Council of Inspectors General on Integrity and Efficiency

A Publication of the Inspectors General of the United States The Journal of Public Inquiry

fall/winter 2008-2009

COUNCIL OF inspectors general on Integrity and efficiency Council of Inspectors General Invitation to Contribute Articles on Integrity and Efficiency to the Journal of Public Inquiry

Members of the Council The Journal of Public Inquiry is “The Inspector General Reform Agency for International Development Department of Homeland Security a publication of the Inspectors Act of 2008” created the Department of Agriculture Department of Housing and Urban General of the United States. We Council of Inspectors General Amtrak Development solicit articles from professional and on Integrity and Efficiency. This Appalachian Regional Commission Department of Interior Architect of the Capitol U.S. International Trade Commission scholars on topics important to the statutory council supersedes Inspector General community. the former President’s Council U.S. Capitol Police Department of Justice Central Intelligence Agency Department of Labor on Integrity and Efficiency and Department of Commerce Legal Services Corporation Executive Council on Integrity Articles should be approximately four Commodity Futures Trading Commission Library of Congress and Efficiency, established under Consumer Product Safety Commission National Aeronautics and Space to six pages (2,000-3,500), single- Executive Order 12805. Corporation for National and Community Administration spaced, and submitted to: Service National Archives The CIGIE mission is to Corporation for Public Broadcasting National Credit Union Administration By mail: address integrity, economy, and The Denali Commission National Endowment for the Arts effectiveness issues that transcend Department of Defense National Endowment for the Humanities Department of Defense individual government agencies; Office of the Director of National National Labor Relations Board Office of Inspector General and increase the professionalism Intelligence National Science Foundation 400 Army Navy Drive, Room 1034 and effectiveness of personnel by Department of Education Nuclear Regulatory Commission Arlington, VA 22202 developing policies, standards, Election Assistance Commission Office of Personnel Management and approaches to aid in the Department of Energy Peace Corps establishment of a well-trained Environmental Protection Agency Pension Benefit Guaranty Corporation By email: and highly skilled workforce Equal Employment Opportunity Postal Regulatory Commission [email protected] in the offices of the Inspectors Commission U.S. Postal Service General. Export-Import Bank of the United States Railroad Retirement Board Farm Credit Administration Securities and Exchange Commission Federal Communications Commission Small Business Administration The Chair of the CIGIE is the Federal Deposit Insurance Corporation Smithsonian Institution Honorable Phyllis K. Fong, Federal Election Commission Social Security Administration US Department of Agriculture Federal Housing Finance Board Special Inspector General for Iraq IG, and the Vice-Chair is Federal Labor Relations Authority Reconstruction Mr. Carl A. Clinefelter, Farm Federal Maritime Commission Department of State Credit Administration IG. The Federal Reserve Board Tennessee Valley Authority membership of the CIGIE Federal Trade Commission Department of Transportation includes the 67 statutory General Services Administration Department of Treasury Disclaimer: The opinions expressed in the Journal of Public Inquiry are Journal Inspectors General of the Government Accountability Office Treasury Inspector General for Tax those of the authors. They do not represent the opinions or policies of any department or agency of the United States Government. of Public Inquiry following agencies. Government Printing Office Administration Department of Health and Human Services Department of Veterans Affairs Letter From the Editor-in-Chief

As I was reviewing the Fall/Winter 2008-2009 issue of the Journal of Public Inquiry, I was reminded about something the late President John F. Kennedy said: “Leadership and learning are indispensable to each other.” The Journal is a learning tool and that is exactly why this publication – especially your contributions to it – play such a vital role in the Inspector General community. The Journal allows us to share our successes, lessons learned, and way forward – all in the hope we will not only become better leaders, but also better teachers. I believe the value of the Journal is further enhanced by ensuring open and transparent communications with the public through its availability on the web and in print. It educates and informs the public with important insight into how we do business. In so doing, the Journal lays a foundation for building public trust – without which we can not be truly effective. This particular issue of the Journal is special because of the many changes brought about by the formation of the Council of Inspectors General on Integrity and Efficiency, which is the subject of our feature article written by the Inspector General of the U.S. Department of Agriculture and CIGIE Chair, Phyllis Fong. The article, entitled “The IG Reform Act and the New IG Council: Dawn of a New Era,” is a comprehensive overview of the IG Reform Act of 2008 and the new goals that the CIGIE has adopted. The Journal also features an excellent example of lessons learned in the testimony of Special Inspector General for Iraqi Reconstruction Stuart Bowen as he discusses the “Hard Lessons” of the early reconstruction effort in Iraq during his appearance before the Commission on Wartime Contracting. Inspector General Patrick O’ Carroll of the Social Security Administration discusses how Social Security intersects with immigration enforcement in a speech delivered at a Federal Bar Association seminar. In addition, an article written by Inspector General Earl Devaney of the Department of Interior and James O’ Sullivan outlines the Honest Services Fraud Statute and its importance in dealing with public corruption cases. Other articles address topics including tape recording of law enforcement-related interviews; the legal requirements of different business entities; and fraud awareness initiatives. These articles are relevant and timely to the issues facing our oversight community. Finally, I would like to thank all of the authors for their submissions. It continues to be a difficult selection process for each and every edition of the Journal. The competition among the submissions continues to increase, which speaks well of the authors, their efforts, and the Inspectors General community as a whole. Your willingness to share your experiences in a transparent, open forum speaks volumes about your belief in what we do and your dedication to improving the process so we can better serve our country. In helping others to learn, we help ourselves become better leaders.

Gordon S. Heddell Acting Inspector General Journal Feature Article of Public Inquiry The IG Reform Act and the New 1 IG Council-Dawn of a New Era Department of Defense Phyllis Fong discusses the IG Reform Act, Inspector General Staff the new Council, and its effect on the future of government oversight. Editor-in-Chief Gordon S. Heddell Oversight and Outreach Publisher John R. Crane Honest Services Fraud Managing Grants for 7 Earl Devaney and James 34 Success Editor O’Sullivan examine honest Elliot Lewis explores the Jennifer M. Plozai services fraud and its effect on challenges of managing grants public corruption. designed for state and local Graphic Designer governments. Jacob A. Brown Using Risk-Based 14 Planning to Enhance Department of Defense 39 Fraud Awareness Copy Editor Audit Impact Gordon Milbourn, III and Initiatives Bill McGloin Mimi Sharkey look at a different Frank Alrbight, Russel J. approach to planning that Geoffrey, and Lauren McLean Journal Editorial Board could potentially enhance audit summarize new fraud-related impact. initiatives. Thomas C. Cross Acting Inspector General How Legal Requirements Iraq’s Inspectors General: National Science Foundation 18 Vary Depending on the 45 A Work in Progress Nature of the Business Danny Athanasaw and Entity Being Investigated Christopher M. Griffith provide Mary Kendall insight into the struggles and Acting Inspector General Thomas Coogan studies the improvements of the Iraqi Department of the Interior different types of businesses Inspectors General. and their relation to legal requirements. Gregory H. Friedman Hard Lessons: The 50 Iraq Reconstruction Inspector General White Paper Tape Experience Stuart W. Department of Energy 24 Recording Interviews Bowen, Jr. testifies before the Daniel Coney outlines the Commission on Wartime argument surrounding the tape J. Russell George Contracting on the lessons recording of law-enforcement Inspector General learned report from the Office of interviews. Treasury Inspector General for the Special Inspector General for Iraq Reconstruction. Tax Administration Postal Operations- 30 Prelude to a Changing Immigration Mary Mitchelson Audit Environment Acting Inspector General 58 Enforcement and Social Theodore Williams reviews a Security: The Inspector Department of Education recent AFAA audit concerning postal operations in the Air General Perspective Force. Patrick O’ Carroll speaks Patrick O’Carroll regarding the connection Inspector General between Social Security and Social Security Administration 1 Denotes the end of an article. immigration enforcement. Feature Article The IG Reform Act and the New IG Council: Dawn of a New Era Over the 30 year period the OIGs have been formally established by law, the community has evolved

By Inspector General Phyllis K. Fong With the passage of the Inspector Gen- eral Reform Act of 20081, the inspector general community entered a new era in its 30-year existence. The new law has brought increased independence and concomitant levels of responsibility to the IGs, both individually and as a community. Since its birth in 1978, the community has evolved from an informal group of entities with similar missions into a formally-established organization with a mission that extends beyond the individual activities of its more than 67 Inspector General members. As a result of the Reform Act, the community is en- tering a period of organizational growth and maturity, with new opportunities to improve the effectiveness of federal pro- ago. IG Act reform initiatives, however, Designated Federal Entity IGs). grams. had been a matter of discussion and con- The IG community recognized the This article will provide an overview sideration since the mid-1990s, when need to participate actively and construc- of the Reform Act (legislative history Senator Susan Collins served as Chair of tively in any efforts to amend and update and key provisions) and the creation of the Senate Governmental Affairs Com- the IG Act. The IG Reform Act of 2008 the new Council of Inspectors General mittee (precursor to the current Home- is the culmination of over seven years of on Integrity and Efficiency. As Chair land Security and Government Affairs effort by the IG community. Ken Mead of the Legislation Committee while the Committee). During that time, Senator (former Department of Transportation Reform Act was moving through Con- Collins introduced at least two bills to IG), during his tenure as PCIE Legisla- gress, and as the first elected Chairper- strengthen IG independence and author- tion Committee chair, started the pro- son of CIGIE, I have had the privilege of ities, but while these measures received cess by surveying the community in working with the many people named in some legislative attention they were 2000/2001 to determine the issues of this article who have played a key role in never enacted. During that period, the highest concern/priority. Based on the bringing these efforts to fruition. IG community was organized to carry survey results, the committee developed out its collective responsibilities through a package of proposals in anticipation LEGISLATIVE HISTORY the two IG councils established by Ex- of congressional interest in introducing Until 2008, Congress had not made any ecutive Order, the President’s Council legislation to mark the 25th anniversary significant revisions to the original- In on Integrity and Efficiency (composed of the original IG Act in 2003. Dur- spector General Act of 1978 since the of Presidentially Appointed, Senate con- ing Russell George’s (Treasury Inspec- 1988 Amendments were passed 20 years firmed IGs) and the Executive Council tor General for Tax Administration IG) 1 P.L.110-409, October 14, 2008. on Integrity and Efficiency (composed of tenure as chair of the Legislation Com-

Visit www.ignet.gov 1 mittee, Congress held hearings on IG IG Appointment and Qualifications community activities and actively con- DUTIES OF THE requires that DFE IGs be appointed sidered some of the legislative proposals COUNCIL without regard to political affiliation, that had been developed, particularly by based on integrity and demonstrated Rep. Jim Cooper. In subsequent years, professional ability. Nikki Tinsley (former Environmental Removal of IGs requires the President Protection Agency IG), while chair of (for PAS IGs) or agency head (for DFE the PCIE Human Resources Commit- IGs) to give Congress 30 days advance tee, took the lead in developing a strat- notice before removing or transferring egy to address IG salary and bonus is- an IG. Notice must include the reason sues. for the action. This preparatory work came to frui- IG Pay sets pay for PAS IGs (and tion when the 110th Congress convened • Reviewing areas of vulnerability SIGAR, SIGIR, CNCS, and CIA) at in 2007. Changes in congressional to fraud, waste, and abuse in fed- level three of the executive schedule, leadership brought an increased empha- eral programs plus three percent. Requires that DFE sis on oversight and accountability, with IGs be classified at or above the majority more focus given to the activities of IGs • Developing coordinated gov- of the DFE’s senior level executives and individually and as a community. ernment-wide activities to address their pay be not less than the average Building on the work that had been these problems and promote ef- total compensation (including bonuses) done since 2000, Rep. Jim Cooper, Sen. fectiveness, including interagency of DFE senior level executives calculated Collins, and Sen. Claire McCaskill each projects to deal with problems that on an annual basis. introduced bills that addressed or in- exceed the jurisdiction or capabil- Cash Bonus or Awards prohibits IGs cluded proposals developed by the IG ity of an individual agency from receiving cash awards or cash bo- community. nuses. These members, working closely • Developing policies to maintain Separate Legal Counsel provides that with Chairmen Henry Waxman (House well-trained, highly skilled OIG each PAS IG shall obtain legal advice Oversight and Government Reform staff from a counsel reporting directly to Committee), Joe Lieberman (Senate an IG. Each DFE IG shall appoint a HSGAC), and Edolphus Towns (House • Maintaining an internet website counsel, or obtain advice from a coun- Government Management, Organiza- and other electronic systems to sel reporting directly to an IG or from tion, and Procurement Subcommittee), benefit all IGs CIGIE staff. championed the Reform Act proposals Council of the Inspectors General through the legislative process. • Maintaining one or more profes- on Integrity and Efficiency establishes a Hearings were held in both Hous- sional training academies for IG unified council ofI Gs, merging the two es, Administration concerns were ad- personnel councils (PCIE and ECIE) previously dressed, and ultimately H.R. 928 was established by executive order. CIGIE’s enacted by the Congress with no oppos- • Submitting recommendations of mission is to address integrity, economy, 2 ing votes in September 2008. Presi- individuals for vacant IG positions and effectiveness issues that transcend dent Bush signed the Inspector General to the appointing authorities individual government agencies; and Reform Act of 2008 into law on Octo- to increase the professionalism and ef- ber 14, 2008. (Public Law 110-409) • Making reports to Congress as fectiveness of OIG personnel by devel- necessary or appropriate oping approaches to establish a well- trained and highly skilled workforce. 2 H.R. 928, Improving Government Account- • Performing other duties within Membership includes PAS, DFE, and ability Act, originally passed the House on Oct. the Council’s authority and juris- Legislative Branch IGs, as well as other 3, 2007, by a vote of 404-11. S. 2324, Inspector officials. General Reform Act of 2007, passed the Senate diction on April 23, 2008 by unanimous consent. Both The OMB Deputy Director for Houses of Congress worked together to reconcile Management serves as Executive Chair- KEY PROVISIONS OF THE LAW the two bills into a final version of H.R. 928, person, with a Chairperson elected from renamed the Inspector General Reform Act of TheI G Reform Act contains a variety of the IG members and an appointed Vice 2008. Final approval occurred in the Senate on provisions designed to enhance IG in- Chairperson. September 24, 2008, by unanimous consent. dependence and accountability. Some This was followed byH ouse action on September Various funding mechanisms are au- 27, 2008, by a vote of 414-0. highlights of H.R. 928 are:

2 Journal of Public Inquiry thorized for council activities, including OIG Web sites requires that each SES employees. This will have wide- interagency funding and use of a revolv- agency homepage contain a direct link to ranging implications for many IGs, ing fund. The Integrity Committee is the OIG Web site; each IG must post on authorizing them to deal directly now established by statute; its member- its Web site, within three days, each pub- with OPM, rather than through their ship and jurisdiction are expanded to in- licly available report or audit; and each agencies, on such issues as requests clude being responsible for receiving, re- IG must maintain a direct link on its web for SES positions, establishing SES viewing and reserving for investigation, site for individuals to report fraud, waste, appraisal systems, and setting SES allegations of wrongdoing against an IG and abuse. pay and performance awards. and certain staff. It also must adopt new Other Administrative Authorities • SES Rank Awards. CIGIE is now procedures and provide expanded infor- provides IGs with additional expanded considered to be an agency head for mation and reports to Congress. personnel authorities. Generally, each purposes of making recommenda- OIG is considered a separate agency and tions to OPM for OIG SES employ- UNDER THE ACT each IG is considered an agency head or ees to receive rank awards. Changes to the IG budget request pro- appointing authority with respect to the Taken as a whole, the Reform Act success under the Act: following administrative authorities: cessfully addresses many issues of impor- • Each IG shall transmit a budget re- • Voluntary Separation Incentive Pay- tance to the IG community and lays a quest to his/her agency head that ments: IGs can now apply directly solid foundation for the future.3 The specifies funds needed to operate, to OPM for the authority to offer community owes a debt of gratitude to to meet all training needs (including voluntary separation incentive pay- all who worked so hard and persevered IG certification that the request sat- ments or “buyouts” within their own over the many years that this legislation isfies all training requirements), and OIG. was in the making. to support CIGIE (these resources • Voluntary Early Retirement Authority: must be specifically identified and IGs can now request directly from TRANSITION TO THE COUNCIL justified). OPM the authority to offer early re- OF INSPECTORS GENERAL ON • Each agency head shall transmit a tirement to their employees. INTEGRITY AND EFFICIENCY proposed budget to the President • Mandatory Retirement for Law En- One of the most significant changes that includes an aggregate amount forcement Officers: Each IG now has brought about by the IG Reform Act is for the IG, amounts for IG training, authority to exempt a law enforce- the creation of a unified council of fed- amounts to support CIGIE, and any ment officer from mandatory retire- eral inspectors general. This seemingly IG comments on the proposal. ment up to the age of 60, if in his or simple measure has profoundly affected • The President shall include in his her judgment the public interest so the way the community addresses issues, budget request a separate statement requires. makes decisions, and, ultimately, is per- of the budget estimate for each IG, • Reemployed Annuitants: IGs can ceived by external parties. the amount requested for each IG, now go directly to OPM to request Over the 30-year period that OIGs the amount requested for training a waiver of the provision requiring have been formally established by law, for IGs, the amount requested to that a retiree’s pay be reduced by the the community has evolved from a loose support CIGIE, and any comments amount of his/her annuity upon re- confederation of offices with common from an IG who believes that the hire by the government (for employ- interests, to two separate councils estab- president’s request would substan- ees in positions for which there is lished by presidential executive order, to tially inhibit him/her from perform- exceptional difficulty in recruiting or a single unified body established by stat- ing IG duties. retaining a qualified employee); and ute responsible to both Congress and the Subpoena Power clarifies thatI G sub- request authority to waive the pay president. poena power extends to electronically reduction provisions for employees/ 3 Several issues were considered by one or both stored information. retirees serving on a temporary ba- Houses but were not enacted in the final bill, due Program Fraud Civil Remedies Act sis (during the time an emergency to the need for more time to thoroughly consider adds DFE IGs to the list of entities that involving a direct threat to life or the proposal or member concerns. Examples include enhanced computer matching authority for are covered by the PFCRA. property or other unusual circum- OIGs, new authority for compelled interviews, Law Enforcement Authority allows stances exist). expanded contracting authority, exemption of DFE IGs to apply for statutory law en- • SES Provisions. Generally, IGs are OIG activities from Paperwork Reduction Act forcement authority. considered to be agency heads and requirements, and specific provisions affecting Semiannual Reporting Requirements OIGs are considered to be agencies individual OIGs. To the extent that the IG community sees a continuing need for these mea- makes IG inspection and evaluation re- for purposes of applying the various sures, the opportunity exists to work productively ports subject to the requirements. provisions of Title 5 pertaining to with the Congress.

Visit www.ignet.gov 3 Leaders in the community recog- weeks, an election (fittingly overseen by nized early on that significant advance Lynne McFarland, FEC IG) was held for planning would be necessary to ensure the first CIGIE chairperson and the re- a smooth transition to a unified coun- sults were announced in mid-November. cil should the reform legislation be en- In November and December, the PCIE acted by Congress. The PCIE Executive and ECIE held their last meetings as sep- Council appointed a Transition Planning arate councils, recognized the leadership Committee composed of four PCIE and of their outgoing Chair and Vice-chairs, four ECIE members and co-chaired by and briefed incoming CIGIE leaders and Earl Devaney and myself.4 This com- staff on continuing matters of interest.5 mittee began its work in January 2008 when it appeared that passage of some CIGIE TODAY form of IG Act legislation would be like- January 2009 represented the start of a ly during the 110th Congress. new era in the life of the IG community. Working through the spring and sum- It is a time of change in many arenas – a mer of 2008, the committee developed new Congress, a new presidential admin- recommendations on such matters as istration, a new council. Building on the elections, committee structure, voting, successes and lessons learned over 30 This is critical to ensuring that a variety funding, and transition process. Mem- years, the new council is moving forward of perspectives are considered whenever bers prepared a draft charter and orga- rapidly. issues involving the community must be nization chart, recognizing that revisions The first CIGIE meeting was held in addressed. would be necessary to reflect the final January 2009 under my leadership and The charter adopted by CIGIE ad- version of enacted legislation. Through- that of Vice-Chairperson Carl Clinefelter dresses governance matters - how CIGIE out this process, the committee met fre- (FCA).6 The Executive Council pre- will do its business. It incorporates pro- quently and considered a variety of per- sented the proposed Charter, the draft visions of the IG Reform Act and adds spectives on each issue before coming to Strategic Business Plan, and the Transi- policies and procedures where necessary consensus on its recommendations. A tion Planning Committee’s recommen- to enable CIGIE to carry out its activi- number of guiding principles were key dations (many of which had already been ties. Key provisions address: to the committee’s approach to its work: addressed in the Charter and Business • Conduct of elections • One IG, one vote – each IG would Plan); after discussion and comment, the • Preparation of strategic and business have an equal vote on CIGIE mat- Charter and Business Plan were formally plans ters. adopted at CIGIE’s February meeting.7 • Developing meeting agendas and • The current PCIE/ECIE Executive The Executive Council continues to obtaining quorums Council would serve as the CIGIE work hard to implement the IG Reform • Voting procedures governing body for 6 months after Act’s provisions and CIGIE’s implement- • Funding mechanisms the law was enacted. ing initiatives. Executive Council mem- • Budget preparation and execution • The current committee chairs and bers represent a broad spectrum of CI- • Committee structure, leadership, committee structure would remain GIE’s membership and include PAS IGs, and membership in place for six months after the law DFE IGs, and a Legislative Branch IG.8 • Procedures to amend the charter The strategic business plan sets forth was enacted. 5 The Councils have been well-served by the • CIGIE’s first year budget and staff many contributions of their outgoing leaders: the council’s business goals, supporting levels would remain consistent with Clay Johnson, former OMB DDM and Chair objectives, and performance measures of both the PCIE and ECIE; Gregory Fried- for the first two years of its operation. It the cost estimates developed by the man (DOE), PCIE Vice-Chair; and Tina Boesz Congressional Budget Office. builds on the strategic mission set forth (former NSF IG), ECIE Vice-Chair. in “A Strategic Framework 2005-2010,” As a result of this Committee’s work, 6 By statute, OMB’s DDM serves as Executive the IG community was well prepared to Chairperson of CIGIE. The Council looks for- adopted by the IG community in 2004, handle the transition to a unified council ward to working closely with a new DDM upon as well as the more recent mission state- his/her appointment and confirmation. upon enactment of the reform legislation ment contained in the IG Reform Act. 7 Both of these documents are available on The plan established three goals aimed in October 2008. Within a matter of IGNET, the IG community’s website. 4 Committee members are Jack Callendar 8 Executive Council members currently are Earl towards establishing CIGIE as a major (PRC), Carl Clinefelter (FCA), Claude Kick- Devaney (DOI), Gregory Friedman (DOE), contributor to government-wide integ- lighter (succeeded by Gordon Heddell) (DOD), Gordon Heddell (DoD), Dan Levinson (HHS), rity and efficiency. Lynne McFarland (FEC), Richard Moore (TVA), Lynne McFarland (FEC), Patrick O’Carroll and David Williams (USPS). (SSA), Tony Ogden (GPO), and Jon Rymer (FDIC).

4 Journal of Public Inquiry Finally, and equally as important as the ease with which the community has be- first two goals, the third goal recognizes gun to see itself as one entity, with a fo- the need to permanently establish an ef- cus on the common challenges and types fective organization to enable CIGIE to of work each individual IG experiences. carry out its statutory responsibilities. We are a stronger community, close-knit Activities under this goal include admin- and better situated to face the challenges istrative operations (developing staffing, ahead. It has become clear that we as IGs funding, and accountability plans; ob- have much more in common with each taining space, facilities, and equipment; other than we have differences. and setting up a revolving fund and ac- Although we cannot predict the chal- counting procedures) and planning and lenges to come, history tells us that there organization activities (updating com- will indeed be opportunities for the IG mittee structure, membership, and char- community to play a key role in assuring ters; and revising strategic and planning government effectiveness. The current documents). economic crisis has led to enactment of In addition to these three overarching historic legislation intended to spur re- goals, CIGIE leaders and staff deal on a covery in key sectors of the American The plan includes objectives and - time daily basis with the ongoing business of economy. frames designed to enable the communi- any federal entity: responding to con- TheI G community’s current challenge, ty to accomplish these goals by Decem- gressional, media, and public requests; then, is to oversee the stimulus spending ber 2010. These three goals are: handling member IG inquiries; and co- provided under the American Recovery 1. Contribute to government-wide ordinating council activities with other and Reinvestment Act of 2009.10 improvements in program integrity, federal entities such as GAO, OMB, and OIGs have been given a very visible efficiency, and cost-effectiveness by OPM. role in providing oversight of funds un- providing cross-agency analysis of In this last arena, particularly note- der ARRA, both in terms of membership OIG findings and recommendations worthy is the work being done by the IG on the newly-created Recovery and Ac- in areas of vulnerability confronting Candidate Recommendation Panel, co- countability Transparency Board,11 and multiple government programs. chaired by Glenn Fine (DOJ) and Lynne in terms of the funding given to 23 spec- 2. Increase the professionalism and ef- McFarland (FEC), to fulfill CIGIE’s ified IGs to provide oversight in their fectiveness of the IG community statutory responsibility to identify and own agencies. ARRA has brought new workforce. provide qualified candidates for vacant visibility and recognition to the IG com- 3. Create an effectively functioning IG positions. munity; it also shines a spotlight on our council able to meet its vision, mis- ability to devise proactive and effective sion, and goals. CONCLUSION ways to ensure that funds are spent well. The first goal recognizes that the coun- As this article goes to press, the IG com- I am confident that, working together, cil’s success will be judged by administra- munity has had three months of active the IG community will continue to do tion and congressional stakeholders large- operation under the umbrella of a uni- an outstanding job to better the delivery ly on the council’s ability to contribute fied council. The transition has been of government programs and improve to improvements in federal operations. smooth, due in large part to the vision the lives of our citizens. 1 To accomplish this, the council will an- and care of many dedicated IGs and the nually identify and perform at least two professionalism and expertise of leaders cross-cutting studies or combined meta from the ranks of the career OIG staff.9 analyses of work performed by OIGs in Perhaps the most noteworthy aspect their individual agencies. of this transition has been the apparent The second goal focuses on the continuing need to provide excellent profes- 9 The accomplishments discussed in this article sional development and training to OIG would not have been possible without the employees. To achieve this goal, the professional expertise and assistance of so many 10 P.L. 111-5, signed by President Obama on dedicated OIG career employees. I regret that February 17, 2009. council will establish a community-wide it is not possible to name them all here. I am 11 The Board is chaired by Earl Devaney (for- academy(ies) to present high quality and personally indebted to USDA OIG’s outstand- mer DOI IG) and is composed of 10 IGs named cost-efficient training to audit, investi- ing staff, particularly David Gray, Mark Jones, in the ARRA: Agriculture, Commerce, Justice, gative, inspection/evaluation, manage- Kathleen Tighe, and Cheryl Viani, who have Energy, Homeland Security, Health and Human ment, and other professional staff. directly managed PCIE Legislation Committee Services, Education, Transportation, Treasury, and CIGIE activities. and Treasury IG for Tax Administration.

Visit www.ignet.gov 5 Phyllis K. Fong

Phyllis K. Fong was sworn in as Inspector General for the U.S. Department of Agriculture on December 2, 2002. USDA is one of the largest and most diverse departments in the federal government. Its mission includes the management of traditional farm programs, private lands conservation, domestic food assistance, agriculture research and education, agricultural marketing, international trade, meat and poultry inspection, forestry, and rural development programs. As Inspector General, Ms. Fong is the senior official responsible for audits, evaluations, investigations, and law enforcement efforts, relating to USDA’s programs and operations. TheO ffice ofI nspector General provides leadership in promoting economy, efficiency, and effectiveness in USDA programs and addressing fraud, waste, and abuse. Ms. Fong was recently elected as the first Chair of the Council of Inspectors General on Integrity and Efficiency, which was established by the Inspector General Reform Act of 2008, Public Law 110-409, to consolidate the former President’s Council on Integrity and Efficiency andE xecutive Council on Integrity and Efficiency. CIGIE’s members include 67 federal Inspectors Gen- eral, and its mission is to promote economy and effectiveness in federal programs through coordinated governmentwide activities. Previously, Ms. Fong served as Chair of the PCIE Legislation Committee and was a member of the PCIE Audit Committee. She also served as PCIE representative to the Comptroller General’s Advisory Council on Government Auditing Standards. Prior to her appointment at USDA, Ms. Fong served as the Inspector General of the U.S. Small Business Administration from April 1999 until December 2002. A career member of the Senior Executive Service, she had also held several positions at SBA OIG, including Assistant Inspector General for Management and Legal Counsel (1994-1999) and Assistant Inspector Gen- eral for Management and Policy (1988-1994). She also served as Assistant General Counsel for the Legal Services Corporation (1981-1983) and as an attorney with the U.S. Commission on Civil Rights (1978-1981). Ms. Fong graduated from Pomona College with a B.A. degree in Asian studies and earned her J.D. degree from Vanderbilt University School of Law. Ms. Fong is a member of the Tennessee and District of Columbia bars.

