Logistics Managers Improperly Allowed Employees to Auction Off Government Property

Report Information

Issue Date
Report Number
23-06147-111
VA Office
Acquisitions, Logistics, and Construction (OALC)
Report Author
Office of Special Reviews
Report Type
Administrative Investigation
Report Topic
Purchase Cards
Supplies and Equipment
Major Management Challenges
Leadership and Governance
Stewardship of Taxpayer Dollars
Recommendations
6
Questioned Costs
$0
Better Use of Funds
$0
Congressionally Mandated
No

Summary

Summary

In March 2023, while conducting an audit of the Denver Logistics Center (DLC), the OIG found an employee recreation group was auctioning items that VA purchasers had requested through free offers associated with supply orders that met a minimum-dollar threshold. DLC staff auction winners took the items for personal use, and the proceeds were used to fund staff social events. The OIG initiated this administrative investigation to examine possible misconduct by VA senior leaders responsible for maintaining ethical procurement practices.

DLC purchasing agents claimed free items for 32 purchases from February 2021 through May 2023. The employee recreation group then sold the items to staff through silent auctions. Under federal law, the items were government property because they were part of a purchase made by VA. Federal ethics regulations state, “employee[s] ha[ve] a duty to protect and conserve Government property and shall not use such property, or allow its use, for other than authorized purposes.” DLC leaders and staff had taken related VA ethics and purchase card training, which explained management of government property, ethical restraints on receiving free incentives, and purchase card prohibitions; however, no one at the DLC appeared to have questioned the propriety of the auctions.

The OIG found the purchases associated with the free items constituted waste. Contrary to VA policy, which requires every effort be made to use government-wide or agency contracts, the DLC purchased these items without considering a preestablished government contract. The DLC director halted the auctions and the acceptance of free merchandise in June 2023. VA concurred with the OIG’s six recommendations that include a full accounting of losses and recoveries, enhanced guidance and training, and taking any other needed administrative actions. VA was also alerted to 168 other facilities that appeared to be receiving free incentives for further examination.

Open Recommendation Image, SquareOpenClosed and Implemented Recommendation Image, CheckmarkClosed-ImplementedNot Implemented Recommendation Image, X character'Closed-Not Implemented
No. 1
Open Recommendation Image, Square
to Acquisitions, Logistics, and Construction (OALC)

Ensure the DALC Recreation Group’s operations fully comply with VA Handbook 5025, Part VIII, or dissolve the group if there is insufficient employee interest in its continuation.

No. 2
Open Recommendation Image, Square
to Acquisitions, Logistics, and Construction (OALC)

Update VA Handbook 7002, Logistics Management Procedures Part 3, section 7, to clarify under which circumstances, if any, VA employees are permitted to request, accept, and record any incentive items provided by vendors in connection with government purchases.

No. 3
Open Recommendation Image, Square
to Acquisitions, Logistics, and Construction (OALC)

Reinforce ethics and policy requirements on the acceptance and disposition of free or donated property with all Denver Logistics Center managers and staff, including distributing to staff the Office of General Counsel’s guidance dated June 30, 2023.

No. 4
Open Recommendation Image, Square
to Acquisitions, Logistics, and Construction (OALC)

Reeducate DLC managers, approving officials, and purchasing agents about VA government purchase card policy requirements that government contracted sources be fully considered and given priority when making purchases.

No. 5
Open Recommendation Image, Square
to Acquisitions, Logistics, and Construction (OALC)

In consultation with the Office of General Counsel, as authorized by 31 U.S.C. § 3711, determine the full magnitude of the loss from the DALC Recreation Group’s improper sale of VA property and take appropriate action to recover the losses, including any proceeds of the auctions currently within the custody or control of the DALC Recreation Group.

No. 6
Open Recommendation Image, Square
to Acquisitions, Logistics, and Construction (OALC)

Consider whether any administrative action should be taken with respect to the conduct or performance of the director of the Denver Logistics Center or any other individual involved in the improper acquisition and disposition of the incentive items, and report to the OIG any actions taken involving these individuals.