Program - Office of Inspector General - U.S. Department of ...

Office Of inspectOr GeneralU.S. Department of tranSportationsemiannual repOrt tO cOnGressApril 1, 2010 – September 30, 2010

From the Inspector GeneralI am pleased to present the Department of Transportation (DOT), Office of InspectorGeneral Semiannual Report to Congress for the second half of fiscal year 2010. Ouraudit and investigative work supports the Department’s strategic goals of safety,reduced congestion, global connectivity, environmental stewardship, security, andorganizational excellence. Over the past 6 months, we issued 78 reports with a totalof 234 recommendations, including financial recommendations totaling over $633million. Our investigative work resulted in 53 indictments, 41 convictions, and a totalof nearly $52 million in fines, restitutions, and recoveries.During this period, we testified at four congressional hearings before four differentHouse and Senate committees, demonstrating the range and complexity of ourwork. In the last 2 weeks of April, we testified on our concerns regarding the FederalAviation Administration’s (FAA) ability to achieve its long-term goals for the NextGeneration Air Transportation System (NextGen); the Pipeline and Hazardous MaterialsSafety Administration’s efforts to address safety risks; and the Federal RailroadAdministration’s (FRA) challenges in meeting its expanded role, especially as it relatesto implementing a high-speed rail program. We also testified in July on the FederalHighway Administration’s progress in addressing our Nation’s deficient bridges andthe additional actions needed to ensure states comply with Federal bridge standards.Our aviation work continued to focus on significant safety concerns. In additionto reporting and testifying on FAA’s efforts to enhance air traffic capacity throughNextGen, we reported on weaknesses in the agency’s placement of newly hired andtrained air traffic controllers and its initiatives to reduce runway incursions. We alsoreported on contractor configuration and procedural errors that led to the November2009 outage in FAA’s Telecommunications Infrastructure, which grounded hundredsof flights nationwide. Our investigations uncovered the use of fraudulent inspectionstickers; the manufacture, distribution, and sale of substandard aircraft parts; and theuse of forged airmen medical certificates—underscoring the need for increased rigorin FAA’s oversight of the airline industry.Our highway and transit audits identified safety risks in two of the Nation’s largest andmost costly surface transportation infrastructure programs—Massachusetts’ CentralArtery/Tunnel project and New Jersey’s Access to the Region’s Core project—andthe need for improved oversight to mitigate these risks. Moreover, our investigationsrevealed widespread abuse of commercial vehicle and driver regulations establishedby the Federal Motor Carrier Safety Administration, including operating vehicleswithout valid commercial licenses or inspection stickers, driving in excess of maximumhours allowed, and illegally disposing hazardous materials. Our investigations alsouncovered multiple fraud schemes to bilk the Federal and state governments andindividuals out of billions of dollars. As a result of our work, numerous cases againstcompanies and individuals have been prosecuted, and more than $38 million in fineshas been assessed.Semiannual Report to Congress • iii

Our rail work focused on the on-time performance of Amtrak’s intercity passengertrains and right-of-way access to freight railroad’s tracks—two key areas thatdirectly impact Amtrak’s bottom line and efforts to successfully implement highspeedrail service. Given the challenges FRA faces in implementing the high-speedrail program, we expect our work in this area to increase in the future.Our audits and investigations of the Department’s information technology systemsindicate that vulnerabilities remain. While FAA has made significant progress inimplementing our recommendations for its air traffic control systems, more workneeds to be done to protect these systems from cyber attacks. Unauthorizedaccess to personally identifiable information on airmen also continues to be aconcern—particularly given that we identified cases in which airmen who had beencertified as fit to fly were receiving benefits for disabilities that indicated otherwise.The Department also needs to take significant action to strengthen its acquisitionfunction. We have found deficiencies in key areas, including the need to establishsound acquisition policies and processes and appropriate organizational alignmentand leadership. The risks these deficiencies create are considerable—as evidencedby Operating Administrations’ failure to effectively design, administer, and justify theuse of cost-plus-award-fee contracts.Finally, we continued to pursue opportunities to ensure accountability, efficiency,and transparency over DOT’s $48 billion in American Recovery and ReinvestmentAct (ARRA) funds, and remain committed to promptly notifying DOT and Congressof actions needed to prevent fraud, waste, and abuse in ARRA programs. As of theend of September, we have 24 planned and ongoing ARRA audits, and 50 openARRA investigations involving allegations of disadvantaged business enterpriseviolations; false claims, statements, or certifications; conflicts of interest; anti-trustviolations; and bid rigging, collusion, embezzlement, and prevailing wage violations.Thirty-five of our 50 ARRA investigations have been accepted for prosecution by theDepartment of Justice.Our work reflects a strong commitment to providing in-depth analyses of importanttransportation issues to serve and inform the public and congressional lawmakers.I commend and thank our hard-working staff for their outstanding efforts anddedication to our critical mission. I would also like to commend and thank SecretaryLaHood for his leadership and tireless efforts in these challenging times. I lookforward to continuing to work closely with the Secretary, his team, and modaladministrators to provide Americans with a 21st century transportation system thatmeets the national objectives of general welfare, economic growth and stability, andsecurity.Calvin L. Scovel IIIFrom the Inspector General • iv

Aviation and Special ProgramsAuditsApril 1, 2010Review of Screening, Placement, andInitial Training of Newly Hired AirTraffic ControllersRequested by the Chairman of the HouseTransportation and Infrastructure Subcommitteeon AviationOver the next decade, the Federal AviationAdministration (FAA) plans to hire and trainnearly 15,000 new air traffic controllers to replaceretiring controllers. To ensure a smoothtransition, FAA will need sound procedures forscreening, placing, and training newly hired airtraffic controllers—many of whom have no priorair traffic control experience. However, FAA doesnot sufficiently consider candidates’ screeningtest results or FAA Academy performance whenselecting and placing them. As a result, some ofthe busiest air traffic control facilities have receivedcandidates who may not have the knowledge,skills, and abilities necessary to becomecertified at those locations. Facility managerswe spoke with noted that some candidates whopassed Academy training were unprepared tobegin facility training.We recommended that FAA evaluate and redesignits current screening test to consider candidates’skill sets, assign candidates to facilities basedon their Academy performances, and implementthe recommendations to improve Academy trainingcontained in FAA’s 2007 Controller Trainingand Development Group report. While FAA onlypartially concurred with our recommendations, itproposed acceptable corrective actions.Semiannual Report to Congress • 1

April 21, 2010Challenges in Meeting FAA’s Long-Term Goals for the Next GenerationAir Transportation SystemFAA’s Next Generation Air Transportation System(NextGen) is expected to greatly enhance airtraffic capacity and reduce operating costs.NextGen is an ambitious, high-risk project thatinvolves multibillion-dollar investments fromboth the Government and the airline industry.The Inspector General’s testimony focused onthe significant challenges FAA must overcometo achieve NextGen’s long-term goals. Centralto this effort is the successful implementation ofmodernization projects that will provide platformsfor NextGen capabilities that can enhance capacity.However, key multibillion-dollar programshave experienced problems, and FAA has yet tofully determine NextGen requirements. Theseinclude the $2.1 billion En Route AutomationModernization program. Delays in this and otherprojects will have a cascading effect on NextGenplans now and well into the future. One criticalstep for avoiding risks with NextGen’s cost,schedule, and capabilities is addressing gapsin partner agencies’ research and developmentefforts and long-term budgets and plans. TheInspector General noted several actions FAAcan take now to strengthen the multi-agencyapproach, better leverage Federal research projects,and prevent duplicative implementationefforts.April 22, 2010Actions Taken and Needed To ImproveManagement and Oversight ofPHMSA’s Hazardous MaterialsSpecial Permits and Approvals ProgramHearing before the House Committee onTransportation and InfrastructureThe Pipeline and Hazardous Materials SafetyAdministration (PHMSA) regulates up to 1 milliondaily movements of hazardous materials, manyof which occur under special permits and approvalsthat allow for relief from the HazardousMaterials Regulations under certain conditions.The Inspector General’s testimony highlightedour work on the management and oversightof PHMSA’s Special Permits and ApprovalsProgram and PHMSA’s response to our recommendations.The Inspector General noted thatwhile PHMSA developed commendable actionplans to address the shortcomings in its authorizationand oversight of special permits andapprovals, work remains to execute the plans asintended. Specifically, PHMSA personnel do notconsistently follow new procedures for grantingspecial permits and approvals, or adequatelyoversee explosive classification approvals. AsPHMSA continues to address these areas, itmust proactively identify safety risks, work withpartner safety agencies to resolve safety and coordinationmatters, and set oversight priorities.Aviation and Special Programs • 2

June 16, 2010Timely Actions Needed To Advance theNext Generation Air TransportationSystemRequested by the Chairmen and Ranking Membersof the House Committee on Transportation andInfrastructure and its Subcommittee on AviationThe National Airspace System handles almost50,000 flights per day and more than 700 millionpassengers per year. FAA expects NextGen tohandle up to three times more air traffic than thecurrent ground-based air traffic control systemand reduce operating costs. Ongoing cost andschedule risks and operational and managementissues prompted us to identify NextGen as one ofthe Department’s top management challenges.While FAA is making progress in addressingthese challenges, several critical actions are stillneeded for successful implementation. Amongthem—and perhaps most important in the nearterm—is setting realistic mid-term expectationsand requirements for key programs and assessingassociated risks. In addition, Congressmandated a multi-agency approach to developNextGen, but most of FAA’s partner agencieshave not adjusted their budgets accordingly.FAA also has not fully leveraged partner agencies’research and development. While FAA hasbegun working with the private sector to developNextGen and shape related policies, it must betterdefine the role of the NextGen Institute—anFAA resource for engaging private sector expertise,tools, and facilities for NextGen activities—and ensure demonstration projects are moreoutcome-focused. We recommended a numberof actions to help FAA reduce implementationrisks, strengthen the multi-agency approach,and improve coordination with the private sector.FAA concurred with all of our recommendationsand proposed appropriate action plans.June 17, 2010Letter to Chairmen Oberstar andCostello Regarding the 2009 FAA TelecommunicationsInfrastructure OutageRequested by the Chairmen of the HouseCommittee on Transportation and Infrastructureand its Subcommittee on AviationAn outage in FAA’s TelecommunicationsInfrastructure (FTI) on November 19, 2009,blocked approximately 75 percent of the FTInetwork traffic and delayed service restorationfor 5 hours, grounding hundreds of flights andthousands of travelers nationwide. We found thatnetwork configuration and procedural errors bythe contractor caused the FTI outage. While FAAand the contractor have taken corrective actionsto prevent another critical outage, they acknowledgethat the risk of outages remains as newservices are added to FTI’s fiber optic network.Furthermore, we found that FAA’s oversight ofthe contractor could have been more effectiveand proactive. Moreover, FAA’s internal reportsshow that FAA and the contractor still need tofully identify FTI vulnerabilities to ensure networkreliability. FAA is shifting more acquisitions andservices to the private sector to reduce costs,and we identified a number of best practicesFAA should consider for FTI and other privatelyowned and operated systems.Semiannual Report to Congress • 3

Because FAA concurred with the findings andrecommendations of an independent reviewpanel convened by the FAA Administrator to investigatethe November 2009 outage, we did notmake recommendations in our report. However,we will continue to monitor FTI and report onFAA’s progress in addressing these issues asnecessary.June 30, 2010Letter to the Idaho CongressionalDelegation Regarding the Reviewof FAA’s Business Case for MovingTerminal Radar Approach ControlServices from Boise, Idaho, to Salt LakeCity, UtahRequested by the Idaho Congressional DelegationThe Idaho Congressional Delegation—Senators Michael Crapo and James Risch,and Representatives Mike Simpson and WaltMinnick—raised concerns over the lack of transparencyregarding estimated costs for transferringterminal radar approach control (TRACON)services from Boise to Salt Lake City. Our reviewfound that while FAA had a process for evaluatingthe estimated costs and savings associatedwith the move, changes in key assumptionsunderlying the projected $24 million in savingswere made and not reflected in the businesscase for the move. Further, FAA’s basis for facilitylifecycle costs may have been unrealistic, andits cost estimates for keeping TRACON in Boisewere questionable.On June 11, 2010, FAA officials informed us thatthey had cancelled the planned transfer of staffand service from Boise to Salt Lake City. GivenFAA’s decision, we made no recommendations.However, we identified lessons learned to helpimprove the soundness and overall transparencyof future business cases.July 16, 2010Letter to Senator LeMieux RegardingAllegations Concerning Venice, Florida,Municipal AirportRequested by Senator George LeMieuxSenator George LeMieux asked us to review aconstituent’s allegations about FAA oversightof the Venice, Florida, Municipal Airport. Theconstituent’s six allegations specifically focusedon FAA’s Orlando Airport District Office’s (ADO)compliance with Agency policies in makingdecisions on airport operations and VeniceAirport’s revenue use. We did not substantiatethe constituent’s allegations that the OrlandoADO did not comply with FAA policies. However,we found sufficient support to initiate a moredetailed review of Venice Airport’s revenue use.Aviation and Special Programs • 4