6 Journal of Public Inquiry Office of Inspector General Department of Interior

[PUBLIC CORRUPTION] Honest Services Fraud A modern tool for dealing with federal public corruption cases

By Inspector General Earl Devaney and James P. O’Sullivan The versatile“honest services” fraud statute makes it a crime to devise a “scheme or artifice to deprive another of the intangible right of honest services.”1 A recent series of high-profile convictions illustrates the effectiveness of this statute as a modern tool for dealing with federal public corruption cases. For example, on September 29, 2008, former Central Intelligence Agency Executive Director Kyle “Dusty” Foggo pleaded guilty to honest services fraud for having fraudu- lently deprived the U.S. of its right to his honest services as a public official. The basis for the charge was that Mr. Foggo had abused his high-ranking position by devising and executing a scheme 3 to induce the CIA into hiring “compa- honest services fraud and conspiracy subsequently pled guilty to conspiracy to nies and individuals with whom he had to commit honest services fraud, stem- commit this crime. concealed his personal relationships.”2 ming from his extensive efforts to induce The honest services fraud statute has Another high-profile example of the public officials to take improper action been useful not only in prosecuting public 4 use of the honest services fraud statute on behalf of his clients. As a result of corruption cases of national significance, is that of former federal lobbyist Jack the Abramoff investigation – and illus- but also in dealing with more common Abramoff. Mr. Abramoff pled guilty to trating the substantial reach of the stat- corruption cases such as government pro- ute – a U.S. Congressman5 and four for- curement fraud. For example, in March mer senior Congressional staff members6 2007, a government contractor pleaded 1 The Honorable Earl E. Devaney is the Inspec- 3 In January 2006, Jack A. Abramoff pleaded guilty to honest services fraud in connec- tor General of the Department of the Interior. guilty to a number of charges including honest tion with a scheme to steer government James P. O’Sullivan is a former Associate General services fraud and conspiracy to commit honest Counsel of the Office of Inspector General, services fraud. contracts at Walter Reed Army Medical Department of the Interior. The authors thank 4 Richard B. Schmitt, “Jack Abramoff Sentenced Chris Martinez, Attorney Advisor, Office of to 48 Months,” L.A. Times (Sept. 5, 2008), avail- vices. Neil G. Volz, a former member of the staff Inspector General, Department of the Interior, able at http://articles.latimes.com/2008/sep/05/ of Congressman Robert W. Ney, pleaded guilty for his assistance in preparing this article. “The nation/na-abramoff5. in May 2006 to conspiracy to commit honest views of co-author James P. O’Sullivan reflect his 5 In September 2006, Congressman Robert services fraud. William J. Heaton, a former personal views and do not necessarily reflect the W. Ney, pleaded guilty to, among other things, member of the staff of Congressman Robert W. views of the Department of Justice.” conspiracy to commit honest services fraud. Ney, pleaded guilty in February 2007 to con- 2 DOJ press release, “Former CIA Executive 6 Tony C. Rudy, a former member of the staff spiracy to commit honest services fraud. Mark Director Kyle ‘Dusty’ Foggo Pleads Guilty to of Congressman Tom DeLay, pleaded guilty in D. Zachares, a former senior staffer to the House Defrauding the United States” (Sept. 29, 2008) March 2006 to conspiracy to defraud the citizens Transportation and Infrastructure Committee, available at http://sandiego.fbi.gov/dojpressrel/ of the United States and the United States House pleaded guilty in April 2007 to conspiracy to pressrel08/sd092908.htm. of Representatives of the right to his honest ser- commit honest services fraud.

Visit www.ignet.gov 7 Center.7 Moreover, the ongoing Na- to the defrauding of a property interest, loyal, faithful, disinterested and impartial tional Procurement Fraud Initiative, an- and did not apply to defrauding the gov- service of federal employees.15 nounced by the DoJ in October 2006,8 ernment and citizens of their intangible Whenever a federal employee engages has yielded convictions and indictments right to the honest services of public of- in deceit, fraud, bias, undue influence, under the honest services fraud stat- ficials.12 Congress responded swiftly to conflict of interest, self-enrichment, self- ute. In December 2006, a federal jury this decision, and in 1988 enacted 18 dealing and concealment, he or she com- in U.S. District Court Western District U.S.C. § 1346, a definitional provision mits a serious breach of public trust and, of Virginia convicted a U.S. Army pro- of the mail and wire fraud statutes that depending on the facts, may become curement official and the chief executive expressly covers a scheme or artifice “to criminally liable under the honest ser- officer of a Defense contractor of two deprive another of the intangible right of vices fraud statute. The statute also ap- counts each of honest services wire fraud, honest services”.13 Since 1988, the hon- plies to other persons who are not federal and one count each of bribery.9 In June est services fraud statute has been applied employees who deprive the government 2007, DoJ announced the guilty plea of in a wide variety of factual circumstances and its citizens of the honest services of a former DoD civilian employee that in- and has proven to be a flexible tool in federal officials. cluded one count of honest services wire dealing with public corruption. Four elements must be established in fraud related to a scheme to obtain unau- order to prove honest services fraud in a thorized pay and entitlements.10 THEORY AND ELEMENTS OF federal government context: the defen- While these cases show that the hon- HONEST SERVICES FRAUD dant must knowingly devise or partici- est services fraud statute is indeed an ef- Although section 1346 is subtle in its pate in a scheme to defraud the govern- fective 21st century tool for dealing with application and can raise nuances of legal ment or the public of its right to honest public corruption, the statute’s ancestry interpretation, the basic theory behind it services; the falsehood at the heart of the goes back to the 19th century when the is straightforward and intuitive, especially scheme must be material; there must be a original mail fraud statute was enacted in cases involving federal government specific intent to defraud; and there must to protect the federal mails. Over the officials.14 A federal government be use of the mails or a transmission by course of the next 100 years, the theory employee takes an oath to support and wire, radio or television in interstate of honest services fraud developed in defend the Constitution and to faithfully commerce. case law interpreting the mail and wire discharge the duties of public office. As regards the first element, the gov- fraud statutes and emerged as a powerful The federal government, the employing ernment generally must prove that the doctrine in the 1970s, supporting pub- agency and citizens in general have a scheme would likely compromise gov- lic corruption prosecutions of state, local right to the honest services of every ernmental objectivity and fairness.16 and federal officials.11 federal employee who undertakes that This often means that the scheme- cen In 1987, however, the U.S. Supreme public trust. The right to honest services tered on a particular, discretionary deci- Court’s McNally decision held that the includes the right to the conscientious, sion or set of decisions.17 The courts, mail and wire fraud statutes applied only 12 McNally v. U.S., 483 U.S. 350 (1987). however, courts have held that there is no 7 See U.S. Attorney for the District of Mary- 13 The full text of 18 U.S.C. § 1346 states: “For requirement that an official actually ren- land press release, “Contractor Pleads Guilty to the purposes of this chapter, the term ‘scheme or Bribing Official at Walter Reed Army Medical artifice to defraud’ includes a scheme or artifice 15 The statute does not define the term “honest Center” (Mar. 9, 2007). to deprive another of the intangible right of hon- services.” A bill, S. 2559, introduced by Senator 8 See DOJ press release, “Deputy Attorney Gen- est services.” A scheme or artifice to defraud us- Leahy in the 109th Congress contained the fol- eral Paul J. McNulty Announces Formation of ing the mail is proscribed by 18 U.S.C. § 1341. lowing definition of the term: “The term ‘honest National Procurement Fraud Task Force” (Oct. Wire fraud is proscribed by 18 U.S.C. § 1343. services’ includes the right to the conscientious, 10, 2006). 14 The statute has a somewhat more contro- loyal, faithful, disinterested, and unbiased service, 9 See DOJ press release, “Former Army Of- versial history when applied in an exclusively to be performed free of deceit, undue influence, ficial and Virginia-Based Defense Contractor private sector scheme. Some cases involving only conflict of interest, self-enrichment, self-dealing, Sentenced For Honest Services Wire Fraud and private parties have encountered resistance from concealment, bribery, fraud, and corruption.” Bribery Convictions” (Mar. 6, 2007). courts and criticism from commentators who 16 E.g., U.S. v. Hasner, 340 F.3d 1261, 1271 10 See DOJ press release, “Former DOD Em- have expressed concerns that the statute may be (11th Cir. 2003) (discussing public officials’ ployee Pleads Guilty to Charges Involving Fraud criminalizing conduct that amounts to no more fiduciary duty to the public to be open and act in and Theft from the Army” (June 5, 2007). than a civil fraud or perhaps only a breach of their best interests, and how the public’s right to 11 See Shushan v. U.S., 117 F.2d 110 (5th Cir.), contract. The statute has also generated criticism honest services is harmed when those duties are cert. denied, 313 U.S. 574 (1941) for an early on federalism grounds when applied to corrup- breached). articulation of the honest services theory in a case tion of state or local officials. Commentators 17 E.g., id. at 1265-68 (Chairman of county involving the corruption of a public official. One have generally taken a more favorable view of housing agency convicted of committing honest of the most notable cases from the 1970s was the statute when a federal interest is at stake or services mail fraud by voting on a government the prosecution of Maryland Governor Marvin the conduct involves a federal official, although contract in order to directly benefit a private Mandel. See U.S. v. Mandel, 591 F.2d 1347 (4th some have nevertheless criticized the statute as party with whom he had an agreement to share Cir. 1979). inherently vague. the resulting commission).

8 Journal of Public Inquiry der any biased or impartial decisions; it is to be used in furtherance of the fraud. may be cases where the facts would not enough that an official failed to disclose The mailing, however, does not have to establish all the required elements of a information material to his or her duties, be essential to the scheme, and the de- conflict of interest crime but would be such as a conflict of interest.18 fendant need not be the one responsible sufficient to establish an honest services The second honest services fraud ele- for it. Also, the definition of “the mails” fraud violation. ment is that the fraudulent scheme must has been extended by statute beyond the involve a material deception by the ac- U.S. Postal Service to include private and BRIBERY SCHEMES cused official. Even though the word commercial carriers involved in interstate Many honest services fraud cases strong- “materiality” appears nowhere in 18 commerce, such as FedEx. ly resemble bribery or illegal gratuity U.S.C. §§ 1341, 1343, or 1346, the Su- For honest services wire fraud charges, cases. For example, in a number of the preme Court established that these and the fourth element requires that the de- honest services fraud cases arising out of similar statutes inherently adopted the fendant, in furthering his or her scheme the Abramoff investigation, there was a common law meaning of fraud, which to defraud, transmitted or caused the scheme or artifice to defraud that con- had always “required a misrepresentation transmission of any writing, signal, or sisted of the defendant accepting (as a or concealment of material fact.”19 In sound by means of a wire, radio, or tele- public official) or providing (as -a lob a nutshell, a material misrepresentation vision communication in interstate com- byist) a “stream of things of value” (e.g., or concealment is one that has “a natural merce. Typically, this includes email, domestic and overseas trips, golf, enter- tendency to influence . . . the decision fax, and telephone/cell phone communi- tainment, meals and drinks, employ- of the decision making body to which it cations, although the statutory terms in- ment opportunities, etc.) to influence was addressed.”20 vite further definition as technology con- or reward official action. In the case of The third element requires that the de- tinues to change and evolve. Moreover, the government officials, they agreed “to fendant have specific intent to defraud. as is also the case with mail fraud, the take a stream of favorable official action” This means not only that the official was communication itself need not contain (e.g., making certain contacts with exec- aware of the scheme, but that he or she a fraudulent representation; it merely utive branch officials, inserting legislative willfully intended for it to harm govern- needs to “further” the scheme in some amendments, etc.). mental honesty and fairness. Such intent way, such as by arranging a meeting place Such cases, even when they do not in- may be proven by circumstantial evi- or providing other information helpful clude a bribery count, nevertheless have dence. No direct admission is required, to executing the scheme. a strong bribery-like quality to them.21 but the facts must be such that could Within the broad parameters of these Unlike the bribery statute, however lead a reasonable jury to conclude that elements lies a vast spectrum of miscon- which requires an explicit quid pro quo the defendant did not act in good faith, duct that can be covered by the honest or a showing that the giving of things of but specifically intended to harm govern- services fraud statute. A scheme or arti- value was intended to induce a pattern of mental objectivity and honesty. fice to defraud citizens and the govern- official actions (e.g., either “this for that” The fourth and final element inan ment of the right to the honest services or “these for those”),22 an honest servic- honest services mail fraud case is, of of public officials can take many forms. es fraud case has no such requirement. course, that the mails be used or caused Some of the most common types of hon- 21 The Information and Plea Agreement in the est services fraud cases involving public case of Congressman Robert W. Ney did not 18 See, e.g., U.S. v. deVegter, 198 F.3d 1324, contain a bribery or illegal gratuity count. 1328 (11th Cir. 1999) (noting that “[a] public officials include bribery schemes, undis- 22 Section 201(b)(2) of Title 18, U.S. Code, official’s undisclosed conflict of interest . . . does closed financial interest schemes, and states that whoever “being a public official . . by itself harm the constituents’ interest in the schemes involving misappropriation of . corruptly demands, seeks, receives, accepts end for which the official serves-honest govern- confidential information. I t is important . . . anything of value . . . in return for being ment in the public’s best interest”) (emphasis to keep in mind; however, that the honest influenced in the performance of any official act” added); U.S. v. Holzer, 816 F.2d 304, 308 (7th shall be fined or imprisoned under the statute. Cir.) (holding that a judge’s receipt of bribes and services fraud statute is flexible enough (Emphasis added.) See also U.S. v. Ganim, “loans” to influence official actions constituted to embrace any scheme to defraud that 510 F.3d 134, 148-49 (2d Cir. 2007) (noting mail fraud irrespective of whether he ruled dif- comes within its limits. that “bribery can be accomplished through an ferently on any cases), vacated, 484 U.S. 807 In many cases, the honest services fraud ongoing course of conduct” if the gifts are being (1987) (ordering reconsideration in light of Mc- given in exchange for a course of official action) ; Nally); U.S. v. Sawyer, 85 F.3d 713, 724 (1st Cir. statute is used in conjunction with other U.S. v. Jennings, 160 F.3d 1006, 1014 (4th Cir. 1996) (noting that “the public is deprived of its criminal statutes, such as those proscrib- 1998) (noting that “[t]he quid pro quo require- right … to disinterested decision making” when ing bribery, illegal gratuities or other ment is satisfied so long as the evidence shows a “an official fails to disclose a personal interest conflicts of interest. Consequently, the ‘course of conduct of favors and gifts flowing to a in a matter over which she has decision-making facts that would support those violations public official in exchange for a pattern of official power”). actions favorable to the donor’”) (quoting U.S. v. 19 Neder v. U.S., 527 U.S. 1, 22 (1999). will often also support an honest services Arthur, 544 F.2d 730, 734 (4th Cir. 1976)). 20 Id. fraud case. On the other hand, there

Visit www.ignet.gov 9 Nor, as is required under the illegal gra- lic’s right to impartial official services.”26 ment procurement process to channel tuity statute, is it necessary to show that Kickback schemes, close relatives of money to themselves and their compa- a thing of value was given “for or because bribery schemes, have also been prosecut- nies.29 The scheme involved the use of of an official act.”23 Thus, instead of ed under the honest services fraud stat- no-bid contracts to a third-party contrac- showing a specific link between a bribe ute. One example of a kickback scheme tor who provided financial benefits to the or gratuity and some official action, in an is the arrangement engineered between Treasury officials. The two officials were honest services fraud case there is a show- Jack Abramoff and Michael Scanlon. convicted of honest services wire fraud ing of a “stream of things of value” and a Abramoff recommended to his Native violations. They also were convicted of corresponding “series of official acts.” American tribal clients that they use the violations of 18 U.S.C. § 208 which bars For this reason, it is useful to consider grassroots and public relations services an executive branch employee from tak- honest services fraud counts in cases that provided by Scanlon’s firm. Abramoff ing action on a matter that could affect may initially be evaluated as a bribery or did not disclose to his clients that he had the employee’s financial interest. illegal gratuities case. Especially since an arrangement with Scanlon to receive Another federal case of this type in- the Supreme Court’s Sun-Diamond24 fifty percent of the net profits of the fees volved an Assistant U.S. Attorney who decision which required a strong link to paid to Scanlon’s firm. In the words of engaged in a scheme to make favorable some official action in gratuities cases, the plea agreement, this scheme violated recommendations to the court and oth- the honest services fraud theory may Abramoff’s “duty to disclose all relevant ers on behalf of cooperating witnesses provide a useful alternative to a bribery facts to his lobbying clients, including and defendants in exchange for money.30 or illegal gratuity charge. conflicts of interest and any financial in- In one instance, the AUSA accepted For example, in the Woodward case terest in fees paid to others.”27 $98,000 from a cooperator. In return, involving a Massachusetts state legislator, the AUSA argued for leniency at a sen- the Court held that an honest services UNDISCLOSED FINANCIAL tencing hearing. The AUSA pled guilty violation may be established where there INTEREST SCHEMES to two counts of honest services wire is a showing of a “generalized pattern of A second type of honest services fraud fraud and one felony conflict of interest gratuities to coax favorable official ac- case involves schemes in which a public count under 18 U.S.C. § 208. tion.25 As the Court further explained, official has an undisclosed financial- in There may be a number of reasons why “[a] person might not, however, give an terest and takes some official action or the honest services fraud statute is not unlawful gratuity with the intent to ef- uses public office to benefit a secret fi- used more frequently in federal prosecu- fect a specific quid pro quo. Rather, as nancial interest. Section 1346 has been tions involving conflicting financial- in the government contends here, a person regularly used to successfully prosecute terests on the part of federal officials. In with continuing and long-term interests state and local public officials in this type some cases, there may not be any element before an official might engage in a pat- of case.28 of concealment and hence no “scheme tern of repeated, intentional gratuity of- Although the honest services fraud or artifice” as required under the mail fenses in order to coax ongoing favorable statute has been less frequently used to and wire fraud statutes. For example, in official action in derogation of the pub- prosecute federal officials for undis- cases where federal employees have acted closed, conflicting financial interests, one on matters that would affect a company 23 For example, 18 U.S.C. § 201(c)(1)(B) notable federal case involved a scheme by with which they were negotiating for states that whoever “being a public official . . . two U.S. Department of the Treasury of- employment or had an arrangement for demands, seeks, receives, accepts . . . anything of value . . . for or because of any official act ficials to use their access to the govern- future employment, the employee may performed or to be performed by such official or 26 Id. have made no attempt at concealment. person” shall be fined or imprisoned under the 27 See Factual Basis for the Plea of Jack A. In some cases of an inadvertent section statute. Abramoff at p. 3. 208 violation, the conflicting financial 24 In U.S. v. Sun-Diamond Growers, 526 U.S. 28 See U.S. v. Mittelstaedt, 31 F.3d 1208 (2d 398 (1999), the Supreme Court ruled that in an Cir. 1994), cert. denied, 513 U.S. 1084 (1995) interest may even have been reported illegal gratuity case it was necessary to show that (consultant employed by two towns to advise on on a financial disclosure report. A more the gratuity was linked to some specific official zoning and planning matters had undisclosed likely explanation for the paucity of fed- act taken by the public official. One current interest in certain real estate projects); U.S. v. eral cases of this type, however, is that legislative proposal seeks to expand the scope of Bissell, 954 F. Supp. 841 (D.N.J. 1996), judg- the illegal gratuity statute by amending the statu- ment aff’d. without opinion, 142 F.3d 429 (3d 29 U.S. v. Quinn, 359 F.3d 666 (4th Cir. 2004). tory definition of “official act” to include “any Cir. 1998) (local prosecutor shared a partnership For additional facts in this case, see Case 1 in the decision or action within the range of official interest in gasoline stations with attorney who 2002 Conflict of Interest Prosecution Survey, duty of a public official.” See H.R. 2438, “Clean represented adversaries of the prosecutor’s office); issued by the Office of Government Ethics on Up Government Act of 2007,” 110th Cong., 1st U.S. v. Grandmaison, 77 F.3d 555 (1st Cir. October 31, 2003. Sess. (introduced May 22, 2007). 1996) (part-time city alderman secretly influ- 30 See Case 3 in the 1997 Conflict of Inter- 25 See U.S. v. Woodward, 149 F.3d 46, 55 (1st enced the award of a contract to a construction est Prosecution Survey, issued by the Office of Cir. 1998), cert. denied, 525 U.S. 1138 (1999). company that was his employer). Government Ethics on March 13, 1998.

10 Journal of Public Inquiry section 208 is itself an adequate tool mation, whether it be government in- vices fraud counts, the Court held that for dealing with employees who act on formation or business information, can the unauthorized browsing of confiden- matters that benefit their own financial constitute a violation of the mail and wire tial taxpayer information did not, stand- interest, whether or not that interest is fraud statutes. Even prior to the enact- ing alone, deprive the government of his concealed.31 ment of the honest services fraud statute, honest services as a federal employee. There are some situations, however, the Supreme Court in Carpenter upheld The Czybinski decision provides useful not covered by section 208, that may the conviction of a Wall Street Journal guidance as to what would be needed to justify use of the honest services fraud reporter who used nonpublic business successfully establish an honest services statute. Section 208 covers the financial information to make money trading in fraud case involving a scheme to misap- interests personally owned by the fed- the stock market.33 propriate confidential government infor- eral official; it also covers certain other Many honest services fraud cases in- mation. The First Circuit acknowledged so-called “imputed interests” that consti- volving public officials engaged in bribery that the government had established that tute a conflict for an official, such as the or undisclosed financial interest schemes the defendant engaged in unauthorized financial interests held by a spouse or a have elements that involve the misuse searches of taxpayer information using minor child. But section 208 does not of nonpublic government information. interstate wire transmissions (the da- cover the financial interests of other close One honest services fraud case in which tabase was in Martinsburg, West Vir- relatives such as a sibling, a parent, or an misappropriation of government infor- ginia). The court, however found that uncle or aunt.32 It also does not cover mation was at the heart of the case was the government did not establish that the financial interests of a “significant United States v. Czubinski.34 the defendant had received any tangible other” or “live-in partner.” Richard Czubinski was employed benefit from his misuse of his position. So, for example, if instead of a steer- by the Internal Revenue Service in the The court thus determined that the case ing a contract to a company owned by Boston office of the Taxpayers Services “falls outside of the core of honest servic- a spouse (which would violate section Division. In order to carry out his of- es fraud precedents”35 in that it did not 208), the official directed the contract ficial duties, which included answering involve bribery, embezzlement of some to a company owned by a brother or taxpayer questions regarding their re- other serious breach of public trust. In a member of the official’s immediate turns, Czubinski was authorized to have this regard, the First Circuit took spe- household, section 208 would not apply. access to the IRS’s Integrated Data Re- cial note of the fact that the defendant’s In these situations, the honest services trieval System. His authorization was duties were ministerial (responding to fraud statute may be a useful alternative limited to answering taxpayer inquiries, taxpayer requests for information about to a section 208 prosecution. The honest but Czubinski browsed the database and their own returns) and did not involve a services fraud statute could apply if there conducted searches that were outside the discretionary, decision-making role. Fi- was a scheme to steer the contract to a scope of his official duties. nally, the court said that the government brother, an in-law or some other family The government indicted Czubin- failed to prove the intent to deprive the member whose financial interests are not ski on nine counts of honest services public of the defendant’s honest services, covered by section 208. wire fraud and four counts of computer since it did not establish that Czubinski fraud. A jury convicted Czubinski on intended to use the files he browsed for MISAPPROPRIATION OF all counts. On appeal, the First Circuit some private purpose. CONFIDENTIAL INFORMATION reversed Czubinski’s conviction on all Thus, to be successful, an honest ser- SCHEMES counts. With respect to the honest service fraud prosecution involving a misap- A third type of honest services fraud case propriation of confidential information is one where the dominant facts involve 33 See Carpenter v. U.S., 484 U.S. 19 (1987). should show that: there was a disclosure R. Foster Winans was a reporter for the Wall a misappropriation of confidential infor- Street Journal who wrote a daily column called of the confidential information to some mation. It is well established that the “Heard on the Street” which evaluated stock private party for private gain; if there was misappropriation of confidential infor- based on business information that he gathered no such outside disclosure, that the gov- in the course of his work for the newspaper. ernment employee used the information 31 For those employees who are required to file The column had an impact, although hard to for his or her own private purposes; the either a public or confidential financial disclosure calculate, on the stocks that it discussed. Winans report, the failure to report a financial interest conspired with Carpenter and others in a scheme employee served in a position that in- could violate both civil and criminal statutes. to provide advance information that would later volved a discretionary, decision-making 32 The Standards of Conduct attempt to address appear in the columns and to trade in stock on role; the breach of public trust was suf- this problem on an administrative level by requir- the basis of this advance information. In addi- ficiently serious; and there was a failure ing officials to consider recusal from matters that tion to various securities laws violations, Winans would affect the financial interest of other close was convicted of honest services fraud. to carry out official duties (such as grant- relatives or members of their household. See 5 34 See U.S. v. Czubinski, 106 F.3d 1069 (1st ing exclusive, preferential treatment) that C.F.R. § 2635.502. Cir. 1997). 35 Id. at 1077.

Visit www.ignet.gov 11 amounted to an intent to deprive the sector employment between the official ernment official, the mayor of Calumet public of the official’s honest services. and an outside party; and an official -en City, Illinois, was convicted under both The misuse of the confidential infor- gaged in a pattern of exclusive preferen- 18 U.S.C. § 666 (federal program fraud) mation would not necessarily have to re- tial treatment of the outside party, such and under the honest services fraud stat- sult in a financial gain to the official or to as providing nonpublic information, ar- ute.38 The honest services fraud- con some private party. It could, for example, ranging for special access, and speaking viction involved a kickback scheme in be the unauthorized release of sensitive on behalf of the outside party’s interests. which a law firm that received “the lion’s nonpublic government information that This pattern of preferential treatment share” of the city’s legal business kicked significantly benefits the goals of some must be serious enough to amount to a back thirty percent of the payments it re- private organization, particularly where deprivation of the public’s right to the of- ceived from the city to the mayor. The there is some demonstrable harm to the ficial’s honest services. concurrent program fraud scheme in- government or the public resulting from Such a theory of an honest services volved the payment of comp time to city the release. fraud case would enable law enforce- employees who had taken leave time to ment to address serious misconduct that engage in political activity. In this case, MISUSE OF OFFICIAL POSITION might not be covered by the conflict of the two counts involved different sets of SCHEMES interest law which deals with represen- facts. As required by the program fraud In one of the cases arising out of the tation of private parties in matters in statute, Calumet City received more than Abramoff investigation, it was -estab which the United States has an inter- $10,000 annually in federal funds. lished that Abramoff had attempted to est. That statute, 18 U.S.C. § 205, bars secure an appointment for Mark Zacha- an employee of the executive branch THE FUTURE OF HONEST res in the Department of the Interior Of- from acting as an agent or attorney in SERVICES FRAUD fice of Insular Affairs. 36 The Office of a matter in which the U.S. is a party The honest services fraud statute contin- Insular Affairs was responsible for U.S. or has a direct and substantial inter- ues to be an effective tool for dealing with island territories; Abramoff had lobbying est. The statute serves two policy goals. public corruption and is often viewed as a interests in the Commonwealth of the First, it protects government processes first-line defense for combating new and Northern Mariana Islands. Abramoff from the improper influence and advan- unusual fraud schemes until Congress was unsuccessful in this effort. Ultimate- tage that a private party might obtain provides a particular legislative response. ly, Mark Zachares found a position on a by being represented by a government The statute should be considered as an Congressional staff. employee. Second, it preserves the value alternative charge where the facts might Abramoff and Zachares had a so-called of loyalty that an employee should have not support all the elements of a conflict “two-year plan” in which Zachares would to his or her employer, the government. of interest crime – for instance, brib- work on the Hill advancing Abramoff’s The statute, however, requires that a per- ery or illegal gratuity cases where there interests and gain valuable contacts that son act as an “agent or attorney.” Thus is no specific link between benefits and would enhance his value as a future lob- it would not apply in a situation where particular official acts, financial conflict byist working for Abramoff. The factual a private party had not engaged the gov- cases where the concealed financial inter- statement in the plea agreement set forth ernment employee as a representative. est is that of a family member or other a bribery-like scheme in which Abramoff For extreme conduct in which the of- relationship not covered by the conflicts provided a “stream of things of value” in ficial acted as a “person on the inside” laws, and cases involving extreme disloy- exchange for a “stream of official action.” and bestowed preferential treatment that alty and violation of the duty of a public Zachares pleaded guilty to conspiracy to compromised the duty to provide honest official to serve the public interest.1 commit honest services fraud. services, the honest services fraud statute This case suggests the outlines of an in- could apply instead. novative application of the honest services fraud statute to deal with a scheme that FEDERAL PROGRAM FRAUD might be described as placing a “mole” SCHEMES in a government position. Such a case Finally, the honest services fraud statue could be established even in the absence can be used in cases involving federal of a bribery-like exchange of favors for program fraud. The federal program official action if the following elements fraud statute proscribes bribery related to were established: there was an express or programs that receive federal funds when implicit understanding of future private there is no bribery of a federal public of- 37 36 See Factual Basis for the Plea of Mark Dennis ficial. In a case involving a local gov- 38 U.S. v. Genova, 333 F.3d 750 (7th Cir. Zachares at 1 (Mar. 14, 2007). 37 See 18 U.S.C. § 666. 2003).

