Service-Disabled Veteran-Owned Small Business Program
Additional Improvements to Fraud Prevention Controls Are Needed
GAO-12-152R, Oct 26, 2011
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This report is in response to a request from congressional subcommittees to evaluate the design of the Department of Veterans Affairs (VA) fraud prevention controls within the Service-Disabled Veteran-Owned Small Business (SDVOSB) verification program instituted in response to Public Law 111-275. This work is part of our ongoing audit of the SDVOSB program governmentwide, which, in part, assesses the design of the three areas of a fraud prevention framework including preventive controls, detection and monitoring controls, and investigations and prosecutions. We will report the results of the larger audit at a later date..
In summary, VA's fraud prevention controls for the SDVOSB program have improved since Public Law 111-275 was enacted including steps taken since Congress' July 28, 2011 hearing; however, further enhancements would help to reduce the program's vulnerability to fraud, waste, and abuse. VA has made progress in implementing a valid verification program with preventive controls to deter ineligible firms from attempting to become verified. VA enhanced deterrents and developed controls to identify firms in its VetBiz database that did not meet SDVOSB eligibility requirements, resulting, according to VA, in over 1,800 ineligible firms being denied SDVOSB verification. However, even with the control enhancements, program weaknesses and vulnerabilities remain. While improvements in preventive controls have been significant, progress has been limited in the areas of detection and monitoring and investigations and prosecutions. VA's monitoring and detection efforts, which now include status protests and announced site visits, lacked periodic compliance reviews and formal processes for unannounced site visits. Moreover, while VA established a debarment committee and is conducting ongoing investigations of suspicious firms, it does not yet have specific criteria in place to implement legislation requiring debarment actions for firms that misrepresent their SDVOSB eligibility. Thus there has been limited actual debarment action against firms found to have misrepresented their SDVOSB status. To address identified vulnerabilities, we recommend that VA take 13 actions in the three areas of the fraud prevention framework--preventive controls, detection and monitoring, and investigations and prosecutions--to provide reasonable assurance that the contracting opportunities meant for our nation's service-disabled veteran entrepreneurs make it to the intended beneficiaries.
Status Legend:
Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
- In Process
- Open
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should strengthen VA's investigative and prosecutorial actions for firms violating SDVOSB program laws and regulations. For example: develop procedures on removing SDVOSB contracts from ineligible firms.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should strengthen VA's investigative and prosecutorial actions for firms violating SDVOSB program laws and regulations. For example: develop specific guidelines outlining the Debarment Committee's decision process to debar firms that misrepresent their SDVOSB status.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should strengthen VA's investigative and prosecutorial actions for firms violating SDVOSB program laws and regulations. For example: develop and implement specific procedures and criteria for staff to make referrals to VA's Debarment Committee and VA's OIG as a result of misrepresentations identified during initial verification and periodic reviews.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should strengthen VA's investigative and prosecutorial actions for firms violating SDVOSB program laws and regulations. For example: develop and implement specific processes and criteria for the Debarment Committee on compliance with the requirement in P.L. 109-461 to debar, for a reasonable period of time, firms and related parties that misrepresent their SDVOSB status.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should strengthen VA's detection and monitoring controls on verified SDVOSB firms. For example: develop procedures for risk-based periodic reviews of verified firms receiving contracts to assess compliance with North American Industry Classification System (NAICS) size standards and SDVOSB program rules.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should strengthen VA's detection and monitoring controls on verified SDVOSB firms. For example: develop and implement a process for unannounced site visits to verified companies' offices to obtain greater effectiveness and consistency in the verification program.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should strengthen VA's detection and monitoring controls on verified SDVOSB firms. For example: develop and implement procedures for conducting unannounced site visits to contract performance locations and interviews with contracting officials to better assess whether verified companies comply with program rules after verification.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should improve VA's preventive controls to provide reasonable assurance that only eligible firms gain access to the VetBiz database. For example: formalize a process for conducting unannounced site visits to firms identified as high risk during the verification process.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should improve VA's preventive controls to provide reasonable assurance that only eligible firms gain access to the VetBiz database. For example: explore the feasibility of validating applicants' information with third parties, for example, requesting consent from SDVOSB applicants to validate tax information with the IRS to assess the accuracy of the information provided.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should improve VA's preventive controls to provide reasonable assurance that only eligible firms gain access to the VetBiz database. For example: establish formal procedures for VA staff to refer suspicious applications to the OIG and provide guidance on what type of cases to refer to the Office of Inspector General (OIG).
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should improve VA's preventive controls to provide reasonable assurance that only eligible firms gain access to the VetBiz database. For example: provide additional guidance and training to the VA contracting personnel on the use of the VetBiz website so that SDVOSB contracts are only awarded to verified firms.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should improve VA's preventive controls to provide reasonable assurance that only eligible firms gain access to the VetBiz database. For example: provide regular fraud awareness training to Center for Veterans Enterprise (CVE) and VA contracting personnel.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To minimize the risk of fraud and abuse within VA's SDVOSB program, the Secretary of Veterans Affairs should strengthen VA's investigative and prosecutorial actions for firms violating SDVOSB program laws and regulations. For example: formalize procedures to advertise debarments and prosecutions.
Agency Affected: Department of Veterans Affairs
Status: Open
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.