July 21, 2010Review of FAA’s Call to Action Plan forRunway SafetyRequested by the Chairman and RankingMember of the Senate Commerce, Science, andTransportation CommitteeEach year, hundreds of near collisions occuron the Nation’s airport runways. In 2007, FAA,airline, and airport officials created the Call toAction Plan to reduce the risk of runway incursions.While the 2007 plan clearly had an impacton the reduction in serious incidents, other factorsmay have contributed to the decrease—includinga drop in airport operations on runwaysand taxiways since 2007 and unreliable incidentdata. We also found that several major airportsmade key safety improvements before the planwas established.To date, FAA and industry stakeholders haveimplemented several of the plan’s short-terminitiatives, such as upgrading airport surfacemarkings. However, if FAA is to achieve its goalof reducing runway incursions by 10 percentby fiscal year 2013, it must also set and meetmilestones for the plan’s mid- and long-term initiatives.In the past, we found that FAA’s effortsdiminished as it initially met its overall goal forreducing runway incursions, only to later see arebound in the number of incidents. We madesix recommendations to ensure FAA effectivelyimplements its Call to Action Plan initiatives. FAAfully concurred with four of the six recommendationsand proposed acceptable alternativecourses of action for the remaining two.August 4, 2010Letter to Representative PetriRegarding Costs Associated with FAA’sAir Traffic Managers ConferenceRequested by the Ranking Member of the HouseTransportation and Infrastructure Subcommitteeon AviationFAA held its December 2009 Air TrafficOrganization Managers Conference in Atlanta,Georgia, to provide managers in-depth trainingon FAA’s new 3-year labor agreement with theNational Air Traffic Controllers Association. Theagreement is the product of years of negotiationbetween FAA and the union, and includes significantnew pay and benefit provisions.We found that conference costs—approximately$5.1 million—were in line with FAA’s estimates,and that officials responsible for planning theevent followed Agency guidance and bestpractices and selected the “best value” whendetermining the host city and venue. While therewere some opportunities to reduce the overallcost of the event, FAA did have legitimate businessreasons for not pursuing them. Based onour findings, we did not make recommendationsto FAA.Semiannual Report to Congress • 5

InvestigationsApril 1, 2010Investigation SubstantiatedWhistleblower’s Concerns aboutFAA’s Oversight of American Airlines’Maintenance ProgramsAfter discovering American Airlines did not complywith an airworthiness directive, an AviationSafety Inspector assigned to the AmericanCertificate Management Office alleged that highlevelofficials in FAA’s Flight Standards Serviceintervened and permitted American to continueoperating noncompliant aircraft. The directiverequired mechanical system inspections, andthe allegations involved American Airlines’ rudderand wiring systems.While our investigation found American Airlinesnoncompliant, we concluded that FAA exercisedits discretion in allowing American to continueoperating 124 aircraft while FAA sought an additionalreview of the problem. FAA orderedan inspection team to cease work and vacateAmerican’s maintenance facility in Tulsa,Oklahoma, while conducting an inspection ofthe rudders of Boeing 757 aircraft and the wiringof MD-80 aircraft. While these actions werenot improper, they fostered the perceptionamong inspectors that FAA was wrongly assistingAmerican to avoid a service disruption. OnAugust 26, 2010, based on American Airline’snoncompliance, FAA announced a $24.2 millioncivil penalty against the carrier.June 17 and July 7, 2010South Florida Aviation Repair StationOwner and Parts Brokers Jailed forAircraft Parts FraudIn March 2010, Jorge Cascante—owner andoperator of CAS Honeycomb, an FAA RepairStation located in Miami, Florida—pled guilty tocharges of aircraft parts fraud for manufacturingaircraft panel assemblies identified with Boeingparts numbers without the authority to apply theBoeing numbers. On June 17, Cascante wassentenced in U.S. District Court, Fort Lauderdale,Florida, to 30 months imprisonment, followed by2 years supervised release.In April 2010, Mariella Bianchi and Juan Beltran,owner and employee of The Airborne Group, anairplane parts broker company, pled guilty to acharge of aircraft parts fraud in connection withthe sale of aircraft parts bearing Boeing partnumbers that were not manufactured by Boeing.On July 7, 2010, Bianchi and Beltran were sentencedin U.S. District Court, Miami, Florida, to30 months incarceration and 3 years supervisedrelease, and ordered to pay $1.9 million for sellingthe fraudulent aircraft parts. They were alsoordered to forfeit $130,706 in proceeds derivedfrom the scheme.These sentencings were the result of OperationWingspan, an ongoing investigation into thefraudulent manufacture, distribution, and saleof military and civilian aircraft parts by brokers,manufacturers, and repair station ownersthroughout the United States who lack FAA orAviation and Special Programs • 6

Department of Defense approval. These aircraftparts include skins, wings, and control surfacesfor various aircraft, including the military versionof the Boeing 707/320 commercial airframe,which is used for the Air Force’s E-3 Sentry,Airborne Warning and Control System, and KC-135 Airborne Refueling aircraft.Manufacturers conspired with various brokersor authorized Defense contractors to sell thesubstandard aircraft parts to the Air Force. Incases where the customer required supportingFAA authorization documents, brokers furtherconspired with FAA repair stations to falsify FAAforms, giving the illusion that the manufacturedparts had been approved by FAA and were suitablefor installation on an aircraft.Thus far Operation Wingspan has resulted inthe execution of 12 search warrants; indictmentof 6 individuals, all of whom have pled guilty;and sentencings culminating in about 14 yearsimprisonment; and $3.4 million in restitution andforfeitures.July 6, 2010New Jersey Pilot Pleads Guilty to FalseStatementsIn U.S. District Court, Newark, New Jersey,Ronald Negron pled guilty to knowingly and willfullymaking false statements to an FAA MedicalExaminer, indicating that he was sober and notconsuming alcohol when in fact he did consumealcohol and was being counseled for alcohol andsubstance abuse.In 2006, FAA revoked Negron’s First ClassMedical Certification for drug and alcoholproblems. In an attempt to regain his medicalcertification, Negron was examined by an FAAMedical Examiner in the Atlantic City, NewJersey, area but was not medically cleared. Ourinvestigation determined that in October 2007,Negron provided an air carrier a fraudulent FAAFirst Class Medical Certification with no restrictions,bearing Negron’s forged signature of theFAA Medical Examiner. Negron’s sentencing ispending.July 28, 2010FAA Certified Mechanic Indicted onAircraft Parts FraudJoseph J. Fisk, an FAA Mechanic CertificateHolder, was indicted in the Federal District Courtof Missouri on one count of fraud involvingaircraft parts in interstate commerce. The indictmentcharges that between March 2009 andSeptember 2009, Fisk allegedly printed and soldfor $100 each labels certifying that a satisfactory100-hour or annual inspection of an aircraftor engine was performed by an FAA inspectionauthorization certificate holder. Such labels wereplaced in aircraft maintenance logbooks in violationof Federal law.Our investigation revealed that neither Fisk noranyone to whom he sold the fraudulent labelswas authorized to perform an annual or 100-hourinspection as represented by the labels he created.Fisk confessed to creating the labels andforging the signature of an FAA inspection certificateholder, who certified annual inspections onSemiannual Report to Congress • 7

as many as 12 aircraft. FAA issued an emergencyorder of revocation for Fisk’s FAA MechanicCertificate.This case was conducted jointly with the FederalBureau of Investigation (FBI) and with FAA’s assistance.Note: Indictments, informations, andcriminal complaints are only accusations by theGovernment. All defendants are presumed innocentunless and until proven guilty.August 9, 2010Investigation SubstantiatedWhistleblower’s Safety Concerns atDetroit Metropolitan AirportOIG investigators substantiated allegations thatFAA managers at Detroit Metropolitan Airportcompromised air safety by directing air trafficcontrollers to manage air traffic in a manner thatviolated local FAA orders. Specifically, we confirmedthat on July 21, 2008, a front-line managerimproperly directed controllers to authorize thedeparture of three Boeing 747 jets in a mannercontrary to local policy. During the investigation,six additional violations of local policy were identified.None of the incidents, however, violatednational standards regarding minimum separationbetween aircraft.We also substantiated concerns that the airport’swind measuring equipment was unreliable. Theinvestigation confirmed that the two wind detectiondevices available to air traffic controllers inthe control tower had provided inconsistent windreadings; one malfunctioned after a sensor wasreplaced.August 26 and 27, 2010Investigations of Airfare Price FixingNets Charges against Two Executivesand $38 Million Fine of Airline CarrierOn August 26, 2010, Joo Ahn Kang and Chung SikKwak—former vice presidents of the Americasof Asiana, and Korean citizens and residents—were indicted by a Brooklyn, New York, Federalgrand jury for conspiring to suppress or eliminatecompetition by fixing fares for passengertransportation services between January 2000and February 2006. Kang and Kwak, along withco-conspirators, communicated and agreed onthe price of one or more components of farescharged to passengers who purchased economyclass tickets for flights between the UnitedStates and Korea.On August 27, 2010, in United States DistrictCourt, Washington, D.C., Northwest Airlines LLC,through Northwest Airlines Cargo, now defunct,pled guilty to conspiring to fix the cargo ratescharged to customers in the United States andelsewhere for international air cargo shipmentsfrom at least July 2004 until at least February2006. The company carried out the conspiracyby agreeing to certain aspects of cargo ratesfor shipments between the United States andJapan. Northwest Airlines was ordered to pay a$38 million criminal fine.This joint investigation is being coordinated bythe Department of Justice’s Antitrust Division,with involvement of the FBI and the U.S. PostalService’s Office of Inspector General. To date,a total of 17 airlines and four executives haveAviation and Special Programs • 8

pled guilty or have agreed to plead guilty. Finesof more than $1.6 billion have been imposed,and all of the pleading executives have beensentenced to time in prison. Note: Indictments,informations, and criminal complaints are onlyaccusations by the Government. All defendantsare presumed innocent unless and until provenguilty.September 27, 2010Former Pilot of Defunct Private JetCompany Admits to Defrauding FAAand Flying Illegal Charter FlightsFrancis Vieira, a former pilot of Platinum JetManagement, LLC—a now-defunct luxury charterjet company based out of Teterboro Airport inNew Jersey—pled guilty to conspiracy to commitwire fraud and to defraud the United States aspart of a scheme to mislead charter customersand brokers and to impede and obstruct FAA.Vieira flew for Platinum Jet from January 2003to February 2005, the month in which oneof the company jets crashed after takeoff atTeterboro Airport. Our investigation revealedthat from November 2002 through November2003, Platinum Jet did not have FAA authorityto fly commercial charter flights. However, Vieiraand his conspirators agreed to operate PlatinumJet as a charter and flew several dozen illegalflights, many of which were for famous athletes,musicians, and other well-known individuals.They falsified load manifests by indicating thatcertain flights were private instead of charter.Vieira admitted that on more than two dozen occasions,he fraudulently altered the weight andbalance graphs for the jet that ultimately crashedat Teterboro. He also admitted to altering graphson another Platinum Jet aircraft.Two of Vieira’s co-defendants have pled guilty toconspiracy charges, while four others are scheduledto stand trial on October 12, 2010, in U.S.District Court in Newark, New Jersey. Sentencingfor Vieira and the others who have pled guilty ispending the outcome of the October trial.September 29, 2010Southern California Electron TubeDistributor Charged with FraudInvolving Aircraft Parts and Wire FraudSteven Jay Sanett, President and Chief ExecutiveOfficer of Penta Financial, Inc., doing businessas Penta Laboratories (PENTA), was chargedwith fraud involving aircraft parts and mail fraudfor falsely representing the origin, source, andcondition of electron tubes.Sanett instructed PENTA employees to preparelabels, packaging, and paperwork bearing falseor misleading information about the electrontubes sold for use in commercial and militaryaircraft, medical equipment, and ground-basedradar. In addition to removing and replacing theoriginal manufacturers’ logos and part numbers,Sanett directed PENTA employees to fill customerorders with modified electron tubes andrefurbished electron tubes.This investigation was conducted jointly with theDefense Criminal Investigative Service, and theDepartment of Homeland Security’s ImmigrationSemiannual Report to Congress • 9

and Customs Enforcement. Note: Indictments,informations, and criminal complaints are onlyaccusations by the Government. All defendantsare presumed innocent unless and until provenguilty.September 29, 2010Woman Pleads Guilty and IsSentenced for DistributingUnregistered PesticidesYuqiong Zheng pled guilty and was sentencedin U.S. District Court, Saipan, Northern MarianaIslands, to 2 years probation for distributingunregistered pesticides. In October 2008,when Zheng arrived on a Northwest Airlinesflight in Saipan from China, Customs officialsnoticed a spill inside a large sack containingsmaller packets of pesticides. The investigationrevealed that Zheng knowingly transportedseveral hundred packets weighing more than200 pounds of Buprophezin, an unregisteredpesticide designated by the Secretary of theDepartment of Transportation as hazardous forair transportation.This investigation was conducted jointly withthe Environmental Protection Agency - CriminalInvestigation Division, with assistance from theU.S. Coast Guard Investigative Service; FAA;and the Commonwealth of the Northern MarianaIslands Divisions of Environmental Quality,Customs, and Quarantine Office.Aviation and Special Programs • 10