12 Journal of Public Inquiry Earl E. Devaney

Earl E. Devaney was nominated by President Clinton on July 1, 1999 to be the seventh Inspector General for the Department of the Interior. Mr. Devaney was confirmed by the full Senate on August 3, 1999. As head of theO ffice ofI nspector General, he is responsible for overseeing the administration of a nation wide, independent program of audits, evaluations, and investigations involving the Department of the Interiors programs and operations. Since assuming his responsibilities, Mr. Devaney has transformed the Office of Inspector General into an innovative organization dedicated not only to detecting fraud, waste, and mismanagement, but also to assist the Department in identifying and implementing new and better ways of conducting business. Mr. Devaney and his team of senior managers have worked diligently toward developing strong working relationships with senior departmental managers, congressional staff and key congressmen and senators. Armed with a philosophy that blends cooperation with strong oversight and enforcement, the Office of Inspector General for the Department of the Interior has made significant advances under the leadership and vision of Mr. Devaney. Having graduated from Georgetown University’s prestigious Leadership Coaching Program, Mr. Devaney’s vision for the Hu- man Resources Committee is to cultivate and advance leadership development for the entire Inspector General community.

James P. O’Sullivan is a senior attorney in the Departmental Ethics Office of the U.S. Department of Justice. From 2005 to 2008, he served as an Associate General Counsel in the Office ofI nspector General of the U.S. Department of the Interior where he worked on public integrity investigations. He was a member of the joint audit team of the Department of Defense and Department of the Interior that received an Award for Excellence from the former PCIE in 2008. Prior to his service at the Department of the Interior, he was the Special Assistant to the Director of the Office of Government Ethics from 2002 to 2005 and was an Associate General Counsel at the Office of Government Ethics from 1992 to 2002. He is a member of the adjunct faculty of the Washington College of Law of the American University and a graduate of George- town University Law Center. Mr. O’Sullivan is admitted to practice in Maryland, the District of Columbia, and New York.

James P. O’Sullivan

Visit www.ignet.gov 13 Office of Inspector General United States Postal Service

[AUDIT] Using Risk-Based Planning to Enhance Audit Impact How to confront the bigger risks to the programs that you audit

By Gordon Milbourn and dates increase. For example, the Postal RISK-BASED PLANNING Mimi Sharkey Accountability and Enhancement Act of Historically, many OIG audit groups pri- The last few years, the U.S. Postal Service 2006 requires new work from us. Our marily focused attention on their specific Office of Inspector General focused at- challenge is to meet our mission by con- program areas, and in previous years, we tention on the type of work we do, the ducting audits that matter the most – did as well. In addition, audit groups quality of that work, and the contribu- and risk-based auditing helps us do that typically risk-assessed narrow topics or tion it makes to the Postal Service’s suc- smarter. individual audits in their planning or cess. While we have dramatically im- audit surveys. While this approach was proved in many areas and introduced a common practice, we were concerned number of innovative approaches to how “Using this risk that it did not help us identify or address we do our work, as our Inspector General deployment strategy the most critical, and in many cases glob- David C. Williams says, “We are pleased, al, issues facing the Postal Service. We but not satisfied.” allows us to position became increasingly interested in those All OIGs make decisions as to what au- our resources issues that crossed or fell between Postal dit work will address the most significant Service Vice President programmatic ar- issues facing their agency. One method to address high- eas. We also sought a way to tackle situa- is to use some form of risk assessment to risk areas more tions where the number and significance make those determinations. This article of the issues we found were greater than discusses a new approach that the Postal efficiently.” the audit resources we had organization- Service OIG has embraced that builds ally dedicated to addressing them. As a upon previous efforts and successes in RISK DEFINED result, we realized that we needed to be the audit planning process. Specifically, What do we mean by risks? Simply, we in the best possible position to know this article discusses our approach to risk- mean events or things that could keep what the totality of the Postal Service’s based planning and what we call “Risk the Postal Service from accomplishing risks are, understand how they impact Deployment” of audit resources, as well its goals and objectives. Risks can be the Postal Service, and help find ways as what the Postal Service is doing as a quantified in terms of money, such as ex- to address them more effectively. There- result of our increased emphasis on risk. cessive costs or foregone revenue. They fore, in 2007 we developed a risk-based can be articulated in terms of loss of data planning approach that examines risks A CHALLENGE TO (either to outside hackers or the crash of Postal Service-wide, which is considered OUR MISSION a system that obliterates much needed state-of-the-art in the internal auditing A key part of our mission is to help the management information), damage to profession. Postal Service improve its bottom line public goodwill or reputation, or dam- We began by doing a top-down risk and meet its universal mail delivery manage to the ethical climate of the organiza- assessment of the Postal Service. In prep- date efficiently and economically. While tion. Risks can also be foregone oppor- aration, we researched the concept of risk our mission stays the same and our re- tunities – such as not introducing a great from a number of sources, such as the In- sources are limited, the environment we new product or mission-critical system, stitute of Internal Auditors and the Cor- work in changes, while customer, stake thereby harming future revenue or mis- porate Executive Board’s Audit Director holder, and legal expectations and man- sion delivery, respectively. Roundtable. Additionally, we received

14 Journal of Public Inquiry helpful advice from the Tennessee Val- ley Authority OIG, which had also increased its focus on risk.

CATEGORIES OF RISK Leaders from our Office of Audit with input from key Postal Service executives, our Office of Investigations and numerous stakeholders, examined the issues facing the Postal Service across the full spectrum of its mission and operations. We grouped Postal Service risks into three broad categories: strategic, financial, and operational, and included aspects of risk related to compliance and information technology within the three categories.

RISK FACTORS We then identified specific risk factors under each of the three overarching categories. The next step was to determine the level of risk for each risk factor by HEAT MAP of greatest interest and concern to top assessing the likelihood of its occurrence To pictorially present our detailed risk management, Postal Service Board of and the impact if it did occur. There assessment results, we illustrated the risk Governors, and to us. Anything ranked are sophisticated quantitative methods factors overall, and individually, for each high to medium impact should be of to make these assessments; however, risk category on a “heat map” using red, particular interest to operational man- we elected, to use such factors as our orange, yellow, and green to present the agers, although it can be important to knowledge of the Postal Service, the levels of risk (see example below): both groups. views of key Postal Service officials, and • Red means a risk factor has a high Using heat maps, we were able to the results of our audits and those of the likelihood of occurrence and a high take volumes of information about each Government Accountability Office. impact if it occurs; and risk factor under the three overarching We learned continuously throughout • Orange means it is either high like- categories and reduce it to a single pic- our development process. For example, lihood and medium impact, or me- ture for each category of risk. We also we quickly realized it was not reasonable dium likelihood and high impact. constructed a summary Postal Service- or practical to plan audits to address ev- • Red or orange ratings mean that the wide heat map, shown below. It was ery risk factor every year. We therefore risks are significant and need to be then easy to see that many risk factors made decisions on what audit work to carefully managed to ensure day-to- were interrelated and certain ones stood perform based on our assessment of risk day success. out as being the most critical. for each risk factor and on how that fit • Using the same two descriptors into the “big picture” for the Postal Ser- of likelihood and impact, yellow HOW ORGANIZATIONS DEAL vice. means a risk factor is medium-me- WITH RISK We also found that we may touch dium, medium-low, low-medium, In addition to showing how specific risk on more than one risk factor during an low-high, or high-low; and factors rate, the heat maps also depict audit of any specific topic. For example, • An assessment of green means that how organizations typically deal with poorly managed relations with mailers both the likelihood and the impact risks. Risks are handled differently, might be an underlying problem found are low. based on their rating, and differ from in a work sharing audit. Generally speaking, the high likeli- one heat map quadrant to another. In At a high level, we then arrayed the hood-high impact and high likelihood- general, organizations: Postal Service’s risk factors visually for medium impact rated risk factors have • Accept risks that have a low likeli- their associated risk category in a “spider the greatest potential impact at the hood of occurrence and a minor diagram,” as shown in top right. Postal Service-wide level, and should be impact if they do;

Visit www.ignet.gov 15 • Share risks that have a low likelihood Risk Deployment allows us to regular- sessment, we briefed the Postmaster of occurrence but a high impact if ly evaluate where our resources are most General, Deputy PMG, and the Board’s they do; needed and to shift personnel or work Audit and Finance Committee regarding • Implement controls for risks that to address those needs. When situations our efforts and results. They expressed a have a high likelihood of occurrence, demand organizational flexibility, we commitment to develop a complemen- but a low impact; and reassign a few individuals, entire teams, tary instrument with interdependent • Implement mitigation techniques or entire directorates into new areas of roles. (to prevent problems) or controls (to work for a period of time, or reassign The Postal Service Chief Financial catch them) for risks that are both specific work from one directorate to an- Officer formed an Enterprise Risk Man- high likelihood and high impact. other. Risk Deployment does not mean agement Committee made up of the bureaucratic restructuring to address the Deputy PMG, Senior Vice Presidents, RISK DEPLOYMENT changing Postal Service environment. Counsel, himself, and others (including It is up to the Postal Service and the Instead, staff either volunteer to partici- the Inspector General as an adjunct, non- board to address the risks that they face; pate in Risk Deployment projects, or are voting member), to further address risks however, we can add tremendous value delegated by management based on what and institutionalize risk management in by bringing the significant ones to their is deemed best for the organization, with the Postal Service. Under the commit- attention and identifying their ramifica- consideration to personal needs. tee’s leadership, a broad-based working tions. The objective of the risk-based Using this Risk Deployment strategy group and individual Postal Service com- planning approach is to increase our allows us to position our resources to ad- ponents have begun identifying – and in value to the Postal Service by focusing dress high-risk areas more efficiently, as some cases developing – techniques to audit attention on the highest risk areas opposed to delaying critical audits when mitigate, control, or share their risks. while still completing our mandatory au- the directorate that routinely handles the dit workload. topic is already fully engaged. NEXT STEPS Our audit directorates are structured Another benefit of the Risk Deploy- We continue to use a risk-based focus with a focus on specific programmatic ment strategy is that it provides an op- and consider Risk Deployment in our areas of the Postal Service. For example, portunity to broaden individuals’ or au- annual planning process. The Office of our Delivery Directorate focuses on the dit teams’ knowledge of postal operations Audit executives and directors regularly operations of, and issues confronting, and to strengthen their auditing skills. assess the risks facing the Postal Service, the Delivery Vice President. A desig- This broader knowledge of and experi- and, recently, OA executives completed a nated structure, with specific resources ence with postal operations will lead to thorough update of last year’s top-down assigned to each directorate, lends sta- more robust audits and greater contribu- risk assessment to kick off our 2009 an- bility to our organization and helps our tions and value to the Postal Service. nual audit planning effort. O ur audit di- auditors over time, gain expertise in the rectors will use this information to plan Postal Service programs they audit. It IMPACT ON INDIVIDUAL specific audits to address what we deter- presents difficulties when we find that AUDITS mined to be the greatest risks facing the the issues confronting a specific Postal As a result of our risk-based planning Postal Service in 2009. Service program have become so signifi- initiative, our audit staff includes an In this manner, we are truly, on an cant and widespread that a single direc- increased focus on risk in their audit OA-wide basis, identifying the most im- torate cannot effectively address them. objectives. Thinking in these terms portant bodies of work that need to be In introducing a risk-based approach helps them see the big picture in their done, and then positioning ourselves to to our work, from a process standpoint audit projects and compels them to do that work without restructuring our we continued with the specific structure consider how individual projects tackle organization every year. This more ag- and programmatic focus of each director- the most significant Postal Service ile approach enhances our value to the ate. This was strongly preferred to reor- concerns. Explicitly, audit staffs Postal Service. Further, it operationally ganizing or permanently reassigning re- contemplate the bigger risks confronting places us in a future-oriented position. It sources each time bodies of needed work the program they audit, as well as how is a new and exciting direction for us to overwhelmed the available resources in a their proposed audit project addresses move in, both in the IG community and directorate. To allow us to quickly ad- those risks. in the broader world of internal audit- dress new or changing risks, however, we ing.1 moved to a proactive Risk Deployment POSTAL SERVICE INSTITUTES approach to become more agile and bet- ENTERPRISE RISK ter able to quickly address significant is- MANAGEMENT sues. After performing our top-down risk as-

16 Journal of Public Inquiry Gordon C. Milbourn

Gordon C. Milbourn III was named Assistant Inspector General for Audit of the U.S. Postal Service Office ofI nspector General in February 2005. He is responsible for all audits in the Postal Service areas of core operations, financial management, technology, and headquarters operations. His staff of approximately 350 employees — located in major offices nationwide — conducts independent audits for the largest civilian federal agency, with over $70 billion in annual revenues, a workforce of over 700,000 employees, and nearly 38,000 facilities. Milbourn began his federal civil service career in 1974 as an internal auditor with the IRS Inspection Service. He left the IRS in 1986 to work for the Naval Audit Service, and in 1987, moved to the Environmental Protection Agency, Office ofI nspector General. During his over 12 years at EPA OIG, he held positions as a Supervisory Auditor, Audit Manager, Headquarters StaffD irector, and Divisional Inspector General for Audit. In 1999, he was selected as the Assistant Inspector General for Audit (Small Business and Corporate Programs) for the Treasury Inspector General for Tax Administration, and from November 2002 to February 2005 served as TIGTA’s Acting Deputy Inspector General for Audit. Milbourn is a graduate of the University of Virginia, and attended the Defense Systems Management College. He has received numerous awards during his career, including four EPA Bronze Medals.

Mimi A. Sharkey is a Program and Policy Specialist for the Office of Audit at the U.S. Postal ServiceO ffice ofI nspector General. She reports directly to the Assistant Inspector General for Audit and serves as an authoritative resource in the area of planning, budgeting, and accountability. Her responsibilities include solving significant problems between and among programs, systems, functions, policies, and other critical issues. In 1997, Ms. Sharkey was hired by the Social Security Administration as a Presidential Management Intern (now known as the Presidential Management Fellows Program). In this capacity, she began working for SSA in their Seattle Regional Office, and then came to headquarters and worked in the Office of the Principal Deputy Commissioner, the Office of Budget, and the Of- fice of Communications. Subsequently, in December 1999, Ms. Sharkey accepted a position with the SSA OIG in their Office of Executive Operations where she worked on strategic planning efforts, public affairs issues (internal and external), media and congressional issues, semiannual reports to Congress, and wrote and reviewed speeches, articles, letters, reports, and brochures. In February 2002, Ms. Sharkey began working for the USPS OIG in Strategic Planning, and held a series of progressively more responsible positions. Ms. Sharkey has earned numerous awards and other recognition throughout her career, and has a Bachelor of Arts degree in Psychology, a Master of Arts degree in Social Work with a minor in Public Administration, and is currently a doctoral candidate at the University of Baltimore in the Doctor of Public Administration program.

Mimi A. Sharkey

Visit www.ignet.gov 17 Office of Inspector General Legal Services Corporation

[INVESTIGATIONS] How Legal Requirements May Vary Depending on the Nature of the Business Entity Being Investigated Identifying these entities will dictate what substantive laws can be applied By Thomas Coogan The President’s Council on Integrity and Efficiency and the Executive Council on Integrity and Efficiency, now Council of Inspectors General on Integrity and Ef- ficiency require all investigators to possess: “A knowledge of applicable laws, rules, and regulations, including the U.S. Con- stitution, the U.S. Criminal Code (including elements of crimes, the federal Rules of Evidence, the federal Rules of Criminal Procedure, and other pertinent statutes, such as the Privacy, Freedom of Information, and Whistleblower Protec- tion Acts.” “Quality Standards for Investigations” (December 2003), p. 3. Further, the CI- GIE states: what type of business entity is being in- what evidence needs to be gathered. “Legal Requirements—Investigations vestigated. Identifying what kind of business should be initiated, conducted, and re- entity is being investigated also will dic- ported in accordance with all applicable Introduction tate what procedural laws need to be laws, rules, and regulations; guidelines Identifying what type of business entity followed by the investigator. These pro- from the Department of Justice and oth- is being investigated will dictate what cedural rules will impose a duty on the er prosecutive authorities; and internal substantive laws can be applied to the investigator and a right on the subject of agency policies and procedures. Inves- entity and what procedural laws must be the investigation. Some procedural laws tigations should be conducted with due followed by the investigator. There are will apply only to individuals and not to respect for the rights and privacy of those many types of business entities, includ- business entities. Some laws, however, involved.” ing corporation, partnerships, and sole will provide rights to some types of busi- “Quality Standards for Investigations” proprietorships. Some substantive laws ness entities. In order to gather informa- (December 2003), p. 7. The goal of this will apply only to certain types of enti- tion appropriately, the investigator must article is to inform readers how legal re- ties. Other substantive laws might ap- identify the type of business entity that quirements vary depending on the nature pear not to apply to business entities, but is the subject of investigation in order to of the business entity being investigated, actually do apply. At the outset of an in- know what procedural laws are applica- whether corporation or partnership or vestigation the applicable substantive law ble regarding the gathering and reporting sole proprietorship, and how to identify must be identified in order to determine of information.

18 Journal of Public Inquiry There are many types of business Substantive Laws That has determined that unlike “natural entities, including corporations, part- Appear Not to Apply to persons,” corporations have no privi- nerships, and sole proprietorships. The Business Entities But Do lege against self-incrimination within most commonly mentioned business en- Some laws may appear not to apply to a the meaning of the Fifth Amendment. tity is probably the corporation. Cor- business entity but in fact do apply. For See Bellis v. United States, 417 U.S. 85 porations generally have more obliga- example, 26 U.S.C. §7206 states that (1974); United States v. Kordel, 397 U.S. tions and fewer rights than other types any “person” who falsifies tax informa- 1, 7 (1970). Corporations are also not of business entities. By far, however, the tion is guilty of a felony. On its face, entitled to notice and right to challenge most common type of business entity in the statute would seem to only apply to a subpoena issued for financial records America is not the corporation but the individuals. However, the legal defini- under the Right to Financial Privacy small, unincorporated businesses, often tion of “person” in the Internal Revenue Act. a sole proprietorship. Sole proprietor- Code, 26 U.S.C. §7701(a)(1), includes ships usually do not register with State not only individuals (i.e. “natural per- Partnerships authorities and have few if any record- sons”) but also partnerships and cor- Like corporations, the U.S. Supreme keeping requirements. Sole proprietor- porations as well as other entities. An Court has determined that partnerships ships generally have fewer obligations important step in dealing with business have no privilege against self-incrimi- and more rights than other types of entities is to understand that laws and nation within the meaning of the Fifth business entities. In addition to corpo- regulations affecting “persons” might Amendment. See Bellis v. United States, rations and sole proprietorships, there also apply to corporations and similar 417 U.S. 85 (1974); United States v. are other types of business entities such organizations that typically would not Kordel, 397 U.S. 1, 7 (1970). However, as partnerships. Partnerships generally be considered “persons.” under the Right to Financial Privacy have obligations and rights that fall be- Act, partnerships of five individuals or tween those of corporations and sole Identifying Procedural fewer are entitled to notice and a right proprietorships. Laws That Apply to to challenge a subpoena for the partner- Business Entities ship’s financial records. Identifying Substantive Identifying what kind of business entity Laws That Apply to is being investigated also will dictate Sole Proprietorships Business Entities what procedural laws need to be fol- The Supreme Court has interpreted Identifying what type of business entity lowed by the investigator. These pro- the Fifth Amendment privilege against is being investigated will dictate what cedural rules will impose a duty on the self-incrimination to include the act substantive laws can be applied to the investigator and a right on the subject of of producing business records of a sole entity. At the outset of an investigation, the investigation. proprietorship. United States v. Doe, 465 the applicable substantive law must be U.S. 605 (1984). The act of producing identified in order to determine what Laws Applying to Gathering records concedes the existence and pos- evidence needs to be gathered. Information from Business session of the records called for by the Entities subpoena as well as the respondent’s be- Substantive Laws That Apply Investigators need to be able to identify lief that such records are those described to Only Certain Types of the type of business entities involved in the subpoena. Entities in the inquiry to determine if various Some substantive laws apply only to laws, such as the Right to Financial Pri- Laws Applying to certain types of entities. Corporations vacy Act or Fifth Amendment, apply to Disclosing Information will be subject to laws covering corpo- their inquiry. The type of entity, and from Business Entities rations; partnerships will be subject to other identifying characteristics, such as The type of entity, such as corporation, laws covering partnerships, etc. In ad- the number of partners, will determine partnership, or sole proprietorship, will dition, some laws will not apply to busi- what procedures need to be followed in determine what procedures need to be ness entities unless they employ a cer- gathering information. followed in disclosing information. tain number of employees. Some laws Determinations on disclosing infor- enforced by the Equal Employment Corporations mation obtained during a government Opportunity Commission will be ap- It can be easy to obtain information investigation will be subject to various plicable only if the entity employs 15 or from a corporation, regardless of its size, information laws, including FOIA, 5 more individuals. whether it is public or private, for-profit U.S.C. §552, and the Privacy Act, 5 on nonprofit. The U.S. Supreme Court U.S.C. §552a. FOIA generally encour-

Visit www.ignet.gov 19 ages disclosure unless there is an exemp- Corporations ability companies to limit their liabil- tion, including an exemption for person- Corporations are created by state law. ity for their professional services. These al privacy protection. That protection, One of their main purposes is to encour- states may allow such professionals to however, cannot be invoked to protect age investors to become shareholders in form “professional” limited liability com- the interests of a corporation or associa- a business in order to provide capital panies, which enable members to limit tion. See, e.g., Sims v. CIA, 642 F.2d 562, investment and earn a return on their their liability for company business, such 572 n.47 (D.C. Cir. 1980); National investment without being liable for any- as contracts with vendors, but not for Parks & Conservation Ass’n v. Kleppe, 547 thing beyond their personal investment the member’s professional services, such F.2d 673, 685 n.44 (D.C. Cir. 1976). in the company. Because they are cre- as advice to clients. A professional lim- According to the DoJ, however, informa- ated by law, they can be, and are more ited liability company, abbreviated PLC, tion about a closely-held corporation or closely regulated than other business should otherwise operate the same as a small business when the individual and entities that can be created without any limited liability company. corporation are identical could be with- particular legal authority, such as a sole held from disclosure. Providence Journal proprietorship or general partnership. Designations Signifying Co. v. FBI, 460 F. Supp. 778, 785 (D.R.I. While there are various types of corpora- Whether an Entity Is 1978), rev’d on other grounds, 602 F.2d tions, including Subchapter C and Sub- Incorporated 1010 (1st Cir. 1979), cert. denied, 444 chapter S (the former paying corporate State law will require corporations U.S. 1071 (1980). See also National tax, the latter passing tax liability to the to use certain designations to signify Parks, supra, 547 F.2d at 686; cf. Zeller v. shareholders), and for-profit and -non that they are incorporated. Delaware, United States , 467 F. Supp. 487, 496-99 profit corporations, they all will file with a state well-known for being friendly (E.D.N.Y. 1979). their State to be incorporated. State fil- to corporations and, therefore, a ing agencies will be a valuable source of ThePrivacy Act, 5 U.S.C. §552a, pro- information. In addition, corporations tects the rights of individuals. Corpora- will be required to maintain certain re- tions and organizations clearly do not cords, including articles of incorpora- have any Privacy Act rights. Guidelines tion, by-laws, and minutes of meetings. from the Office of Management and Finally, as with any other business, cor- Budget, responsible for administering porations will maintain financial records the Privacy Act, also suggest that an in- to account for their business and to file dividual has no Privacy Act rights when tax returns. the records of that person pertain to him Professional corporations are a special solely in his “entrepreneurial” capacity. type of corporate entity used by certain Some courts, however, do not agree and professionals, such as physicians, ac- have applied the Privacy Act to such re- countants, and attorneys. cords. Limited Liability Companies Basic Types of Business Limited liability companies are not cor- Entities and Their porations; however, like corporations Characteristics they are intended to shield investors There are a variety of business entities. from personal liability for the acts of the The most common, however, are corpo- business. They are designated by ab- rations, partnerships, and sole propri- breviations such as LLC, LC, and Ltd. etorships. Co. Limited liability companies, like Publicly traded corporations will have corporations, will typically have filing a wealth of publicly available informa- requirements with their State. Their re- tion. A publicly-traded corporation is cordkeeping requirements may not be as one that has its stock traded. Private cor- formal. For example, rather than articles porations, also known as close or closely of incorporation and by-laws there could held corporations, do not publicly trade be a membership agreement. Tax liabil- stock and information about these non- ity is supposed to pass to the members. public companies will also be more dif- Some states prohibit certain profes- ficult to track down than for public cor- sionals, such as physicians, accountants, porations. and attorneys, from forming limited li-

20 Journal of Public Inquiry home to many of them, has a long necticut. §33-655 General Statutes states “Company” or “Co.” will list of designations that can be used: of Connecticut. TheD istrict of Co- be a designation for a corporation; “association,” “company,” “corpora- lumbia, home to most federal agen- however, some states that allow the tion,” “club,” “foundation,” “fund,” cies, has perhaps the most simple use of “Company” prohibit the use “incorporated,” “institute,” “soci- and straightforward requirement of “and Company”, “and Co.”, “& ety,” “union,” “syndicate,” or “lim- for required designations: “corpo- Company” or “& Co.” and those ited,” (or abbreviations thereof, with ration,” “company,” “incorporated,” designations are used by unincorpo- or without punctuation), or words or “limited,” or shall contain an ab- rated entities, such as partnerships. (or abbreviations thereof, with or breviation of 1 of such words. § 29- See, e.g., §273.177 Kentucky Re- without punctuation) of like import 101.08 District of Columbia Code. vised Statutes if the word “company” of foreign countries or jurisdictions When the above words are seen, or or the abbreviation “Co.”; but if the (provided they are written in Ro- related abbreviations such as “Inc.,” word “company” or the abbreviation man characters or letters). Title 8, “Corp.,” “Co.,” “Ltd.,” and others, “Co.” is used, it may not be immedi- §102, Delaware Code. One of those the investigator can be fairly sure ately preceded by the word “and” or words or abbreviations used for cor- that the business entity is incorpo- the abbreviation “&.” porations in foreign corporations rated. In some states individuals and presumably could be “Societa per Not every business entity that partnerships may register a fictitious Azioni” or the abbreviation “S.p.A.” looks like a corporation is a corpora- name with the word “Company” in used by Italian corporations and ex- tion, and some designations can be it. Designations therefore can be pressly allowed by the State of Con- misleading. For example, in most helpful but not necessarily accurate in helping to identify the type of entity being investigated.

Partnerships Unlike corporations that are created by statutory law, partnerships typically are not governed by statutes, but by common law and practice applied and interpreted by courts when legal questions arise. Typical business partnerships, sometimes called general partnerships, are formed when two or more persons join together for a common business purpose. Ordinarily there is no filing requirement, although some states will allow partnerships to file. The partnership, like other business entities, also will ordinarily need to register for tax purposes. The partnership is usually formed when the partners sign a written partnership agreement. Unlike shareholders whose liability is limited, general partners are “wholly and severally” liable unless the agreement says something else. That means if one partner creates a liability for the partnership, every partner is liable for the whole amount, not just their individual proportional share.

