Federal Reports

The Office of Special Reviews substantiated allegations that Peter Shelby, while serving as VA’s Assistant Secretary for Human Resources and Administration (HR&A), improperly steered a $5 million contract for the benefit of individuals with whom he had a personal relationship. The OIG determined that VA could not use the contract services, resulting entirely in waste. In February 2018, VA awarded a one-year contract to a Service-Disabled Veteran-Owned Small Business (SDVOSB) (the Small Business) that provides leadership development training. The contract also included talent assessment services for evaluating whether to hire or promote candidates. When the contract concluded in August 2019, it became evident that VA had purchased services far in excess of what it could use. VA used only 232 of the 17,000 one-year training licenses it purchased for $3.8 million and VA received no value whatsoever for the talent assessment services because required privacy and security certifications were not obtained. The OIG determined that this waste occurred as a direct result of Mr. Shelby’s misuse of his official position by directing his senior staff to arrange for the award of this contract to the Small Business on a sole-source basis (i.e., without competition). The OIG determined that although there was statutory authority to contract with SDVOSBs, use of VA’s sole source authority in this case was not supported by an adequate justification as required by VA policy and regulation. Mr. Shelby resigned from federal service in July 2018 after learning that he had been recommended for possible removal for reasons unrelated to this contract. The OIG makes eight recommendations for process improvements spotlighted by this investigation and for VA to consider whether any administrative action should be taken for certain employees. VA concurred with all eight recommendations.

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John Mckoy previously pleaded guilty in U.S. District Court, Eastern District of Pennsylvania, on June 14, 2019, to multiple health care fraud charges related to a scheme to defraud Amtrak’s health care plan. McKoy was the owner and operator of several neighborhood health carefacilities, including Mt. Pleasant Medical Management, Inc. and Harris Medical Management, Inc. Between November 2004 and October 2007, McKoy submitted, and caused to be submitted, hundreds of false and fraudulent claims to United Health Care Corporation and was paid approximately $291,000 for services purportedly rendered to predominately Amtrak patients who were never seen or treated for those services. On July 8, 2020, McKoy was sentenced to six months imprisonment, three years’ supervised probation, and ordered to pay restitution to Amtrak in the amount of $291,255.In addition to Amtrak OIG, this joint investigation was conducted with the U.S. Postal Inspection Service, Department of Labor OIG, and the Federal Bureau of Investigation.

What We Looked AtTitle XI of the Merchant Marine Act of 1936 established the Maritime Administration’s (MARAD) Federal Ship Financing Program (Title XI), which provides loan guarantees to private companies for ship construction and shipyard modernization. The Fiscal Year 2019 John S. McCain National Defense Authorization Act requires us to audit MARAD’s policies and procedures for reviewing and approving loan guarantee applications. Our audit objectives were to assess (1) the completeness of the program’s policy for application reviews and (2) the program’s adherence to the policy in its application reviews. What We FoundMARAD’s Title XI policy manual does not fully cover 13 of 28 regulatory requirements that address program eligibility and applications. A MARAD official acknowledged that the manual does not cover all requirements but pointed out that missing requirements are not frequently relevant to application reviews. However, lack of inclusion of all requirements creates a risk that the program will omit attention to relevant requirements, and in turn, diminish the reliability of information the program uses to assess applicants’ eligibility and creditworthiness.MARAD lacks adequate procedures to ensure that staff fully comply with requirements. The program also takes longer to process applications than the 9-month statutory review period, and the program’s controls are inadequate to ensure staff comply with policy requirements. According to the Government Accountability Office, management must enforce accountability for the entity’s internal control, including through supervisory feedback. However, the program supervisor reviews applications for completeness on an ad-hoc basis. The lack of internal controls could inhibit assessments of applicants’ eligibility and creditworthiness. RecommendationsWe made three recommendations, and MARAD concurred with all three.

The Administration for Children and Families (ACF), within HHS, requested that we audit Sharon Baptist Head Start (Sharon Baptist) after ACF identified instances of noncompliance with Federal requirements in a January 2014 monitoring review.Our objective was to determine whether Sharon Baptist complied with Federal requirements applicable to related party-rent and related-party receivable transactions.