03 1. Safeguards To Prevent Entry 0 0\n of Prohibited Pests and\n Diseases Into the United\n States (33601-3-Ch)\n\n 03/31/03 2. Controls Over Permits To 0 0\n Import Biohazardous Materials\n (33601-4-Ch)\n\nARS 03/28/03 3. Florida A&M University - 560,371 421,764\n Science Center Cooperative\n Agreement (02007-1-At)\n\nCCC 12/26/02 4. FY 2002 CCC Financial 0 0\n Statements (06401-15-FM)\n\nFNS 02/07/03 5. FSP Administrative Costs 8,663,131 0\n (27099-14-Te)\n\n 03/31/03 6. FSP Employment & 3,152,731 614,600\n Training Program - Tennessee\n (27601-12-At)\n\nFS 02/28/03 7. FY 2002 Forest Service Financial 0 0\n Statements \xe2\x80\x93 Summary of IT\n Findings (08401-2-FM)\n\nOPPM 10/21/02 8. Departmental Compliance With 0 0\n the National Energy Policy Acts\n and Executive Order 13123\n (89099-1-HQ)\n\nRBS 01/10/03 9. Lender Servicing of B&I 3,766,908 3,766,908\n Guaranteed Loans\n (34601-4-At)\n\nRMA 01/09/03 10. FY 2002 FCIC Financial 0 0\n Statements (05401-11-FM)\n28\n\x0c PREVIOUSLY REPORTED BUT NOT YET RESOLVED\n\n\nThese audits are still pending agency action or are under judicial, legal, or investigative proceedings. Details on the\nrecommendations where management decisions had not been reached have been reported in previous Semiannual\nReports to Congress. Agencies have been informed of actions that must be taken to reach management decision, but\nfor various reasons the actions have not been completed. The appropriate Under and Assistant Secretaries have\nbeen notified of those audits without management decisions.\n\n Amount With\n Total Value No Mgmt.\n at Issuance Decision\nAgency Date Issued Title of Report (in dollars) (in dollars)\n\nCCC 02/26/02 11. FY 2001 CCC Financial 19,586 0\n Statements (06401-4-KC)\n\nOffice of 09/30/98 12. Evaluation of CR Efforts 0 0\nCivil Rights To Reduce Complaints\n(CR) Backlog (60801-1-Hq)\n\n 03/24/99 13. Evaluation of CR Management 0 0\n of Settlement Agreements\n (60801-2-Hq)\n\n 03/10/00 14. Office of CR Management of 0 0\n Employment Complaints\n (60801-3-Hq)\n\n 03/10/00 15. Status of Implementation of 0 0\n Recommendations Made in\n Prior Evaluations of Program\n Complaints (60801-4-Hq)\n\nCSREES 08/06/02 16. Grants to National Center 1,246,161 1,246,161\n for Resources Innovation\n (13099-2-Te)\n\nFNS 03/22/00 17. CACFP - National Initiative to 319,279 0\n Identify Problem Sponsors -\n Wildwood, Inc. (27010-3-KC)\n\n 05/11/01 18. NSLP - Food Service 3,572,137 3,572,137\n Management Companies\n (27601-12-KC)*\n\n 09/10/01 19. NSLP - Food Service 3,537,912 3,198,926\n Management Companies\n MWR (27601-24-Ch)\n\n\n\n\n 29\n\x0c Amount With\n Total Value No Mgmt.\n at Issuance Decision\nAgency Date Issued Title of Report (in dollars) (in dollars)\n\n 11/21/01 20. CACFP - Wildwood, Inc. - 36,895,611 36,895,611\n Phase II (27010-6-KC)\n\n 03/29/02 21. NSLP - Chartwell\xe2\x80\x99s 307,711 307,711\n Food Service Management\n Company (27601-13-KC)*\n\nFS 03/31/97 22. Research Cooperative and 1,771,984 468,547\n Cost Reimbursable\n Agreements (08601-18-SF)\n\n 11/14/01 23. MATCOM \xe2\x80\x93 Contract Audit 66,899 66,899\n (08017-10-KC)\n\nFSA 09/28/95 24. Disaster Assistance Payments, 1,805,828 1,672,929\n Lauderdale, TN (03006-4-At)\n\n 03/30/99 25. Payment Limitation - Mitchell 881,924 881,924\n County, Georgia (03006-20-At)\n\n 07/30/01 26. 