Visit www.ignet.gov 21 Limited Partnerships uses a fictitious business name instead of present detailed information on U.S. Some partnerships allow for limited li- the same of the sole proprietor, it may and international insurance compa- ability for some partners and unlimited not be entitled to all of the same legal nies.) liability for others. These are known as protections that the individual would be • Directory of Companies Filing An- “limited partnerships” abbreviated “L.P.” entitled to receive. nual Reports with the Securities and There also can be partnerships where all Exchange Commission Under the partners are liable for the partnership ex- Information to Identify Securities Exchange Act of 1934 cept for professional services rendered by Corporations (Published by Government Printing a partner. These entities are known as Corporations are required to register Office, this directory lists companies “limited liability partnerships” abbrevi- with their State of incorporation. States that sell stock on the national ex- ated “L.L.P.” will maintain information about corpo- changes or over the counter and that rations and some states will have infor- file annual reports with SEC.) Sole Proprietorships mation available online. For example, • Directory of Corporate Affiliations— By far, however, the most common type Pennsylvania corporations can be re- Who Owns Whom (Annual direc- of business entity in America is not the searched at http://www.corporations. tory provides information on almost corporation but the small, unincorporat- state.pa.us/corp/soskb/csearch.asp. Lo- 150,000 public and private parent, ed businesses, often a sole proprietorship. cal business journals contain corporate subsidiary, and associate companies Sole proprietorships hold themselves information. For publicly traded corpo- in the United States and overseas.) out as businesses but mostly operate be- rations, information is publicly available • Dun & Bradstreet’s Million Dollar cause of the efforts of one person. These online from “EDGAR,” the SEC Filings Directory (Annual Dun & Brad- “mom-and-pop” operations account for & Forms database at http://www.sec.gov/ street directory contains information up to 70 percent of all business activity. edgar.shtml. All publicly traded compa- on over 20,000 public and 140,000 Sole proprietorships usually do not regis- nies, foreign and domestic, are required private utilities, transportation com- ter with State authorities and have few if to file registration statements, periodic panies, banks, trust companies, mu- any recordkeeping requirements. reports, and other forms electronically tual and stock insurance companies, A sole proprietorship will be run through EDGAR. Anyone can access wholesalers, and retailers, including by one person, sometimes with the help and download this information for free. corporate officers, locations, phone of family members or close associates. EDGAR will contain extensive informa- numbers, type of business, and num- States typically will not require any filing, tion about the corporation, including the ber of employees.) except perhaps to register for paying sales names of Board members and corporate • Financial Yellow Book (Directory tax. Sole proprietorships are popular be- officers. Some corporate tax return is lists over 41,000 top executives at cause there are no start-up requirements, publicly available. For example, Forms leading financial institutions from no documentation, and no costs, such as 990, which are filed with the Internal chief executives to subject-area offi- legal fees. Because unlike corporations Revenue Service by non-profit corpora- cers and over 8,500 board members sole proprietorships are not created by tions and other entities, are available on- and their affiliations.) statute, state agencies will typically not line through Guidestar, a privately fund- • Foreign Representatives in the U.S. have much if any information. That will ed database of nonprofit organizations at Yellow Book (Directory includes of- require the investigator to obtain in http://www.guidestar.org/. ficials’ titles, addresses, and telephone formation from the sole proprietorship. The Government AccountabilityO f- and fax numbers for personnel who It is not unusual for a sole propri- fice’s “Investigators’ Guide to Sources of represent foreign corporations in the etorship to do business under a name Information” (GAO/OSI-97-2) at http:// United States.) other than the same of the sole propri- www.gao.gov/archive/1997/os97002. • Moody’s International Manual etor. For example, Mary Smith, a sole pdf lists the following additional sources (Manual contains background and practitioner accountant, might do busi- of information about corporations: financial information on over 3,000 ness as “ABC Accounting,” a “fictitious” • America’s Corporate Families (An- foreign firms.) business name, and her business records nual Dun & Bradstreet directory • Moody’s Investors Services (Moody’s might identify the sole proprietorship as listing approximately 11,000 parent broad business-sector manuals cover “Mary Smith d/b/a ABC Accounting.” companies and over 79,000 subsid- companies whose stock is traded on (In some jurisdictions they will use “trad- iary companies and divisions owned stock exchanges and contains history ing as” or “t/a” instead of “doing business by the parent companies) and background; names and titles of as” or d/b/a.) Some States will require • Best Insurance Reports (Annual edi- officers and directors; location of that the fictitious business name be reg- tions of the Best Insurance Reports plants and properties; the headquar- istered. In addition, when a business [Life-Health and Property-Casualty] ters phone number and address; and

22 Journal of Public Inquiry financial statements.) not be so straightforward. Partnerships There are many types of business • Predicasts Funk and Scott Index, and sole proprietorships typically are entities, including corporations, partner- United States (Directory indexes ar- not required to register with the state or ships, and sole proprietorships. Corpo- ticles on products, companies, and federal government. Unless they do for rations generally have more obligations industries that appear in most busi- some reason, such as registering under a and fewer rights than other types of ness periodicals and newspapers.) fictitious name, public agencies will not business entities. In contrast, sole pro- • Standard & Poor’s Corporation maintain information about partnerships prietorships generally have fewer obliga- Records (Directory cover over or sole proprietorships. In the absence of tions and more rights than other types 12,000 publicly traded companies official information that identifies a busi- of business entities. Partnerships gener- and 34,000 subsidiaries, affiliates, ness entity, investigators should consult ally have obligations and rights that fall and privately held firms, including with legal counsel to ensure that proper between those of corporations and sole company’s brief history, financial substantive and procedural laws are iden- proprietorships. Investigators must un- statements, capital structure, lines tified. Because partnerships and sole derstand what type of business entity of business, subsidiaries, and offi- proprietorships will have certain rights is being investigated because different cers and directors. Information on not afforded to corporations, investiga- substantive and procedural laws will ap- 70,000 executives is also available.) tors should not assume that an entity is ply to different entities. Obtaining in- • Standard & Poor’s Register of Cor- a corporation. formation to identify corporations will porations, Directors and Executives be easier than for partnerships and sole (Annual directory lists about 56,000 Conclusion proprietorships. When doing investiga- public and private companies and Identifying what type of business entity tions of this type, knowing more about the names and titles of over 400,000 is being investigated will dictate what the nature of the business is essential to officials.) substantive laws can be applied to the the investigator’s success.1 entity and what procedural laws must Information to Identify be followed by the investigator. At the Partnerships and Sole outset of an investigation the applicable Proprietorships substantive law must be identified in or- Finding out about partnerships and sole der to determine what evidence needs to proprietorships, however, will ordinarily be gathered.

Thomas Coogan is the Assistant Inspector General for Investigations at the Legal Services Corporation Office ofI nspector Gen- eral, which, unlike most other OIGs, not only investigates fraud but also has specific statutory authority to investigate regulatory compliance. He came to LSC after retiring from the Postal Service OIG where he served in various executive capacities, including Deputy Inspector General and General Counsel and was Chair of the Council of Counsels to the Inspectors General. He also worked at the FDIC, USDA, DOJ and the Secret Service. Mr. Coogan is also a faculty member and program coordinator of the Master’s degree program in forensic studies at Stevenson University in Maryland, a fully-accredited graduate program in forensic accounting, computer forensics, investigations and law that is offered on campus as well as on-line. H e is an appointed member of the Higher Education Committee for the Association of Certified Fraud Examiners and past contributor to the Journal of Public Inquiry. He has received many honors, including awards from the President’s and Executive Councils on Integrity and Efficiency.M r. Coogan received a Bachelor’s degree from Hamilton College, a Master’s degree in forensic science from Antioch College, a law degree from the Antioch School of Law, and has been admitted to practice law in New Hampshire, where he served as a federal judicial law clerk; Maryland, where he worked in private practice; and the District of Columbia. Thomas Coogan

Visit www.ignet.gov 23 Office of Inspector General Department of Commerce

[INVESTIGATIONS] White Paper Tape Recording Interviews In my survey, of the relatively few in law enforcement who opposed the idea of tape recording interviews, the arguments were remarkably consistent and one-dimensional

By Daniel Coney This white paper discusses tape-recording law enforcement related interviews, and identifies the positive and negative aspects of the practice. In researching this paper, I surveyed law enforcement officers and agents, primarily drawn from the ranks of the Rocky Mountain Inspec- tors General Council, prosecutors and judges. I also discussed this topic with Federal Law Enforcement Training Cen- ter legal staff, and researched professional writings. In presenting assessments of both sides of the issue in this paper, I hope to open a constructive dialogue resulting in improved understanding of the practices OIG law enforcement employs, and whether changes to those practices are necessary.

The Drivers for Change pointed out, “Now, often, the defense part due to the parade of law enforce- The changing face of law enforcement has only to raise the specter of the possi- ment officers who have been indicted must result in professional law enforce- bility that inappropriate steps were taken for their own crimes and the rampant ment agencies adapting to technology within the “communication event”. One corruption of the past in some depart- changes, as well as changes in the po- Special Agent in Charge related how his ments. Just recently, Federal Bureau of litical and social climate we operate in. agency went to tape recording interviews Investigation agent John Connally was Today, federal law enforcement needs to following a case where the jury refused convicted of helping the Boston mafia implement a flexible and realistic policy to believe a confession because the per- arrange hits, while two OIG agents from of capturing the results of our interviews ception was law enforcement was hiding the U.S. Department of Health & Hu- in a more effective way. something by not taping the interview. man Services were indicted for separate The dynamics of today’s legal practice The key driver for change is the fact fraud schemes. In recent years, some 18 in defense of criminal or civil defendants that law enforcement is not held in high Federal Air Marshals have been charged is all too familiar to those who have been esteem, and the agent’s testimony bears with felonies. The Giglio and Henthorn in court over the last decade. Given the no greater influence or credibility than court decisions reflect the court’s dis- stringent requirements to obtain a fed- any other witness, and sometimes less. pleasure with law enforcement ethics eral indictment, defense attorneys have The public and the courts both seem to and their attempt to be sure such ethi- resorted to an intentional practice of believe agents have a stake in the out- cal concerns are known by defense. The putting witnesses on trial rather than come of the proceedings – a belief per- FBI laboratory failures still linger in the confronting the facts of the case. OIG haps founded since some agencies rate public memory, and routine news sto- agents are routinely castigated in court performance and grant awards based on ries about DNA freeing another wrongly and administrative proceedings, their the outcomes of those proceedings. The convicted person are abound. intentions painted as corrupt. Well- respect and presumption of truthfulness In this environment, we have seen known interviewing expert Don Rabon once enjoyed by law enforcement simply more and more courts and prosecutors does not exist in the culture anymore, in preferring evidence that does not rely on

24 Journal of Public Inquiry the testimony of law enforcement of- Historical Argument about 65 percent of their interviews last ficers. Because of cost restraints, deci- In my survey, of the relatively few in year, representing 450 to 500 interviews, sions on which cases to pursue are based law enforcement who opposed the idea and only had one lawyer refuse to con- in part on the level of litigation the pros- of tape recording interviews, the argu- sent. Other SACs who regularly record ecutor will face, particularly suppression ments were remarkably consistent and interviews reported no problems stem- hearings where witness or defendant one-dimensional. Essentially, the best ming from refusals to consent, thus, it statements are at issue. Effective law en- argument presented was one of history appears this is not a material problem. forcement is not simply about proving – an “if it ain’t broke don’t fix it” con- Where someone does not consent to a facts; sophisticated agents actively seek cept in which the overriding theme is recording, the interview can still take to eliminate or at least mitigate possible that over the many years they have done place, memorializing the fact that a re- defenses before ever bringing the case to investigations and secured convictions, cording opportunity was offered which prosecution. they had never needed to use record- the interviewee declined, which still has When it comes to interviewing, ings. the effect of protecting the appearance instead of asking the question, “Why This is an obviously flawed argument. of propriety before a jury. should we tape?”, the better question While the past informs the present and is, “Why aren’t we taping?” Are there is the basis for setting precedent, it Integrity and Ethics legitimate grounds for not taping inter- should not make us so inflexible that we By necessity, law enforcement as a pro- views, or in only taping in limited cir- do not take advantage of new and better fession, and individually as officers and cumstances? If our interest is to serve ways to accomplish the mission before agents, must be one in which we are the public, why would we not want to us. Such an emotional response appeals above reproach. Even the appearance be as transparent and up-front about to our sense of tradition more than any- of impropriety or underhandedness re- our practices as possible? If our inter- thing else, but holds little logic. flects poorly on all of us. The fact that est is conveying the facts as truthfully as we are not recording interviews fuels possible, why would we not resort to the Restricting the Ability to conspiracy theories and fears of a public best evidence we could possibly obtain? “Get the Interview” that often worries about such things as If our interest is in protecting the rights One argument is that having a tape re- “big brother” and an over-reaching gov- of citizens, why aren’t we bending over cording device in the room puts people ernment. backwards to insure what they say is not on the defensive, and more likely to re- There is nothing we do in our in- taken out of context? fuse an interview. I have found no em- terviews that should not be open to the I would submit that while there is pirical studies on this topic, but my per- utmost public scrutiny. After all, we are historically no precedent for tape record- sonal experience using a tape recorder usually talking about depriving a citizen ing, and thus a resistance from some in has found no resistance at all, particu- of their liberty, seizing their assets and law enforcement to something “new”, larly when it is explained in the context other serious intrusions. We are not the the reason why this has been so is two- that the recording is intended to protect KGB, nor the Gestapo – we proudly fold: in the past, the technology was not them from misquoting their statements. bear the banner of public servant. As acceptable and the costs for an adequate In fact, it is apparent the interviewee such, establishing and following a policy ability to record were infeasible. Since forgets entirely about the tape recorder of routinely recording interviews of sus- those two questions were answered in as the interview progresses. It also al- pects and key witnesses puts us under the negative, there was never a need to lows a more natural “conversation” to the microscope as much as the person ask further questions. take place, with an agent not necessarily interviewed. It equals the scales so to However, today’s technology and cost having to take furious notes to capture speak, and it disables defense attorneys feasibility is well within any agency’s everything said in an interview. from being able to make inane argu- reach. Furthermore, the culture and ac- An appropriate parallel is the Miranda ments that impugn the integrity of the countability of the times we live man- decision in 1966. In the immediate af- agents. At the same time, it installs an dates we progress to a point where we termath, law enforcement as a whole pre- element of professionalism and self-po- at least ask the more in-depth questions dicted widespread impacts on interview licing. The dashboard cameras in patrol about why we do not take advantage of success that never materialized. Profes- cars have been a boon to demonstrate the cost effective technology that now sional law enforcement officers adapted how professional an officer acted, or exists. This article is intended to do just quite well and today few would argue in cases when an officer abused his -au that – to look at fourteen of the most that Miranda amounts to much more thority, it had the effect of being able to common arguments or concerns about than a slight bump in the road. One weed out those officers. While embar- tape recording interviews. SAC commented that his OIG recorded rassing for the department, it is much

Visit www.ignet.gov 25 better to remove from service those who them. Every reasonable effort cannot handle their position. should be employed to make the facts speak for themselves Operational Security – and tape recordings do that A concern for law enforcement involves in a literal way. revealing techniques or strategies employed by a professional investigator. I H ighlighting would suggest it is rather the plan for Mistakes implementing law enforcement tactics in Another issue concerns a any given situation that is critical, not the myriad of problems that fall elements of the tactics themselves, which generally under a fear that are more “like plays in professional foot- memorializing the encounter ball – everyone pretty much has access to on tape captures mistakes that the same game plans and plays. It isn’t could affect the case. It may so much who has the most plays as who be that it captures the flaws of can best execute the plays that they all an inexperienced or inept in- have.” terviewer. It may capture pro- This is really the point of public dis- cedural mistakes or faux pas’ trust in law enforcement, and therefore involving speech that is unbe- jury bias, is we by nature are very secre- coming. Of those surveyed, tive of what we do and how we do it. the overwhelming majority We cannot expect jurors to trust our tes- cited the fact that an agent timony if they do not understand how knowing an interview was we go about obtaining confessions any going to be recorded resulted more than we can expect them to trust in more thorough and profes- physical evidence if they don’t under- sional interviews. One SAC stand how it was collected at a scene. stated it has “made my agents That presupposes first that your agents Some people point to particular tactics better interviewers – no one wants to go will make mistakes, and second that we the public may see as distasteful, such as into an interview unprepared, and then don’t want those mistakes exposed. This excessive use of profanity when dealing sound foolish on the tape. An agent will is fundamentally unethical, and from with certain segments of society. This only do that once.” Watergate to Martha Stewart, is the basis perhaps is an issue for certain agencies Interviewing is one of the integral com- from which worse lapses in judgment oc- in some contexts, but for the vast major- ponents of the job, and enhancing that cur. Where we make mistakes, we ought ity of the OIG community, there is no skill is possible through using mistakes to own up to them, regardless of the con- excuse for the unprofessionalism of pro- made, as well as very good techniques, sequences. We must not also assume that fane, abusive or out-of-control speech. to train others to avoid future mistakes. all mistakes are fatal; judges and juries do The public can see such speech as intimi- Furthermore, from a supervisory stand- not expect human beings to be perfect, dating and coercive because it is, and we point, SACs are able to much more effec- and minor lapses should not be expected should not be lowering our standards to tively monitor individual agent perfor- to result in exclusion of the statement. allow such conduct. If we cannot sup- mance and deal with allegations if they Training & Policy Needs port a practice when exposed to the light can review the interview. Presently, it is of day, then it should not be a practice rare for a SAC to actually see an agent “in Headquarters management and field in our repertoire at all, despite results we action” and be able to judge performance managers must have realistic expecta- may sometimes achieve. The means and based on what an agent does rather than tions about the learning curves and the ends must both be pure in American law the status quo, which is judge an agent time it will take for agents to comfortably enforcement. Law enforcement needs to based on the ability of a prosecutor to re- integrate this practice into their routine. realize their customer is really the jury, solve a case appropriately. There are some differences interviewing whether that be an actual jury, a decision Yet another issue that is more funda- on tape, such as setting protocols for pre- making judge, a tribunal or administra- mental to this argument is the ethical ba- ambles on tapes, what to do if you have tive board that makes final decisions. sis for why we would not want a mistake to stop a tape mid-way through an in- We need to be accountable and trans- exposed in the first place. The underly- terview, how much talk occurs before or parent to our customer so they can be ing assumption is we don’t want to have after a recording is turned on, or intro- comfortable with the facts presented to a recording in case there are mistakes. ducing documents during an interview.

26 Journal of Public Inquiry There needs to be training provided for agent can have discretion to continue transcribing tapes - they need to focus these kinds of procedural issues, and the the interview without the tape, but the on keeping an investigation moving. agent needs to be completely aware of tape up to that point has captured the There is also the issue of authenticat- the technical functioning of the record- declination by the interviewee and the ing a transcript by the same person doing device they are using. interview report should articulate such ing the interview. One of the benefits One SAC said some otherwise com- a rejection. Secondarily, the agent may of using a transcription service is the in- petent agents “freeze” when they record ask for verbal consent to record the independent third party verification and the interview – much like a “stage fright” terview before turning on the recorder, authentication of what is on the tape. kind of reaction. This is a training need then upon turning the recorder on, Transcription services are cost-effective, that all the people I spoke with said was make a preamble including a statement though they can be costly, which is why overcome by becoming comfortable such as, “John Doe has consented to the one SAC pointed out there needs to be with doing interviews with a recorder recording of this interview, is that right discretion first on when to record an on, even if such recordings are in mock Mr. Doe?” The elicited response then interview, and second, on which inter- interviews. The feedback they get from captures the consent on tape. views need to be transcribed. A second- seeing or hearing themselves on tape ary issue involves confidentiality and se- will make them better interviewers. Accuracy & Completeness curity clearance needs for the contracted There also needs to be a protocol One of the major benefits cited by re- transcription service, as well as securing for how one saves the recording for evi- spondents to the survey was the im- any email transactions of digital voice dentiary purposes, and as the technol- proved accuracy and completeness files. ogy progresses, agencies need to keep of their reports. The more complex a My personal practice has been to use abreast of what is on the horizon for case, the more help recording seems to the interview tapes to prepare a compre- electronic recording, such as authenti- be, particularly when you have initial hensive summary statement in the form cation of digital recordings to defeat any complaints or qui-tam complainant in- of an interview report. I place in the defense claim of tampering. Another terviews of subject matter experts who body of the report a statement that the issue at the forefront is designing and will use technical jargon and mention interview was recorded and the record- equipping interview rooms wired for names, events, dates, and places that the ing is available in evidence. I provide audio and video, which aids in the qual- investigator is unfamiliar with. As the a copy of the recorded interview to the ity of both forms of recordings. investigation progresses and the agent prosecutor, but I never seek to produce understands the issues and acronyms a transcript since transcripts are useful Consent or Notice better, having the ability to go back more at trial than for investigations. In One important consideration is wheth- to a tape and listen again has aided a my view, if a transcript is needed, this er to seek consent before recording. more timely completion of investiga- should be a litigation expense bore by FLETC advised there is no legal require- tive steps. This is particularly useful in the prosecutive authority rather than ment to obtain consent to record an procurement, health care, and scien- the investigative agency. interview or give notice that a law en- tific or engineering related cases where forcement officer is taping an interview, there are many technical issues. Some Liability Insurance barring some union requirements. agencies merely do a brief cover memo “One of the biggest issues faced by law Another complication for consid- to a transcript, in which case they cite enforcement officials – and the reason eration is whether to obtain consent the timesavings involved over typing an an increasing number of agencies are re- before or after activating a recording interview report, while other agencies cording interrogations in their entirety device. It is obviously much better to cite extra time given to agents for report – relates to allegations that mistreat- have as part of the recorded conversa- completion results in a much better and ment of a suspect by officers resulted tion the notices and explanations given more thorough product, but not neces- in a coerced confession. A recently as to the interviewee on tape. There are at sarily a timesaving. October 2006, a United States District least two solutions. The first possibil- Court awarded $9 million in damages to ity is to not ask for consent, but rather Transcription Alejandro Dominguez, who spent four simply give notice that a recording is A major issue that has both pros and years in prison for a crime he did not taking place. This practice is consis- cons involves the time and cost of commit.” In the litigious society we all tent with federal law, and helps elimi- transcription. One SAC, laboring this know we live in, it has reached a point nate interviewee resistance by not giv- point, said headquarters must not ex- where it is necessary to defend ourselves ing them an opportunity to say no to pect agents to transcribe tapes unless against claims of wrongdoing, and to do a consent. If the person does not wish they want a case to come to a screeching so proactively. Tape recording the infor the interview to be taped, then the halt. Agents are not equipped to handle terview process is the most reasonable

Visit www.ignet.gov 27 and efficient method of providing what Over-reliance on interviews is that recording will reduce amounts to low-cost liability insurance Technical Equipment the time and expense involved with liti- for both the agent and agency. Such not One of the more practical considerations gation, and yield more plea bargains. only protects from monetary damages, in tape recording interviews involves reli- One very successful prosecutor had but also serves to, little by little, begin ance on a tape recording that fails. This a very different opinion, saying tape re- to build trust back in the public’s mind perhaps illustrates two problems – one cording will likely not reduce pleading concerning police conduct. being mechanical failure, the other being practice at all. First, even if we have a cli- the agent relying too heavily on techni- ent “dead to rights” in a taped interview, Technical Competence of cal equipment. One agent related an defense counsel will still move to suppress The Public experience in which a confession was it because that is their job. The existence Another issue mentioned as weighing in gained, but when the tape recording was of solid evidence against a defendant says on the issue of juries is the fact that the played, the critical point of the confes- nothing about how vigorously defense vast majority of the public has become sion was missing. Defense counsel was counsel will fight to exclude it. Further- technologically savvy. As such, they are able to make hay with this at first, but more, tape recordings are Jencks and/or more skeptical of law enforcement’s re- fortunately, the agents had two backups. Brady material that must be turned over sistance to using the technology. Juries Both agents had taken written notes con- to defense counsel. In many long-term, want to make judgments of guilt or in- temporaneously with the interview and complicated cases, an interview of a wit- nocence themselves, and they want to the confession was in both sets of notes, ness might look very different in year one hear straight from the defendant’s mouth and they were using an interview room of an investigation than in year three or to make that judgment. Our job is to with a video recording. Though the five. Early statements may include erro- service that need by providing a product video recording did not have sound, it neous assumptions and a lack of a fully our customer can confidently use. showed that during the critical moment, developed understanding of the fraud the tape had to be flipped over. Today, scheme. Clearly, these are explainable Over-reliance on Written digital recording devices that fit in the differences, but that is the point – a de- Statements palm of your hand are available at low fense attorney will take any difference Obtaining written statements can be a cost, and have recording capacities of and try to raise doubt in a jury’s mind. tricky business. If the defendant writes over 8 hours without having to switch a The preference from a prosecutor’s point his own confession, which is preferred, tape. The lessons learned here are: agent of view is to only have to deal with tes- it is human nature to minimize the notes are still helpful, perhaps even nec- timony at trial. The prosecutor also said criminal conduct. It is common that a essary; redundant systems are a good idea videotape is the better taping method, person will make valid and even strong on important interviews; pictures (video) because body language communicates so admissions during the course of a verbal are better than mere audio; and agents much and demeanor can be interpreted interview, but when reduced to writing, are still going to have to testify about and by a jury in a video, where it cannot in amount to nothing more than excuses. I justify their procedures to a skeptical au- an audio tape. have actually had a subject write himself dience. entirely out of a confession after verbally CONCLUSION making admissions. On the other hand, Litigation Risk Overall, the evidence in support of tape if the agent writes the confession, the in- Some of the most time-consuming liti- recording interviews is clear and con- variable defense claim is we put words in gation work has to do with procedural vincing. The concerns voiced primarily the defendant’s mouth, or he felt coerced rather than factual issues. Suppression in the area of litigation risk are the most into signing words not his own – the hearings are all about excluding facts troublesome aspects militating against claims are endless. because of what is typically a procedural recording, and should lead us toward a Furthermore, most OIG’s have re- error, mistake, or intentional act on the robust policy that tries as much as pos- quirements for employees to cooperate in part of law enforcement. Central to this sible to account for these concerns. For investigations. Such cooperation clearly proposition is law enforcement’s proce- instance, though it may be helpful to would include answering questions in an dures with respect to interviewing wit- have a tape recording of witness inter- interview, but it is quite possible a claim nesses and suspects, and how the results views early in a complicated case, the could be made that an employee has of those interviews are memorialized. fact that conflicts between those record- met his or her obligation to cooperate Interestingly, this is the area that perhaps ings and later statements may cause by submitting to an interview, but not has the greatest contrast between the more harm than good when we reach the in providing a written statement. Tape- views expressed by survey respondents. litigation phase perhaps ought to point recording interviews precludes any such The conventional wisdom expressed us to a general policy against recording contingencies. among those in favor of tape recording interviews of witnesses early in an in-

28 Journal of Public Inquiry vestigation. Presently, it is common to increase some facets of litigation, this 2001 that he would consider making this make serial requests for information and likely will be a function first of the novel- change , and slowly the prohibition is be- continue to ask questions of these kinds ty of the practice. The more routine and ing lifted. of witnesses as our understanding of the accepted the practice becomes, the fewer Finally, in 2003, the State of Illinois case develops and there is no reason that issues will arise with it, so long as there is passed legislation requiring law enforce- cannot continue. a consistent policy and adherence to the ment at the state and local levels to re- At the end of the day, we must ask policy about how to appropriately con- cord all subject interviews in homicide ourselves two questions: Who is/are our duct taped interviews. Secondly, though cases. Maine and New Mexico have fol- customer(s), and what is the best prod- the initial foray into this area will pro- lowed suit. President Barack Obama was uct we can provide? Ultimately, juries or duce lessons learned, the benefit in the a junior state senator in Illinois at the administrative boards are the end user of professionalism of law enforcement and time, and was the driving force behind the product we produce, but in between responding to cultural demands needed the bill. Though “prosecutors resisted there are a host of others we have to be to be successful will produce greater divi- it, he argued persuasively that it would responsive to as well. Based on recent dends than refusing to adapt. Just like ensure convictions in the large majority jury responses, court decisions, and in- the worries associated with Miranda in of cases.” It is safe to assume this could put from prosecutors and judges, there the 60’s, this new challenge we will look be an issue we must face in the imme- can be no dispute that tape recording in- back on in a few years and wonder what diate future. Rather than be compelled terviews goes a long way toward provid- we were so worried about. While there by law or executive order, why not do ing the best product we can. is a transitional process that will involve what is right in the first place? This is Additionally, we are to serve the pub- a learning curve, if we are serious about an idea where its time, like it or not, has lic interest and do so in the most eco- serving the public and being successful, come.1 nomical way we can. Investigations can we must adapt to the changing environ- be costly affairs. Because a tape record- ment or find that we are producing but- ing tends to make a case more airtight if tons when the demand is for zippers. done right, it provides better assurance U.S. Attorney’s Offices across the of a return on investment – that return country are being responsive to the being enhancement of public safety, pro- courts, who more and more demand the tection of taxpayer money, making our accountability of taped interviews. Even programs whole, and carrying out the the FBI has recently decided to change mission that we have been charged with. course and start allowing the taping of It is my judgment that though the their agent’s interviews. Director Muel- practice of tape recording may actually ler said in his confirmation hearings in