In Focus: Uncovering Aviation Safety Risks throughJoint Regulatory and Investigation EffortsMajor air carriers are increasingly relying oncontract maintenance facilities for aircraftrepairs. Since 2003, outsourced maintenancecosts have accounted for 60 percent or more oftotal maintenance costs. Despite this significantoutlay, we have consistently found that FAA’soversight of aircraft repair facilities and partsmanufacturers lacks the rigor needed to ensureoutsourced repairs meet FAA standards and touncover fraud and abuse in aircraft maintenance,certification, and parts supply.Several ongoing and completed investigationsconducted jointly by FAA and OIG exemplify thesurreptitious schemes businesses and individualsuse to deceive FAA regulatory officials andthe significant risks these deceptions introduce.For example, our investigations uncovered ascam involving the sale and use of fraudulentlabels that indicated a satisfactory 100-hour orannual inspection of an aircraft or engine hadbeen performed by an FAA-authorized inspector.Because inspections validate an aircraft’s structuraland operational integrity and help identifystress of aircraft components, these fraudulentlabels could mask a catastrophic failure. FAAissued an emergency order of revocation for thefraudulent certificates.Through Operation Wingspan, we uncovered thefraudulent manufacture, distribution, and sale ofmilitary and civilian aircraft parts. Manufacturersconspired with various brokers and authorizedDOD contractors to sell substandard aircraftparts—including skins, wings, and control surfaces—tothe Air Force for use in its E-3 Sentry,Airborne Warning and Control System, KC-135Airborne Refueling, and other aircraft. In somecases, brokers further conspired with FAA repairstations to falsify FAA authorization documents,Semiannual Report to Congress • 11

giving the illusion that the manufactured partshad been approved by FAA and were suitablefor installation on aircraft. Thus far, OperationWingspan has resulted in the indictment of 6 individuals,all of whom have pled guilty; sentencingsculminating in 14 years imprisonment; and $3.4million in restitution and forfeitures.A number of our investigations are promptedby whistleblower disclosures of potential dangers.OIG investigators recently substantiatedwhistleblower concerns about safety at DetroitMetropolitan Airport. Specifically, we confirmedthat in July 2008, a front-line FAA manager directedcontrollers to authorize the departure ofthree Boeing 747 jets in a manner that violatedlocal FAA orders regarding aircraft separation.Our investigation also confirmed that two winddetection devices available to controllers in theAir Traffic Control Tower had provided inconsistentwind readings and one malfunctioned evenafter a sensor was replaced.By combining regulatory and law enforcementefforts, we have uncovered blatant violations thatresulted in criminal prosecutions, enforcementaction, dissemination of public safety notices,and hundreds of thousands of unapproved partstaken out of the aircraft parts supply chain. Wewill continue to work with FAA to identify andinvestigate businesses and individuals who unscrupulouslyundermine air safety efforts.In Focus: Uncovering Aviation Safety Risks • 12

Highway and Transit ProgramsAuditsApril 20, 2010The Commonwealth of Massachusetts’Safety Review of the Central Artery/Tunnel Project Was Comprehensive,but FHWA’s Oversight Approach HasShortcomingsMandated by the National Transportation SafetyBoard Reauthorization Act of 2006In July 2006, a concrete ceiling panel fell andkilled a motorist in one of the Central Artery/Tunnel (CA/T) project’s tunnels, prompting theCommonwealth of Massachusetts to initiate anindependent, two-phase safety review of theBoston Metropolitan Highway System, includingthe CA/T Project. As we reported In August 2007,the Phase I review—intended to identify immediatesafety risks—was generally comprehensive.The Phase II safety review—an evaluation of allsafety risks, completed in August 2008—was comprehensiveand rigorous, and actions to addressmany of the identified safety risks have been taken.However, several risks remained unresolved,including implementing measures to improve theCA/T Project’s preparedness for a tunnel fire.While the Federal Highway Administration (FHWA)has taken action to oversee the Commonwealth’sefforts to resolve safety risks, its approach hasseveral shortcomings. First, FHWA’s definition ofa safety risk requiring independent field verificationis less stringent than the one used duringthe safety review. Second, FHWA’s protocol forconducting independent field verifications is notSemiannual Report to Congress • 13

always followed. Third, FHWA’s working list formonitoring the Commonwealth’s actions omitssome potentially significant activities.FHWA concurred or concurred in part with ourrecommendations for strengthening its oversightof the Commonwealth’s actions to addressunresolved safety risks. While FHWA disagreedwith our position pertaining to independent fieldverifications, the Federal Highway Administratorexpressed his commitment to ensuring the safetyof the CA/T.April 29, 2010Final Report on ConsumerAssistance to Recycle and SaveProgram: Most Transactions MetProgram Requirements, but ProgramCompletion Activities ContinueMandated by the Consumer Assistance toRecycle and Save (CARS) Act of 2009CARS required the National Highway TrafficSafety Administration (NHTSA) to establish andadminister a program that would encourage consumersto trade in their vehicles for new, morefuel-efficient vehicles. Congress established anaggressive implementation schedule, and tripledprogram funding 12 days into implementation.After 1 month, dealers requested payment forover 690,000 vehicle sales, nearly exhaustingthe $3 billion in program funds.NHTSA’s controls over this complex programensured that most CARS transactions met basicprogram eligibility requirements—such as fuelefficiency, ownership, and insurance. However,controls related to trade-in vehicle disposalwere less effective. Immediate consumer responseand the infusion of additional programdollars presented significant implementationchallenges. We also found that NHTSA lackeda comprehensive plan to efficiently carry outremaining close-out activities—including evaluatingprogram compliance and determining totalprogram costs—and better inform the Secretaryof Transportation and Congress of its progressand overall program performance. NHTSA concurredwith our recommendations and provideda description of the actions it took to addressprogram implementation challenges.May 17, 2010Final Report on Actions Needed toMitigate Risks Associated with theAccess to the Region’s Core ProjectSelf-InitiatedNew Jersey Transit’s (NJT) Access to theRegion’s Core (ARC) project is one of the largesttransit infrastructure projects in the UnitedStates. Project costs are estimated at more than$9 billion and the Federal Transit Administration(FTA) plans to commit $3 billion through its NewStarts program. Given this considerable investmentand the risks inherent in a project of thismagnitude, we evaluated FTA’s oversight of theproject.FTA’s oversight provided reasonable assurancethat significant project risks were identified.However, FTA did not have NJT’s final projectdocuments that describe strategies for mitigatingHighway and Transit Programs • 14

identified risks. We also found that NJT had yetto address certain ARC funding challenges, includinguncertainty over long-term local funding,and lacked sufficient controls to detect fraudand ensure contractor integrity.We made six recommendations to help ensureFTA’s planned actions fully address ARC’s risksand challenges. FTA concurred with five, andpartially concurred with one. We consider theactions FTA has taken and plans to take as beingfully responsive to our recommendations.July 21, 2010FHWA Has Taken Actions but CouldDo More to Strengthen Oversightof Bridge Safety and States’ Use ofFederal Bridge FundingHearing before the House Transportation andInfrastructure Subcommittee on Highways andTransitFHWA has estimated that approximately $100billion would be needed to address the morethan 150,000 bridges nationwide that have deterioration,cracks, or other structural deficiencies.OIG’s Assistant Inspector General for Highwayand Transit Audits testified that while FHWAhas taken action to prioritize bridge inspectionsand better enforce National Bridge InspectionStandards, sustained management attention isneeded to ensure that identified safety risks areaddressed, and that planned improvements inthe inspection oversight program are implementedin time for FHWA’s 2011 inspection of states’compliance with Federal bridge standards.The Assistant Inspector General also noted thatFHWA’s current practices do not ensure that statesare effectively using Highway Bridge Programand American Recovery and Reinvestment Actfunds to improve their deficient bridges.August 17, 2010Letter to Ranking Member IssaRegarding DOT’s Use of ARRA SignageRequested by the Ranking Member of the HouseCommittee on Oversight and GovernmentReformWe examined DOT’s policies and guidance onthe use of ARRA signage and found that two offive DOT operating administrations (OA) receivingARRA funds—FTA and Federal RailroadAdministration (FRA)—originally required ARRArecipients to post signage to publicly identify thesource or expenditure of ARRA funds. FTA andFRA have relaxed their original ARRA signagerequirements, and currently all five OAs encourage,rather than require, recipients to post signs.Semiannual Report to Congress • 15

InvestigationsApril 26, 2010Three Sentenced to Imprisonment forFraud Related to Fatal Truck Accidentin Philadelphia, PennsylvaniaVictor Kalinitichll, Valerjis Belovs, and JosephJadczak were sentenced in MontgomeryCounty Court of Common Pleas, Norristown,Pennsylvania, on charges related to an accidenton U.S. Interstate 76 in Philadelphia,Pennsylvania, in which one person died andfive others were seriously injured. Belovs drovea commercial vehicle owned by Kalinitichll intostopped traffic. Each individual was sentenced to23 months incarceration and fines ranging from$300 to $2,000. Kalinitichll was also ordered topay $26,000 in restitution.The investigation determined that the crashresulted from the failure of the tractor-trailer’sbrakes to function properly. Both Belovs andKalinitichll admitted they were aware of theproblem and took no steps to fix it. The investigationfurther determined that the commercialvehicle displayed a valid inspection stickerprovided by Jadczak, who admitted that he hadnot inspected the truck. We also found that atthe time of the accident, Belovs was driving inexcess of the maximum hours set by the FederalMotor Carrier Safety Administration (FMCSA) foroperating a commercial vehicle.The investigation was conducted jointly with theMontgomery County District Attorney’s Officeand the Pennsylvania State Police with FMCSAassistance.May 06, 2010More Charges Filed in Iowa Ready-MixConcrete Price Fixing ConspiracyKent R. Stewart, President of Great LakesConcrete, was charged in U.S. District Court,Sioux City, Iowa, with violating the ShermanAntitrust Act. It is alleged that Stewart conspiredwith others from January 2008 until August 2009to fix prices of ready-mix concrete sold to variouscompanies in Iowa.As part of the same investigation, Steven K.VandeBrake, President of Alliance Concrete, Inc.,pled guilty on May 4, 2010, to antitrust violationsfor his role in ready-mix price fixing conspiracies.VandeBrake admitted that he conspired withindividuals from three different companies to setpricing for ready-mix concrete sold to Iowa companiesfrom January 2008 until August 2009.This joint investigation involved FBI, the U.S.Attorney’s Office, and the Department of Justice’sAntitrust Division’s Chicago Field Office.May 07, 2010North Carolina Motor CarrierSentenced for Making FalseStatementsIn U.S. District Court, Winston-Salem, NorthCarolina, Charles D. Goodwin, Inc. (CDGI), doingbusiness as Goodwin’s Trucking Company, wasHighway and Transit Programs • 16