1999 Crop Disaster Program 950,891 950,891\n (03099-42-KC)\n\n 09/30/02 27. Assessments on Imported 4,583,797 4,583,797\n Tobacco (03099-164-At)\n\nFSIS 06/21/00 28. Implementation of the Hazard 0 0\n Analysis and Critical Control\n Point System (24001-3-At)\n\n 06/21/00 29. Imported Meat and Poultry 0 0\n Inspection Process (24099-3-Hy)\n\n 09/30/02 30. Overtime Controls (24099-4-At) 0 0\n\nMultiagency 09/30/98 31. CSREES Managing Facilities 3,824,211 74,366\n Construction Grants\n (50601-5-At)\n\n 03/31/99 32. Private Voluntary Organization 18,629,558 18,501,064\n Grant Fund Accountability\n (50801-6-At)\n\n 9/28/00 33. Crop Loss Disaster 10,728,872 149,178\n Assistance Program\n (50801-3-KC)\n\n\n\n30\n\x0c Amount With\n Total Value No Mgmt.\n at Issuance Decision\nAgency Date Issued Title of Report (in dollars) (in dollars)\n\n 09/09/02 34. Management of USDA 1,813,809 0\n Hazardous Waste Management\n Funds (50801-12-At)\n\nOCIO 03/30/01 35. Security Over USDA IT 0 0\n Resources Needs Improvement\n (50099-27-FM)\n\n 09/10/02 36. FY 2002 USDA Government 0 0\n Information Security Reform\n Act (50099-50-FM)\n\nRBS 10/01/99 37. B&I Loan - Indiana 595,511 595,511\n Farms Pork Marketing\n (34099-3-Ch)\n\n 01/28/02 38. Lender Servicing of 1,536,060 1,536,060\n B&I Guaranteed Loans \xe2\x80\x93\n Florida (34601-3-At)\n\nRD 08/05/02 39. Security Over IT Resources - 0 0\n Rural Development\n (85099-2-FM)\n\nRHS 01/08/99 40. RRH Program - Dujardin 195,694 195,694\n Property Management, Inc.,\n Everett, WA (04801-5-SF)*\n\n 05/25/00 41. RRH Nationwide Initiative 4,922,879 4,919,579\n in Missouri, St. Louis, MO\n (04801-2-KC)\n\n 09/28/01 42. RRH, Insurance Expenses, 596,665 500,667\n Phase II (04601-4-KC)\n\nRMA 09/30/97 43. Crop Insurance on Fresh 15,082,744 0\n Market Tomatoes\n (05099-1-At)\n\n 02/28/01 44. FY 2000 FCIC Financial 0 0\n Statements (05401-1-Hq)\n\n\n\n\n 31\n\x0c Amount With\n Total Value No Mgmt.\n at Issuance Decision\nAgency Date Issued Title of Report (in dollars) (in dollars)\n\n 03/12/01 45. RMA/FCIC FY 2000 0 0\n Financial Statements\n Report on Management Issues\n (05401-2-Hq)\n\n 03/14/01 46. Crop Insurance for 2,254,014 2,254,014\n Specialty Crops\n (05601-4-At)\n\n 05/21/01 47. Review of Written 1,565,730 1,565,730\n Agreements (05002-1-Te)\n\n 03/15/02 48. Monitoring of RMA\xe2\x80\x99s 0 0\n Implementation of Manual 14\n Reviews/Quality Control\n Review System (05099-14-KC)\n\n 09/30/02 49. Viability of 1999 Fall 21,100,000 21,100,000\n Watermelon Crop Insurance\n In Texas (05601-8-Te)\n\n 09/30/02 50. Review of Large Insurance 6,998,779 6,998,779\n Claims for Watermelon\n (05601-9-Te)\n\n\n\n\n32\n\x0c AUDITS WITHOUT MANAGEMENT DECISION - NARRATIVE FOR NEW ENTRIES\n\n\n\n\n1. Safeguards To Prevent Entry of Prohibited 4. FY 2002 CCC Financial Statements\n Pests and Diseases Into the United States (06401-15-FM), Issued December 26, 2002\n (33601-3-Ch), Issued February 20, 2003\n We issued an unqualified opinion on CCC\xe2\x80\x99s financial\nManagement decision has not been accepted for 30 of statements. However, as in prior years, we continue to\nthe 37 