Daniel H. Coney has served in the law enforcement profession for nearly 25 years, including as a police officer and a Special Agent. He works in the Denver office of theO ffice of theI nspector General for the U.S. Department of Commerce. His experience has been primarily in financial fraud investigations in the health care, contracting, grant, and non-profit arenas, netting nearly 100 indictments and $65 million in monetary recoveries over the past 15 years. Dan has continually held certifications as a Certified Fraud Examiner and Certified Financial Investigator since 1995, and the certification of Certified Business Manager since 2001. He has been awarded the Distinguished Achievement Award by the Board of Regents of the Association of Certified Fraud Examiners, as well as been presented the prestigious Guardian of Justice Award from the United States Attorney’s Office for the District of Kansas. Daniel H. Coney

Visit www.ignet.gov 29 Air Force Audit Agency

[AUDIT] Postal Operations: Prelude to a Changing Audit Environment

By Theodore J. Williams Force systems such as Army munitions Force government activities was essential Like most federal agencies, our Air Force systems and Naval Facilities Command for meeting our customer needs. audit environment is complex and dy- military construction systems. More- namic, with missions constantly chang- over, information technology audits gen- DoD Postal ing to meet new requirements and warf- erally must be coordinated with Defense Responsibilities ighter needs. Our mission—to provide Information Services Agency officials, Under the “single manager” concept for all levels of Air Force management with and several recent projects such as Hur- military mail, the Secretary of the Army independent, objective audit evaluations ricane Katrina support and pharmacy is the Executive Agent for the Military across the full spectrum of Air Force operations required interaction with US Postal Service and relies on the Military operations—poses challenges for how we Northern Command, the Federal Emer- Postal Service Agency to validate USPS employ our audit staff effectively to pro- gency Management Agency, and DoD bills, provide technical assistance, and vide world class audit service. Increas- joint medical organizations. Clearly, our monitor overseas postal operations. Day- ingly, new technologies, growing num- Air Force audit environment is changing to-day Air Force postal operations fall bers of DoD joint service organizations dramatically and we must refine our pro- under the purview of the Office of Warf- and automated information systems cesses to ensure continued value-added ighting Integration and Chief Informa- present new challenges for how we go audit results for our clients. tion Officer (SAF/XC), which provides about accomplishing our audit mission. A recent Air Force Audit Agency audit oversight and management of day-to- To continue adding value for our cus- of Air Force Postal Operations provides day Air Force postal operations such as tomers, we can no longer audit strictly an excellent example of the need for Air planning, programming, and budgeting within the confines of Air Force opera- Force and all government auditors to for overseas military mail transportation tions, but must increasingly cross organi- work in a changing audit environment requirements. zational lines to interact with other DoD to achieve audit objectives. This -au and government agencies to obtain in- dit required our Air Force audit team Postal Audit Team formation needed for evaluations. to interact with DoD and other federal The Administrative Assistant to the Sec- As an example, Chief Financial Of- agencies such as the U.S. State Depart- retary (SAF/AA) is responsible for over- ficers Act audits of Air Force financial ment and the U.S. Postal Service to fully seeing HQ Air Force Secretariat funding, statements and line items rely extensively evaluate postal operations and obtain to include SAF/XC, and expressed con- on Defense Finance and Accounting information needed to accomplish our cern about rising Air Force postal costs. Service financial information, as well as audit objectives. This article will illus- Specifically, SAF/AA requested an AFAA from information provided by non-Air trate why interaction with other non-Air review of all aspects of postal operations,

30 Journal of Public Inquiry to include postal billings, cost sharing, Inchon (Korea) mail terminals. • Potential for sending letters and par- and policies in effect that impacted all • Surface and Air Support System cels using higher class priority when DoD military departments. To meet The SASS is a USPS system that ‘lower class’ rates could apply. SAF/AA’s request, we formed an audit uses zip code information to deter- An overriding customer concern was team comprised of a Program Manager, mine which military department to related to DoD postal policies governing three Audit Managers, and, as with most charge for mail movement. military mail movement and costs that centrally-directed Air Force audits, our • Global Enterprise Mail System had not been revised since implementa- statisticians. To complement and assist The GEMS is a USPS system used tion (some 30 years or older); Services in researching, planning, and applying to dispatch military mail from the have never been able to reassess policies the audit were ten installation auditors United States and the Narita, Oki- and procedures. With that in mind, located at stateside and overseas Euro- nawa, and Inchon mail terminals. we believed the audit could identify pean and Pacific locations. Working to- Together, AMPS and GEMS sys- opportunities to affect policy and law gether, the Program Manager and each tems generate manifests for mail to save money. In addition, SAF/AA Audit Manager contributed their own from overseas mail terminals to questioned whether the Air Force postal unique knowledge, expertise, and ability stateside terminals (retrograde), and practices were consistent with other ser- to this complex tasking, ensuring a suc- from stateside terminals to overseas vices, and asked that we crossflow infor- cessful, comprehensive review of postal terminals (prograde) that are trans- mation with all interested DoD postal operations. Working in geographically mitted to SASS for billing. officials. separated offices, the audit team- effec tively communicated and coordinated Audit Research, Planning, Crossflow with Other audit work and report writing to stream- and Design DoD Services line the audit process, providing senior The team interacted with USPS, State To facilitate the review and maximize AFAA and Air Force management with Department, Military Postal Service results, the audit team provided fre- specific, hard-hitting, value-added audit Agency, Army, and Navy officials to quent interim briefings to Air Force offi- results. Most critical to this success was identify organizational responsibilities cials and Military Postal Service Agency, our thorough understanding of the key as well as the pertinent management in- Army, and Navy mail officials of condi- roles DoD and government agencies formation systems used to collect, ana- tions that appeared to impact DoD mail played in overall military postal opera- lyze, and summarize billing data. Audit operations. Based on this positive in- tions. planning began with preliminary SAF/ teraction and cooperation, the Military The Military Postal Service is the XC and SAF/AA meetings to discuss Postal Service Agency director invited primary organization that Air Force and management concerns regarding the an- the lead Audit Manager to present an other services use to transport official nual $100 million Air Force postal costs open-forum discussion during the an- and personal mail, priority supply items, that were rising each year. nual Atlantic Mail Conference in Gar- publications, and other materials to Based on our initial planning meet- misch, Germany. The lead Audit Man- overseas areas in peacetime and contin- ings, several other Air Force, DoD, and ager provided a presentation addressing gencies. The DoD pays for mail trans- government officials expressed great in- current DoD mail policies and obtained portation between the U.S. gateways terest in the audit, having a collective valuable feedback from all DoD postal such as New York (John F. Kennedy) desire to reduce over all postal costs and representatives attending the confer- and San Francisco airports and overseas thoroughly evaluate the following areas: ence. This cooperative forum helped and inter- and intra-theater locations, • Billing processes; the audit team obtain buy-in for the au- with the three military departments • Billing system interfaces; dit approach, and develop realistic and sharing the transportation costs. To ac- • Postal policies that determine which practical recommendations for revising complish the fairly complicated billing service or activity pays for postal DoD mail policies and providing more process, DoD and USPS use three pri- service; efficient mail service to military mem- mary postal systems to measure, moni- • Personal and official mail; bers and families. tor, and bill military mail movement as • Potential use of postal services for described below. personal reasons; Audit Site Visits • Automated Military Postal System • Types of mail sent between overseas The audit team site visits included Joint The AMPS is a DoD system used installations; Military Postal Service Agency-Atlantic to dispatch mail from all overseas • Authorized customers at overseas (Newark and JFK terminals), JMPSA- military mail terminals except the locations using postal services; Pacific (San Francisco), Air Mobil- Narita and Okinawa (Japan) and • Second destination charges; and ity Command and US Transportation

Visit www.ignet.gov 31 Command (Scott AFB), and the Frank- dard third and fourth class mail and in- actions, and SASS transactions to furt Mail Terminal to become familiar cludes vendor printed matter, catalogs, GEMS and AMPS transactions to with stateside and overseas terminal pro- brochures, pamphlets, and circulars. The identify transactions from each sys- cesses during the research phase. Faced stateside gateways should separate BBM tem that could not be traced from with the challenge to assess and evaluate and send it space available (surface con- input to output. virtually all aspects of Air Force postal tainer) rather than intermingle BBM operations to include funding, billing, with other class mail and send it priority BULK BUSINESS MAIL POLICY mail movement, automated systems, and (commercial air). The DoD Postal Manual outlines deliv- policy, the team scoped the audit and de- • Condition. Personnel located at the ery and non-delivery policies for BBM. signed the audit program for application stateside mail gateways sent BBM as When destination postal personnel re- at multiple high-volume postal sites. The priority rather than space available ceive BBM, they attempt to make deliv- following provides background on each mail. ery. If undeliverable, postal personnel area evaluated as well as results. • Coverage. Auditors interacted with remove the BBM address and discard the USPS personnel and Joint Military mail. TheD oD manual does not address INTRA-THEATRE MAIL Postal Agency – Atlantic and Pacific controls required to reduce undeliverable MOVEMENT gateways to review gateway ware- BBM volume. Under the Intra-theatre Delivery house processes and obtain mail • Condition. DoD and Air Force bulk Service concept, the Military Postal volumes of overseas BBM. We re- business mail policy allowed unde- Service provides postage-free delivery viewed and documented the weights liverable BBM to be sent overseas. of official, personal, organizational, and of all incoming BBM during the pe- The audit manager discussed policy commercial correspondence and parcels riod 16 through 29 September. Spe- with Military Postal Service Agency, that do not enter the USPS network cifically, we documented the amount Army, and Navy mail managers and within the United States, its territories, of BBM received at eight selected identified common issues with the or possessions. To use IDS, both the overseas installations that was mixed other DoD services. sender and addressee must be authorized with priority mail. • Coverage. We evaluated the adequa- Military Postal Service users and, in lieu cy of DoD and Air Force postal poli- of postage, the block letters “MPS” must SYSTEM INTERFACE BILLINGS cies and reviewed and documented be marked on the envelope or parcel. Air Mail transactions originating in AMPS weights of all incoming and outgo- Force post office personnel must ensure identify dispatching office zip codes ing mail at eight selected overseas all IDS letters, envelopes, and parcels are whereas mail transactions originating in installations. We also documented sent as space available mail rather than GEMS identify destination zip codes. weights of BBM and the amount of pay higher costs for priority mail. The Military Postal Service Agency uses undeliverable BBM. • Condition. Air Force postmasters SASS billing information to charge each sent IDS mail using priority rather Service a proportionate amount of the INTRA-THEATRE DELIVERY than space available rates. USPS military mail bill. SERVICE POLICY • Coverage. We determined whether • Condition. The GEMS and SASS TheD oD – USPS Postal Agreement, ne- intra-theater mail was shipped pri- interface did not provide assurance gotiated in February 1980, specified that ority versus space available mail by that GEMS transactions originating personal first-class letters, post cards, and working with Military Postal Service at retrograde dispatch locations were audio cassettes weighing 12 ounces or Agency personnel to obtain AMPS properly processed. less within the Atlantic, Latin America, reports of zip codes and intra-the- • Coverage. Auditors discussed sys- and Pacific theaters sentID S would be at ater mail movement; pulling AMPS tem capabilities and requested data “no cost.” Current DoD Postal Manual AV-7, Report by Mail Class, for all downloads from Military Postal Ser- IDS policy was not specific as to what APO zip codes manifesting mail to vice Agency personnel supporting items can be sent IDS, but did disallow other APO zip codes in FY06; using mail transactions and manifests. We using IDS for advertising, commercial Excel to quantify mail sent priority determined whether Air Force mail purposes, and shipment of household versus space available; and compar- billings were properly processed goods. ing the priority and space available by obtaining Army, Air Force, and • Condition. DoD and Air Force IDS Department of Transportation rate. Navy transactions from the DoD policy needed revision to reduce per- AMPS and the USPS GEMS and ceptions of waste and abuse. The au- BULK BUSINESS MAIL SASS systems. We matched AMPS dit manager discussed current policy MOVEMENT transactions to SASS transactions, with Military Postal Service Agency, Bulk Business Mail is comprised of stan- GEMS transactions to SASS trans- Army, and Navy mail managers and

32 Journal of Public Inquiry identified common issues with the • Revise DoD intra-theatre policy creasing dramatically. This postal effort other DoD services. to reduce perceptions of waste and provides an excellent example of the • Coverage. We evaluated the ade- abuse and ensure only appropriate positive benefits of collaboration and quacy of DoD and Air Force postal shipments were mailed ($2.7 mil- innovative approaches to audit, work- policies and reviewed and docu- lion savings over FYDP); ing closely with all interested stake- mented weights of all incoming • Establish procedures to segregate holders, can positively impact a joint and outgoing intra-theatre mail at and bill the Army and Air Force program or activity. Because of the eight selected overseas installations. based on actual, rather than esti- tremendous interest in the audit from We reviewed all IDS packages re- mated, shipment weights; all stakeholders, the audit team briefed ceived and documented potential • Recoup Air Force contract contain- results to the very senior levels of DoD IDS abuse at these locations. er shipment over-billing valued at and Air Force postal management. The $2.2 million; presentation persuaded senior officials Audit Benefits • Implement USPS system controls that postal policies were outdated and Since current DoD postal operations and to provide assurance that the USPS inefficient, and could easily be used to policies are not Air Force-specific, postal properly bills DoD for retrograde promote fraud, waste, and abuse. Se- deficiencies applied to all DoD depart- mail; nior Air Force leadership (SAF/XC, ments. The audit work performed and • Automate Germany-Air Mail SAF/AA) fully concurred with all rec- associated recommendations will result Terminal operations to ensure ommendations in the report, and sent in Air Force savings of $34.6 million, Army and Air Force pays accurate a personal email to the Auditor Gen- but also DoD savings of at least $100 amounts for their respective retro- eral noting the significance of the report million over the Future Years Defense grade mail service; and since it will have immeasurable positive Program. And, because we performed • Deobligate unneeded obligations impact on future overseas postal opera- the audit at only ten judgmentally se- and establish procedures to ensure tions, save money, and improve DoD lected Air Force installations, Air Force unneeded obligations are deobligat- postal service to our warfighters. As a officials believed the savings could actu- ed in the future, resulting in mak- team, the AFAA auditors professionally ally be much greater. We recommended ing $4.5 million available for other represented our organization at its best the Air Force: Air Force mission needs. and set the stage for future audits of • Set proper Major Command intra- programs that may overlap DoD and theatre distribution policies ($17 Prelude to Future Audits other government agencies. 1 million savings over the Furture As this audit example clearly indicates, Year’s Defense Plan); the audit environment is changing and Contributor: Mr. Michael Rollyson, Au- • Revise Air Force, DoD, and USPS the need to work with other DoD and dit Manager, AFAA/FSC, March ARB bulk business mail policies ($7.5 government agencies to accomplish CA million savings over FYDP); comprehensive audit objectives is in-

Theodore J. Williams, a member of the Senior Executive Service, is Auditor General of the Air Force, Office of the Secretary of the Air Force, Washington, D.C. He also serves as head of the Air Force Audit Agency, which is responsible for all internal auditing in the Air Force. He exercises full administrative and technical supervision over a worldwide organization composed of more than 800 members assigned to 50 locations. Mr. Williams served in the Air Force more than 26 years before retiring in the rank of colonel in 1999. While on active duty, he worked for the Air Force Audit Agency more than 11 years as an acquisition auditor, audit manager, branch chief, acting office chief, program manager and executive officer to the Air Force Auditor General.H e was also an AC-130, KC-135, and EC-135 navigator, instructor and evaluator for more than 10 years.

Theodore J. Williams

Visit www.ignet.gov 33 Office of Inspector General Department of Labor

[PROGRAM GRANTS] Managing Grants for Success The core of any entity or operation is its people and the environment in which they operate By Elliot P. Lewis Much of what the federal government is charged with achieving is not done directly by the government and its employees, but rather through grants to state and local governments, educational institutions, and nonprofit entities. The federal government relies extensively on grants to deliver services to the public. For example, one of the Department of Labor’s core responsibilities is to improve citizens’ capabilities and opportunities for profitable employment. Many of La- bor’s programs to achieve these goals are administered through grants. The Employment and Training Ad- ministration is the largest grantor agency within the Department of Labor with an FY 2008 appropriation of $44 billion. Of this amount, grants comprise $11 funds are spent wisely, reach recipients billion. Through its grants,ET A admin- quickly, and attain desired results will Framework to Ensure isters programs to improve the employ- represent an enormous challenge for Effective Grant ment prospects of adults, youth, and dis- the Department of Labor, and an added Management located workers. oversight responsibility for the OIG. Successful grants management involves As unemployment climbs, businesses Delivering services through grants nothing more than good internal control. outsource or close, technology advances, presents unique vulnerabilities as man- Many people think of financial manage- and the types of employment opportu- agement, costs and ultimately, success- ment when they hear the words internal nities change, Department of Labor em- ful performance are not under the direct control. Internal control, however, has ployment and training programs can be a control of the agency. For this reason, it much broader applications. Internal con- critical link for someone obtaining a new is imperative that the agency remain vigi- trol is a process, effected by management job or acquiring the necessary skills and lant throughout the life of the grant— and employees, designed to provide rea- re-training that will make them employ- from pre-award through grant closeout sonable assurance of achieving a specified able in a new industry. The current eco- to ensure that grant programs are ef- objective. Therefore, the internal control nomic climate, coupled with the ever- fective, reach intended recipients, and framework is critical to managing grants changing employment landscape, means achieve intended results. for success. Internal control consists of that programs must be ready to respond Based on issues that I have seen in five interrelated components: to the needs of our workers and to ensure nearly 30 years of auditing grants from • Control Environment; that the taxpayers’ interest is protected. many different federal agencies, this ar- • Risk Assessment; The need for effective grants manage- ticle outlines the internal control frame- • Control Activities; ment is now amplified by The American work needed to manage grants for suc- • Information and Communication; Recovery and Reinvestment Act of 2009, cess, and key control activities that and which adds billions of dollars to ETA’s should be performed during the grant • Monitoring. grant programs. Ensuring that these life cycle.

34 Journal of Public Inquiry Control Environment mitment to ethics and integrity. This is ment of other government expenditures, The core of any entity or operation is its especially critical when deciding which the grantee has the primary responsibil- people and the environment in which grantees to select and which grants to ity for performance and management of they operate. The same is true for a grant award. If proper procurement proce- the grant. As a result, risks should be program and its individual grantees. dures are not followed, grantees may be considered for the grant program, the The success of any grant program is de- selected that are not the best choices to grantor agency, and the grantees. pendent first and foremost on the com- provide needed services or did not of- mitment of those running the program fer the best grant proposal. Program of- GRANT RISKS and the tone they set throughout the ficials must make sure that the people Is the grant program new or significant- organization. This includes not only the with procurement expertise are involved ly revised? This poses greater risk than a grantor agency, but the grantee as well. in the selection process, and that they well-established program where people People at all levels of both organizations have the necessary authority and inde- have had time to learn and understand must possess the right knowledge, the pendence to carry out their duty. Sub- the grant program and implement ap- adequate skills and they must be ex- ject matter experts must be involved of propriate controls. Similarly, are the pected to carry out their duties with the course and make decisions on questions grants themselves regularly made, such as integrity that expending taxpayer dol- pertaining to their area of expertise, but formula grants or are the grants unique, lars demands. The control environment procurement experts must be allowed to such as demonstration grants? Unique permeates all the other components of make the decisions on purely procure- or one-time grants have increased risk, the internal control framework. ment matters. It is ultimately up to the because you are trying something new Effective grants management begins leadership of the grantor agency to en- that does not have a track record. Has with strong, consistent commitment by sure this happens. there been a significant increase in fund- officials responsible for the program. Program officials must demonstrate ing the grant program or are funding The success of every grant program is integrity, commitment to competence, levels consistent from period to period? greatly impacted by the commitment and a willingness to assign authority A significant ramp up of spending for of the person at the highest level of the and responsibility to have positive im- a program increases the risk that funds grant-making agency (and the highest pact on grant management. Conversely, will not be used as intended or as effec- level of the grantee). What is important lack of such commitment will have an tively as possible. As noted previously, to that individual permeates through adverse impact on grant management the unprecedented funding increases in the organization and drives what the and consequently on grant performance the economic stimulus package, com- organization focuses its time and atten- and results. bined with the need to award those tion on. If a grant program’s success is funds quickly, will increase the risk to viewed as important and a priority, that Risk Assessment successful performance. Other risk fac- will drive performance. I believe that An entity must be aware of and address tors to consider include the complexity you get what you focus on. If the agency the risks it faces. In the case of grants, of the program, how challenging the is clearly focused on achieving results this includes the risk that the grant will program goals are, and whether Con- through its grant programs, it is much not achieve its intended purpose or that gress has clearly defined what the pro- more likely that those results will be it will not be done in the fair and ethical gram is intended to deliver. achieved. This focus is not something manner required of programs financed that is occasionally done, or is only done with public funds. As with many en- GRANTOR AGENCY RISK at the kick-off of a new program or new deavors, when spending public dollars, Does the grantor have sufficient resourc- round of grants. The focus must be con- results are important, but the end does es to administer and oversee the grant tinuous. The agency must define what not justify the means. Taxpayers ex- program? Are staff sufficiently knowl- success looks like and constantly assess pect that the government’s business be edgeable about the grant program? Is its progress in achieving that success. conducted in an appropriate manner. the grantor properly organized so that The head of the organization also The grant-making agency must clearly the responsibilities are assigned to the sets the tone for the organization, or identify what it wants to achieve with right people and they have the neces- the manner in which things are ac- its grant program, what is acceptable in sary authority to carry out their respon- complished. If the head of the organi- accomplishing that goal, and then sys- sibility? The organizational structure zation sets and enforces an expectation tematically assess what could prevent of a grantor agency is critical. People of integrity and ethical behavior, that such achievement. need access to the information to per- will drive the culture of the organiza- Grants have inherent risks because of form their jobs, and they also need the tion. Sound decisions demand a com- their nature. That is, unlike the manage- appropriate level of authority to carry

Visit www.ignet.gov 35 out their responsibilities. I have seen Written policies and procedures must be organizational structures where an office established and executed to help ensure responsible for establishing grant policy that actions identified by management and procedures did not have the author- (or by law) as necessary to address risks ity to require grant officers to adhere to are effectively carried out. the policies because the grant officers To ensure successful performance, con- were under a different line of authority. trol activities must be implemented that cover all phases of the grant life cycle. I GRANTEE RISKS divide the life cycle of a grant into four Is the grantee experienced in managing phases: pre-award, award, performance, the particular grant program, does it have and post-performance. experience with other federal grant pro- Pre-Award. There are a number of grams, or is it new to managing federal actions program officials should con- grants? New grantees which lack experi- sider at the beginning of the grant cycle ence in managing federal funds present (pre-award phase) to help ensure effec- a special risk as they are often unaware tive grants management. A competitive of all of the rules and regulations that process should be used to the greatest ex- go with spending taxpayer dollars versus tent possible. Clear and objective criteria other funding. A grantee with experi- should be established to evaluate propos- ence in managing federal grants may re- als and prospective grantees. The entire quire additional guidance and oversight selection process and the rationale for when it becomes involved in a program decisions should be documented. Fol- with which it has had no prior experi- lowing proper procurement procedures ence. Even for an existing grantee, risk in awarding grants is paramount. For assessment should include an evaluation example, program officials should make of the grantee’s past performance, finan- sure that proposal evaluation panels in- cial management, and significant man- clude appropriate technical experts; they grant agreement, but a proposal may not agement or staffing changes that have may wish to make pre-award site visits be sufficiently clear or organized in the occurred. You must also consider wheth- to prospective grantees; and may consid- manner required by a good grant agree- er the grantee is receiving a significant er steps to expand outreach to have the ment. Modify the proposal as necessary. increase in funding. The grantee may be broadest range of organizations compete Finally, make sure that the grantee un- adept at operating the grant program, to offer services. When the grantor agen- derstands what is required by their grant but may not have the capacity to admin- cy has the ability to select grantees (i.e., agreement. Consider using post-award ister a significantly larger program. the grant is not a formula grant or other conferences or meetings to explain the It is important for agencies to de- directed grant), it is imperative that the grant. velop, use, and continue to improve and best, most capable grantees are selected. Taking these steps in the early stage of strengthen their methods for assessing Award. Once the decision is made the grant process is important in seeing risk. to award a grant, a comprehensive, clear, that clear expectations are built into the and specific grant agreement is critical. grant from the beginning. Control Activities The grant agreement is the principal Performance. The performance phase For each risk identified, control activities means by which the grantor agency com- is particularly impacted by the quality should be developed to address or miti- municates to the grantee what is expect- of controls at the grantee. The grantor gate those risks. The type and degree of ed and how it is to be done. If program agency must ensure that the grantee has control activities should be commensu- officials do not clearly spell out what is the necessary people and systems to ef- rate with the level of risk identified. The required, then they can not expect the fectively achieve the desired grant results level of risk can be measured in two ways: grantee to deliver. Grant agreements and manage the federal dollars. One of the probability that the risk will occur must delineate clear, measurable objec- the biggest problems I have noted with and the impact it will have. Those risks tives; specify all products to be delivered, costs claimed for grants is a lack of docu- that are most likely to occur and would if any, and incorporate all expectations mentation that the funds have been spent have the greatest impact should be ad- and requirements. Grant objectives and correctly—in particular, documentation dressed with the greatest level of control. resulting outcomes must be clearly linked of personnel time spent on grant activi- Control activities are defined by the poli- to agency program goals. Grant propos- ties. Grantees need to document what cies and procedures of an organization. als may be a good starting point for the they do and how it benefits the grant.

36 Journal of Public Inquiry Post-Performance. Once a grant has to overstate program success. If not de- ended, the need for good controls con- tected, poor performing entities receive tinues. It is during this period that the additional funding as the government grantor agency needs to ensure that all “throws good money after bad.” deliverables have been met. All grant Don’t assume that just because criti- funds need to be accounted for. Grant cal information has been identified or performance needs to be evaluated. communicated that it has reached the Evaluating grant performance is neces- people that need to know and that they sary for making decisions about future understand it. Regular follow up is funding of a grantee, but also to deter- needed to ensure grantees understand mine how effective the grant program all the requirements and limitations was in achieving its goals. for operating their grant. This includes what costs are allowable and what is un- Information and allowable. Communication I am reminded of a lesson I learned All of the other components of the in- very early in my career. While auditing ternal control structure need informa- a federal grantee. I had spent weeks at tion and communication in order to the grantee’s office testing claimed costs. function. Information and communica- I was surprised at how many items of tions systems enable the grantor agency costs were clearly not allowable under and grantees to capture and exchange the cost principles. At the conclu- the information needed to manage the sion of fieldwork and before leaving grant program. In order to determine the grantee’s offices, there was an exit if a grant is achieving what is intended, conference to go over the findings. The those responsible for the grant program grantee officials listened intently at each must have the right information, at the finding that was presented. They took Grantees need to understand the cost right time, and it must be reliable. This copious amounts of notes as each item principles and any additional require- communication is two-way. The grantor was it terms of unallowable costs and on ments that affect what they can claim agency requires information in order to which section of the cost principles that for reimbursement. Grantor agencies determine if the grantee is doing what was being applied. At the conclusion can require grantees to explain how was intended. The grantee needs to of the presentation, I asked the grantee they will go about determining allow- know what is expected, how it is expect- officials if they had any questions. The able costs. This will help ensure that ed to be done, what limitations there first question they asked was what that the grantee has properly focused on this are, and what deliverables there are. cost principle document I kept refer- and developed effective systems. T ime- Without clear information about goals, ring to was and where could they get ly reporting by the grantee will help the the grantee may not provide the expect- a copy. I told them they already had grantor identify progress or detect prob- ed product and/or service. Finally, the it—attached to their grant agreement. lems. However, meaningful informa- public needs certain information so that I then proceeded to walk them through tion has to be reported and the grantor there is transparency and accountability their grant agreement. When they said agency needs to know that the grantee for the program and public dollars en- they never realized it was there, I asked has good systems to produce accurate trusted to the agency. how they determined what types of reports. Good reporting can help target Grant recipients are required to costs were allowable under the grant. monitoring and oversight to greater ef- maintain systems capable of record- The consensus was that if an expense fect. A common trap is to only focus ing and reporting accurate and timely would be a legitimate business expense on those grantees who report problems financial, participant and performance for their organization, then it would be or less than expected results. Some- information. Such information is criti- a legitimate expense under the grant. times you need to follow up on those cal to the government’s ability to deter- The lesson learned was to ask obvious results that look good (or too good) as mine whether grantees are delivering questions and not assume. I learned not they might not be as good as they ap- the required services and to hold them to assume that just because the require- pear. If they are as good as they look, accountable for federal funds. Reporting ments of the grant had been included the grantor agency may discover some inaccurate financial and performance as part of the written grant agreement best practices that can be replicated in information is a common problem. that the people receiving it knew it was other grants and programs. Obviously, a grantee has an incentive there, had read it, and understood it.