sentenced to 5 years probation, a $35,300 fine,and $400 special assessment for making falsestatements to FMCSA regarding the company’sdrivers’ hours of service.A FMCSA compliance review of CDGI followinga multiple-fatality accident involving a companydriver revealed that the driver had violatedFMCSA hours of service regulations. The driverwas found not to be at fault in the accident,but a subsequent investigation determined thatbetween June 2007 and May 2008 CDGI driversmade numerous false entries in their drivers’duty status logs to cover up violations of theFMCSA hours of service regulations. In October2009, CDGI management pled guilty and admittedto falsifying drivers’ duty status logs. Whileon probation, and pursuant to a plea agreement,electronic onboard recording devices that capturehours driven and speed must be installedand maintained in all trucks owned by or underthe control of CDGI.This case was investigated with significant assistancefrom FMCSA.May 18, 2010Mississippi State Troopers Indictedfor False Statements Related toFraudulent Commercial Drivers’LicensesIn U.S. District Court, Jackson, Mississippi,Lieutenant Colonel (Retired) Joseph L. Rigby,Captain (Retired) Johnny D. Rawls, LieutenantJames C. Smith, and Master Sergeant DarrellD. Walker—former troopers with the MississippiDepartment of Public Safety—were indictedon multiple counts of making false statementsrelated to commercial drivers’ licenses (CDL).The Mississippi Bureau of Investigation (MBI)requested assistance in investigating allegationsthat state troopers had aided and abetted othersin creating false test scores to obtain CDLs, andhad made operational enhancements such ashazmat and passenger endorsements withoutgoing through mandated state and Federal testingrequirements. The troopers were also allegedto have aided and abetted others in altering CDLdriver records to reduce speeding infractions tolesser charges and altering guilty judicial dispositionsin driving records. If convicted, the troopersare each subject to fines and a maximum of5 years imprisonment.OIG is coordinating with FMCSA’s SouthernService Center to correct the driving records inan effort to mitigate any public safety concerns.Ongoing analysis of the Commercial DriverLicensing System and the National Driver Registrywill determine if false statements were made byother Mississippi Department of Public Safetypersonnel. This investigation is being conductedjointly with the FBI and MBI. FMCSA assistancehas been instrumental to the progress of theinvestigation. Note: Indictments, informations,and criminal complaints are only accusations bythe Government. All defendants are presumedinnocent unless and until proven guilty.Semiannual Report to Congress • 17

June 4, 2010Jury Convicts Man on Charges Relatedto Household Goods Fraud SchemeA Federal Jury in U.S. District Court, Portland,Oregon, convicted Lester C. Kasprowicz onseven counts of mail fraud in connection withhis operation of illegal household goods movingcompanies.This investigation—prompted by allegations ofviolations of FMCSA household goods regulations—determinedthat Kasprowicz continuedto operate his Oregon-based moving companyfollowing Federal and state permanent injunctionorders in May 2002, prohibiting him fromdoing business in household goods. Kasprowiczdefrauded customers by e-mailing or faxing misleadingor false estimates, then almost doubledcharges after customers entered into a contractand their goods were loaded onto the movingtruck. If a customer refused to pay the inflatedamount, Kasprowicz threatened to leave thecustomer’s goods on the street or store them atan unknown location until the customer paid.Kasprowicz illegally operated the householdgoods moving company for years by using a hostof ghost companies, false names, mail drops, andmultiple business names that resembled thoseof well-known, legitimate moving companies.Kasprowicz was convicted at trial and scheduledfor a detention hearing on June 8, 2010.This investigation was conducted jointly with theOregon Department of Justice and FMCSA.June 10, 2010Engineering Company PresidentSentenced to 12 MonthsImprisonment and Ordered to Pay$1.6 Million in Restitution for MailFraud Involving FHWA-FundedContractsKamleshwar Gupta, President and CEO of KamEngineering, Inc. (KEI), was sentenced in U.S.District Court, Chicago, Illinois, for mail fraudrelated to falsified information submitted to theIllinois Department of Transportation (IDOT) andother state entities for payment on state transportationcontracts. From 1994 to 2003, Guptasubmitted false invoices and financial informationregarding overhead expenses and the number ofhours worked by KEI employees on contractsfor IDOT, Chicago Department of Transportation,Metra, and the Illinois State Tollway Authority,many of which FHWA helped fund. In thescheme to defraud, Gupta directed KEI’s 30-plusemployees to complete time sheets in pencil andthen altered the time sheets by moving hoursamong different jobs and contracts. Fraudulentinvoices were then mailed to IDOT for payment.The total amount of fraudulent invoices equaledmore than $1.6 million.Gupta was sentenced to 12 months and 1 dayimprisonment and 2 years supervised release,and ordered to pay $1.6 million in restitution.Gupta has made full restitution to all parties involved.Charges against KEI were dropped afterindictment. KEI, now defunct, and Gupta weresuspended by FHWA.Highway and Transit Programs • 18

June 17, 2010Louisiana Commercial Driver’s LicenseThird-Party Examiner SentencedA Louisiana Department of Public Safety, Officeof Motor Vehicles (LADPS-OMV) compliancereview revealed that Harold G. Stewart—ownerof Stewart Auto Sales (SAS), a registered thirdpartyCDL tester in Zwolle, Louisiana—tested alarge number of CDL candidates with no failureratings, a fraud indicator. During OIG’s interviewof Stewart, he admitted to falsifying the skillstests for 250 CDL candidates for which he waspaid approximately $200 per test. The LADPS-OMV recalled and retested all 320 CDL driversSAS had tested.Stewart pled guilty to making a false statementfor his role in falsifying 250 (out of 320) CDL skillstests. Stewart was sentenced to 5 years probationand 25 hours of community service, assessed a$500 fine, and ordered to make restitution in theamount of $7,316.03 to LADPS for expenses theState incurred in recalling and re-testing driverswho obtained CDLs through Stewart.July 21, 2010Texas Transportation Company andOfficials Sentenced for HazmatViolationsTexas Oil and Gathering, Inc. (TOG), its ownerJohn Kessel, and operations manager EdgarPettijohn were sentenced in U.S. District Court,Houston, Texas, on one count of conspiracy toviolate the Safe Drinking Water Act, and onecount of knowingly disposing of waste in violationof the act. Kessel and Pettijohn directed thefalsification of documents such as bills of ladingand drivers’ logs in order to illegally dispose ofhazardous waste water.Kessel and Pettijohn were each sentenced to5 years probation, and ordered to perform 500hours of community service and pay a $200 specialassessment. Kessel was also ordered to paya $40,000 fine. TOG was sentenced to 3 yearsprobation, ordered to pay a $40,000 fine, and a$200 special assessment.This continuing investigation is being jointlyconducted with the Environmental ProtectionAgency - Criminal Investigation Division, withassistance from state environmental agencies.August 16, 2010Former Owners of Pennsylvania BridgeBeam Manufacturer Plead Guilty in$136 Million DBE FraudErnest G. Fink, Jr.—former co-owner, VicePresident, and Chief Operating Officer ofSchuylkill Products, Incorporated (SPI) andits wholly-owned subsidiary CDS EngineersIncorporated (CDS)—pled guilty in U.S. DistrictCourt, Harrisburg, Pennsylvania, to charges ofcriminal conspiracy to commit wire fraud to defraudDOT’s Disadvantaged Business Enterprise(DBE) program. Fink and others at SPI manufacturedconcrete products for highway andtransit construction projects, and CDS operatedas SPI’s engineering and erection division. The“pass-through” scheme, which is alleged tohave run for over 15 years, involved the improperSemiannual Report to Congress • 19

award of over 330 federally-funded highway andtransit contracts in Pennsylvania valued at over$136 million, making it the largest reported DBEfraud in DOT history.Fink admitted that he and others used MarikinaConstruction Company, a Pennsylvania DOT- approvedDBE since 1993, as a front company toobtain lucrative government contracts reservedfor small and disadvantaged businesses. Theindictment alleged that between 1993 and 2008,SPI and CDS personnel negotiated, coordinated,performed, managed, and supervised over $136million in DOT-funded contracts awarded toMarikina. Fink admitted that all the profits fromthe contracts ended up with SPI and CDS. Inexchange for allowing SPI and CDS to use itsname, Marikina was paid a fixed fee for eachcontract.Previously, three former executives associatedwith SPI, CDS, and Marikina pled guilty to criminalcharges and admitted that they took numerousfraudulent steps to conceal the scheme.The scheme included SPI and CDS personnelpretending to be Marikina employees by usingMarikina passwords, signature stamps, businesscards, letterhead, and e-mail addresses, as wellas placing magnetic placards and decals withthe Marikina logo to cover up logos on SPI andCDS trucks.This investigation was conducted jointly withthe FBI, the Department of Labor OIG, and theInternal Revenue Service’s Criminal InvestigationDivision. A criminal trial for the remaining defendant,SPI’s former co-owner, president and CEO,is pending.August 17, 2010Pennsylvania Motor Carrier Broker andSons Plead Guilty to Double BrokeringSchemeRubik Avetyan and his two sons, Alfred andAllen Avetyan, pled guilty in U.S. District Court,Harrisburg, Pennsylvania, to one count of criminalconspiracy related to a “double brokering”scheme in which they provided false informationto FMCSA to illicitly acquire a DOT motor carrierregistration number for their company, StateTransport, Inc. The Avetyans admitted that theyobtained loads from unsuspecting brokers asState Transport, Inc., and then used a differentcompany name to broker the loads to othercarriers with the intent of not paying the carriersthat actually delivered the loads. The Avetyansreceived payments from the original brokers butdid not pay the carriers. State Transport used apost office drop box and a telephone service toforward calls and facsimiles from the Harrisburgarea to California to conceal its true identity andlocation.The forfeiture agreement associated withthe Avetyans’ plea requires recovery of$1,060,902.26. A sentencing date has not yetbeen set. In June 2009, FMCSA revoked StateTransport’s new entrant registration and orderedit to cease interstate operations.The investigation was conducted jointly with theU.S. Postal Inspection Service and the Bureau ofAlcohol, Tobacco, Firearms, and Explosives withthe assistance of FMCSA.Highway and Transit Programs • 20