recommendations. APHIS needs to provide us identify material weaknesses in its internal controls over\nwith additional information regarding its Memoranda of financial reporting. CCC still needs to improve its (1)\nUnderstanding with the U.S. Department of Homeland information security controls, (2) financial system\nSecurity (DHS), and the arrangements that have been functionality, (3) mechanisms that govern funds\nor will be made to transfer inspection responsibilities to controls, (4) financial reporting policies and procedures,\nDHS. We also need additional information on other and (5) budgetary accounting and reporting policies and\nfunctions that will remain the responsibility of APHIS, procedures.\nsuch as the plans to enhance the accuracy of the\nWADS database, the completion of background checks We also identified instances of noncompliance with (1)\nfor APHIS employees, and the methodology to be used the Computer Security Act of 1987 and the Government\nin preparing GPRA reports. Information Security Reform Act (GISRA), (2) the Debt\n Collection Improvement Act of 1996, and (3) the Federal\n2. Controls Over Permits To Import Biohazardous Financial Management Improvement Act of 1996. We\n Materials (33601-4-Ch), Issued March 31, 2003 have agreed to management decision on 9\n recommendations and continue to work with CCC to\nFour of the 11 recommendations remain open. APHIS reach management decision on the remaining 20\nofficials need to provide an additional response to clarify recommendations. To reach management decision on\nthe current Veterinary Service (VS) procedures for many of the remaining recommendations, CCC needs\ninspecting new applicants prior to permit issuance. In to provide us the proposed completion dates for its\naddition, agency officials need to explain how they planned corrective actions.\nwould check the validity of VS permit packages arriving\nat ports-of-entry where APHIS personnel are not 5. FSP Administrative Costs (27099-14-Te),\npresent, and how they would handle permit packages Issued February 7, 2003\nthat do not involve agricultural select agents.\n The New Mexico State Agency responsible for FSP did\n3. Florida A&M University - Science Center not follow FNS and Federal procurement guidelines to\n Cooperative Agreement (02007-1-At), Issued fund a new computer system to administer FSP and\n March 28, 2003 other Federal programs. The State agency incurred\n unauthorized expenditures of over $8 million allocable\nARS agreed with most of our recommendations, but to FSP. One recommendation remains open in the\ngenerally disagreed with our recommendations that it report. FNS continues to work with the State agency to\nrecover the $233,184 reimbursed for ineligible identify and recover unauthorized amounts that may\npersonnel expenses and disallow the $57,444 pending have been improperly reimbursed to the State. To\nreimbursement, and recover the $114,512 reimbursed accept management decision, we will need\nfor 36 ineligible items and disallow the $16,624 pending documentation to show establishment of a claim for\nreimbursement from ineligible items. ARS agreed that amounts to be recovered.