Summary: 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.