August 18, 2010Pennsylvania Driver’s License andCommercial Drivers’ Licenses FraudRings BustedA Federal grand jury in Philadelphia,Pennsylvania, charged Vitaliy Kroshnev, his wifeTatyana Kroshnev, and seven others with makingfalse statements, identification document fraud,and bank fraud for their role in a conspiracy thatallegedly aided more than 300 unqualified individualsin fraudulently obtaining PennsylvaniaCDLs.From 2007 to 2010 the defendants, under theauspices of the Kroshnevs’ International TrainingAcademy (ITA)—a truck-driving training facilityand business that rented tractor-trailers forFMCSA-regulated CDL Skills Tests—arrangedfor hundreds of non-residents of Pennsylvaniato fraudulently obtain Pennsylvania CDLs. Theindicted conspirators allegedly bypassed federalregulations by providing applicants with falsePennsylvania residency documents, as well asforeign language interpreters to provide applicantsthe answers for the CDL Knowledge Test.While examining allegations involving the allegedfalse CDLs, we initiated investigationsof a sophisticated, fraudulent governmentidentification document ring that uncoveredillegal cash payments to Pennsylvania DOT(PennDOT) officials, including Alexander Steele,a driver’s license examiner. Our investigationsuncovered evidence that Pierre E. Jean-Louis, aformer PennDOT-approved interpreter and CDLholder, participated in a scheme with AlphonsoWilson and Michel Lominy, both driving schooloperators, in which cash payments were madeto PennDOT driver’s license examiners inexchange for issuing illicit drivers’ licenses tounqualified foreign nationals. Lominy employedJean-Louis who, instead of acting as an interpreter,assisted Lominy’s customers in cheatingon the Pennsylvania driver’s license examination.Lominy charged his customers up to $2,000 foreach fraudulent driver’s license. Another licenseexaminer, Roy G. Davila, allegedly used his positionas an examiner to obtain cash payments inexchange for issuance of Pennsylvania drivers’licenses.In July 2010, Lominy was sentenced to 4 yearsimprisonment after pleading guilty to Federalcharges of conspiracy, extortion, and identificationfraud. On August 18, 2010, Jean-Louis wassentenced to 1 year imprisonment, 3 years supervisedrelease, and fined $1,200 in connectionwith extortion and identification fraud charges.On September 9, 2010, a Federal grand jury inPhiladelphia, Pennsylvania, charged Davila withmanufacturing fraudulent identification documents,extortion, and aggravated identity theft.Wilson has pled guilty and his sentencing ispending. Steele is awaiting trial for his role in thescheme.OIG continues to analyze ITA business recordsto assist PennDOT in identifying and addressingCDL holders who obtained their licensesthrough ITA. OIG, PennDOT, and FMCSA continueto develop a strategy for best addressingthe drivers who allegedly used false residencydocuments and corrupt interpreters to obtaintheir CDLs. These ongoing investigations areSemiannual Report to Congress • 21

eing conducted jointly with the Department ofHomeland Security’s Immigrations and CustomsEnforcement, the Internal Revenue Service, theFBI, and with assistance from FMCSA and thePennsylvania State Police. Note: Indictments,informations, and criminal complaints are onlyaccusations by the Government. All defendantsare presumed innocent unless and until provenguilty.August 30, 2010North Carolina Man Sentenced to 22Months in Jail for Fraudulent MedicalReview Officer SchemeMichael R. Bennett—doing business asWorkplace Compliance, Inc. (WCII), a drug andalcohol testing consortium—was sentencedin U.S. District Court, Winston-Salem, NorthCarolina, to 22 months imprisonment and 3 yearssupervised release, and ordered to perform 100hours of community service and pay a $400special assessment for fraudulently conductingunauthorized final reviews on numerous drugtest results from laboratories used by motor carriersand air carriers. WCI was placed on 3 yearsprobation and ordered to pay a $1,200 specialassessment. Mr. Bennett and WCI are both liablefor restitution up to $209,030.Our investigation revealed that between 2005and 2009 Mr. Bennett obtained lab test resultsand used computer software to generate fraudulentMedical Review Officer (MRO) reports.These reports claimed that an MRO had verifiedthe lab test results and that the report was incompliance with the Department’s regulations oftransportation workplace drug and alcohol testingprograms.This investigation was conducted with significantinvestigative assistance from FAA, FMCSA,and DOT’s Office of Drug and Alcohol Policy andCompliance.September 7, 2010Former West Virginia Department ofTransportation Employee Sentencedto Five Years Probation for Interferencewith Commerce by ExtortionGwen Conley, former transportation engineeringtechnician with the West Virginia Department ofTransportation (WVDOT) Division of Highways,was sentenced in U.S. District Court, Charleston,West Virginia, to 5 years probation and orderedto pay a $6,000 fine as a result of his guilty pleato interference with commerce by extortion, aHobbs Act violation.Conley used his WVDOT position—which includedoversight authority for the federally funded $21million Route 10 project in Man, Logan County,West Virginia—to extort thousands of dollars fromEnvironmental Solutions, LLC (ESL), a projectsubcontractor responsible for temporary erosioncontrol and hydroseeding. From November 2007through August 2008, Conley asked for andreceived money from ESL for claiming that ESLperformed more erosion control services than itdid. The owner of ESL paid Conley based on apercentage of the money Conley calculated ESLwould make on the work it did not perform.Highway and Transit Programs • 22

This investigation was conducted jointly with theWest Virginia State Police and with substantialassistance from FHWA.September 23, 2010Former New York ConstructionCompany Vice President Convictedfor Soliciting Kickbacks fromSubcontractorJoseph Iorio, former Vice President ofConstruction of Yonkers Contracting Company,was convicted by a Federal jury, Brooklyn, NewYork, on charges of mail and wire fraud. Thecharges were based on his role in solicitingapproximately $194,000 in kickbacks from atrucking subcontractor on construction projects,including an FHWA-funded project.The investigation revealed that between Marchand October 2008, Iorio solicited kickbacks froma trucking company subcontractor in connectionwith at least three New York State MetropolitanTransportation Authority construction projectson which Yonkers was bidding—including theAtlantic Yards Arena Development in Brooklyn,a federally funded project on which Yonkers bidaround $346 million. The arrangement involvedthe trucking company owner building 25 to 50cents a ton into his price proposals, payable inkickbacks to Iorio, who would use his influenceto ensure the trucking company was chosen forthe subcontract work if Yonkers was awarded theprojects. The arrangement was kept discrete andhidden from Yonkers; Isoro was paid by checksmade out to JJA Construction, a business entityassociated with Iorio.A future sentencing date will be set by the Court.This investigation was conducted jointly with theDepartment of Labor OIG and the Port Authorityof New York and New Jersey OIG.Semiannual Report to Congress • 23

Highway and Transit Programs • 24

In Focus: Ensuring Safety of the Nation’s Bridgesthrough Enhanced Oversight of Federal InvestmentsFHWA estimates that $100 billion is neededto address existing bridge deficiencies andmake other improvements. Nearly 150,000 of theNation’s bridges are considered deficient due tomajor deterioration, cracks, or other structuraldeficiencies, and more than 23,000 of thesebridges are part of the National Highway System—roadwaysthat FHWA classifies as importantto our economy, defense, and mobility. Institutingeffective bridge funding and inspectionprograms is critical to maximizing investmentsand overseeing states’ bridge safety efforts.Over the last several years, we have reported onthe challenges FHWA has encountered in establishingand maintaining effective bridge fundingand inspection programs. Key among these challengesis the lack of a data-driven, risk-basedapproach to bridge oversight—one that wouldtarget the most significant bridge safety risks.We first identified this challenge in 2006 whenwe found that inaccurate or outdated maximumbridge weight limit calculations and posting entrieswere recorded in state and national bridgedatabases, possibly causing decision makers tomisdirect funds and actions intended to reducethe number of deficient bridges. We also reportedthat limitations in FHWA’s Fiscal ManagementInformation System impede FHWA’s abilityto track how states are using Federal dollars toimprove deficient bridges.FHWA’s bridge safety programs are also hinderedby a lack of clear and comprehensive guidanceon what actions FHWA bridge engineers shouldtake when states fail to comply with bridge inspectionstandards, providing little assurancethat states are taking needed actions to improvebridge safety. In early 2010, we reported that 7 ofthe 11 bridge engineers we surveyed respondedthat FHWA’s guidance did not adequately definewhen to suspend funds to enforce compliance.Semiannual Report to Congress • 25

Consequently, Federal-aid highway funds wereprovided to states with serious incidents of noncompliance.In one case, a bridge engineer reportedto FHWA that a state was substantiallycompliant, despite the state’s failure to close 96bridges as required by bridge inspection standards.As we testified in July 2010, FHWA is takingsteps to respond to our recommendations. Specifically,FHWA is developing a uniform definitionof compliance with its bridge standards, and data-driven,risk-based metrics for assessing statecompliance. The Agency also launched a pilotprogram in 12 division offices that uses the newmetrics and a prototype database for recordingresults and generating reports. However, FHWAhas shown little progress in acquiring data toevaluate states’ use of Highway Bridge Programfunding. Sustained management attention isneeded to ensure that data weaknesses are correctedand that the pilot program is fully implementedduring the next bridge inspection cycle,scheduled for 2011.We will continue to monitor FHWA’s efforts tofully implement our recommendations.In Focus: Ensuring Safety of the Nation’s Bridges • 26

Rail and Maritime Programs andEconomic AnalysisAuditsApril 8, 2010Letter to Appropriations CommitteesRegarding Amtrak User Fees for Rightof-WayAccess and Incentive Paymentsfor On-Time PerformanceMandated by the Fiscal Year 2009 OmnibusAppropriations ActOur report to the Committees on Appropriationsidentified user fees paid by Amtrak to freight railroads,irrespective of funding source, for accessto the right-of-way and any incentive paymentspaid related to on-time performance. Amtrakdoes not pay a market-based “access fee” foruse of a host freight railroad’s track. Instead,pursuant to the Railroad Passenger Service Actof 1970, Amtrak is only required to pay host railroadsfor the incremental cost associated with itstrack usage. During fiscal year 2009, Amtrak paid$115 million in track usage payments to freightrailroads, accounting for roughly 3.3 percent ofits total operating expense.April 29, 2010Federal Railroad Administration FacesChallenges in Carrying Out ExpandedRoleHearing before the Senate AppropriationsSubcommittee on Transportation, Housing andUrban Development, and Related AgenciesThe Deputy Inspector General testified on thechallenges FRA faces in carrying out the dutiesof its expanded role under the Passenger RailInvestment and Improvement Act (PRIIA) andSemiannual Report to Congress • 27

the Rail Safety Improvement Act (RSIA) while stillcarrying out its prior responsibilities, includingoverseeing Amtrak. Together PRIIA and RSIAcall for the implementation of a high-speedrail program, improvements in intercity passengerrail services, and safety enhancementinitiatives. The Deputy Inspector General notedthat each new mandate carries a unique set ofchallenges for FRA, especially as they relate toimplementing the high-speed rail program. Shealso noted that ARRA exacerbated these challengesby accelerating timelines and providingFRA with an additional $8 billion. Finally, theDeputy Inspector General noted that while wehave found that Amtrak has improved its operatingand capital planning, new PRIIA mandatesand ARRA funding could require Amtrak to makemore improvements.May 17, 2010Semiannual Report on Amtrak’sFinancial and Operating Performanceand Savings from ReformMandated by the Consolidated AppropriationsAct, 2010Our semiannual report to the House and SenateAppropriations Committees identified Amtrak’syear–to–date financial performance and savingsfrom operational reforms. In the first 6 monthsof fiscal year 2010, Amtrak’s operating loss of$263.3 million was $71.4 million, or 21.3 percent,better than budgeted. However, this loss is$12.2 million more than the loss during the first6 months of fiscal year 2009. The lower-thanbudgetedloss was due to higher–than-expectedrevenues and lower-than-expected expenses.Much of the savings achieved in the first half ofthe year are expected to erode in the second halfas Amtrak forecasts a year-end operating lossof $552.1 million—$10.9 million or 1.9 percentbetter than budget, but $94.2 million more thanfiscal year 2009.While Amtrak no longer focuses on measuringsavings from reform initiatives, its use of recentlyimplemented key performance indicatorsappears to be an efficient approach to gaugecompany performance and monitor operatingand financial performance to budget.September 23, 2010Implementation of New Metricsand Standards Is Key to SustainingImprovement in On-Time Performanceon Amtrak’s Cascades and CoastStarlight RoutesMandated by the Passenger Rail Investment andImprovement Act of 2008Together, the Coast Starlight and AmtrakCascades passenger rail corridors run morethan 1,800 miles between Vancouver, BritishColumbia, and Los Angeles, California. On-timeperformance (OTP) of these and other intercitypassenger trains directly impacts Amtrak’s bottomline and its efforts to successfully implementhigh-speed and intercity passenger train service.While the Coast Starlight and Amtrak Cascadeslines experienced significant delays from 2004through 2009, total minutes of delay on both linesdropped after 2006. Several factors contributedRail and Maritime Programs and Economic Analysis • 28

to the decrease in delays—and ultimately thelines’ improved OTP—including improved operationsby the host railroads and Amtrak, andreduced freight traffic caused by the depressedeconomy. FRA has taken action to developnew OTP metrics and standards, as requiredby PRIIA. However, delays in issuing these newperformance measures have stalled other actionsthat could further improve OTP over thelong term. We made recommendations to theFRA Administrator to ensure that the benefits ofrecent Federal intercity passenger rail legislationare fully realized and improvements in OTP forthe Coast Starlight and Amtrak Cascades aresustainable. FRA concurred with all of our recommendationsand proposed appropriate actionplans.Semiannual Report to Congress • 29