\none project was ineligible and agreed to recover\nexpenses associated with that project. ARS and OIG\ncontinue to disagree whether three other projects are\neligible.\n\n\n\n\n 33\n\x0c6. FSP Employment & Training Program \xe2\x80\x93 9. Lender Servicing of B&I Guaranteed Loans\n Tennessee (27601-12-At), Issued March 31, 2003 (34601-4-At), Issued January 10, 2003\n\nThis audit disclosed significant fiscal and program Seven of this report\xe2\x80\x99s recommendations remain without\nmanagement deficiencies in the State agency\xe2\x80\x99s management decision. We recommended that RBS, in\nEmployment and Training program. Excessive costs of conjunction with the Office of the General Counsel,\nover $3 million were claimed for a 2-year period. reduce the guarantee. We based our recommendation\nManagement decisions have not been reached on four on the lender\xe2\x80\x99s lack of due diligence in the planning and\nrecommendations. We continue to work with FNS to construction of the proposed sawmill, selection of an\nresolve these recommendations. unorthodox method of appraising machinery and\n equipment, and the application of guaranteed loan\n7. FY 2002 Forest Service Financial Statements \xe2\x80\x93 funds for an unauthorized purpose (repaying itself for\n Summary of IT Findings (08401-2-FM), Issued funds advanced before RBS\xe2\x80\x99 conditional commitment).\n February 28, 2003\n 10. FY 2002 FCIC Financial Statements\nManagement decisions have not been reached on the (05401-11-FM), Issued January 9, 2003\nreport\xe2\x80\x99s 16 recommendations. The report, issued as a\nresult of the FY 2002 FS Financial Statement audit, had We issued an unqualified opinion on FCIC\xe2\x80\x99s financial\nrecommendations to implement controls and improve statements. However, we identified one material internal\nsecurity over the FS\xe2\x80\x99 IT resources. We are reviewing control weakness related to the reconciliation of fund\nagency response to our recommendations, and working balances reported by the U.S. Treasury with its general\nwith FS to achieve management decision. ledger. We identified two reportable conditions related\n to its monitoring of the Reinsured Organizations and its\n8. Departmental Compliance With the National financial reporting process. We also identified instances\n Energy Policy Acts and Executive Order 13123 of noncompliance with the Privacy Act of 1974 and the\n (89099-1-HQ), Issued October 21, 2002 Federal Financial Management Improvement Act of\n 1996. We have reached management decision on four\nOur audit disclosed that some information included in recommendations and continue to work with FCIC to\nthe Department\xe2\x80\x99s Annual Report on Energy reach management decision on the remaining three\nManagement Activities was unsupported, incorrect, and/ recommendations. To reach management decision for\nor incomplete, and thus could not be independently one of the recommendations, FCIC needs to implement\nverified. We attributed this condition to the absence of an independent, comprehensive, and continuous\nadequate quality assurance procedures established by monitoring and testing effort to ensure its financial\nthe Office of Procurement and Property Management management systems comply with Federal\n(OPPM), the agency within USDA delegated by the requirements.