Visit www.ignet.gov 37 For the next grant audit, I asked at the ditions, including changing risks. Since the ultimate recipient or beneficiary of beginning who determines what costs grant funds are spent by entities outside the program. Monitoring should be are charged to the grant and how do they the federal government, appropriate and designed to determine that the program determine it. Likewise, a grantor agency clear agency guidance, monitoring, and as a whole is working as intended and should not assume that just because they oversight of grantees are key to provid- achieving the desired results, not just an have included every requirement in a ing both financial and performance ac- individual grantee. grant agreement that the grantee will re- countability. Monitoring should also be a continu- alize the requirements are there and un- The first steps toward ensuring ad- ous process, not a one-time event. Mon- derstand how to apply them. equate monitoring are to make sure that itoring and oversight, along with the Program officials need to take proac- the agency’s monitoring plan evaluates other elements described in this article, tive steps to ensure that grantees know the items that comprise the essential must be consistent and frequent. what is included in their grant and that framework for grant management as they understand it. This can be done outlined above: control environment, Conclusion with post-award conferences and through risk assessment, control activities, infor- Effective grants management requires monitoring visits. It can also be accom- mation and communication. Monitor- picking the best service providers, making plished by the manner in which infor- ing is critical to identifying what is not expectations clear to grantees, ensuring mation is communicated—for example, working so that the same mistakes are that success can be objectively measured, use transmittal letters to highlight key not repeated in future grants. It is equal- providing active oversight, evaluating requirements and expectations. ly important to identify what is working outcomes, and using the successes and so that best practices can be replicated in failures to improve the program. It is Monitoring future grants. imperative that federal agencies exercise Once risks have been assessed, controls Monitoring is generally thought of as the most stringent level of oversight at have been put in place to address those the grantor agency monitoring its grant- all phases of the grant process to ensure risks, and information is flowing, the ees. This is true; however, monitoring in that federal dollars are spent effectively grantor agency must monitor the entire the sense of sound internal controls also and that citizens receive the services and process to determine if the controls are includes monitoring the grantor agency’s results they deserve. As agencies will be working as intended. Monitoring al- operations as well. Monitoring should spending billions of dollars under the lows the system to work dynamically, encompass the entire grant program—at Recovery Act, stringent oversight is all adjusting as necessary to changing con- the federal level, the grantee level, and the more critical.1

Elliot P. Lewis is the Assistant Inspector General for Audit of the Office of Inspector General, U.S. Department of Labor. As the Assistant Inspector General for Audit, Elliot is responsible for and provides overall leadership to the Office of Audit. He is responsible for all audits within the Department of Labor including all financial and performance audits covering employment and training services, unemployment compensation, workers’ compensation, workplace safety standards and oversight, mine safety standards and oversight, as well as many other services to protect the American workers. Prior to his appointment as AIGA, he served as the Deputy Assistant Inspector General for Audit. Mr. Lewis joined the U.S. Department of Labor in 1991 as an Assistant Director of the Office of Financial Manage- ment Audits. He was promoted to the position of Director, Office of Financial Management Audits in 1996. In 2000, Mr. Lewis became the Director, Office of Audit Operations.

Elliot P. Lewis

38 Office of Inspector General Department of Defense

[OUTREACH] Department of Defense Fraud Awareness Initiatives Increased procurement spending has unfortunately resulted in a new generation of fraudsters

By Frank Albright, Russel Geoffrey, Lauren McLean Within the federal inspector general community, fraud schemes, especially in the area of procurement fraud, have risen steadily in recent years. Defense budgets and procurement activity have risen dramatically, increasing from $304 billion in fiscal year 2000 to almost $700 billion in fiscal year 2008. This increased procurement spending has had the un- fortunate result of producing new fraud schemes and a new generation of fraudsters. With so much at stake, it is critical that the Inspector General community remain vigilant in combating fraud, waste, and abuse in procurement as well as other high risk areas. And at the U.S. Department of Defense Office ofI nspector General we are taking this fight to the Second, DoD IG ,in partnership with DoD communities on methods to de- next level. the National Procurement Fraud Task tect, prevent, and investigate fraud, First, we’ve set goals focused on pun- Force, Panel on Contracting Integrity,1 waste, and abuse in procurement and ishing and detecting fraud, waste and DoD Procurement Fraud Working other high risk areas such as health care abuse include: Group, and DoD component organiza- and workers’ compensation. The various • Realizing savings in defense con- tions have several new initiatives aimed DoD initiatives include training classes, tracting; at educating the Inspector General and conferences, and on-line resources for • Reducing corruption and cost over- contracting professionals, attorneys, in- runs; 1 Section 813 of the John Warner National vestigators, and auditors. • Reforming acquisition manage- Defense Authorization Act for fiscal year 2007, ment; Public Law 109-364, directed DoD to establish a Panel on Contracting Integrity that is respon- Highlights of New DoD • Reducing fraudulent acquisition Training Opportunities practices; sible for conducting a department-wide review of progress made by DoD to eliminate areas of and Fraud Resources… • Increasing oversight of procurement vulnerability in its contracting system. The Panel More Than One To Choose practices in the warfighting environ- established 10 subcommittees that include the From ment; Procurement Fraud Indicators Subcommittee, DoD IG, in partnership with the Panel • Rebuilding the acquisition work- chaired by the DoD Assistant Inspector General for Acquisition and Contract Management. The on Contracting Integrity, Procurement force; and subcommittee members include representatives Fraud Indicators Subcommittee, has de- • Prioritizing prosecution to deter from Army Audit Agency, Air Force Office of veloped several new initiatives to educate fraud, waste, and abuse. Special Investigations and the Navy Acquisition Integrity Office. auditors, attorneys, investigators, and

Visit www.ignet.gov 39 contracting professionals about fraud. The new initiatives include:

• The October 2008 launching of the “Fraud Indicators in Procurement and Other Defense Activities” Web page; • Partnering with the Defense Acquisition University to develop online training for contracting professionals, and • Hosting its initial fraud conference at DAU, Fort Belvoir, Virginia. We are also sponsoring a special training session at the DoD Procurement Fraud Working Group’s Annual Training Conference.

DoD IG Resources for Contractors Other new DoD IG fraud resources include the Office of In- vestigative Policy and Oversight’s new Contractor Disclosure Program, which was developed to ensure compliance with recent changes to the Federal Acquisition Regulation (FAR Case 2007-006). The purpose of the Contractor Disclosure Program is to: • Afford contractors a means of reporting certain violations of criminal law, violations of the civil False Claims Act, or significant overpayments discovered during self-policing activities; provide a framework for government verification of the matters disclosed; and • Provide an additional means for a coordinated evaluation of Department of Defense Training in Fraud Awareness administrative, civil, and criminal actions in this endeavor included the Government Accountability appropriate to the situation. Office, U.S. Agency for International Development Office of IPO created a link on the DoD IG, Web site (www.dodig. Inspector General, and the Special Inspector General for Iraq mil, click on the icon bearing the program’s name) which includes Reconstruction. During the project, interviews were con- information about the new reporting requirements, a sample ducted with a variety of technical experts such as auditors, DoD Contractor Disclosure Submission Form, and contact investigators, attorneys, and contracting professionals which information for contractors wanting to make a disclosure or resulted in 40 fraud scenarios and related indicators in 10 dif- obtain additional information about the program. IPO has ferent areas. The fraud scenarios and indicators cover a variety also initiated several outreach efforts to assist with educating of topics such as contracting, in-theater and retail operations, the DoD community and other organizations about the new health care, and workers’ compensation. reporting requirements. Additional resources located on the web page include fraud guidance for auditors, fraud handbooks developed by DoD New Fraud Web Page and other federal agencies, information on upcoming fraud The “Fraud Indicators in Procurement and Other Defense training opportunities, and useful links. An interactive “Test Activities” Web page (www.dodig.mil/inspections/apo/fraud/in- Your Fraud IQ” link was recently added for those interested dex.htm) has a variety of useful tools for the inspector general in getting feedback on their knowledge of fraud, waste, and community and anyone that would like to learn more about abuse. The web page will be updated periodically with new fraud, waste, and abuse. The Web page was developed by the “Fraud IQ“ tests, fraud scenarios, and indicators. The DoD DoD IG’s Audit Policy and Oversight group and the Subcom- IG is currently developing a fraud dictionary for the web page mittee with the assistance of more than 35 DoD agencies and which will include information on common fraud terms and components, as well as the American Institute of Certified schemes. Web site visitors are encouraged to submit com- Public Accountants. Other federal agencies that participated ments, provide feedback, or submit a fraud scenario.

40 Journal of Public Inquiry • Overview of criminal, civil, and administrative penalties and remedies • Information on investigative agencies that should be con- tacted if fraudulent activity is suspected • Links to fraud handbooks and other fraud resources developed by DoD agencies • Opportunities for participants to test their knowledge of fraud schemes and indicators. Persons completing the training will qualify for continuing professional education credits depending on the requirements of their field or license.

Upcoming DoD Sponsored Fraud Conferences

DoD Procurement Fraud Working Group Annual Training Conference Recognizing that procurement fraud is of national significance and poses a threat not only to personnel safety, but also places at risk enormous taxpayer dollars, the DoD Procurement Fraud Working Group was established to develop a closer working relationship among the relevant DoD activities and agencies involved in the identification, investigation, and prosecution of contractor fraud. Its mission is to bring together experienced supervisory fraud agents, attorneys and auditors within the DoD enforcement community in a forum of information exchange, legislative/policy development, and continu- Department of Defense Training in Fraud Awareness ing education in regard to current issues, future national trends, investigative strat- On-Line Fraud Training for Contracting egies, appropriate remedies, Professionals and enforcement problems in the procurement fraud arena. It Another DoD IG/Subcommittee initiative is the development is intended not only to provide a real exchange of information of online training for contracting professionals. The training and ideas among the various DoD agencies, but to also to pro- will be available to anyone that would like to learn more about vide enhanced interagency coordination, communication and ways to prevent, detect, and identify acquisition fraud. The cooperation with the U.S. Department of Justice and other training is especially useful for persons working in the acquisi- government agencies combating procurement fraud. tion field such as contracting officers and program managers; The group, which was formed about five years ago, has however auditors, investigators and attorneys are encouraged hundreds of members, and a Steering Committee of approxi- to take part in the training which will take one or two hours to mately 20 members meets monthly. Members include lawyers, complete. The training is presented through a series of mod- investigators, auditors and policy personnel from Army, Navy, ules that address a variety of acquisition-related fraud topics Air Force, the Defense Logistics Agency, the Defense Contract and will be available at the DAU Web site (www.dau.mil) start- Management Agency, the Defense Contract Audit Agency, ing in April 2009. Additionally, the DoD IG’s Audit Policy National Aeronautics and Space Administration, the Criminal and Oversight group is working with DAU to prepare a series and Civil Divisions of the DoJ, the National Reconnaissance of short video clips that will be available for viewing at the be- Office, and the Office of the Secretary of Defense. ginning of each training module. This year’s conference will be held during spring 2009, Highlights of topics included in the training are: and attendance will be capped at 150. A link will soon be up • More than 15 acquisition fraud scenarios covering topics on the DCMA web site, www.dcma.mil, to register. This year, such as defective testing, false invoices and false claims as a change from past years, there will be fewer “talking head” • Information on common fraud schemes and related indi- presentations and more smaller-group discussions looking at cators the entire fraud investigation process from referral to comple-

Visit www.ignet.gov 41 tion, with a view towards identifying and continuing profes- problems in the coordination of fraud sional education credits remedies. Represented in these groups may be earned depend- will be agency fraud counsel, auditors, ing on the requirements procuring contracting officers/program of each specific field and/ managers, administrative contracting or professional license. officers, DoJ criminal and civil lawyers, The conference has space and debarment officials. On the last day for 350 attendees so early there will be a panel comprised of legal registration is encouraged. counsel of major Defense contractors. Approximately 50 spaces will be reserved for con- Defense Acquisition University Hosts tracting professionals and Fraud Conference all registrations will be The DoD IG, in partnership with the processed on a first-come, Subcommittee, will sponsor its initial first-serve basis. If you are fraud conference at DAU during the interested in suggesting a summer 2009. The conference will pro- conference topic or would vide information on emerging issues and like more information trends in the areas of fraud, waste, and about the event, please abuse. Separate learning tracks will be visit the following link: available for auditors, investigators, at- (www.dodig.mil/inspec- torneys and contracting professionals. tions/apo/fraud/index. The event will include interactive break htm) out sessions, opportunities to obtain significantly from a high of nearly 60 dis- information on fraud from a variety of DoD IG’s New Contractor closures in 1988. Feedback from major subject matter experts, and networking Disclosure Program DoD contractors indicated that many opportunities. Sample conference topics With prompting from the Department disclosures were being made to contract- include: of Justice and direction from legislation ing officers instead. Based on feedback • Information on the new mandatory known as the “Close the Contractor from the DoD IG, the DoD and others, disclosure requirement for contrac- Loophole Act,” the Federal Acquisition the DoJ was moved to recommend to the tors; Regulation was revised on December 12, FAR Council that disclosures of fraud be • Methods to identify fraud in the 2008 (see, 73 F.R. 67064). Stemming made mandatory. procurement process; from FAR Case 2007-006, contractors IPO has responded to the new require- • Highlights of recent DoD procure- are now required to strengthen their in- ment by transforming its once-voluntary ment fraud cases; ternal controls and codes of business eth- program into a new mandatory one, • Fraud and corruption in the combat ics. The rule provides for the suspension simply titled the “Contractor Disclo- environment: highlights of fraudu- or debarment of a contractor for know- sure Program.” As was done previously, lent activity in Iraq and Afghani- ing failure by a principal to disclose, in the program will receive disclosures of stan; writing, to the government, credible evi- potential fraud and ensure they are fully • An interactive “Solve the Scenario” dence of fraud or criminal activity relat- coordinated with all affected DoD com- session; ed to procurement fraud laws including ponents: the Defense Contract Audit • Tips for auditors on making referrals the civil False Claims Act, or significant Agency; the Defense Contract Manage- to investigative agencies; overpayments. ment Agency, the suspension and debar- • Fraud risk assessment techniques for From 1986 until now, contractors ment authorities of the Defense Logistics auditors wishing to disclose potential fraud to the Agency and the military departments, Information on this conference will DoD have been encouraged to make vol- the defense criminal investigative organi- be available on the “Fraud Indicators” untarily disclosures to participate in the 2 web page. A sample conference agenda Voluntary Disclosure Program, which zations , the criminal and civil divisions and speaker biographies will be posted is managed by the DoD IG. While that of the DoJ, and the individually affected for viewing during conference planning. program has resulted in recoveries of contracting officers. With input from An on-line registration form will also be nearly $500 million to date, participa- 2 Includes the Defense Criminal Investigative Service, the Army Criminal Investigation Com- available on the web page in early spring tion in recent years has dwindled to ap- mand, the Naval Criminal Investigative Service, 2009. The conference is free to attend proximately 10 disclosures per year, down and the Air Force Office of Special Investigations.

42 Journal of Public Inquiry and the Congress. attorneys and the National Defense In- IPO has collaborated dustrial Association. with many groups in the formulation of the Con- DoD Fraud Initiatives… tractor Disclosure Pro- Opportunities to Increase gram and in its “market- Your Fraud Awareness ing.” IPO represented the The various DoD fraud initiatives de- Principal Deputy Inspec- scribed in this article highlight the DoD’s tor General of the DoD in ongoing commitment to combating cochairing the Contractor fraud, waste, and abuse in procurement Integrity Reporting Com- and other high-risk areas. The Depart- mittee of the National ment encourages the Inspector General Procurement Fraud Task and procurement communities to par- Force, along with the In- ticipate in any or all of the training ven- spector General of the Na- ues and conferences offered during 2009. tional Reconnaissance Of- TheD oD IG encourages challenge all at- fice. That committee, with torneys, investigators, auditors, and con- strong representation from tracting professionals to: the DoJ, General Services • Visit the “Fraud Indicators in Pro- Administration, and the curement and Other Defense Activi- NASA, was instrumental ties” Web page and take time to re- in coordinating the federal view the available resources and take government response to the “Test Your Fraud IQ” quiz the new FAR requirement. those offices,I PO will refer the matter to • Learn more about procurement Since the new regulation was promul- the appropriate organizations to ensure fraud indicators and schemes by par- gated, IPO has been busy participation action is taken that best fits the circum- ticipating in the DAU online fraud on panels and providing briefings to the stances of the individual disclosure and training American Bar Association, the American the best interests of the DoD and DoJ. • Attend DoD sponsored conferences: Conference Institute, the Defense Indus- IPO will also provide program reporting DoD Procurement Fraud Work- try Initiative, and DLA attorneys. Up- internally within DoD, and to the DoJ ing Group Conference or the DAU coming presentations include DCMA Hosted Fraud Conference • Visit the DoD IG web page to learn more about the new Contractor Dis- closure Program; and • Visit the Defense Contract Man- agement Agency, Contract Integ- rity Center’s webpage (http://home. dcma.mil/cntr-dcmac-y/index.htm) to review fraud indicators, DOD newsletters and various tools used to fight fraud and help in fraud investigations. We look forward to working with you to help prevent and detect fraud and abuse within the DoD, and to collaborate with other fraud-fighting professionals -out side DoD, as we collectively advance the cause of ethics and accountability. It is a collective responsibility that will require the continued collaboration of fraud fighting professionals both within and outside DoD.1

Visit www.ignet.gov 43 Frank Albright

Frank Albright is the Director of Policy and Programs, within the Office of Investigative Policy and Oversight of the Office of Inspector General or the Department of Defense. In that capacity, Special Agent Albright directs the establishment of policy affecting the Defense Criminal Investigative Organizations including the Defense Criminal Investigative Service, the Army Criminal Investigation Command, the Naval Criminal Investigative Service, and the Air Force Office of Special Investigations as well as other investigative and law enforcement organizations in the Defense agencies and the Military Departments. Programs under Special Agent Albright’s cognizance include the OIG Subpoena Program, responsible for oversight of between 300-400 subpoenas issued annually in support of Defense investigations; and the DoD Contractor Disclosure Program, which provides a formal mechanism for the intake and coordination of disclosures of potential fraud made by Defense contractors either voluntarily, or as required by law or regulation. Special Agent Albright accepted his position with the OIG following a distinguished career as an Air Force officer and special agent/criminal investigator with the AFOSI.

Russel Geoffrey has been a member of DLA/DCMC/DCMA since 1991, and has held his position as Director of the Defense Contract Management Agency’s Contract Integrity Center since its inception in May of 2000. In this position he manages a staff of six other attorneys and support personnel that have the agency-wide mission of coordinating fraud remedies and assisting in the prevention, detection, investigation and prosecution of fraud and other irregularities. Russel Geoffrey

Lauren McLean is an Auditor Technical Specialist in the Policy and Oversight component of the Department of Defense Inspector General. Prior to Audit Policy and Oversight, Ms. McLean was an audit team leader within the Defense Financial Auditing Service of the Office of the Inspector General DoD beginning in April 2005. From December 2002 to April 2005, she was a lead auditor at the United States Agency for International Development OIG where she worked in the Financial Audits Division on segments of the annual Government Management Reform Act audit during FY 2003 and FY 2004. Ms. McLean’s diverse background also includes experience as an auditor at Madole Wagner, PLLC and Kerry J. Patton, CPA. She also worked for several years as a staff auditor with the City of Tulsa, Internal Auditing Department. Lauren McLean

Journal of Public Inquiry Special Inspector General for Iraq Reconstruction

[OUTREACH] Iraq’s Inspectors General: A Work in Progress Public Corruption is endemic in Iraq By Danny Athanasaw and Christopher Griffith No one at the ministry seems to know why I’m there or what I am supposed to do. Everyone assumes we’re just spies for the Americans.. . . if we’re too active, our minister will fire us. If I do my job, they’ll kill me. -Concerns related by some Iraqi Inspec- tor Generals and their staffs to U.S. Em- bassy – Baghdad officials, 2007.

Introduction Birthed in war, without precedent in peace, the Iraqi Inspector General system has struggled to find its place in post-Saddam Iraq. This article provides an overview of the system and assesses its chances for long-term survival. The duties of Iraqi IGs are strikingly Iraqi Anticorruption CPA Order 57 similar to those of their American coun- Institutions: A “Three- Coalition Provisional Authority Order terparts. Legged Stool” 57, signed by Ambassador Paul Brem- These include, but are not limited The CPA envisioned Iraq’s IGs as one of er on February 10, 2004, “established to: auditing the ministry’s records and that newly liberated country’s three main within each Iraqi ministry an Office of activities; conducting administrative in- anticorruption institutions. The other Inspector General . . . headed by an In- vestigations; receiving and assessing al- two are the Commission on Integrity, spector General.” legations concerning waste, fraud, and which has a limited law enforcement ca- The IGs were initially appointed by abuse that affect the ministry’s interests; pacity, and the Board of Supreme Audit, Ambassador Bremer to serve a five-year recommending corrective actions to the which is roughly analogous to the U.S. term, which could be renewed for an administer; and cooperating with investiga- Government Accountability Office. Im- ditional five-year period. Upon the June tive agencies and the judiciary in matters portantly, BSA and COI are independent 2004 restoration of full Iraqi sovereignty, requiring their attention. commissions under the Iraqi Constitu- the power to appoint IGs shifted to the To accomplish these broad objectives, tion -- the IGs are not. This fact accords Prime Minister’s Office. the IGs are supposed to be accorded “full BSA and COI an additional layer of legal Under CPA Order 57, IGs “report di- and unrestricted access to all [ministerial] protection that the IGs do not possess. rectly to the relevant minister” and may offices.” Further,O rder 57 provides IGs CPA Order 55 established COI as be removed “only for cause.” CPA Order with the power to subpoena witnesses Iraq’s lead anticorruption agency. Under 57 remains the law of the land, although and documents. Ultimately, the IGs are Order 55, COI possesses the statutory an Iraqi-drafted proposed replacement supposed to report their findings to their authority to investigate all allegations law is currently winding its way through minister and issue an annual report to of public corruption and forward those the national legislature. the Iraqi public. cases which merit judicial action to the Central Criminal Court of Iraq. Addi-

Visit www.ignet.gov 45 tionally, COI is charged with educating answer, if he can. This exchange of pa- throughout the GOI. As elsewhere, the Iraqi populace about the dangers of per – and all they use is paper – can drag nepotism often trumps qualifications corruption and drafting and administer- on for years. Naturally, the OIGs of- leading to unqualified persons holding ing financial disclosure regulations for ten resent being asked to do COI’s job. sensitive posts. all Government of Iraq employees. Third, institutional distrust often limits However, certain traits are common CPA Order 77 outlines BSA’s du- cooperation. In the post-Saddam era, to all OIGs. For instance: ties as Iraq’s primary audit institution. acute political rivalries have seriously • Hotlines. All Inspectors General BSA conducts regular financial audits hampered the relationship between are required to operate an anony- of the GOI’s ministries and reports its some IGs and COI’s Commissioner. mous tip hotline that is accessible findings to COI and to the relevant Fourth, BSA’s has been somewhat re- to all citizens. Often, this is little IG. Unlike COI and the IGs, however, luctant participant in the U.S.-imposed more than an irregularly-manned BSA was not created by the Coalition anticorruption structure. BSA is often cell phone or a desk phone in the in 2004. Instead, it was founded dur- reluctant to provide its audit findings to IG’s office; ing the British occupation of Iraq in the other two anticorruption agencies. • The IG Council. This informal the 1920s. BSA’s longevity sets it apart Finally, no formal information sharing body has been in existence for sev- from its brother institutions and leads it process exists. Data requests are usually eral years. It provides all IGs with to guard jealously what it perceives as its handled in person and at the highest the opportunity to discuss and re- prerogatives. levels. solve issues common to the com- In this tripartite system, personnel munity; and from the ministerial OIGs are the only Iraqi Inspector • Training requirements. TheI G sys- ones who have regular, daily involve- General OFFICES - Some tem needs basic training to achieve ment with the ministries. Therefore, Characteristics greater efficiencies and expertise in they are often the first to uncover po- There are 35 IGs in Iraqi government. the areas of auditing, inspections, tential abuses or crimes. Thus, when Most are housed within the GOI’s min- and investigations. Specifically, the an IG determines that a matter may istries, with the remainder working at IGs’ auditors must receive training involve corruption, fraud, embezzle- quasi-ministerial government entities, in general auditing skills so that they ment, or outright theft on the part of a such as the Shia’a, Sunni, and Christian can actually perform audits on a ministerial employee, Order 57 requires Endowments. OIGs range in size from regular basis. At the moment, most the IG to refer this information to COI, the very small (the Ministry of Foreign auditors have very little knowledge along with whatever evidence the IG Affairs OIG has approximately 20 em- of performance auditing. has gathered to date. COI then con- ployees) to the very large (the Ministry ducts further inquiries and determines of Defense OIG is authorized a staff of United States whether the case should be forwarded to several thousand, on paper). The budget Involvement the CCCI for adjudication. to fund staff and other expenses comes Since 2004, the U.S. government has In practice, there are many problems from the ministry through the Ministry supported a variety of efforts aimed at with the flow of information among the of Finance. building the capacity of Iraq’s IG sys- anticorruption institutions. First, there Little cross-office uniformity of -in tem. Early on, the DoD led the way. is no established evidentiary threshold ternal structure exists among the vari- DoD OIG deployed its first representa- that triggers a case referral from an IG to ous IGs. For example, some offices tive to Iraq in March 2004. In 2005, COI. This has created substantial con- have relatively strict separation among a team from DoD OIG’s Investigations fusion. On occasion, COI thinks that administrative workers, auditors, and and Evaluations Directorate traveled to certain IGs are being uncooperative be- inspectors. Others rely more on ad Baghdad to train and advise the OIGs cause they forward little or any case data hoc staffing arrangements. In these of- from the GOI’s two largest ministries, to COI while the IGs are often unsure fices there usually is the IG, a principal the Ministry of Interior, which controls how much evidence they need to gather aide or two, and an amorphous pool of all police forces, and the Ministry of before they send a case file to COI. Sec- “staff,” which includes everyone from Defense. ond, COI does not have the investiga- bodyguards, to drivers, to auditors. Ad- To this day, DoD, through the Multi- tory capacity to deploy its agents to the ditionally, since the Iraqi IG commu- National Security Transition Command ministries to gather evidence and take nity is just over four years old, all IGs – Iraq, continues to train, mentor, and testimony. COI usually just receives a face the problem of finding qualified advise the MOI and MOD OIGs. On file from an IG and then sends back a subordinates to accomplish their mis- a relatively regular basis, personnel as- written list of questions for the IG to sions. OIG employees are drawn from signed to MNSTC-I provide several

46 Journal of Public Inquiry weeks or months of classroom training heart deals with firms owned by their As a new institution, the IGs need to on basic investigative topics to a class of friends and relatives. The sheer complex- integrate more deeply with other, more mid-level employees from the two secu- ity of the rules often makes it difficult to established GOI agencies. Cognizant of rity ministries’ OIGs. Certain Iraqi OIG track where the money even goes. Iraq’s this problem, the IGs established formal personnel also receive a significant de- IG community recognizes these issues mechanisms to facilitate this desired co- gree of “hands-on” mentoring from these and seems committed to working with ordination. In 2007, the GOI formed U.S. advisors. Unfortunately, there are the ministries in order to enhance trans- the Joint Anticorruption Council in not enough advisors to mentor all those parency and accountability in the con- 2007. Its members include the COI who would benefit from it, nor enough tracting process. Many IGs are taking Commissioner, the BSA President, rep- instructors qualified to train all those in a more proactive role in reviewing con- resentatives from the IG community, need of training. tracts to ensure that procurement regula- and representatives from the Prime Min- DoD’s involvement with the Iraqi tions are obeyed and that the money is ister’s Office. The JACC is a coordinat- IG system has always been limited to actually spent on public goods. ing body and does not have the power two (MOI and MOD) of the 35 OIGs. A related issue of concern to the IGs to set policy or allocate funds. Initially From 2004 through early 2007, scant is whether the goods delivered under the beset by political infighting, the JACC formal U.S. assistance was provided to contract are, in fact, the actual deliver- seems to be slowly evolving into a forum any of the other OIGs. Meanwhile, the ables specified in the contract. For in- where the interested stakeholders can en- U.S. Department of State was pouring stance, MOI and MOD frequently enter gage in a free and open exchange of ideas millions of dollars and dozens of person- into arms contracts with outside vendors and opinions. nel into capacity building efforts at COI. for the purchase of weapons and vehicles. Another venue where this integra- From 2004 through 2007 well over 40 In years past, the weapons and vehicles tion is occurring is in the Council of American advisors – DoS, military, and actually delivered to the GOI have often Representatives’ Integrity Committee. contractor – worked with COI on a daily been so out-of-date or dilapidated that The 275 member COR is Iraq’s national basis. they were unusable. TheI Gs from MOI legislature. Its Integrity Committee has Finally, in early 2007, DoS appointed and MOD have begun to conduct in- oversight responsibility for the three anti- a Senior Consultant to Iraq’s Inspectors spections of such goods on a more regu- corruption agencies. Recently, the Com- General. He was responsible for train- lar basis in order to ensure that the weap- mittee has begun to engage more closely ing, mentoring, and advising all non- ons and material delivered to the armed with the anticorruption institutions in security ministry OIGs. Over the course forces are actually in working condition. an effort to define common priorities of 2007, the Senior Consultant imple- Similarly, Iraq’s prisons are often in and resolve any differences in the most mented several courses that covered the shockingly poor condition. Overcrowd- amicable manner possible. basics of what it meant to be an Inspec- ing and lack of food are but two of the In 2008, the United Nations began tor General and forged partnerships with issues faced by Iraqi correctional insti- to take a more hands-on approach to various agencies and contractors (such tutions. In an attempt to remedy these dealing with Iraq’s anticorruption insti- as USAID and MNSTC-I) to deliver problems, the IG for the Ministry of Jus- tutions. The UN is currently assisting additional educational products to the tice is now aggressively inspecting and the IGs, COI, and the BSA with train- Iraqi IG community. What he could ac- reporting upon conditions in these fa- ing their personnel and drafting new complish was necessarily limited by the cilities. TheMO J IG’s actions reflect the anticorruption laws. Thanks to the im- fact that he was one man responsible for concern for human rights that U.S. ad- proved security situation in Iraq, most of more than 30 separate OIGs scattered visors have attempted to inculcate across this training now occurs in Baghdad as throughout Baghdad. the board among all Iraqi IGs. opposed to Amman, Jordan or elsewhere overseas. Main Issues Confronted by Coordination Efforts Iraq’s IGs Public corruption is endemic in Iraq. Successes and Challenges One area where many OIGs have en- The SIGIR has referred to it as a “second Iraq’s IGs struggle with a unique set of deavored to make their presence felt is in insurgency.” Consequently, the IGs are problems. In addition to the universal the government contracting process. In forced to dedicate significant amounts concerns voiced by government workers Iraq, regulations governing procurement of their time to anticorruption initia- throughout the world, such as not hav- and contracting are byzantine and ever- tives. But if these efforts are to yield ing a large enough budget or a sufficient evolving. There are many steps along the sustainable results, coordination among number trained staff, Iraq’s IGs are still way where corrupt mid-level officials can the three anticorruption agencies, while struggling to learn what it means to be arrange for kickbacks or broker sweet- perhaps not sufficient, is most certainly an Inspector General. As Iraqi IGs go necessary.

