Federal Reports

This management advisory presents the evaluation results of two 7(a) loans as part of our ongoing High Risk 7(a) Loan Review Program. This is the first in a series of advisories for 7(a) loans we reviewed in fiscal year 2019. The objectives of our evaluation were to determine whether (1) high‐dollar/early‐defaulted 7(a) loans were originated and closed in accordance with the Small Business Administration’s (SBA’s) rules, regulations, policies, and procedures and (2) material deficiencies exist that warrant recovery of guaranteed payments to lenders.Our review of these two high-dollar/early-defaulted 7(a) loans identified that lenders for both loans did not provide sufficient evidence to support that they originated and closed the loans in accordance with SBA’s requirements. Specifically, the lenders did not provide adequate documentation to substantiate reasonable assurance that the borrowers met requirements for repayment ability, eligibility, collateral, equity injection, and debt refinance.As a result, the lenders’ material noncompliance with SBA requirements while originating and closing the loans resulted in a combined potential loss to SBA of approximately $5.3 million. We recommended that SBA require the lenders to bring the two loans into compliance or seek recovery of approximately $5.3 million. SBA agreed with the recommendations and has contacted the lenders to obtain additional information to bring the loan into compliance and stated that if the issues are not overcome, recovery will be sought from the lenders.

The OIG’s data analytics identified WES-McCorkle Branch as having recorded $161,848 to Account Identifier Code (AIC) 526, Refund Spoiled/Unused Customer Meter Stamps, from July 1, 2018 to March 31, 2019. Meter revenue refunds for the WES-McCorkle Branch accounted for 45 percent of all refunds processed under AIC 526 within the Ohio Valley District for the same timeframe. The WES-McCorkle Branch was the highest within the Ohio Valley District and the second highest in the nation for the scope period. The objective of this audit was to determine whether meter revenue refunds were properly issued, supported, and processed.

We issued this to determine whether the Social Security Administration (SSA) identified, and took appropriate action on, all cases in which a new representative payee was needed when a current representative payee died.

An Amtrak Electrician in Providence, Rhode Island, resigned from employment on July 10, 2019, following our investigation, which revealed the employee violated company policies by engaging in outside employment multiple times per week for several months in 2016 and 2017 and that, in early 2019, the employee left his work-site to preview another potential side job. During an interview, the employee admitted to leaving the Amtrak job site and performing electrical work for a side job during his shifts and on company time. The employee resigned from Amtrak prior to his disciplinary hearing.

An effective provider enrollment screening process is an important tool for preventing Medicaid fraud. It plays a vital role in identifying unscrupulous providers and preventing them from enrolling in Medicaid. The Federal Government requires States to conduct risk based screening activities as part of their processes for enrolling providers in Medicaid. OIG's evaluation of the Medicaid provider enrollment screening process in 2016 found that States were struggling to implement the required screening activities. Many States had yet to implement fingerprint based criminal background checks-a screening activity required for providers that the Federal Government deems to be at high risk for fraud, waste, and abuse. If not all high-risk providers undergo criminal background checks, the Federal and State Governments are vulnerable to unscrupulous providers intent on defrauding the Medicaid program.

Our audit objective was to determine whether the U.S. Patent and Trademark Office contracting personnel administered contract closeout procedures in accordance with federal and Departmental policy and regulations.

What We Looked AtIn 2009, Congress appropriated $10.5 billion for the Federal Railroad Administration's (FRA) High-Speed Intercity Passenger Rail (HSIPR) Program. To implement the program and fund the HSIPR projects, FRA took on new oversight responsibilities and entered into cooperative agreements with State departments of transportation and other entities. FRA also established an intra-agency agreement (IAA) with the John A. Volpe National Transportation Systems Center (Volpe). The IAA allowed FRA to implement its Monitoring and Technical Assistance Program with Volpe's assistance and acquire Monitoring and Technical Assistance Contractors (MTAC) to provide oversight support. In November 2013, Volpe competitively awarded 11 master contracts, with an estimated value of $75 million, for MTAC services. Given the significant funds involved and FRA's expanded oversight responsibilities, we initiated this audit to assess (1) FRA's acquisition of MTACs through the Volpe Center and (2) FRA's management and use of MTAC oversight services for HSIPR projects.What We FoundVolpe's acquisition and management of the MTACs did not always follow Federal requirements or guidance. For example, Volpe prepared independent government cost estimates without adequate support, and awarded an MTAC master contract and three task orders valued at $7.6 million to a contractor that lacked a current audit of its accounting system. Also, adding steps to its invoice review process could help Volpe ensure that it pays allowable and reasonable costs for MTAC work. In addition, FRA lacked both the necessary oversight tools and a consistent reporting and recommendation tracking process to ensure effective use of MTAC services when it launched the HSIPR program. As result, the MTACs did not consistently document oversight reviews and much of their work was not formally reported. This in turn impeded FRA and Volpe's ability to realize the full benefit of the MTACs' oversight.Our RecommendationsWe made 11 recommendations to improve FRA and Volpe's acquisition and use of MTACs, and the Department concurred with all of them. We consider these recommendations resolved but open pending completion of the Department's actions.