\nAssistant Secretary for Administration with the\nresponsibility to prepare the Annual Report. We\nrecommended that OPPM develop a management\ncontrol process to ensure it verifies and maintains\ndocumentation that supports the assertions made in the\nAnnual Report. We are working with OPPM to\nimplement our recommendations.\n\n\n\n\n34\n\x0c INDICTMENTS AND CONVICTIONS\n\nBetween April 1 and September 30, 2003, OIG Indictments and Convictions\ncompleted 268 investigations. We referred 173 cases to April 1 - September 30, 2003\nFederal, State, and local prosecutors for their decision.\n Agency Indictments Convictions*\nDuring the reporting period, our investigations led to\n244 indictments and 223 convictions. The period of time AMS 2 0\nto obtain court action on an indictment varies widely; APHIS 45 15\ntherefore, the 223 convictions do not necessarily relate ARS 6 3\nto the 244 indictments. Fines, recoveries/collections, CSREES 1 2\nrestitutions, claims established, cost avoidance, and ERS 3 0\nadministrative penalties resulting from our investigations FNS 127 161\ntotaled about $24.1 million. FS 2 2\n FSA 33 17\nThe following is a breakdown, by agency, of indictments FSIS 12 10\nand convictions for the reporting period. NRCS 3 4\n OCFO 1 0\n RBS 1 1\n RHS 3 3\n RMA 5 3\n RUS 0 2\n ___ ___\n Totals 244 223\n\n *\n This category includes pretrial diversions.\n\n\n\n\n 35\n\x0c OFFICE OF INSPECTOR GENERAL HOTLINE\n\nThe OIG Hotline serves as a national receiving point for\nreports from both employees and the general public of\nsuspected incidents of fraud, waste, mismanagement,\nand abuse in USDA programs and operations. During\nthis reporting period, the OIG Hotline received 807\ncomplaints, which included allegations of participant\nfraud, employee misconduct, and mismanagement, as\nwell as opinions about USDA programs. Figure 1\ndisplays the volume and type of the complaints we\nreceived, and figure 2 displays the disposition of those\ncomplaints.\n\n\n\n\nFigure 1 Figure 2\n\nHotline Complaints Disposition of Complaints\nApril 1 to September 30, 2003 April 1 to September 30, 2003\n(Total = 807) Health/\n Safety Referred to\n 4 Referred to USDA Agencies\nReprisal for Response\n 1 FNS for Tracking Referred to\n Participant 162 366 State Agency\n Fraud 32\n 397\n\n\n\n\nBribery Opinion/\n 2 Information\n 89 Referred to\n USDA or Other Referred to\n Waste/ Employee\n Mismanagement Misconduct Agencies for Filed Without Referred to Other Law\n 167 147 Information- Referral- OIG Audit or Enforcement\n No Response Insufficient Investigations Agencies\n Needed Information for Review 1\n 135 73 38\n\n\n\n\n36\n\x0c FREEDOM OF INFORMATION ACT (FOIA) AND PRIVACY ACT (PA) REQUESTS FOR THE PERIOD\n APRIL 1 TO SEPTEMBER 30, 2003\n\n\nNumber of FOIA/PA Requests Received 128\n\nNumber of FOIA/PA Requests Processed: 133\n\n Number Granted 27\n Number Partially Granted 29\n Number Nondisclosed 77\n\nReasons for Denial:\n\n No Records Available 12\n Referred to Other Agencies 21\n Denied in Full (Exemption 7A) 17\n Request Withdrawn 3\n Fee-Related 6\n Not a Proper FOIA Request 8\n Not an Agency Record 0\n Duplicate Request 3\n Other 7\n\nRequests for OIG Reports From Congress\nand Other Government Agencies\n\n Received 38\n Processed 35\n\nAppeals Processed 3\n\n Appeals Completely Upheld 2\n Appeals Partially Reversed 0\n Appeals Completely Reversed 0\n\nNumber of OIG Reports/Documents 52\nReleased in Response to Requests\n\nNOTE: A request may involve more than one report.