U.S. Department of Defense OIG
The mission of the DoD OIG is to detect and deter fraud, waste, and abuse in Department of Defense programs and operations; promote the economy, efficiency, and effectiveness of the DoD; and help ensure ethical conduct throughout the DoD.
The DoD OIG's headquarters is located in Alexandria, Virginia. The OIG also has more than 50 field offices located in the United States, Europe, Southwest Asia, and South Korea. Over 1,000 DoD OIG employees are assigned to OIG headquarters, and more than 500 OIG employees, mostly auditors and investigators, are assigned to DoD OIG field offices. At any time, approximately 50 employees are temporarily assigned in Southwest Asia. DoD OIG programs are:
The DoD OIG identified these challenges based on a variety of factors, including DoD OIG oversight work, research, and judgment; oversight work done by other DoD Components; oversight work conducted by the Government Accountability Office; and input from DoD officials. While the DoD OIG reviewed DoD statements, documents, and assessments of these and other critical issues, the DoD OIG identified these top challenges independently.
The top management challenges document discusses each challenge, actions taken by the DoD to address the challenge, and oversight work by the DoD OIG and others related to the challenge. As reflected in this document, the FY 2019 top 10 DoD management and performance challenges are:
Examples of criminal investigation and prosecution results resulting from DoD OIG actions:
June 24, 2019 Two Physicians and Two Registered Nurses Indicted in Mississippi Compounding Pharmacy Fraud Scheme. Two Mississippi-licensed physicians and two Mississippi-licensed registered nurses were charged in an indictment unsealed today for their roles in a multimillion dollar scheme to defraud TRICARE, the health care benefit program serving U.S. military, veterans and their respective family members, as well as private health care benefit programs Blue Cross & Blue Shield of Mississippi and United Healthcare of Mississippi.
June 17, 2019 Granite Bay Man Sentenced For Multi-Million Dollar Product Substitution Fraud On Federal Government Agencies. U.S. District Judge Kimberly J. Mueller sentenced Jim A. Meron, 54, of Granite Bay, today to 33 months in prison and three years of supervised release on two counts of wire fraud arising out of a government-procurement fraud scheme, U.S. Attorney McGregor W. Scott announced. As part of the sentence, the Court ordered Meron to pay restitution of $1,622,729.13 to dozens of victims. The Court also entered a final order forfeiting more than $1.7 million in assets seized during the investigation of Meron's crimes.
June 14, 2019 United States Files False Claims Act Complaint Against Two Compounding Pharmacies and Their Owner For Submitting Inflated Claims and Improperly Waiving Patient Copayments. The Department of Justice announced today that the United States has filed a complaint in intervention against Smart Pharmacy Inc., and SP2 LLC, two compounding pharmacies located in Jacksonville, Florida. The complaint alleges that the pharmacies improperly included the drug aripiprazole, an atypical antipsychotic drug, in compounded pain creams in order to boost the pharmacies' reimbursement for the prescriptions and that the pharmacies routinely waived patient copayment obligations. The government has also brought claims against Gregory Balotin, a co-owner of the pharmacies, for his involvement in the alleged schemes.
June 13, 2019 Three Physicians and Five Marketers Charged for Violations to Federal Anti-Kickback Statutes. Three physicians and five marketers have been charged in U.S. District Court with violations of the federal anti-kickback statute and other criminal offenses, announced U.S. Attorney Trent Shores. The men allegedly caused federal health care insurance programs to pay reimbursement costs for fraudulent and expensive compounding drug prescriptions written by recruited doctors in return for kickback payments. The defendants would then use the reimbursed funds for their own financial gain.
June 13, 2019 "Wholesaler Admits to Conspiracy to Manufacture and Sell Counterfeit Goods to the U.S. Military & Government. A Brooklyn, N.Y., clothing and goods wholesaler pleaded guilty in U.S. District Court in Providence today to charges related to his participation in a conspiracy that sold more than twenty million dollars worth of Chinese-made counterfeit goods to the United States military, government purchasers, and companies that supply the U.S. Government.
June 11, 2019 Medical Device Maker ACell, Inc. Pleads Guilty And Will Pay $15 Million To Resolve Criminal Charges And Civil False Claims Allegations. ACell, Inc. (ACell), a Maryland-based medical device manufacturer, pleaded guilty to charges relating to its MicroMatrix powder wound-dressing product (MicroMatrix). ACell entered a guilty plea before U.S. District Court Judge Ellen L. Hollander in the District of Maryland to one misdemeanor count of failure and refusal to report a medical device removal in violation of the Federal Food, Drug, and Cosmetic Act (FDCA).
June 6, 2019 Fort Washington Man Sentenced to 66 Months in Federal Prison for Two Separate Drug Cases. U.S. District Judge Paul W. Grimm sentenced Daniel Mark Wilkerson, age 45, of Fort Washington, Maryland today to 66 months in federal prison, followed by five years of supervised release, for possession with intent to distribute more than 100 kilograms of marijuana, and in a separate case for conspiring to steal prescription drugs from federal military hospitals. Judge Grimm also ordered that Wilkerson pay restitution of $4,450,679.60, and forfeit $16,320.44.
June 5, 2019 Opioid Manufacturer Insys Therapeutics Agrees to Enter $225 Million Global Resolution of Criminal and Civil Investigations. As part of the civil resolution, lnsys agreed to pay $195 million to settle allegations that it violated the False Claims Act. As part of the criminal resolution, lnsys will enter into a deferred prosecution agreement with the government, lnsys's operating subsidiary will plead guilty to five counts of mail fraud, and the company will pay a $2 million fine and $28 million in forfeiture.