Visit www.ignet.gov 47 about defining their roles within the • Training: The Coalition has pro- Outlook GOI, they face opposition from power- vided very basic training to the IGs Right now, the COR is discussing a draft ful stakeholders who do not enjoy the and their staffs, but these initiatives law that would replace CPA Order 57. thought of non-partisan oversight. are now winding down. The GOI This bill attempts to delineate clearly the The security environment in Iraq – has also funded various training pro- IGs’ roles as they relate to COI and BSA. though improving – has adversely im- grams, but needs to arrange for more It also clarifies theI Gs’ powers and some pacted the IGs’ ability to do their jobs. advanced and in-depth instruction. aspects of their internal office operations. A number of OIG staffers have died in Without competent subordinates, When this bill will ultimately become the violence and countless more have no IG can be expected to function law, and what it will look like when it seen their family members kidnapped, effectively. does are, is uncertain. wounded, or killed. Additionally, in- • Budget Security: Currently, the Overall, the Iraqi Inspectors General numerable man-hours have been lost to various OIGs receive their budget have come a long way since 2004. The checkpoints, car bombs, blackouts, cur- from their ministry. This impinges most progress has been made in the se- fews, and the very human hesitation that on their independence and hampers curity ministries, where the U.S. advi- one confronts when deciding whether to their ability to plan for the future. sory effort has been concentrated. The commute down highways colloquially Improvements in this area will re- GOI must commit itself to sustaining referred to as “IED alleys.” Progress, and quire the cooperation from the Min- these gains as U.S. support inevitably de- the lack thereof, must always be judged istry of Finance and the COR. creases. Other IGs, such as the IG for in light of these facts. • Pensions and Retirement: The the Ministry of Justice, have also accom- Today, an OIG is functional in ev- pension of an IG who retires today plished a great deal under challenging ery Iraqi ministry. Considering that the would be based on the salary he drew circumstances. entire concept of Inspectors General was at his previous government job. This Recent improvements in the secu- only introduced to the Iraq in 2003-04, is usually significantly lower than his rity environment have afforded the IG this is a significant achievement in and pay as an Inspector General. This community with the breathing room it of itself. But moving beyond this thresh- makes it difficult to attract skilled needs to focus on hiring and training old accomplishment, how successful has recruits from other GOI agencies. qualified staff, engaging with theCOR the introduction of an IG system to Iraq This issue will become more and on crucial legal reform issues, and broad- actually been? And what are the most more of a problem as new IGs are ening and deepening its relationships severe challenges the IGs face during this named over the coming 12 months. with COI and BSA. Under Saddam, the period of transition to greater Iraqi con- • Continuity and Succession: The ruling clique had a veritable license to trol of all domestic institutions? five-year terms of the initial batch of steal. And while corruption still plagues • Coordination with COI and BSA: IGs will expire in 2009. Iraq, the IGs have taken the first mod- This would include clarifying, prefer- The Prime Minister’s Office will then est steps toward revoking that license and ably through a formal memorandum renew or replace IGs’ whose terms have safeguarding the riches of Iraq for future of understanding, audit responsi- expired. generations.1 bilities between BSA and the IGs. Finally, Iraq’s IGs are at risk of hyper- Right now, it is unclear which insti- politicization. Elements within the GOI - Dr. Danny L. Athanasaw and Mr. Chris- tution audits which programs. Such recognize the potential of the IG system topher M. Griffith. The authors served with coordination could be accomplished and are trying to seize control of it in the U.S. Department of State in Embassy through the JACC, but since the furtherance of their own political goals Baghdad’s anticorruption office, where their governing statutes (the CPA Orders and objectives. It is imperative the In- portfolio included advising Iraq’s Inspectors and their eventual Iraqi-authored re- spectors General retain their individual General. Dr. Athanasaw spent approxi- placements) would be impacted, the independence and that no single IG mately thirteen months in Iraq (2007-08) COR’s Integrity Committee should comes to dominate his peers. It would and Mr. Griffith spent more than two years also play an active role. be especially damaging if the IGs were to there. Both authors currently work with • Planning: The individual IGs have fall under the control of a person or en- the Special Inspector General for Iraq Re- only recently begun to grapple with tity with close ties to the head of govern- construction in Virginia. This article is planning for the future. To date, ment. Such a situation with approximate based on their personal observations made outside of MOI and MOD, little the state of affairs under SaddamH ussein during their time with the Department of long-range strategic planning has and undercut the central philosophical State in Baghdad. been done. Budgets, hiring plans, principle behind the entire concept of and audit programs all need to be Inspectors General - independence. refined and set down on paper.

48 Journal of Public Inquiry Danny Athanasaw

Danny L. Athanasaw joined SIGIR as its Chief of Staff in March 2008. He advises the Inspector General on a broad range of managerial and technical issues related to SIGIR’s mission. His responsibilities also include strategic planning and the formulation of all internal policies. Previously, Dr. Athanasaw served in Baghdad as the Department of State’s Senior Consultant to the Iraqi Inspectors General. In that capacity, he counseled, trained, and mentored more than two dozen Iraqi IGs on ethics, transparency, investigations, inspections, and audits. As the Senior Consultant, Dr. Athanasaw built relationships between Iraq’s IGs and a wide array of U.S. and international institutions, including: the President’s Council on Integrity and Efficiency, the UnitedN ations, and the European Union. In the spring of 2007, the Department of State honored Dr. Atha- nasaw for his work in Iraq by presenting him with its Meritorious Honor Award. Prior to joining the Department of State, Dr. Athanasaw held a variety of senior positions within the Department of Trea- sury’s Office ofI nspector General. There, he regularly conducted detailed reviews of theD epartment’s finances and operations. He also managed the Inspectors General Auditor Training Institute where he supervised the training of up to 1,500 auditors and evaluators from federal and local governments. In all, Dr. Athanasaw has over 35 years of experience in the federal government. Dr. Athanasaw received his B.A. from the University of Tampa, his M.S. in Administration from Central Michigan University, and his Doctorate in Public Administration from Nova Southeastern University. He also taught undergraduate and graduate courses in accounting before deploying to Iraq in 2007.

Christopher M. Griffith currently serves as SIGIR’s Senior Program and Policy Manager. Prior to joining SIGIR, Mr. Griffith spent more than two years in Iraq with the U.S. Department of State. There, he served as a Senior Advisor to theE mbassy’s anticorruption and rule of law offices.E arlier in his career, Mr. Griffith spent several years working as a litigation attorney inN ew York City. He graduated with honors from Harvard and received his J.D. from Cornell Law School.

Christopher Griffith

Visit www.ignet.gov 49 Special Inspector General for Iraq Reconstruction

[TESTIMONY] Hard Lessons: The Iraq Reconstruction Experience Congressional testimony before the Commission on Wartime Contracting in Iraq and Afghanistan, Washington, D.C., February 2, 2009

By Inspector General Stuart W. Bowen, Jr. Chairman Thibault and members of the Commission on Wartime Contracting in Iraq and Afghanistan, thank you for in- viting me to testify on the latest lessons learned report from the Office of the Special Inspector General for Iraq Re- construction entitled Hard Lessons: The Iraq Reconstruction Experience.

Introduction and Background SIGIR is the successor organization to the Coalition Provisional Authority In- spector-General, which was established by Congress in November 2003 at the same time that it provided $18.4 billion for the Iraq Relief and Reconstruction Fund. The agency’s mandate, which 2008. Like SIGIR’s three previous les- Ministers Allawi and Ja’afari, to ensure has been expanded several times by Con- sons learned reports, Hard Lessons is not that we understood the Iraqi perspective gress, is to oversee more than $50 billion an audit. Rather, it seeks to meet our on the reconstruction program. Hard dollars appropriated for the relief and congressional mandate to provide “ad- Lessons also drew on the body of SIGIR’s reconstruction of Iraq. More than 90 vice and recommendations on policies audits, inspections, and investigations, percent of this money has gone into four to promote economy, efficiency, and -ef as well as reports from other oversight principal funding accounts: TheI raq Re- fectiveness” in programs created for Iraq’s agencies and investigative bodies. lief and Reconstruction Fund, the Iraq relief and reconstruction. At the outset of the reconstruction Security Forces Fund, the Commander’s The research for Hard Lessons com- effort in 2003, Lieutenant General Jay Emergency Response Program, and the prised hundreds of interviews with key Garner, who headed the Office ofR econ- Economic Support Fund. participants in the reconstruction effort struction and Humanitarian Affairs, said To fulfill its Congressional mandate, and the review of thousands of docu- that history would “judge the war against SIGIR conducts audits, inspections, and ments. SIGIR reached out to every Iraq not by the brilliance of its military investigations. Our office also initiated a senior U.S. official involved in rebuild- execution, but by the effectiveness of series of lessons learned studies to identi- ing Iraq and almost all agreed to be in- the post-hostility activities.” Hard Les- fy problems and propose solutions in hu- terviewed or provide useful responses to sons chronicles that postwar reconstruc- man resources, contracting, and program questions. In addition, SIGIR staff in- tion and, as the title suggests, it has been management in Iraq. Today, SIGIR is re- terviewed rank and file members of the very difficult. The United States govern- leasing Hard Lessons: The Iraq Reconstruc- military and civilian agencies as well as ment was unprepared and ill-equipped tion Experience, a detailed account of the private contractors who carried out the to mount a major contingency relief and U.S. effort to rebuild Iraq from prewar work of Iraq’s reconstruction. We talked reconstruction program in Iraq in 2003. planning in mid-2002 through the fall of with many Iraqi leaders, including Prime For the last six years we have been on a

50 Journal of Public Inquiry steep learning curve. ian Management Act of 2008”. This and Reconstruction The U.S. taxpayer has paid for a wide act, which incorporates a number of Operations array of programs and projects in Iraq, recommendations made by SIGIR in TheI raq experience gives rise to five core ranging from training the Iraqi army our previous lessons learned reports, principles that should form the founda- and police to building and repairing creates a structure to address the plan- tion of preparing for contingency relief the country’s infrastructure in the oil, ning, personnel, and program manage- and reconstruction operations: electricity, water, justice, transportation, ment needs of contingency relief and • Security is necessary for large-scale and health sectors. Appropriated funds reconstruction operations. Hard Lessons reconstruction to succeed; have supported programs to build de- concludes with some recommendations • Developing the capacity of people mocracy, enhance the rule of law, and to ensure that RSCMA fulfills its pur- and systems is as important as bricks improve the ability of Iraq’s national, pose. and mortar; provincial and local governments to ex- Divided in five parts, Hard Lessons • Soft programs serve as an important ecute their budgets. Some of these proj- begins with the blinkered and disjointed complement to military operations ects have succeeded, but, as Hard Lessons prewar planning that occurred between in insecure environments; documents, many did not. September 2001 and April 2003 when • Programs should be geared to in- ORHA deployed to Baghdad. Part digenous priorities and needs; and Central Questions and Two covers the 14-month period dur- • Reconstruction is an extension of Answers ing which the Coalition Provisional political strategy The central questions addressed by this Authority governed Iraq. The CPA’s report are: why did the U.S. reconstruc- ambitious vision, which focused on Security is Necessary for Large-Scale tion effort so often fail to achieve its improving Iraq’s infrastructure, became Reconstruction to Succeed goals? And, what can our government the foundation for a greatly expanded A successful reconstruction program re- do to ensure that it has the capacity to reconstruction program. The United quires a balancing of security, political, manage future contingency operations? States struggled over the next four years and economic interests. Reconstruction Hard Lessons answers the first ques- to develop and implement a strategy cannot proceed on a large scale without tion by reviewing the chronology of the for reconstructing Iraq as a stable and the requisite security to protect those reconstruction effort and examining the democratic nation on the path to pros- responsible for implementing and over- challenges our government faced as the perity. Deteriorating security both in- seeing projects. When embarking on a rebuilding program expanded from the formed and complicated every decision. contingency relief and reconstruction $2.4 billion envisioned by prewar plan- Part Three, examines the repeated re- operation, the U.S. government should ners to twenty-five times that much. alignment of U.S. funding to address analyze whether and at what costs those The report answers the second question the grave security threats posed by an security risks can be mitigated. Projects by identifying 13 hard lessons we must exploding insurgency. Employing a va- should only proceed when senior lead- learn from the Iraq reconstruction expe- riety of tactics to address the growing ers determine that the strategic objec- rience. violence the United States poured mon- tives they seek to fulfill outweigh the Former Secretary of Defense Don- ey and – finally – more troops into the risk of failure and the costs of mitigating ald Rumsfeld and former Secretary of country, all the while trying to rebuild security risks. State Condolezza Rice have both said Iraq’s physical infrastructure, its security that United States government did not forces, and its capacity to govern. Part Developing the Capacity of People and have the right structure for conducting IV chronicles the strongly-resourced Systems is as Important as Bricks and contingency relief and reconstruction surge, and the rise of Iraq’s role in its Mortar operations. Consequently, as Rumsfeld own reconstruction. The CPA’s reconstruction program- fo told SIGIR, “The U.S. government has Part V lays out SIGIR’s 13 major cused chiefly on large infrastructure had to rely on quickly assembled ad hoc findings – the hard lessons of the Iraq projects aimed at improving the delivery efforts such as ORHA to coordinate re- reconstruction experience. These find- of essential services. Little of its money construction.” Nearly everyone SIGIR ings are grouped in three categories was set aside to boost government ca- has spoken with agrees that the United which cover the principles, organization pacity. The failure to fund capacity States must reform the way it manages and mechanics of contingency relief and building programs alongside infrastruc- relief and reconstruction. reconstruction operations. ture construction contributed to a crisis The U.S. Congress has already passed in sustainability that continues to this an important reform measure with “The First Principles for day. A robust capacity-development Reconstruction and Stabilization Civil- Contingency Relief program implemented from the outset

Visit www.ignet.gov 51 of the reconstruction effort could have The U.S. Government did not have the prevented this. Such a program should administrative structure and regulatory be an essential component of any future framework needed to effectively mount contingency relief and reconstruction a large-scale reconstruction program in operations. Iraq. SIGIR has five major findings concerning the organization of relief and re- Soft Programs Serve as an Important construction operations: Complement to Military Operations in • Executive authority below the Presi- Insecure Environments dent is necessary to ensure the ef- An emerging lesson from Iraq is that fectiveness of contingency relief and when violence is pervasive, soft programs reconstruction operations; – like those orchestrated by USAID and • The U.S. government should de- Provincial Reconstruction Teams – are velop new wartime contracting rules especially important in advancing U.S. that allow for greater flexibility; goals. Working through indigenous net- • Uninterrupted oversight is essential works seems to increase community ac- to ensuring taxpayer value in con- ceptance and provide a higher and more tingency operations; The U.S. Government Should Develop lasting degree of local security than mili- • An integrated management structure New Wartime Contracting Rules that tary or private-security protection alone and management information sys- Allow for Greater Flexibility could achieve. Because such programs tem are needed to effectively oversee The U.S. needs contracting reform that operate out of view of most U.S. person- interagency reconstruction efforts; enables U.S. dollars to be more effec- nel, the selection of metrics and careful and tively used in contingency relief and monitoring of expenditures are critical to • Outsourcing management to con- reconstruction operations. A “Contin- ensuring value for the U.S. taxpayer. tractors should be limited because gency FAR” should be developed by the it complicates lines of authority in Congress and the executive branch. The Programs Should be Geared to contingency reconstruction opera- standard FAR’s complicated contracting Indigenous Priorities and Needs tions. regulations, which can be further modi- Host country buy-in is essential to recon- fied by agency rules, should be knitted structions’ long-term success. In many Executive authority below the President into a single set of simplified, uniform cases there was a lack of sufficient Iraqi is necessary to ensure the effectiveness of rules for conflict environments that all participation in deciding how or what to contingency relief and reconstruction contracting agencies would have to use. reconstruct. Detailed joint planning with operations A much larger corps of well-trained and Iraqi officials – perhaps the most impor- The role of executive authority – and the experienced contracting officers must be tant prerequisite for success after security lack thereof – over interagency coordi- developed and maintained for deploy- – only gradually improved over time. nation lies at the heart of the failures in ment during all phases of contingency the Iraq reconstruction program. The operations, including planning. Simi- Reconstruction is an Extension of question of who was in charge, both in larly, a diverse pool of contractors with Political Strategy Washington and in Baghdad, was fiercely expertise in post-conflict reconstruction If war, as Clausewitz famously said, is contested throughout the reconstruction should be pre-competed and pre-quali- an extension of politics by other means, effort. The lack of unity of command fied to be available when a contingency so too is relief and reconstruction an in Iraq meant that unity of effort was operation begins. extension of political, economic and seldom achieved. Too often, programs military strategy. There is a big differ- were designed to meet agency goals rath- Uninterrupted Oversight is Essential ence between pursuing reconstruction er than U.S. interests. Stronger integra- to Ensuring Taxpayer Value in to catalyze long-term economic growth tion was needed not only between the Contingency Operations and deploying reconstruction to support military and civilian agencies, but also In the absence of effective management a counterinsurgency campaign. among the civilian agencies themselves. by government officials, contractors in Reform efforts should press for the cre- Iraq were often left in dangerous circum- Organizing the ation of structures that will promote the stances to carry out insufficiently defined Interagency System development of a unifying strategy with contracts written by inexperienced con- for Contingency Relief clearly delineated agency responsibilities tracting officers who lacked situational and Reconstruction and adequate authority to enforce its ex- awareness. Uninterrupted oversight by Operations ecution. inspectors general and the Congress – ac-

52 Journal of Public Inquiry raised questions regarding what consti- of the several chiefs of mission to exer- tuted an inherently government activity, cise their authority made the effective and the extent to which oversight author- cross-jurisdictional management of perity can be delegated to a contractor. sonnel almost impossible. A uniform set of human resource rules that would ap- Contracting Mechanisms ply to all federal personnel deployed for and Human Resources contingency operations is needed, as are in Contingency Relief stronger recruiting mechanisms, a large and Reconstruction stable of ready-to-deploy personnel, and Operations a plan for managing long-duration con- SIGIR has identified three areas where tingencies. the United States must improve its ability to harness the personnel resources it The U.S. Government Must Strengthen needs to implement large-scale recon- its Capacity to Manage the Contractors struction programs: that Carry Out Reconstruction Work in • The U.S. government needs a new Contingency Relief and Reconstruction companied by adequately staffed quality- human-resources management sys- Operations control and quality-assurance programs tem capable of meeting the demands Once Baghdad fell and the looting began, – is essential to ensuring the efficient and of a large-scale contingency relief the scope of reconstruction quickly over- effective use of taxpayer dollars. and reconstruction operation; whelmed the U.S. government’s standing • The U.S. government must strength- capacity to respond. The post-Cold War An Integrated Management Structure en its capacity to manage the con- downsizing of USAID and military con- and Management Information System tractors that carry out reconstruc- struction capacities increased the U.S. are Necessary to Effectively Oversee tion work in contingency relief and government’s reliance on the private sec- Interagency Reconstruction Efforts reconstruction operations; and tor. Not even the Pentagon could mobi- After the reconstruction program began • Diplomatic, development, and area lize contractors fast enough. The deci- in 2003, at least 62 offices and agencies expertise must be expanded to en- sion to reduce the number of warranted played some role in managing projects. sure a sufficient supply of qualified contracting officers during the ten years There were, however, no interagency personnel in contingency recon- preceding the Iraq invasion proved par- project management and information struction operations. ticularly consequential. It became clear systems that could coordinate the activi- that the U.S. and international contrac- ties of the hundreds of firms and sub- The U.S. Government Needs a New tors hired by the Defense Department contractors executing construction work Human-Resources Management System and the CPA were not ready to quickly orders at thousands of sites across Iraq. Capable of Meeting the Demands of a mount a large-scale reconstruction op- Integrated systems could have helped to Large-Scale Contingency Relief and eration in a dangerous security environ- ensure that programs and projects were Reconstruction Operation ment. planned and completed with effective Supplying adequate numbers of person- communication, control, and coopera- nel with the requisite expertise emerged Diplomatic, Development, and tion. as a critical bottleneck early in the re- Area Expertise Must be Expanded construction effort. Although person- to Ensure a Sufficient Supply of Outsourcing Management to nel recruitment improved somewhat as Qualified Personnel in Contingency Contractors Should be Limited the reconstruction enterprise matured, Reconstruction Operations Because it Complicates Lines at no time were there sufficient numbers The Iraq mission suffered from a short- of Authority in Contingency of experienced advisors to meet Iraq’s age of personnel with diplomatic skills, Reconstruction Operations critical capacity-building needs. Wash- language and cultural expertise, and de- By law, contractors report solely to the ington was unable to draw effectively velopment experience. The Iraq recon- government contracting officers or the on the extraordinary talent available in struction experience illustrates the extent designated representatives of the agency America to form a cadre of workers that to which civilian agencies lack capacity to that awarded the contract. In Iraq, the combined private-sector expertise with project power abroad. Cuts at USAID, proliferation of contractors serving as academic knowledge and bureaucratic for example, have halved the number of managers and advisors in each of the of- skill. Further, the failure to provide permanent government employees at that fices managing reconstruction projects unambiguous authority to the Chief of agency. To remedy this weakness, Secre- Mission in NSPD 36 and the reluctance tary of Defense Robert Gates has called

Visit www.ignet.gov 53 for a “dramatic increase in spending on If Congress expects the RSCMA to suc- Unity of Effort the civilian instruments of national se- ceed, it should consider funding the ini- The Iraq reconstruction experience curity.” The Congress and the President tiative. makes clear that contingency relief and should consider a long-term strategy for reconstruction operations require coordi- building technical and area expertise in Second, more must be done to ensure nated and cross-jurisdictional structures, the government’s civilian diplomatic that the interagency coordination and planning, resources, and management. and development agencies and creating integration required by RSCMA actu- The Iraq endeavor fell short on many mechanisms for deploying such capabili- ally occurs occasions because the absence of unity ties abroad in times of peace and crisis. Even though the law now defines the role of command prevented unity of effort. of the S/CRS, its ability to foster change Too often, agencies and offices worked Reforming Contingency across the government remains unproven in their respective stovepipes without en- Relief and Reconstruction and many of the same structural obstacles suring that their activities fully support- Operations still exist. Contingency relief and recon- ed U.S. goals and objectives. As General On October 14, 2008, President George struction operations are not inherently Petraeus told me, “State is never going to W. Bush signed into law, as part of the the function of any single department. put an ambassador under a general, and National Defense Authorization Act, The TheD efense Department, usually the DoD is never going to put a general un- Reconstruction and Stabilization Civil- largest player in contingency relief and re- der an ambassador.” A new integrated ian Management Act of 2008, the most construction, has pursued its own course interagency system for contingency relief significant congressional legislation to towards enhancing its capacities for such and reconstruction operations is neces- date regarding the structure of and plan- operations. DoD Directive 3000.05, is- sary to ensure future success. ning for contingency relief and recon- sued in November 2005, provided that The Iraq reconstruction experience struction operations. The Act places “stability operations are a core U.S. mili- demonstrates that the U.S. government responsibility for preparing the civilian tary mission” that “shall be given a prior- was neither prepared for nor able to re- side of contingency relief and recon- ity comparable to combat operations and spond quickly to the ever-changing de- struction operations within the Depart- be explicitly addressed and integrated mands of the contingency relief and re- ment of State and directs the Secre- across all DoD activities.” The direc- construction mission we faced. Reforms tary of State, in consultation with the tive gave the military departments the along the lines of – or going beyond USAID Administrator, to develop an responsibility to conduct contingency – RSCMA are a prerequisite for future interagency strategy for executing recon- relief and reconstruction operations if success. The inevitability of future construction and stabilization operations. civilian agencies cannot. In response to tingency relief and reconstruction opera- RSCMA establishes in law reforms this directive the Army has made stability tions – whether they result from political that President Bush began when he operations a central part of its doctrine, conflicts or natural disasters – demands signed NSPD 44, which assigned the and the U.S. Army Corps of Engineers that the U.S. government develop new State Department the lead in managing has strengthened its engineering support ways to prepare for the inevitable crises government-wide civilian preparation to combatant commands and enhanced and project civil-military power to man- for contingency operations. The State its own capacity to deploy divisions spe- age them. Department’s Coordinator for Recon- cializing in post-conflict reconstruction. The President and the Congress should struction and Stabilization (S/CRS) now Nevertheless, progress towards meeting take further steps toward achieving this has the responsibility to monitor crises the DoD directive’s goals has been un- goal. Time and resources must be devot- worldwide, prepare contingency plans, even. ed to developing a sound doctrine and to and recruit, train and equip personnel increasing the U.S. government’s capac- for relief and reconstruction missions. Third, the Administration should work ity to conduct relief and reconstruction Without adequate funding and a large to revise and integrate the civilian and operations. Great effort, reflection, and staff, S/CRS will not be able to accom- military components of contingency imagination could put the Iraq recon- plish the tasks assigned to it. Three things and reconstruction operations struction experience to good use by de- are necessary to fulfillR SCMA’s purpose: The President and the relevant cabinet veloping new approaches and structures secretaries should ensure that all agen- build on the hard lessons learned in Iraq. First, the Congress must provide appro- cies – especially State and Defense – bet- 1 priations suitable to meet the RSCMA ter integrate the structure and resources mandate for contingency relief and reconstruction operations.