Rail and Maritime Programs and Economic Analysis • 30

In Focus: The Federal Railroad Administration’sChallenges in Meeting Its Expanded RoleIn April 2009, the President, along with the VicePresident and the Transportation Secretary, announceda vision for a new national network ofhigh-speed rail corridors. Implementing the High-Speed Intercity Passenger Rail (HSIPR) programsignificantly changes the Nation’s transportationsystem and requires substantial planning on thepart of the states and the Federal Government.PRIIA, RSIA, and ARRA outline the goals of HSIPR.The greatest responsibility for implementingHSIPR falls on FRA, dramatically altering FRA’srole. Together, PRIIA and RSIA call for the implementationof a high-speed rail program, improvementsin intercity passenger rail services,and safety enhancement initiatives. FRA mustcoordinate with hundreds of public and privatestakeholders to establish a national rail plan thataddresses interconnectivity with other modes oftransportation and recognizes the need for a sustainablefunding mechanism to support passengerrail. FRA must also develop written policiesand practices to guide the program’s grant lifecycleprocess and oversight activities, and obtainadequate staff to oversee implementation. ARRAexacerbated these challenges by acceleratingtimelines and providing FRA an additional $8 billionfor discretionary grant programs to jump startthe development of high-speed rail corridors andenhance intercity passenger rail service. Sincethen, Congress has appropriated an additional$2.5 billion for HSIPR program grants.While FRA is charged with implementing a highspeedrail program, it must also continue to executeits rail safety responsibilities and its oversightof Amtrak. Specifically, FRA must effectivelymanage the Rail Line Relocation discretionarygrant program, the Railroad Rehabilitation andImprovement Financing Loan program, and theAmtrak grant program. Together, these programsaccount for more than a third of FRA’s total budget.Semiannual Report to Congress • 31

Our November 2009 Top Management Challengesreport, along with our ARRA-related work,identified the risks inherent in FRA’s expandedrole and in investing Federal grant funds in privaterail infrastructure. We have ongoing workreviewing access agreements between statesand private freight railroads that will assist FRA inachieving HSIPR program benefits. At this time,FRA is working with freight railroads to addresstheir concerns about the requirements outlinedin FRA’s guidance for access agreements. Wealso have ongoing work to identify best practicesin financial forecasting for HSIPR projects. Thiswork will assist FRA in awarding and monitoringthe development of projects that receive HSIPRgrants. Through our monitoring and evaluation ofFRA’s implementation of the HSIPR program, wewill continue to communicate to the Secretary,the Congress, and the public the important issuesassociated with FRA’s transformation.In Focus: The Federal Railroad Administration’s Challenges • 32

Financial and Information TechnologyAuditsMay 19, 2010Quality Control Review of Single Auditon the Washington Metropolitan AreaTransit AuthorityDuring fiscal year ending June 30, 2009, theWashington Metropolitan Area Transit Authorityexpended approximately $281 million in grantsfrom FTA and FHWA. Clifton Gunderson LLPrendered an unqualified (clean) opinion on theAuthority’s financial statements and compliancewith major Federal programs. However, CliftonGunderson recommended that the Authoritycorrect deficiencies related to the applicationof its indirect cost rate. We determined thatClifton Gunderson’s work generally met therequirements of generally accepted governmentauditing standards; the Single Audit Act of 1984,as amended; and OMB Circular A–133. We foundnothing to indicate that Clifton Gunderson’sopinion on the financial statements or reports oninternal control and compliance were inappropriateor unreliable.June 18, 2010Information Security and PrivacyControls over the Airmen MedicalSupport SystemsRequested by the Chairmen of the HouseCommittee on Transportation and Infrastructureand its Subcommittee on AviationFAA’s Airmen Medical Support Systems (MSS)currently stores more than 18 million medicalSemiannual Report to Congress • 33

ecords supporting the medical assessments ofover 3 million airmen. To ensure aviation safetyand protect the privacy of airmen, it is critical thatthis information be secure. However, we foundthat serious security lapses in FAA’s managementof MSS made airmen’s personally identifiableinformation (PII) vulnerable to unauthorizedaccess. Further, only limited progress has beenmade in identifying airmen who receive disabilitybenefits while holding medical certificates.We made a series of recommendations tostrengthen the confidentiality, integrity, andavailability of airmen’s PII, and to ensure unqualifiedairmen do not receive medical certificationsallowing them to fly. FAA concurred with all butone of our recommendations: to implementmultifactor user authentication, as required byOMB. FAA has begun to take action to addressidentified weaknesses in order to provide greaterassurance that sensitive information is protectedfrom misuse and airmen holding medicalcertifications are fit to fly.July 21, 2010Quality Control Review of Single Auditon the Port Authority of AlleghenyCountyFor fiscal year ending June 30, 2009, the PortAuthority of Allegheny County expended approximately$115 million in grants from FTAand FRA. Maher Duessel, CPAs, rendered anunqualified (clean) opinion on the Authority’sfinancial statements and compliance with majorprograms. We determined that Maher Duessel’swork generally met the requirements of generallyaccepted government auditing standards; theSingle Audit Act of 1984, as amended; and OMBCircular A–133. We found nothing to indicatethat Maher Duessel’s opinion on the financialstatements or reports on internal control andcompliance were inappropriate or unreliable.August 9, 2010Letter to Representatives Mica andPetri Regarding Air Traffic Control WebSecurityRequested by the Ranking Members of the HouseTransportation and Infrastructure Committee andits Subcommittee on AviationAs the result of a roundtable discussion on FAA’sair traffic control system’s vulnerability to cyberattack, Representatives Mica and Petri askedus to provide an update on FAA’s efforts toimplement recommendations made in our “WebApplications Security and Intrusion Detectionin Air Traffic Control Systems” report, issuedin May 2009. Of the five recommendations wemade, FAA has implemented four, but has notyet established a timetable for completingthe work necessary to address the remainingrecommendation.Financial and Information Technology • 34

InvestigationsJuly 15, 2010Pilot Sentenced for Making FalseStatements on His Medical ApplicationIn the Northern District of California, Bruce N.Moody was sentenced to 12 months probationand ordered to pay $1,000 in restitution for hisrole in falsifying his airman medical application.Moody failed to report on his 2001, 2003, 2005,2007, and 2008 airman medical applications thathe suffered from insomnia, depression, poorconcentration, anxiety, fatigue, and memorydifficulties while serving as a pilot in command.Moody admitted to lying about his condition onFAA Form 8500.8.This investigation was initiated as a result of a referralfrom FAA alleging that Moody had been receivingdisability benefits from the Social SecurityAdministration (SSA) and the Department ofVeterans Affairs (VA) for a psychiatric diagnosis,yet failed to disclose the information to FAA. Theinvestigation was conducted by the OIG, withtechnical assistance from the SSA, VA, and FAA.September 20, 2010Former Federal Railroad AdministrationEmployee Sentenced for Theft ofGovernment PropertyContonja Saunders, a Financial ManagementSpecialist formerly with the Research andInnovative Technology Administration (RITA)and FRA, was sentenced in U.S. District Court,Greenbelt, Maryland, to 5 years probation and240 hours of community service, and ordered topay $30,090 in restitution for theft of Governmentproperty.Saunders admitted to taking five U.S. Governmentcell phones in April 2007 and distributing themfor her and her family’s personal use. She designatedherself the Verizon account representativewithout authorization, then accessed DOT accountingsystems to approve payments of over$30,000 in Government funds on the Verizonaccount. To avoid detection, Saunders changedthe Verizon billing address from DOT to herhome address after she transferred from RITAto FRA and enlisted the aid of a DOT intern toscreen Verizon account notifications. Saundersresigned from her position with FRA on August7, 2010.Semiannual Report to Congress • 35

Financial and Information Technology • 36

Acquisition and ProcurementAuditsAugust 24, 2010Federal Motor Carrier SafetyAdministration Lacks Core Elementsfor a Successful Acquisition FunctionRequested by the Federal Motor Carrier SafetyAdministratorTo achieve its primary mission of reducingcrashes, injuries, and fatalities involving largetrucks and buses, FMCSA spends about 40percent of its procurement dollars on contractarrangements—compared to about 5 percentgovernmentwide. FMCSA’s contracts are consideredhigh risk because they tie contractors’profits to numbers of hours worked. However,we found that FMCSA’s pre-award processeswere inadequate for ensuring effective businessarrangements and maximizing competition. Wealso found that FMCSA lacked effective administrationand oversight of its contracts to ensurethat the Agency’s needs were met in the mostefficient and economical manner. FMCSA’s acquisitionframework lacked organizational alignmentand leadership, policies and processes,acquisition data, and human capital—all of whichare critical components for operating effectively.Throughout our audit, FMCSA officials citedactions they had undertaken to improve procurementpractices and stated that additionalenhancements were under way. We made a numberof recommendations to improve FMCSA’sacquisition practices—practices that shouldenable the Agency to better position itself toSemiannual Report to Congress • 37

fulfill its mission. FMCSA concurred with all ofour recommendations.August 25, 2010Improvements in Cost-Plus-Award-Fee Processes Are Needed to EnsureMillions Paid in Fees Are JustifiedSelf-InitiatedWhile cost-plus-award-fee (CPAF) contractscan encourage excellence by providing financialincentives based on contractor performance,they require effective monitoring to ensure contractdollars are spent wisely and award fees arejustified based on contractor performance andrelated expected outcomes.However, DOT’s Operating Administrations havenot effectively designed, administered, or justifiedtheir CPAF contracts. For example, we foundthat (1) performance evaluation plans did notinclude measurable criteria to adequately evaluatecontractor performance; (2) rating descriptionswere vague and/or inconsistent and didnot clearly define the basis for performance; (3)performance monitors did not provide adequatesupport to justify contractor ratings; (4) paymentstructures allow for award fees for average orbelow-average performance; and (5) contractingofficials did not justify the cost effectiveness ofselecting a CPAF contract.We made a number of recommendations to improveDOT’s design, administration, and overallmanagement of CPAF contracts and increase theeffectiveness of award fees as an incentive forexcellent contractor performance. In a consolidatedresponse from the Office of the Secretaryof Transportation (OST), FAA concurred withour recommendations targeted for FAA. OSTconcurred with two of our recommendations forOST and partially concurred with the other two.Acquisition and Procurement • 38

InvestigationsSeptember 13, 2010New Jersey Construction Firm OwnerPleads Guilty to DBE Fraud SchemeEva C. Glasgow, owner of Eva GlasgowContractors, Inc. (EGC), pled guilty in U.S.District Court, Camden, New Jersey, to chargesof conspiracy to make false statements on DBEreports and to making false statements and concealingmaterial facts related to prevailing wagestatutes.Our investigation revealed that JPC Group, Inc.(JPC), the prime contractor on a $26 millionFHWA-funded road construction project, andthe subcontractor conspired with Glasgow touse EGC as a pass-through for JPC to claimcredit for meeting DBE contract requirements.The conspiracy resulted in JPC claiming creditfor millions of dollars in fraudulent DBE workthat was actually performed by a non-DBE subcontractor.Additionally, EGC submitted certifiedpayroll records to New Jersey claiming that EGCemployees were paid the prevailing rate andbenefits, when the evidence suggested that theywere paid less than the required rate.This investigation is being conducted jointly withthe Internal Revenue Service and the Departmentof Labor OIG.September 13, 2010Buffalo Concrete Supplier Pleads Guiltyto Fraud and Forfeits $1.8 MillionOscar Rayford, owner of Rayford Enterprises, acertified DBE, pled guilty in the Western Districtof New York to one count Information charginghim with mail fraud in connection with a schemeto defraud the Federal DBE program. As part ofthe plea, Mr. Rayford agreed to forfeit $1.8 millionto the Government.Between 2001 and 2007, Rayford falsely representedto various Government agencies that hiscompany, a concrete manufacturer, performed a“commercially useful function” on five separateFHWA-funded highway construction projects.The investigation disclosed that Lafarge NorthAmerica, a non-DBE concrete supplier, performedin excess of $3.2 million of work onRayford’s behalf, with Rayford keeping a smallpercentage of the value of the subcontracts.A sentencing date has not been scheduled.September 27, 2010FAA Employee Pleads Guilty toStealing $123,774Keysha Logan, a management assistant inFAA’s Finance Services Comptroller Group,Washington, D.C., pled guilty in U.S. DistrictCourt in Greenbelt, Maryland, to embezzlement.Semiannual Report to Congress • 39