June 3, 2019 Government Contractor Pleads Guilty To Making False Statements. Enco Industries, Inc., a company located in Plaistow, New Hampshire, pleaded guilty to making false statements to the U.S. Department of Defense's Defense Logistics Agency, announced United States Attorney Scott W. Murray.
June 3, 2019 United States Files False Claims Act Complaint Against South Carolina Chiropractor, Pain Management Clinics, Urine Drug Testing Laboratories, and Substance Abuse Counseling Center. The United States has filed a complaint under the False Claims Act against Daniel McCollum, a chiropractor based in Greenville, South Carolina, and pain management clinics and urine drug testing laboratories that McCollum owned or managed for engaging in illegal financial relationships and providing medically unnecessary services and items, including urine drug testing and steroid injections and prescriptions for opioids and lidocaine ointment, the Department of Justice announced today.
The Inspector General Act of 1978, Section 8(c)(3), requires the Inspector General of the Department of Defense to "provide policy direction for audits and investigations relating to fraud, waste, and abuse."
The following links to resources can help increase an auditor's awareness of possible audit risk factors, as well as their responsibilities for audit planning, executing, reporting, and referring the matter to the appropriate investigative organization when an audit identifies fraud indicators.
The resources highlight key generally accepted government auditing standards (GAGAS), requirements, and overall DoD audit expectations and best practices for identifying and detecting potential fraud. GAGAS describes fraud as: a type of illegal act involving the obtaining of something of value through willful misrepresentation. Whether an act is, in fact, fraud is a determination to be made through the judicial or other adjudicative system and is beyond the auditor’s professional responsibility. However, the various scenarios and the accompanying fraud indicators describe situations related to some common fraud schemes that DoD auditors might encounter.
Our resources include:
DoD employees must disclose any known fraud, abuse, corruption, mismanagement, or waste to the appropriate DoD, Federal government, other appropriate official, or hotline. DoD employees are also encouraged to report any suspected irregularities indicating that fraud, waste, abuse, corruption, or mismanagement may have occurred or may be ongoing. Individuals should be able to make all disclosures without the fear of reprisal.
DoD auditors or non-Federal government auditors performing auditsfor the DoD have additional responsibilities. The DoD OIG expects auditors to be proactive in identifying and referring to the appropriate investigative organization known or potential fraud, abuse, or corruption. By maintaining a high level of fraud awareness and appropriately assessing fraud risk during the planning and execution phases, the auditor is better positioned to uncover fraudulent acts. DoD auditors must adhere to their fiduciary responsibilities to the DoD, the Federal government, and the public.
Auditors who perform independent audits and attestation engagements of DoD organizations, programs, activities, and functions are required by DoD Instruction (DoDI) 7600.02, “Audit Policies,” to comply with the GAGAS issued by the Comptroller General of the United States. The GAGAS require auditors when performing financial and performance audits and examination-level attestation engagements (work that requires a positive assurance) to:
Auditors should design procedures to obtain reasonable assurance of detecting fraud, noncompliance with provisions of laws, regulations, contracts, or grant agreements, and abuse that could materially affect the audit or examination. For review-level (work that provides negative assurance) and agreed-upon procedures-level (provides no opinion or assurance) attestation engagements, auditors are not required to assess fraud risk factors or design steps to address those risks.
Auditors must perform procedures when they find information or indicators that fraud may have occurred that could materially impact the subject matter under review. In those cases, auditors should determine whether the fraud was likely to have occurred and, if so, determine the effect on the results of the engagement. GAGAS requires auditors to comply with any legal requirements to report known or likely fraud, noncompliance with provisions of laws, regulations, contracts, or grant agreements, or abuse directly to parties outside the audited entity.
DoDI 7600.02, paragraph 6.3, establishes the requirement that auditors shall refer to the appropriate investigative organization any indications of potential fraud or other criminal acts discovered while performing audit work.
Best practices for DoD audit organizations include identifying and assessing potential fraud risks factors during the planning phase for review-level and agreed-upon procedures attestation engagements similar to what the auditor does for other audit services or work. When risk factors are identified during the planning phase, the auditor should discuss with their supervisor or higher-level management whether the requested or planned review-level or agreed-upon-procedures-level engagement is appropriate.
With audit management approval, auditors should discuss with the requestor the fraud risk factors and whether an alternative type of audit or attestation engagement would be more appropriate. When the auditor identifies fraud indicators or other information that strongly points to a high probability of fraud during the planning phase, the auditor, after consulting with their management, should raise their concerns to the appropriate oversight or investigative organization.
Best practices also include designing some steps or procedures to address identified risk factors for a review-level attestation engagement. While DoD auditors are required to comply with GAGAS, other auditing standards may provide insight into best practices or other approaches to assessing fraud risks or identifying fraud indicators. The GAGAS incorporates the American Institute of Certified Public Accountants (AICPA) standards for fieldwork and reporting for financial audits and attestation engagements.
The AICPA auditing standards for financial audits and the GAGAS for financial and performance audits provide specific steps that are not included in the AICPA or the GAGAS for attestation engagements such as inquiring of management about potential fraud. Auditors may find these specific steps useful when considering how to best implement GAGAS for attestation engagements. Similarly, audit organizations may learn about other audit organizations’ approaches and methods for assessing fraud risks and identifying and detecting fraud indicators and adapt best practices when feasible.