54 Journal of Public Inquiry Stuart W. Bowen, Jr.

Stuart W. Bowen, Jr. was appointed Inspector General for the Coalition Provisional Authority in January 2004. Since October 2004, he has served as the Special Inspector General for Iraq Reconstruction. As the “taxpayer’s watchdog” in Iraq, Mr. Bowen oversees over $47 billion in U.S. appropriated reconstruction funds, including the Iraq Relief and Reconstruction Fund, the Iraq Security Forces Fund, the Economic Support Fund, and the Commander’s Emergency Response Program. Since January 2004, Mr. Bowen has made 20 trips to Iraq, managed the production of over 240 audits and inspections, issued 3 comprehensive lessons learned reports, and provided 15 quarterly reports on Iraq reconstruction to the Congress. In 2006 the President’s Council on Integrity and Efficiency awarded Inspector General Bowen and SIGIR the Gaston L. Gianni, Jr. Better Government Award for “demonstrating integrity, determination, and courage in providing independent oversight and unbiased review of United States’ reconstruction efforts in Iraq.” Inspector General Bowen’s public service career includes service in The WhiteH ouse as Deputy Assistant to the President and Deputy Staff Secretary, Special Assistant to the President and Associate Counsel. From 1994 to 2000, he held a variety of positions on Texas Governor George W. Bush’s staff, includingD eputy General Counsel, Deputy General Counsel for Litigation, and Assistant General Counsel. Mr. Bowen previously served as an Assistant Attorney General of Texas and as a Briefing Attorney to Texas Supreme Court Justice Raul Gonzalez. Prior to his appointment as Inspector General, Mr. Bowen was a partner at Patton Boggs, LLP, in its Washington, D.C. office. Mr. Bowen is licensed by the Texas State Bar, Board Certified in Administrative Law by theT exas Board of Legal Specialization, and admitted to practice before the United States Supreme Court, several other federal courts, and all Texas state courts. Mr. Bowen served four years on active duty as an intelligence officer in the U.S. Air Force, rising to the rank of Captain. He holds a B.A. from the University of the South and J.D. from St. Mary’s Law School.

Visit www.ignet.gov 55 “If war, as Clausewitz famously said, is an extension of politics by other means, so too is relief and reconstruction an extension of political, economic and military strategy.” -Excerpt from Hard Lessons: The Iraq Reconstruction ExperienceT estimony by Stuart W. Bowen, Jr. (p. 50-55) Commission on Wartime Contracting in Iraq and Afghanistan

1On July 18, 2007, Senators Jim Webb (D-VA) and Claire Mc- cal Year 2008. Following a Senate floor debate September 27, Caskill (D-MO) introduced a bill to establish an independent, 2007, the landmark provision won broad bipartisan approval bipartisan Commission on Wartime Contracting to study U.S. and was incorporated in the defense bill. wartime contracting in Iraq and Afghanistan. The bill was in- Congressman John Tierney (D-MA) also introduced lan- spired by the work of the “Truman Committee” which con- guage similar to the Webb-McCaskill amendment in the House ducted hundreds of hearings and investigations into govern- of Representatives in September 2007 as a stand-alone bill. The ment waste during and after World War II that resulted in an bipartisan legislation was supported by key taxpayer watchdog estimated savings of more than $178 billion (in today’s dollars) groups including: the Project on Government Oversight, Tax- to the American taxpayer. payers for Common Sense, the Government Accountability This bill was the first joint initiative of freshmen- sena Project, OMB Watch, Common Cause, U.S. PIRG, and Iraq tors, including Senators Webb, McCaskill, Amy Klobuchar and Afghanistan Veterans of America. (D-MN), Bernie Sanders (I-VT), Jon Tester (D-MT), Sherrod The FY2008 NDAA, originally identified as H.R. 1585, Brown (D-OH), was subsequently Sheldon White- Commission renumbered H.R. house (D-RI), Ben 4986 after H.R. Cardin (D-MD), 1585 was vetoed and Bob Casey by President Bush (D-PA). Majority on December 28, Whip Senator Dick 2007. On Janu- Durbin, Armed ary 16, 2008, H.R. Services Com- 4986 was passed by mittee Chairman the House of Rep- Senator Carl Levin, resentatives and, and Senators Tom on January 22, by Carper, John Kerry, the Senate. The bill Diane Feinstein, was signed into law Barbara Boxer, Ba- by President Bush rack Obama and January 28, 2008. Tim Johnson also However, in sign- served as co-spon- ing H.R. 4986, the sors of the original President identified amendment, filed a number of provi- as no. 2206, to the sions of the Act, in- Commissioners hear testimony at the Feb. 2, 2009, hearing. Left to right: National Defense cluding section 841 Robert Henke, Clark Kent Ervin, Chairman Michael Thibault, Dov Authorization Act (which establishes Zakheim, Linda Gustitus, Charles Tiefer (NDAA) for Fis- the Commission on 1 www.wartimecontracting.gov, “Background Information and Wartime Contract- Chronology” 56 Journal of Public Inquiry -Excerpt from Hard Lessons: The Iraq Reconstruction ExperienceT estimony by Stuart W. Bowen, Jr. (p. 50-55)

DoD Principal Deputy Inspector General Thomas F. Gimble shakes hands with Commission Co-Chair Michael J. Thibault after the hearing. In the background is Commissioner Clark Kent Ervin

ing), that he claimed “purport to impose requirements that Similarly, congressional testimony by the Department of De- could inhibit the President’s ability to carry out his constitu- fense Inspector General (DoD IG) staff in May 2008 revealed tional obligations to take care that the laws be faithfully ex- that its review of 702 U.S. Army commercial payments in Iraq, ecuted, to protect national security, to supervise the executive Kuwait, and Egypt indicated the Army made an estimated $1.4 branch, and to execute his authority as commander in chief.” billion in contract and vendor payments that lacked minimum In his signing statement the President continued, “The execu- supporting documentation and information for proper pay- tive branch shall construe such provisions in a manner consis- ment. When payments were not properly supported, the Army tent with the constitutional authority of the President.” lacked assurance that funds were used as intended. The DOD The law establishing the Commission defines a broad and IG also estimated $6.3 billion in Army commercial payments substantive mandate. The Commission is required to study, had the minimum supporting documents and information for assess and make recommendations concerning wartime con- a proper payment, but lacked support needed to comply with tracting for the reconstruction, logistical support, and the per- various laws and regulations. formance of security functions in Iraq and Afghanistan. The To achieve its objectives, the Commission is empowered to Commission’s major objectives include a thorough assessment hold hearings, take testimony, receive evidence, and provide of the systemic problems identified with interagency wartime for the attendance and testimony of witnesses as well as the contracting, the identification of instances of waste, fraud and production of documents. The Commission is able to secure abuse, and ensuring accountability for those responsible. from any agency of the federal government any information or Numerous audits, investigations, and congressional hearings assistance that it considers necessary to enable it to carry out have documented the magnitude of the problem. The Defense its mandate to study, assess, and to make recommendations Contract Audit Agency estimated in 2007, for example, that to Congress on wartime contracting. The Commission is also there were more than $10 billion in questioned and unsup- empowered to refer to the U.S. Attorney General any violation ported costs relating to the Iraq reconstruction and military or potential violation of law it identifies. The Commission is support contracts valued at $57 billion that it had reviewed. required to make two reports to Congress: an interim report in The agency noted that contracts worth $300 billion remained 2009, and a final report in 2010. to be audited. Visit www.ignet.gov 57 Office of Inspector General Social Security Administration

[SPEECH] Immigration Enforcement and Social Security: An IG Perspective Every year SSA receives 245 million wage reports from employers representing 4 trillion dollars in earnings

By Inspector General Patrick P. O’Carroll Condensed from a speech delivered by Pat- rick P. O’Carroll, Jr., Inspector General for the Social Security Administration, on November 18, 2008 at a Federal Bar Asso- ciation seminar, Worksite Enforcement and Immigration, Loyola University, Chicago, Illinois.

It’s a pleasure to be here with you in Chicago, and I’m honored to have been asked to speak. You’ve had a lot of ex- citement here in Chicago lately, from the Cubs’ run for the World Series to a native son’s first appearance as President- elect. I can’t compete with such momen- tous events, but I do hope to give you an understanding of how the mission of my office intersects with the topic of your mission intersects with the missions of in the context of immigration and work- conference—workplace enforcement other agencies. site enforcement. and immigration. Today, we’re discussing immigration, Federal inspectors general serve as The federal government, with its near- and where our jurisdiction intersects watchdogs over Executive Branch agen- ly 3 million-strong workforce can feel with that of Immigration and Customs cies, in an effort to increase public ac- somewhat amorphous, with only vague Enforcement. But we could just as easily countability and transparency in Gov- distinctions between one agency and the be talking about identity theft, where we ernment operations. Our mission is to next. The truth, however, is that Con- intersect with the Federal Trade Com- help improve our agencies’ programs and gress has done a good job of giving Exec- mission, disaster-related fraud (such as in operations by conducting audits and in- utive Branch agencies their own patches the wake of Katrina), where we intersect vestigations aimed at preventing and de- of earth to tend, so to speak. with FEMA, or any number of other ar- tecting fraud, waste, and abuse. For the Social Security Administra- eas in which the SSN is in play. TheO ffice of theI nspector General, or tion, that patch of earth is administering Before I go too far, though, I want OIG, for SSA was created in 1995, when the programs enacted by the Social Se- to start by placing this discussion in con- SSA became an independent Federal curity Act in 1935—as well as programs text. I realize that some of you may not agency, separate from the Department of added to that mandate in the years since. be familiar with the role of an inspector Health and Human Services. Today we One critical component of that mission general or with our organization specifi- are a team of 575 auditors, investigators, involves the integrity of the Social Secu- cally. Then I’ll zero in on how we work attorneys, and others which produced rity number, or SSN. And as the uses of with the Social Security Administration, over 100 audit reports and closed over the SSN have expanded over the years, or SSA, and other agencies to combat 10,000 investigations last fiscal year. so has the number of places in which our SSN misuse in all of its forms, including These are big numbers—but let me put

58 Journal of Public Inquiry those accomplishments in perspective. cal law enforcement agencies which have benefits they have earned. We oversee an agency that manages the taken the lead on fighting bank fraud, Every year, SSA receives 245 million largest social insurance program in the mail fraud, and other identity theft wage reports from employers, represent- world. Last year, SSA paid 614 billion crimes not directly related to Social Se- ing 4 trillion dollars in earnings. Ameri- dollars to over 50 million people. Our curity. This refocusing of our resources cans must be confident in the knowledge challenging mission is to protect and im- has allowed us to more specifically tar- that SSA will correctly record those earn- prove SSA’s already well-oiled machine. get SSN misuse that directly affects SSA’s ings, and that they will get the full ben- Each year, we receive upwards of programs and its beneficiaries. For ex- efits due them. When earnings are in- 100,000 allegations of Social Security- ample, we often find that individuals will correctly recorded, the individual worker related fraud, and I mentioned that last misuse SSNs in connection with receiv- and all taxpayers bear the cost of getting year, we closed over 10,000 investiga- ing government assistance, medical ser- the record corrected. tions. Only about 9 percent of those cases vices, or other benefits. Our work in this area reaches in many were classified as Social Security number Over the last 3 years, for example, directions, and one of those paths inter- misuse, while 70 percent were related to we have participated on a Department sects with the mission of Immigration fraud in SSA’s disability programs—both of Justice task force dedicated to com- and Customs Enforcement at the De- Disability Insurance, which is an earned bating fraud related to Hurricanes Ka- partment of Homeland Security. When benefit, and Supplemental Security In- trina and Rita. In the storms’ wake, employers or self-employed people report come, for low-income disabled individu- many individuals took advantage of the earnings on a W-2 form or 1099, SSA als. chaotic situation and defrauded disaster validates the name and Social Security Nevertheless, SSN misuse has certain- assistance programs. There were people number against its own records. When ly been one of our most enduring chal- who claimed they were living in a hurri- an earnings report contains a name or lenges over the 13 years of our existence. cane-affected area when they never had. SSN that does not match SSA’s records, Despite its relatively smaller share of our Some individuals filed dozens of false and the discrepancy can’t be resolved, caseload, maintaining the integrity of the claims using made-up names and SSNs. SSA posts those earnings to a virtual re- Social Security number remains a key And many cases involved pure identity pository known as the Earnings Suspense part of our mission, because of its role theft—someone pretending to be an- File, or ESF. as the cornerstone of SSA’s programs and other individual who rightly deserved Sometimes the error is due to a sim- operations. the funds. ple discrepancy in SSA’s records—for This 9-digit identification number was Most of these cases involved some instance, when a woman marries and created in 1936 for only one purpose: to degree of Social Security number misuse, changes her name, but neglects to notify uniquely identify individuals so that SSA and we also found that many of those SSA. If her employer reports her wages could accurately track their earnings and suspected of fraud against FEMA and under her new name, that name won’t contributions, and pay them benefits HUD were also Social Security benefi- match up with her SSA record, so the when the time came. Of course, we all ciaries or SSI recipients. As a result, we Agency may post those earnings to the know that today, Social Security num- have been involved in a number of task ESF. Of course, sometimes these errors bers are used for much more than that force investigations. Overall our hurri- are caught by the beneficiary, and the original purpose. You are just as likely cane fraud investigations have led to 52 earnings record can be corrected. to have to supply your SSN to go to the convictions and the recovery of signifi- However, most wage items remain in doctor or buy a cell phone, as to report cant government funds. the ESF. As of October 2006, the ESF income to the IRS and Social Security or Of course, Social Security number had accumulated about 586 billion dol- apply for retirement benefits. misuse also occurs for the purpose of ob- lars in wages and 264 million wage items. As identity theft appeared on the ho- taining a job in the United States. The This creates an enormous resource drain rizon and became the crime of the new need to maintain the accuracy and infor SSA and creates the risk that untold century, we found ourselves investigating tegrity of SSA’s records gives the OIG a numbers of individuals will not receive more and more SSN misuse cases that stake in identifying and preventing this the benefits they are due at retirement, had no true bearing on SSA’s programs type of SSN misuse. In fact, I believe upon becoming disabled, or as the result and operations. In recent years, however, our efforts are critical to maintaining the of another life-altering event. I’ve led the OIG in an effort to focus our integrity of the entire Social Security sys- We have conducted substantial audit resources on combating only that SSN tem. That’s because the system is based work related to the Earnings Suspense misuse which is directly linked to SSA’s on SSA’s ability to match workers’ earn- File, in an effort to understand why wage programs and operations. ings to their Social Security records, so reports end up in the file. The most well- We now generally refer identity theft that when those workers become disabled known of those audits came up with a allegations to those Federal, State and lo- or retire, they will receive the monthly list of 100 employers with the most wage

Visit www.ignet.gov 59 items in the ESF, and analyzed those Another administrative challenge is misuse. We dis- items for errors or SSN misuse. We posed by the fact that any unauthorized covered that up found that many of the 100 employers worker who later becomes authorized to 85 percent of were in the service, restaurant, and ag- to work can go to SSA and request that the company’s riculture industries. We also found that wages in the ESF be attached to his or employees were SSN misuse seemed to be the reason for her earnings record. So even though the using SSNs not most of the mismatched records. wages were earned and reported under assigned to them We then conducted an audit focusing another SSN, that person can qualify by SSA. As ICE on just the service, restaurant, and agri- for benefits if they can prove that they pursued 360 culture industries. We analyzed a sample earned the wages and are now authorized unauthorized of the wage reports in the ESF that were to work. workers, our submitted by employers in these indus- In light of the direct impact on SSA agents sought tries. Twenty-five percent of the SSNs programs and operations, we do choose out and arrested had never been assigned, and 75 percent to participate with ICE to a very limited the company’s belonged to someone else—in fact, many extent in worksite enforcement investi- owner and three belonged to young children or deceased gations related to employment-related managers for individuals. That audit also found that SSN misuse. Specifically, we choose to conspiracy. 48 percent of wage items contributed by participate only in those worksite en- We also ar- agricultural employers during the three- forcement operations where an employer rested a previously deported man who year period we reviewed failed to match is complicit in providing its workforce was running a counterfeit document en- SSA records. with fraudulent SSNs. terprise out of a Boston-area storefront. Thus, while many of the ESF entries These employers harm the integrity The company was referring workers to may be the result of simple error, we be- of not only Social Security’s records, but the counterfeiter to obtain false docu- lieve that the main contributor to the also its operations, by intentionally re- ments that the company then accepted ESF is unauthorized work by nonciti- porting false information year after year for hiring and wage-reporting purposes. zens. Unfortunately, we also determined for dozens or even hundreds of individu- The counterfeiter eventually pled guilty that there’s little SSA can do to stem the als, and sometimes even by supplying and was sentenced to time served, and tide of erroneous wage reports. Although counterfeit Social Security cards. transferred to ICE for deportation pro- we recommended that SSA assist IRS in Even in those investigations we join, ceedings. The company’s owner and developing an employer penalty mecha- the OIG’s role is often limited. But managers also pled guilty and are await- nism, we’re not aware that any such ef- when we can stop employers from pro- ing sentencing in Federal court. fort has been undertaken. viding workers with fictitious SSNs or As you can see, our agents often find To this point, I’ve spoken about em- the SSNs of other people, the impact on themselves working to combat docu- ployment-related SSN misuse in general, SSA programs and operations can be sig- ment fraud, which can go hand-in-hand but that broad term encompasses many nificant. with SSN misuse. Unfortunately, there variations. An individual may create an In one egregious case, ICE requested is a profit to be made by counterfeiting SSN out of thin air to supply to an em- our assistance with an investigation of Social Security cards and immigration ployer, or use a deceased or living rela- a Boston company with a Department documents and selling them to unau- tive’s number, or they may have bought of Defense contract worth 100 million thorized workers. As a result, the SSA a fake Social Security card on the street. dollars. This company manufactured, OIG participates on ICE’s Document In rare instances, they may have even ac- among other things, bulletproof vests and Benefit Fraud task forces in major quired a genuine number from an SSA and backpacks for military personnel in U.S. cities, including Washington, D.C. employee. Iraq and Afghanistan. ICE suspected the There, as part of a continuing investiga- When an unauthorized worker uses an company’s owner and plant managers of tion known as Operation Card Shark, SSN that belongs to a living individual, conspiring to hire unauthorized workers our agents have helped dismantle seven that individual and SSA face administra- on a large scale. fraudulent document laboratories and tive challenges in getting his or her earn- We joined the ICE investigation, and secure convictions for 60 individuals to ings record corrected. And if the error in reviewing SSA’s records, we found that date. is never caught or the record corrected, over five years, the company had repeat- As part of another task force led by the true number holder may be paid the edly failed to respond to SSA’s corre- State law enforcement officials, we also wrong amount of benefits, which over a spondence informing them of erroneous helped break up an extensive document lifetime could mean millions of dollars wage reports. What’s more, they never mill operation run by MS-13 and other lost to taxpayers. took any corrective action to prevent the Latino gangs throughout New York City

60 Journal of Public Inquiry to the records of children ages 7 to 13. be applying for new jobs. Also ignored Although SSA flags earnings posted to is the important fact that many of the er- records of children 6 or younger, this rors are caused by individuals’ failure to process does not cover ages 7 to 13. update their SSA We found that 88 percent of the earn- records when they get married or become ings we reviewed did not appear to result legally authorized to work. from legitimate employment. Many of Of course, all Social Security numbers the employers were in industries that do are vulnerable to misuse, but it’s mislead- not normally employ children, because ing to imply that using E-Verify will risk they offer jobs not allowable for children innocent employees’ jobs. All employees under guidelines set by the Department would be given ample opportunity to of Labor. correct their records with SSA before an SSA agreed with recommendations employer could take any adverse action. we made in that report, including that Nevertheless, we are fighting an uphill the Agency explore the idea of legislation battle. No matter how many employers to allow the disclosure of SSA informa- we arrest and how many audit reports tion that may help other Federal agen- we issue, we won’t solve the problem of and New Jersey. After months of under- cies more effectively accomplish their employment-related SSN misuse and cover operations and surveillance, we ar- missions. One such data-sharing effort discrepant earnings records until and rested dozens of people, and seized thou- already underway is the Department of unless we address our inability to share sands of fake Social Security cards. Homeland Security’s E-Verify program. information among the various Federal As we delve deeper into these issues, Because SSA data is the foundation of agencies with a role in this process. we’ve found that many unauthorized this effort, we have been involved in Rest assured that we will continue workers have found a new way to slip evaluating and providing feedback. our audit work in these areas. We will through the cracks. In the past, they gen- In fact, last year, at the request of continue our investigations, such as erally used fake documents containing Congress, the OIG undertook three such those I’ve described today. In particu- invalid SSNs or SSNs that did not match evaluations, focusing on data accuracy lar, we will continue to pursue employ- the names on the documents. But now and security. The first of these Con- ers who knowingly provide false SSNs or the trend is toward using entire identities gressional Response Reports, Accuracy documents to employees and false wage of actual United States citizens. of SSA’s Numident File, has been oft- reports to SSA. And we will continue Identity theft rings obtain personally quoted by the media—and even more to work with SSA, Congress, and other identifiable information, and then sell frequently mis-quoted. agencies to make these efforts more - ef documents containing these valid iden- In that study, we found errors in SSA’s fective. tities to unauthorized users. This new records that might result in what we call I should note that all of the audit work scheme has evolved as a way of circum- a “tentative non-confirmation” of an em- I’ve mentioned today is available on our venting employer verification services, ployee’s work authorization. The media Web site, www.socialsecurity.gov/oig. which look for a match between the in- often cite that finding as evidence that TheOI G, as an oversight body, will con- dividual’s name and SSN. E-Verify will cause innocent workers to tinue to do everything it can to ensure This is our newest employment-re- be fired, and employers to be sued for the integrity of the Social Security num- lated challenge, because there’s no way discrimination. ber. We will also encourage its protec- to identify this type of fraud unless the Unfortunately, they’re taking our find- tion by private and public entities; and true number holder comes forward to ings out of context. Our auditors esti- provide meaningful sanctions for those report discrepancies in his or her earn- mated that about 4 percent of all SSA’s who fail to protect it or who misuse it ings record. And because some of these Numident records contained discrep- themselves. number holders are children, we may not ancies in name, SSN, date of birth, or Thanks once again to the Federal have that opportunity until they enter citizenship status that could result in a Bar Association for its efforts to foster the workforce years from now. mismatch if submitted through E-Verify. a productive exchange on this issue of Although detecting this fraud, and What the media fail to mention is that critical importance. I’m honored to have then investigating to a successful resolu- our findings were based on a random the opportunity to be here today, and I tion, is difficult, we are making strides on sample of SSA’s records, so many of those thank all of you for your interest and at- audit and investigative fronts. For exam- records belong to people whose SSNs tention.1 ple, last September we released an audit were assigned decades ago. They are ei- assessing the validity of earnings posted ther deceased or retired, and would not

Visit www.ignet.gov 61 Patrick P. O’Carroll

Patrick P. O’Carroll, Jr. currently serves as the third Inspector General (IG) for the Social Security Administration, having been appointed to that position on November 24, 2004. Under his direction, the SSA Office of theI nspector General inspires public confidence in the integrity and security of SSA’s programs by conducting independent and objective audits, evaluations, and investigations. Since assuming the SSA OIG leadership, Mr. O’Carroll has intensified the OIG’s efforts to identify and prevent fraud, waste, and abuse in SSA programs through the institution of innovative and collaborative approaches to the office’s core functions and the management and development of human and technological resources. The results of these efforts can be seen in the OIG’s most recent achievements. In FY 2008, the OIG’s investigators reported over $370 million in investigative accomplishments through SSA recoveries, restitution, fines, settlements, judgments, and pro- jected savings. OIG auditors issued 108 reports with recommendations identifying over $1.1 billion in federal funds that could be put to better use and $2.4 billion in questioned costs. And OIG’s attorneys reported over $6.5 million in civil monetary penalties and assessments. In addition to directing an OIG workforce of almost 600 auditors, attorneys, investigators, and support personnel nationwide, Mr. O’Carroll also chairs the Investigations Committee of the Council of the Inspectors General on Integrity and Efficiency, which addresses issues that transcend individual Government agencies, and increases the professionalism and effectiveness of IG personnel throughout the federal government. Under Mr. O’Carroll’s leadership, the Committee has sought new ways to improve investigative functions, establish investigative guidelines, and promote best practices and training opportunities for thousands of agents in the federal IG community. Prior to his appointment as Inspector General, Mr. O’Carroll held a number of increasingly responsible positions in the SSA OIG organization, including Assistant Inspector General for Investigations and Assistant Inspector General for External Affairs. Mr. O’Carroll also brought to the OIG the benefits of his 26 years of experience with the United States Secret Service. Mr. O’Carroll received a B.S. from Mount Saint Mary’s College in Emmitsburg, Maryland, and a Master of Forensic Sciences from the George Washington University, Washington, D.C. He also attended the National Cryptologic School and the Kennedy School at Harvard University. Mr. O’Carroll is a member of the International Association of Chiefs of Police and the Association of Government Accountants.

62 Journal of Public Inquiry Council of Inspectors General Invitation to Contribute Articles on Integrity and Efficiency to the Journal of Public Inquiry

Members of the Council The Journal of Public Inquiry is “The Inspector General Reform Agency for International Development Department of Homeland Security a publication of the Inspectors Act of 2008” created the Department of Agriculture Department of Housing and Urban General of the United States. We Council of Inspectors General Amtrak Development solicit articles from professional and on Integrity and Efficiency. This Appalachian Regional Commission Department of Interior Architect of the Capitol U.S. International Trade Commission scholars on topics important to the statutory council supersedes Inspector General community. the former President’s Council U.S. Capitol Police Department of Justice Central Intelligence Agency Department of Labor on Integrity and Efficiency and Department of Commerce Legal Services Corporation Executive Council on Integrity Articles should be approximately four Commodity Futures Trading Commission Library of Congress and Efficiency, established under Consumer Product Safety Commission National Aeronautics and Space to six pages (2,000-3,500), single- Executive Order 12805. Corporation for National and Community Administration spaced, and submitted to: Service National Archives The CIGIE mission is to Corporation for Public Broadcasting National Credit Union Administration By mail: address integrity, economy, and The Denali Commission National Endowment for the Arts effectiveness issues that transcend Department of Defense National Endowment for the Humanitites Department of Defense individual government agencies; Office of the Director of National National Labor Relations Board Office of Inspector General and increase the professionalism Intelligence National Science Foundation 400 Army Navy Drive, Room 1034 and effectiveness of personnel by Department of Education Nuclear Regulatory Commission Arlington, VA 22202 developing policies, standards, Election Assistance Commission Office of Personnel Management and approaches to aid in the Department of Energy Peace Corps establishment of a well-trained Environmental Protection Agency Pension Benefit Guaranty Corporation By email: and highly skilled workforce Equal Employment Opportunity Postal Regulatory Commission [email protected] in the offices of the Inspectors Commission U.S. Postal Service General. Export-Import Bank of the United States Railroad Retirement Board Farm Credit Administration Securities and Exchange Commission Federal Communications Commission Small Business Administration The Chair of the CIGIE is the Federal Deposit Insurance Corporation Smithsonian Institution Honorable Phyllis K. Fong, Federal Election Commission Social Security Administration US Department of Agriculture Federal Housing Finance Board Special Inspector General for Iraq IG, and the Vice-Chair is Federal Labor Relations Authority Reconstruction Mr. Carl A. Clinefelter, Farm Federal Maritme Commission Department of State Credit Administration IG. The Federal Reserve Board Tennessee Valley Authority membership of the CIGIE Federal Trade Commission Department of Transportation includes the 67 statutory General Services Administration Department of Treasury Disclaimer: The opinions expressed in the Journal of Public Inquiry are Journal Inspectors General of the Government Accountability Office Treasury Inspector General for Tax those of the authors. They do not represent the opinions or policies of any department or agency of the United States Government. of Public Inquiry following agencies. Government Printing Office Adminstration Department of Health and Human Services Department of Veterans Affairs Inspector General Act of 1978, as amended Title 5, U.S. Code, Appendix 2. Purpose and establishment of Offices of Inspector General; departments and agencies involved

In order to create independent and objective units--

(1) to conduct and supervisesupe audits and investigations relating to the programs and operations of the establishments listed in section 11(2);

(2) to provide leadership and coordination and recommend policies for activities designed (A) to promote economy, efficiency, and effectiveness in the administration of, and (B) to prevent and detect fraud and abuse in, such programs and operations; and

(3) to pprovide a means for keeping the head of the establishment and the Congress fully and currently informed about problems and deficiencies relating to the administration of such programs and operations and the necessity for and progress of corrective action;