\n\nDuring this 6-month period, 31 audit reports were\npublished on the Internet at the OIG Web site:\nwww.usda.gov/oig.\n\n\n\n\n 37\n\x0cAppendix I\n\n\n INVENTORY OF AUDIT REPORTS\n WITH QUESTIONED COSTS AND LOANS\n FROM APRIL 1 THROUGH SEPTEMBER 30, 2003\n\n\n DOLLAR VALUES\n\n QUESTIONED UNSUPPORTEDa\n NUMBER COSTS AND LOANS COSTS AND LOANS\n\nA. FOR WHICH NO MANAGEMENT 40 153,124,841 84,772,187\n DECISION HAD BEEN MADE\n BY APRIL 1, 2003\n\nB. WHICH WERE ISSUED DURING 15 30,578,737 9,254,559\n THIS REPORTING PERIOD\n\n TOTALS 55 $183,703,578 $94,026,746\n\nC. FOR WHICH A MANAGEMENT 18\n DECISION WAS MADE DURING\n THIS REPORTING PERIOD\n\n (1) DOLLAR VALUE OF\n DISALLOWED COSTS\n\n RECOMMENDED FOR RECOVERY $17,831,270 $2,371,663\n\n NOT RECOMMENDED FOR RECOVERY $4,361,483 $0\n\n (2) DOLLAR VALUE OF $13,051,303 $5,652,581\n COSTS NOT DISALLOWED\n\nD. FOR WHICH NO MANAGEMENT 37 $149,031,962 $86,002,502\n DECISION HAS BEEN MADE BY\n THE END OF THIS REPORTING\n PERIOD\n\n REPORTS FOR WHICH NO 29 $128,079,489 $76,754,606\n MANAGEMENT DECISION WAS\n MADE WITHIN 6 MONTHS\n OF ISSUANCE\n\na\nUnsupported values are included in questioned values.\n\n\n\n\n38\n\x0cAppendix II\n\n\n INVENTORY OF AUDIT REPORTS\n WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE\n FROM APRIL 1 THROUGH SEPTEMBER 30, 2003\n\n\n NUMBER DOLLAR VALUE\n\nA. FOR WHICH NO MANAGEMENT 16 $53,191,308\n DECISION HAD BEEN MADE\n BY APRIL 1, 2003\n\nB. WHICH WERE ISSUED DURING 3 $675,867,175\n THE REPORTING PERIOD\n\n TOTALS 19 $729,058,483\n\nC. FOR WHICH A MANAGEMENT 7\n DECISION WAS MADE DURING\n THE REPORTING PERIOD\n\n (1) DOLLAR VALUE OF $19,008,946\n DISALLOWED COSTS\n\n (2) DOLLAR VALUE OF $1,981\n COSTS NOT DISALLOWED\n\nD. FOR WHICH NO MANAGEMENT 12 710,047,556\n DECISION HAS BEEN MADE BY\n THE END OF THE REPORTING\n PERIOD\n\n REPORTS FOR WHICH NO 9 34,180,381\n MANAGEMENT DECISION WAS\n MADE WITHIN 6 MONTHS\n OF ISSUANCE\n\n\n\n\n 39\n\x0cAppendix III\n\n\n SUMMARY OF AUDIT REPORTS RELEASED\n FROM APRIL 1 THROUGH SEPTEMBER 30, 2003\n\nDURING THE 6-MONTH PERIOD FROM APRIL 1 THROUGH SEPTEMBER 30, 2003, THE OFFICE OF\nINSPECTOR GENERAL ISSUED 40 AUDIT REPORTS, INCLUDING 1 PERFORMED BY OTHERS.\n\nTHE FOLLOWING IS A SUMMARY OF THOSE AUDITS BY AGENCY:\n\n QUESTIONED UNSUPPORTEDa FUNDS BE\n AUDITS COSTS COSTS PUT TO\nAGENCY RELEASED AND LOANS AND LOANS BETTER USE\n\nFARM SERVICE AGENCY 5 $448,289 $152,535\nFOOD AND NUTRITION SERVICE 13 $1,831,418 $6,663\nFOOD SAFETY AND INSPECTION SERVICE 2\nFOREST SERVICE 3\nMULTIAGENCY 5 $20,052\nNATURAL RESOURCES CONSERVATION\n SERVICE 1\nRURAL BUSINESS-COOPERATIVE SERVICE 6 $23,608,137 $9,095,361 $598,112\nRURAL HOUSING SERVICE 4 $4,670,841 $3,183,305\nRURAL UTILITIES SERVICE 1 $672,085,758\n\n TOTALS 40 $30,578,737 $9,254,559 $675,867,175\n\n TOTAL COMPLETED:\n SINGLE AGENCY AUDIT 35\n MULTIAGENCY AUDIT 5\n SINGLE AGENCY EVALUATION 0\n MULTIAGENCY EVALUATION 0\n\n