Logistics Managers Improperly Allowed Employees to Auction Off Government Property

Submitting OIG:

Report Description:

In March 2023, while conducting an audit of the Denver Logistics Center (DLC), the OIG found an employee recreation group was auctioning items that VA purchasers had requested through free offers associated with supply orders that met a minimum-dollar threshold. DLC staff auction winners took the items for personal use, and the proceeds were used to fund staff social events. The OIG initiated this administrative investigation to examine possible misconduct by VA senior leaders responsible for maintaining ethical procurement practices. DLC purchasing agents claimed free items for 32 purchases from February 2021 through May 2023. The employee recreation group then sold the items to staff through silent auctions. Under federal law, the items were government property because they were part of a purchase made by VA. Federal ethics regulations state, “employee[s] ha[ve] a duty to protect and conserve Government property and shall not use such property, or allow its use, for other than authorized purposes.” DLC leaders and staff had taken related VA ethics and purchase card training, which explained management of government property, ethical restraints on receiving free incentives, and purchase card prohibitions; however, no one at the DLC appeared to have questioned the propriety of the auctions. The OIG found the purchases associated with the free items constituted waste. Contrary to VA policy, which requires every effort be made to use government-wide or agency contracts, the DLC purchased these items without considering a preestablished government contract. The DLC director halted the auctions and the acceptance of free merchandise in June 2023. VA concurred with the OIG’s six recommendations that include a full accounting of losses and recoveries, enhanced guidance and training, and taking any other needed administrative actions. VA was also alerted to 168 other facilities that appeared to be receiving free incentives for further examination.

Date Issued:

Wednesday, March 20, 2024

Agency Reviewed / Investigated:

Department of Veterans Affairs

Submitting OIG-Specific Report Number:

23-06147-111

Component, if applicable:

Office of Acquisitions, Logistics, and Construction

Location(s):

Agency-Wide

Type of Report:

Investigation

Questioned Costs:

Funds for Better Use:

Number of Recommendations:

Report updated under NDAA 5274:

View Document:

Attachment	Size
VAOIG-23-06147-111.pdf	1.75 MB

Additional Details Link:

https://www.vaoig.gov/reports/administrative-investigation/logistics-managers-im…

Recommendation Number	Recommendation Status	Significant Recommendation
01	Open	Yes
VA’s chief acquisition officer and principal executive director for the Office of Acquisition, Logistics, and Construction ensure the DALC Recreation Group’s operations fully comply with VA Handbook 5025, Part VIII, or dissolve the group if there is insufficient employee interest in its continuation.
02	Open	Yes
VA’s chief acquisition officer and principal executive director for the Office of Acquisition, Logistics, and Construction update VA Handbook 7002, Logistics Management Procedures Part 3, section 7, to clarify under which circumstances, if any, VA employees are permitted to request, accept, and record any incentive items provided by vendors in connection with government purchases.
03	Open	Yes
VA’s chief acquisition officer and principal executive director for the Office of Acquisition, Logistics, and Construction reinforce ethics and policy requirements on the acceptance and disposition of free or donated property with all Denver Logistics Center managers and staff, including distributing to staff the Office of General Counsel’s guidance dated June 30, 2023.
04	Open	Yes
VA’s chief acquisition officer and principal executive director for the Office of Acquisition, Logistics, and Construction reeducate DLC managers, approving officials, and purchasing agents about VA government purchase card policy requirements that government contracted sources be fully considered and given priority when making purchases.
05	Open	Yes
VA’s chief acquisition officer and principal executive director for the Office of Acquisition, Logistics, and Construction in consultation with the Office of General Counsel, as authorized by 31 U.S.C. § 3711, determine the full magnitude of the loss from the DALC Recreation Group’s improper sale of VA property and take appropriate action to recover the losses, including any proceeds of the auctions currently within the custody or control of the DALC Recreation Group.
06	Open	Yes
VA’s chief acquisition officer and principal executive director for the Office of Acquisition, Logistics, and Construction consider whether any administrative action should be taken with respect to the conduct or performance of the director of the Denver Logistics Center or any other individual VA OIG 23-06147-111 \| Page 15 \| [Publish Date] Logistics Managers Improperly Allowed Employees to Auction Off Government Property involved in the improper acquisition and disposition of the incentive items, and report to the OIG any actions taken involving these individuals.

Recommendation Number

Recommendation Status

Significant Recommendation

Additional Details

Open

Yes

VA’s chief acquisition officer and principal executive director for the Office of Acquisition, Logistics, and Construction ensure the DALC Recreation Group’s operations fully comply with VA Handbook 5025, Part VIII, or dissolve the group if there is insufficient employee interest in its continuation.

Open

Yes

VA’s chief acquisition officer and principal executive director for the Office of Acquisition, Logistics, and Construction update VA Handbook 7002, Logistics Management Procedures Part 3, section 7, to clarify under which circumstances, if any, VA employees are permitted to request, accept, and record any incentive items provided by vendors in connection with government purchases.

Open

Yes