Logan admitted that from 2007 to 2010, she usedher Government-issued credit card to buy giftcards from Office Depot and other retailers, keptthe gift cards for personal use, and approvedGovernment funds to pay for the purchase of thegift cards. For example, on January 23, 2010,Logan charged $535.43 on her GovernmentMasterCard at Office Depot to purchase a $200American Express gift card and three $100 Visagift cards. Logan used the gift cards for her personalbenefit and used FAA’s computer systemto approve the Government’s payment for thecharge.The total loss resulting from the embezzlementscheme is $123,774.47. FAA has initiated administrativeproceedings against Logan. Loganis scheduled to be sentenced in January 2011.Acquisition Departmentwide and Procurement Issues • •40 40

Departmentwide IssuesApril 23, 2010Letter to Ranking Member IssaRegarding the Status of Open AuditRecommendationsRequested by the Ranking Member of the HouseCommittee on Oversight and GovernmentReformIn his March 24, 2010, letter, Congressman Issaasked OIG to provide information on the numberof open recommendations; estimated cost savingsassociated with these open recommendations;our top three open recommendations; andthe number of recommendations that have beenimplemented since January 5, 2009.As of April 6, 2010, we identified 341 open recommendationsincluded in 107 audit reports. Of the341 open recommendations, 45 recommendationsin 33 reports carry an estimated monetarybenefit or cost savings. We determined the threemost important recommendations based onwhether the recommendation will lead to significantimprovements in safety, significant financialbenefits, or significant improvements in theeconomy or efficiency of the program audited.Last, between January 5, 2009 and April 6, 2010,we closed 424 recommendations contained in173 audit reports.Semiannual Report to Congress• 41

June 18, 2010Letter to Senators Grassley andCoburn Regarding Information inSupport of OIG’s MissionRequested by Senators Grassley and CoburnIn response to Senators Grassley and Coburn’sApril 8, 2010, letter, we provided information onthe independence necessary to carry out our audits,evaluations, and investigations. We reported(1) that the Department is generally responsiveto our requests for information; (2) a summaryof our non-public investigations and managementadvisories; (3) no threats to or attemptedobstruction of our ability to communicate withCongress on the budget or other matters; and(4) the number of open recommendations andassociated cost savings estimates, our top threeopen recommendations, and the number ofrecommendations implemented since January5, 2009.August 23, 2010Letter to Chairman Towns on OIG’s TopThree Open Audit RecommendationsRendering the Greatest Cost Savingsto the Federal BudgetRequested by the Chairman of the HouseCommittee on Oversight and GovernmentReformWe identified the following top three openrecommendations: (1) the Department shouldmonitor its field offices’ quarterly inactive projectreviews, particularly on stagnant projects, to ensurethat inactive obligations are liquidated in atimely manner throughout the year (totaling $800million); (2) FAA should direct airport sponsors todevelop and implement plans to recover FAA’sshare from the disposition of 3,608 unneedednoise land acres (estimated at $160.6 million);and (3) RITA should coordinate with FHWA toidentify and review old Intelligent TransportationSystems program contracts and agreementsand de-obligate nearly $20 million in unneededfunds.Departmentwide Issues • 42

Other AccomplishmentsOIG’s other accomplishments and contributions are those that extend beyond the legal reportingrequirements of the Inspector General Act. These accomplishments are part of our statutory responsibilitiesto review existing and proposed legislation and regulations; respond to congressional anddepartmental requests for information; and review policies for ways to promote effectiveness andefficiency and detect and prevent fraud, waste, and abuse.April 16, 2010Spoke on Issues of Concern to theAviation Industry in Implementing ARRAA Program Manager from Aviation and SpecialProgram Audits presented our ARRA FAA workto the annual Airports Council International-NorthAmerica Spring Legal Issues Conference in SanAntonio, Texas. The conference consisted of anaudience of airport and FAA personnel, and DOTAttorneys. The Program Manager discussedARRA requirements and funding, DOT OIG oversightplan, ARRA challenges, ARRA scan results,ongoing audit work, and lessons learned.May 4, 2010Briefed Brazilian Officials on DOT OIGMissionThe Deputy Inspector General, Principal AssistantIG for Investigations, Deputy Assistant IG forAviation and Special Program Audits, AssociateCounsel, and a Special Agent briefed top Brazilianofficials on our mission at the 2010 BrazilianNational Briefing, sponsored by The GeorgeWashington University’s Brazilian anti-corruptionprogram. Participants included more than 20 Brazilianofficials, including those from the Ministry ofHealth; representatives from the Internal RevenueService, Inspector General Office; and officialsfrom the Federal Police Department.May 19, 2010Spoke on Federal Audit ApproachesRelated to ARRAThe Inspector General spoke at the 18th BiennialForum of Government Auditors in San Antonio,Texas, on the OIG community’s strategy for promotingaccountability in ARRA funded projects.June 3, 2010Spoke on OIG’s ARRA OversightStrategiesThe Deputy Inspector General presented a keynoteaddress, “Promoting Transparency and Accountabilityin DOT’s Implementation of ARRA” atthe Mid-Atlantic Intergovernmental Audit Forumin Ocean City, Maryland. The Deputy InspectorGeneral’s presentation highlighted our auditand investigation work on ARRA as it relates toaviation, surface safety, information security, andacquisitions and procurement; the challenges weidentified in each of these areas; and OIG outreachefforts to combat fraud, waste, and abuse.Semiannual Report to Congress • 43

July 26 through 29, 2010Co-Sponsored the Sixth BiennialNational Fraud Awareness Conferenceon Transportation InfrastructureProgramsOIG co-sponsored this week-long conference withthe American Association of State Highway andTransportation Officials, the District of ColumbiaDepartment of Transportation, the WashingtonMetropolitan Area Transit Authority, the MarylandDepartment of Transportation, the VirginiaDepartment of Transportation, and the DelawareDepartment of Transportation to sharpen awarenessof fraud schemes; share best investigative,audit, and oversight practices; and strengthenwork relationships among attendees. Participantswho attended the conference, held in Arlington,Virginia, included attorneys, auditors, engineers,contract and procurement officers, investigators,and law enforcement personnel from all levels ofgovernment.The conference provided a unique opportunity toeducate stakeholders in Federal, state, and localgovernment as well as the private sector on howto identify and prevent fraud, waste, and abuseand protect taxpayer investments. The agendacovered topics such as ARRA stewardship andoversight challenges; fraud schemes, includingthose related to DBE, as well as contract, grant,and anti-trust fraud; effective audit practices; andensuring safety in infrastructure projects.This year’s conference was our most successfulto date, with more than 400 participants. In additionto OIG presenters, the conference included anumber of high-level external speakers, includingThe Honorable John D. Porcari, Deputy Secretaryof DOT; The Honorable James L. Oberstar, U.S.House of Representatives; Helen Lew, the firstInspector General for the Washington MetropolitanArea Transit Authority; and representativesfrom the Virginia, District of Columbia, Delaware,Maryland, and North Carolina Departments ofTransportation.September 15, 2010Spoke on Suspension and DebarmentProgramsThe Inspector General and IGs from the Departmentof Homeland Security and the General ServicesAdministration discussed suspension anddebarment policies, procedures, and practicesat their respective departments and agencies atthe Association of Government Accountants’ FifthAnnual Internal Control and Fraud Conference.The panel discussion, “How Effectively Are WeUsing Suspension and Debarment Actions forPoorly Performing Contractors?,” was moderatedby the Tennessee Valley Authority IG.Other Accomplishments • 44

Work Planned and in ProgressThis section describes OIG’s ongoing and planned work for October 1, 2010, through March 31, 2011.This work focuses on the Department’s Strategic Plan and its core missions of transportation safetyand mobility, as well as responds to requests by Administration officials and Congress. We take intoaccount the need to support DOT’s most critical programs and ensure that departmental resources areprotected from fraud, waste, and abuse.AVIATION AND SPECIAL PROGRAMSIN PROGRESSFAA Progress in Developingand Implementing NextGenTransformational ProgramsAt the request of the Chairmen and Ranking Membersof the House Committee on Transportationand Infrastructure and its Subcommittee on Aviation,OIG is assessing FAA’s actions to addressrecommendations made by an RTCA task forceconvened to review mid-term actions in NextGen’sdevelopment. Specifically, OIG is determining theextent to which FAA is (1) responding to the taskforce’s recommendations, including adjusting itsbudgets and establishing mechanisms for continuedcollaboration with industry and (2) addressingbarriers that may hinder its ability to successfullyimplement the recommendations.Certification of NextGen TechnologiesAt the request of the Chairmen of the HouseCommittee on Transportation and Infrastructureand its Subcommittee on Aviation, OIG is assessingFAA’s revised certification procedures,which require Agency certification for FAA-ownedsystems but not for contractor-owned systems.The Chairmen raised questions about how this isimpacting FAA’s continued responsibility to overseethe performance of key NextGen technologiesthat will be owned by the private sector, suchas Automatic Dependent Surveillance-Broadcast(ADS-B). Accordingly, we are examining the newprocedures, as applied to ADS-B, to (1) determinethe impact of the procedures on FAA’s statutoryresponsibility for maintaining the safety and integrityof air traffic control systems and (2) identify thechallenges and risks associated with the privatesector operating and maintaining key air trafficcontrol systems.FAA’s System Wide InformationManagement Program (SWIM)SWIM is a secure, web-based architecture that isexpected to streamline information sharing to airspaceusers and provide access to weather andflight management information, and aeronauticalservices and applications. OIG is examining (1)Semiannual Report to Congress • 45

the status of FAA’s efforts to develop and implementSWIM and (2) problems that could affect nationwidedeployment or limit anticipated benefits.Progress and Problems Implementingthe En Route AutomationModernization (ERAM) ProgramAt the request of the House AppropriationsSubcommittee on Transportation, Housing andUrban Development, and Related Agencies, OIGis reviewing FAA’s implementation of ERAM—a$2.1 billion program to replace existing hardwareand software at facilities that manage high altitudeair traffic in the National Airspace System.Our objectives are to (1) determine FAA’s progressin implementing ERAM and address persistentsoftware problems and (2) identify the risks theseproblems may pose on FAA’s plans to implementcritical NextGen systems.FAA Oversight of Pilot Training andRegional AirlinesAt the request of the Chairmen and Ranking Membersof the Senate Committee on Commerce,Science, and Transportation and its Subcommitteeon Aviation Operations, Safety, and Security;the Chairman of the House Transportation andInfrastructure’s Subcommittee on Aviation; andRepresentatives Slaughter, Lee, and Higgins, OIGis performing an audit of pilot training and regionalairlines to assess (1) FAA oversight of air carrierpilot training and proficiency programs and (2) theprocesses and data that FAA and air carriers useto evaluate the competence and qualifications ofpilots when they are hired.Commercial Aviation Accidents, PilotExperience, and Pilot CompensationsAt the request of the Chairmen and Ranking Membersof the Senate Committee on Commerce,Science, and Transportation and its Subcommitteeon Aviation Operations, Safety, and Security,OIG is conducting an audit to identify and assesstrends in commercial aviation accidents, includingcorrelations between pilot experience andcompensation.FAA’s Organization DesignationAuthorization and Risk-Based ResourceTargeting ProcessesAt the request of Representative Lipinski, OIGis assessing FAA’s Organization DesignationAuthorization (ODA) program and its Risk-BasedResource Targeting (RBRT) process. The ODAprogram authorizes companies to perform certainfunctions on FAA’s behalf, including issuing airworthinesscertificates, approving certain aircraftengineering designs and test data, and modifyingexisting approved designs. RBRT classifies certificationprojects in low, medium, and high riskcategories so that engineers and managers canfocus their oversight on projects deemed to havethe highest risk. OIG is determining (1) the roleFAA plays in the selection process for individualswho perform work under the ODA program,(2) the adequacy of FAA’s safety oversight of theprogram, and (3) the effectiveness of FAA’s RBRTassessment process.Work Planned and in Progress • 46