TOTAL RELEASED NATIONWIDE 40\n\n TOTAL COMPLETED UNDER CONTRACTb 1\n\n TOTAL SINGLE AUDIT ISSUEDc 0\n\na\n Unsupported values are included in questioned values\nb\n Indicates audits performed by others\nc\n Indicates audits completed as Single Audit\n\n\n\n\n \xe2\x80\x93 \xe2\x80\x93 Continued\n\n\n\n\n40\n\x0c AUDIT REPORTS RELEASED AND ASSOCIATED MONETARY VALUES\n FROM APRIL 1 THROUGH SEPTEMBER 30, 2003\n\n QUESTIONED UNSUPPORTED FUNDS BE\nAUDIT NUMBER COSTS COSTS PUT TO\nRELEASE DATE TITLE AND LOANS AND LOANS BETTER USE\n\n\nFARM SERVICE AGENCY\n\n030060008SF DISASTER PAYMENTS TO PRUNE PRODUCERS IN $295,754\n2003/04/16 CALIFORNIA \xe2\x80\x93 PRODUCER D\n030060016CH FARM SERVICE COUNTY OFFICE AUDIT FY 2002\n2003/06/06\n030080002KC REVIEW OF CCC BIDDING PROCEDURES AND\n2003/09/25 AWARDS FOR COMMODITIES\n030990166AT IMPLEMENTATION OF THE PEANUT QUOTA BUYOUT $152,535 $152,535\n2003/08/12 PROGRAM\n036010019KC 2000 MARKETING ASSISTANCE LOANS AND LOAN\n2003/09/30 DEFICIENCY PAYMENTS\n\n TOTAL: FARM SERVICE AGENCY 5 $448,289 $152,535\n\nFOOD AND NUTRITION SERVICE\n\n270100006TE NATIONAL SCHOOL LUNCH PROGRAM, NOVA\n2003/09/24 CHARTER SCHOOL SOUTHEAST\n270100007TE NATIONAL SCHOOL LUNCH PROGRAM, LAKE WORTH \xe2\x80\x93 $1\n2003/09/23 ISD\n270100008TE ACCOUNTABILITY AND OVERSIGHT OF THE NATIONAL\n2003/09/30 SCHOOL LUNCH PROGRAM \xe2\x80\x93 ST. MARGARET MARY\n SCHOOL, SAN ANTONIO, TX\n270100009KC NATIONAL SCHOOL LUNCH PROGRAM \xe2\x80\x93 EFFINGHAM, KS\n2003/06/03\n270100010KC NATIONAL SCHOOL LUNCH PROGRAM \xe2\x80\x93 GIRARD, KS\n2003/07/31\n270100011KC NATIONAL SCHOOL LUNCH PROGRAM \xe2\x80\x93 OTTAWA, KS $1,415\n2003/08/05\n270100012KC NATIONAL SCHOOL LUNCH PROGRAM \xe2\x80\x93 PITTSBURG, KS $3,319\n2003/08/29\n270100013KC NATIONAL SCHOOL LUNCH PROGRAM \xe2\x80\x93 BONNER SPRINGS,\n2003/06/20 KS\n270100015CH FOOD STAMP PROGRAM ADMINISTRATIVE COSTS $1,799,597\n2003/08/13\n270100018KC NATIONAL SCHOOL LUNCH PROGRAM, ELWOOD, KS\n2003/08/04\n270160001SF CACFP AUDIT FUNDS \xe2\x80\x93 CALIFORNIA DEPARTMENT OF $27,086 $6,663\n2003/04/16 EDUCATION\n270990013TE TEXAS EBT SYSTEM DEVELOPMENT\n2003/06/23\n270990022SF REVIEW OF ELECTRONIC BENEFITS TRANSFER SYSTEM\n2003/09/24 DEVELOPMENT \xe2\x80\x93 STATE OF NEVADA\n\n TOTAL: FOOD AND NUTRITION SERVICE 13 $1,831,418 $6,663\n\nFOOD SAFETY AND INSPECTION SERVICE\n\n240990001FM SECURITY OVER INFORMATION TECHNOLOGY\n2003/08/11 RESOURCES AT FSIS\n246010002KC FSIS OVERSIGHT OF CONAGRA RECALL\n2003/09/30\n\n TOTAL: FOOD SAFETY AND INSPECTION SERVICE 2\n\nFOREST SERVICE\n\n080030008SF FOREST SERVICE\xe2\x80\x99S SOUTHERN CALIFORNIA\n2003/04/01 CONSERVATION STRATEGY GROUP\n080160001SF FOLLOW-UP REVIEW OF FOREST SERVICE SECURITY\n2003/09/30 OVER AIRCRAFT AND AIRCRAFT FACILITIES\n080170012KC CONTRACT AUDIT \xe2\x80\x93 MANAGEMENT ASSISTANCE\n2003/08/01 CORPORATION OF AMERICA (MACA)\n\n TOTAL: FOREST SERVICE 3\n\n 41\n\x0c AUDIT REPORTS RELEASED AND ASSOCIATED MONETARY VALUES\n FROM APRIL 1 THROUGH SEPTEMBER 30, 2003\n\n QUESTIONED UNSUPPORTED FUNDS BE\nAUDIT NUMBER COSTS COSTS PUT TO\nRELEASE DATE TITLE AND LOANS AND LOANS BETTER USE\n\nMULTIAGENCY\n\n500990012KC USDA \xe2\x80\x93 IMPLEMENTATION OF THE AGRICULTURAL RISK\n2003/09/30 PROTECTION ACT\n500990014AT