OIG Investigations (Without Subpoena Bells and Whistles) Coming to a Program Near You

by Sheppard Mullin Richter & Hampton LLP
Contact

The Inspector General Act of 1978 aimed to “consolidate existing auditing and investigative resources to more effectively combat fraud, abuse, waste and mismanagement in the programs and operations of [the executive branch].” To fulfill this mandate, the Act created the Offices of Inspector General (“OIG”) in various executive departments and agencies, including the Department of Defense (“DOD”), and authorized them to conduct and supervise audits and investigations to prevent and detect fraud, waste, and abuse. The DOD OIG’s primary investigative weapon has been the subpoena. More recently, however, the DOD OIG has subtly expanded its investigative arsenal by calling upon the Defense Contract Audit Agency (“DCAA”) to step up its fraud inquiries and by conducting more “Quality Assessments” and “Audits” without sounding the warning shot of the subpoena.

In carrying out its supervisory function, the DOD OIG issued a report this past March on the quality of the DCAA’s fiscal year 2010 audits which recommended that the DCAA engage in discussions with contractor management regarding potential fraud. See http://www.dodig.mil/pubs/documents/DODIG-2013-044.pdf. The DCAA responded by circulating a memorandum for regional directors (“MRD”) in July instructing its field auditors to take a more aggressive investigative posture by asking contractor management whether it has knowledge of or has received allegations relating to fraud affecting the subject matter under review. See http://www.dcaa.mil/mmr/13-PAS-014.pdf. The MRD further instructs field auditors to engage in face-to-face communications with contractor management so they can measure responses and ask follow-up questions, and identify other non-management employees that can corroborate management’s responses or provide additional information.

Contractors have argued that the DCAA does not have the statutory authority to access employees. The DOD OIG and DCAA have responded saying that employees are “records” within the meaning of the Inspector General Act of 1978 and the Federal Acquisition Regulations (“FAR”), and therefore the DCAA may talk to any employees it needs to in order to gain an understanding of the subject matter under review. The DOD OIG and DCAA have also pointed out that the Generally Accepted Government Auditing Standards (“GAGAS”) permit the DCAA to talk to employees when necessary to evaluate contractors’ internal controls and obtain support for the statements they make.

The argument for why the DCAA has the authority to interview contractor employees is somewhat suspect given that the DCAA’s fiscal year 2012 report to Congress proposed that the FAR be expanded to expressly grant the DCAA access to contractor employees. See http://www.dcaa.mil/DCAA_FY2012_Report_to_Congress.pdf. The need for a regulatory change shows that access to contractor employees does not presently exist in the FAR. These caveats aside, the fact remains that DCAA field auditors have been instructed to proactively interview contractor employees about fraud topics (and presumably share what they learn with the DOD OIG) and will continue doing so for the indefinite future.

In addition to prodding the DCAA to step up its investigation of fraud with contractor employees, the DOD OIG has become more stealthy in its own investigations. Rather than issuing subpoenas with all the accompanying bells and whistles as they have traditionally done, the DOD OIG has started to conduct more “Quality Assessments” and “Audits.” The DOD OIG may characterize these Quality Assessments or Audits as routine, informal inquiries (i.e., “this is not a witch hunt”) that are meant to help all involved. While the DOD OIG’s intentions may seem benign or benevolent, contractors should not forget that the primary mission of the DOD OIG is to detect and prevent fraud, waste, and abuse, and it can take the findings obtained during these Quality Assessments and Audits and refer them to federal prosecutors just as it would evidence collected in response to a formal subpoena.

All of this is to say that the DOD OIG, and likely other OIGs, is coming up with new and innovative ways to conduct suspected fraud investigations in a manner that is less alarming to contractors than the traditional subpoena. Contractors should be alert to DCAA requests for interviews or DOD OIG Quality Assessments or Audits, no matter how routine or mundane they may seem. Finally, there are a host of concerns and risks when contractor employees are subject to OIG or DCAA investigative inquiries including employee rights when speaking with Government investigators and adequate protection of contractor attorney-client privileged information and attorney-work product to which the employee may have been exposed.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Written by:

Sheppard Mullin Richter & Hampton LLP
Contact
more
less

Sheppard Mullin Richter & Hampton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!