CONTROLS OVER BIOLOGICAL AGENTS, CHEMICALS\n2003/09/29 AND RADIOACTIVE MATERIALS \xe2\x80\x93 USDA FUNDED\n RESEARCH FACILITIES\n500990015KC 2000 CROP DISASTER PROGRAM $20,052\n2003/09/30\n50990052FM FY 2003 FEDERAL INFORMATION SECURITY\n2003/09/24 MANAGEMENT ACT\n506010005HQ ADEQUACY OF INTERNAL CONTROLS OVER TRAVEL\n2003/06/06 CARD EXPENDITURES\n\n TOTAL: MULTIAGENCY 5 $20,052\n\nNATURAL RESOURCES CONSERVATION SERVICE\n\n100990010KC NRCS HOMELAND SECURITY PROTECTION OF\n2003/09/30 FEDERAL ASSETS\n\n TOTAL: NATURAL RESOURCES CONSERVATION SERVICE 1\n\nRURAL BUSINESS-COOPERATIVE SERVICE\n\n340990005TE REQUEST AUDIT OF B&I LOAN IN LOUISIANA $5,585,136\n2003/09/30\n340990006TE B&I REQUEST AUDIT IN ARKANSAS $6,993,578\n2003/07/29\n346010005AT RD LENDER SERVICING OF B&I GUARANTEED $9,145,549 $8,920,598\n2003/08/27 LOANS IN GEORGIA\n346010008SF RURAL DEVELOPMENT \xe2\x80\x93 LIQUIDATION OF BUSINESS $220,009 $174,763 $598,112\n2003/09/30 AND INDUSTRY GUARANTEED LOANS\n346010010TE LENDER SERVICING OF B&I GUARANTEED LOANS - $1,663,865\n2003/07/23 LOUISIANA\n346010015TE NATIONAL REPORT ON B&I LOAN PROGRAM\n2003/09/30\n\n TOTAL: RURAL BUSINESS-COOPERATIVE SERVICE 6 $23,608,137 $9,095,361 $598,112\n\nRURAL HOUSING SERVICE\n\n040040003AT RD RRH PROGRAM TENANT INCOME VERIFICATION - $4,598,330 $3,183,305\n2003/06/26 GAINESVILLE, FL\n040040005HY SURVEY OF SINGLE FAMILY HOUSING PROGRAM IN\n2003/05/27 MAINE\n040990005AT RD B&I GUARANTEED LOAN \xe2\x80\x93 PARADISE OF PUERTO\n2003/06/12 RICO, INC.\n046010002HY REVIEW OF PROGRESSIVE PROPERTY MANAGEMENT, $72,511\n2003/07/22 INC., RRH PROJECTS\n\n TOTAL: RURAL HOUSING SERVICE 4 $4,670,841 $3,183,305\n\nRURAL UTILITIES SERVICE\n\n096010006KC RURAL UTILITIES SERVICE WATER AND WASTE $672,085,758\n2003/09/08 GRANTS\n\n TOTAL: RURAL UTILITIES SERVICE 1 $672,085,758\n\n GRAND TOTAL: 40 $30,578,737 $9,254,559 $675,867,175\n\n\n\n\n42\n\x0c43\n\x0c\x0cAbbreviations of Organizations\nAMS Agricultural Marketing Service\nAPHIS Animal and Plant Health Inspection Service\nARS Agricultural Research Service\nCCC Commodity Credit Corporation\nCSREES Cooperative State Research, Education, and Extension Service\nCR Office of Civil Rights\nDHS U.S. Department of Homeland Security\nERS Economic Research Service\nFAS Foreign Agricultural Service\nFCIC Federal Crop Insurance Corporation\nFNS Food and Nutrition Service\nFS Forest Service\nFSA Farm Service Agency\nFSIS Food Safety and Inspection Service\nGIPSA Grain Inspection, Packers and Stockyards Administration\nNASS National Agricultural Statistics Service\nNITC National Information Technology Center\nNRCS Natural Resources Conservation Service\nOCFO Office of the Chief Financial Officer\nOCIO Office of the Chief Information Officer\nOGC Office of the General Counsel\nOIG Office of Inspector General\nOMB Office of Management and Budget\nOPPM Office of Procurement and Property Management\nRBS Rural Business-Cooperative Service\nRD Rural Development\nRHS Rural Housing Service\nRMA Risk Management Agency\nRUS Rural Utilities Service\nUSDA U.S. Department of Agriculture\n\x0cU.S. DEPARTMENT OF AGRICULTURE\nOFFICE OF INSPECTOR GENERAL\nSTOP 2309\n1400 INDEPENDENCE AVE., SW\nWASHINGTON, DC 20250-2309\n\n\n\n\n www.usda.gov/oig\n\x0c'