Department of Transportation and FAAOversight of Domestic Code-ShareRelationshipsAt the request of the Chairmen of the House Committeeon Transportation and Infrastructure andits Subcommittee on Aviation, OIG is conductingan audit of DOT and FAA oversight of codeshareagreements between domestic air carrierpartners. Our audit objectives are to (1) examineDOT’s and FAA’s legal authority to review agreementsbetween mainline air carriers and theirregional partners, (2) assess how mainline air carriersensure that their regional partners have thesame level of safety, and (3) determine whetherthe public has adequate information on carriers tomake informed decisions when purchasing airlinetickets.FAA Regulations and Airline PoliciesRegarding Crew Rest Requirementsand Fatigue IssuesAt the request of the Chairmen and Ranking Membersof the Senate Committee on Commerce, Science,and Transportation and its Subcommittee onAviation Operations, Safety, and Security, OIG isconducting an audit to (1) identify FAA regulationsand airline policies on crew rest requirements andfatigue issues, including the role of pilot domicileand duty locations; (2) determine how FAA andairlines enforce these regulations and policies;and (3) assess how FAA and airlines update thesepolicies and procedures to ensure they addresschanging conditions in the aviation industry.Costs and Controls Associated withthe 2009 FAA/National Air TrafficControllers Association ContractAt the request of Representative Mica, RankingMember of the House Committee on Transportationand Infrastructure, OIG is conducting anaudit of the new collective bargaining agreementbetween FAA and the National Air Traffic ControllersAssociation to (1) evaluate the accuracy andcompleteness of FAA’s cost estimate of the newcontract, (2) identify contract provisions that couldincrease costs, and (3) determine if FAA has sufficientcontrols in place to prevent cost increases.FAA’s Efforts To Improve Its System forTracking Controller TrainingIn July 2009, the House Appropriations Subcommitteeon Transportation, Housing and UrbanDevelopment, and Related Agencies directedOIG to provide an update on FAA’s progress indeveloping procedures for collecting accuratedata on controller training failures to more effectivelymonitor and improve the controller trainingprogram. The Subcommittee also requested thatOIG review FAA’s metrics for measuring and reportingthe effectiveness of its controller trainingprogram. Accordingly, OIG is (1) evaluating FAA’sactions taken to improve its system for trackingthe training progress of newly hired controllersand (2) determining if FAA uses appropriate trainingattrition metrics in reporting controller trainingprogress.Semiannual Report to Congress • 47

Job Creation under the AmericanRecovery and Reinvestment Act of2009At the request of Representative Mica, RankingMember of the House Committee on Transportationand Infrastructure, OIG is reviewing job creationand reporting associated with ARRA fundingfor two FAA accounts: the Airport ImprovementProgram (AIP) and Facilities and Equipment(F&E). OIG is determining whether (1) AIP andF&E projects funded under ARRA are preservingand creating jobs and (2) the reporting of job datasatisfies ARRA requirements.FAA Oversight of Venice, Florida,Municipal Airport RevenuesAt the request of Senator LeMieux, OIG is assessingwhether FAA’s oversight ensures that the Cityof Venice is using airport revenues for appropriatepurposes and that the airport is as self-sustainingas possible.FAA Implementation of RTCA’sNextGen Task Force RecommendationsAt the request of the Chairmen and RankingMembers of the House Committee on Transportationand Infrastructure and its Subcommittee onAviation, OIG is assessing FAA’s implementationof recommendations made by RTCA, a Federaladvisory committee. Specifically, we are determiningthe extent to which FAA is (1) respondingto the task force’s recommendations, includingadjusting its budgets and establishing mechanismsfor continued industry collaboration, and(2) addressing barriers that may hinder its abilityto successfully implement the recommendations.FAA Oversight of Use of AirportRevenue – Denver International AirportOIG is determining whether FAA’s oversight ensuresthat (1) Denver International Airport is asself-sustaining as possible and obtains fair marketvalue for land sales and (2) the City of Denver,the airport sponsor, uses airport revenues only forairport purposes in accordance with Federal law.PLANNEDFAA Oversight of Aircraft RepairStationsAt the request of the Chairman of the HouseTransportation and Infrastructure’s Subcommitteeon Aviation, OIG will assess U.S. airlines’ use ofaircraft repair stations. Specifically, OIG plans to(1) identify the changes that FAA has made to itsrepair station oversight in response to OIG recommendations,(2) assess the effectiveness of thesechanges in improving FAA oversight, and (3) identifyany challenges that need to be addressed.Controller Staffing and Training atCritical Air Traffic Control FacilitiesIn July 2010, the House Appropriations Subcommitteeon Transportation, Housing and UrbanDevelopment, and Related Agencies directedOIG to review training and staffing at FAA’s mostcritical facilities to assess whether FAA’s trainingWork Planned and in Progress • 48

protocol ensures that all air traffic control facilities,especially the busiest and most complex facilities,have enough controllers to maintain the safety ofthe National Airspace System. Accordingly, OIGwill review FAA’s plans to provide its most criticalair traffic control facilities with controller staffing,training resources, and other support needed toensure the continuity of facility operations.FAA Efforts To Improve AlaskanAviation SafetyAlaskans depend far more than the rest of the Nationon aviation to meet their daily needs. Smallaircraft meet much of this demand for aviationservices but often lack the technology neededto safely navigate Alaska’s challenging terrain inbad weather. During summer 2010, small aircraftin Alaska experienced a spike in accidents andfatalities, including a crash that killed Alaska’sformer U.S. Senator Ted Stevens and four others.Because Alaska’s accident rate exceeds the nationalaverage, OIG will assess FAA’s technologystrategies and investments for improving aviationsafety in the State.FAA Oversight of ARRA ExpendituresARRA requires OIG to conduct audits of ARRAfundedprojects to ensure the effective andefficient use of DOT’s ARRA funds. Accordingly,OIG plans to determine whether FAA oversight ofARRA grants is ensuring that airport sponsors arebeing reimbursed for only eligible expenditures.PHMSA Management and Oversightof Hazardous Materials EmergencyPreparedness Grants ProgramAt the request of the Chairman of the HouseCommittee on Transportation and Infrastructure,OIG will audit PHMSA’s management and oversightof the Hazardous Materials Emergency Preparedness(HMEP) grant program. Specifically,OIG will evaluate the effectiveness of PHMSA’s(1) policies, processes, and resources to executethe program; (2) guidance to states, local governments,and tribal organizations on HMEP and theuse of Federal funds; and (3) program oversight toensure Federal funds are used for eligible activitiesin accordance with Federal law, regulations,and submitted grant applications.PHMSA Oversight of Hazardous LiquidPipeline Management ProgramsIn July 2010, the House Appropriations Subcommitteeon Transportation, Housing and Urban Development,and Related Agencies called on OIGto assess PHMSA’s implementation of Federalpipeline safety regulations regarding human factorsand other aspects of control room management.OIG will also examine pipeline operators’integrity management programs.Semiannual Report to Congress • 49

HIGHWAY AND TRANSIT PROGRAMSIN PROGRESSFTA Oversight of Major Transit Projectsin New York CityOIG is conducting audits of four transit projects inNew York City, totaling approximately $7 billion inFederal funding: (1) the Fulton Street Transit Center,(2) the Port Authority Trans-Hudson Terminal,(3) the Second Avenue Subway, and (4) the EastSide Access projects. OIG is evaluating the effectivenessof FTA’s oversight of each project andassessing whether ARRA goals and requirementsare being met, if applicable.FTA Oversight of the Dulles CorridorMetrorail ProjectOIG is conducting an audit of FTA’s oversight ofPhase 1 of the Dulles Corridor Metrorail Project inthe Washington, D.C., metropolitan area. This infrastructureproject involves a Federal investmentof $900 million through FTA’s New Starts program,including $77.3 million in ARRA funds. Our auditobjectives are to (1) evaluate the effectiveness ofFTA’s oversight of the Dulles Corridor MetrorailProject and (2) assess safety concerns.Oversight Challenges Associated withTransit Safety ProgramsOIG is reviewing challenges associated withenhancing federal oversight authority for transitsafety programs. Our audit objective is to highlightchallenges and risks related to increasing Federaloversight of transit safety and actions the Departmentcan take to enhance its effectiveness.NHTSA Office of Defects InvestigationOIG is reviewing actions taken by NHTSA’s Officeof Defects Investigation (ODI) with regard to Toyotarecalls and the overall process for identifyingand investigating safety defects. Our audit objectivesare to (1) examine NHTSA’s efforts to ensureODI has the appropriate information systemsand processes in place to promptly identify andtake action to address potential safety defects asintended by the Transportation Recall Enhancement,Accountability, and Documentation Act;(2) assess NHTSA’s procedures and processes forensuring companies provide timely notification ofpotential safety defects; and (3) examine lessonslearned from the Toyota recalls to identify neededimprovements to current policies and procedures.NHTSA Ethics PoliciesAt the request of the Chairmen of the SenateCommittee on Commerce, Science, and Transportationand its Subcommittee on ConsumerProtection, Product Safety, and Insurance, OIG isreviewing NHTSA’s ethics policies and practices.We are assessing whether (1) NHTSA’s ethicspolicies, procedures, and training are adequateto prevent pre- and post-employment ethicsviolations or appearances of impropriety and (2)Work Planned and in Progress • 50

any favoritism or bias is shown towards industryduring the normal course of conducting defectinvestigations.FHWA’s National Review TeamsOIG is assessing whether FHWA’s National ReviewTeams have been effective in helping FHWAoversee $26 billion in ARRA funding and mitigatethe key risks posed by ARRA’s implementation.Oversight of Highway ProjectsAdministered by Local Public AgenciesOIG is assessing FHWA’s oversight of the $6 billionto $8 billion provided annually to localities forhighway projects along with $8 billion in ARRAfunding. Our audit will compare the oversight providedto local public agency programs approvedthrough ARRA with that provided to programsfunded by regular Federal aid.FHWA Oversight of High-Dollar ARRAHighway ProjectsOIG is conducting an audit to determine if FHWA’soversight of selected higher dollar ARRA projectshas resulted in project compliance with Federalaidhighway requirements for cost, schedule, andquality. ARRA provided $27.5 billion to FHWA forhighway infrastructure investments and requiredFHWA to ensure that states receiving ARRA fundsadhere to Federal-aid highway program requirements.Denali Commission’s Use of FederalaidHighway and Transit FundsAt the request of Senator Bond, OIG is assessingthe Denali Commission’s use of Federal-aidhighway and transit funds and evaluating DOT’soversight of the Commission and state transportationagencies.PLANNEDOST’s Transportation InvestmentsGenerating Economic Recovery(TIGER) GrantsOIG plans to assess whether the Departmentmet ARRA discretionary grant requirements andto evaluate the strategy for discretionary grantadministration and oversight. ARRA created newdiscretionary grant programs, including $1.5billion for surface transportation infrastructureprojects to be administered by the Office of theSecretary.FTA’s Charter Bus RegulationIn response to a provision in the ConferenceReport accompanying the fiscal year 2010 Departmentsof Transportation, Housing and UrbanDevelopment, and Related Agencies appropriationsbill, OIG plans to review the effect of chartertour regulations on quality and price of transitservices.Semiannual Report to Congress • 51

RAIL AND MARITIME PROGRAMS AND ECONOMIC ANALYSISIN PROGRESSMARAD’s Title XI Loan GuaranteeProgramAt the request of the Senate Appropriations Subcommitteeon Transportation, Housing and UrbanDevelopment, and Related Agencies, OIG is assessingthe Maritime Administration’s (MARAD)response to recommendations we made in our2003 and 2004 audit reports on the Title XI LoanGuarantee Program and the degree to whichinformation is readily available for monitoring theprogram.Amtrak Semiannual Reports onOperational SavingsAs mandated by Congress, OIG is issuing semiannualreports to the House and Senate Committeeson Appropriations on our estimates of thesavings accrued as a result of operational reformsinstituted by Amtrak.Amtrak’s Five-Year Capital PlanAt the request of the House Committee on Appropriations,we are reviewing Amtrak’s capitalplanning process. Specifically, we are assessing(1) how Amtrak’s 5-year capital requirementsalign with its business and strategic goals, (2)Amtrak’s efforts to prioritize its capital projectsamong competing needs, (3) Amtrak’s ability toimplement its increased capital budget providedby ARRA, and (4) Amtrak’s approach to evaluatingthe performance of capital projects.Utilization of Amtrak’s MaintenanceFacilitiesIn accordance with Section 227 of PRIIA of 2008,OIG is auditing Amtrak’s utilization of its existingequipment maintenance and repair facilities. Ourobjectives are to examine (1) Amtrak’s use of itsthree back shop facilities; (2) the productivity ofthese facilities; and (3) the extent to which Amtrakis maximizing the use of each facility, includingthe provision of maintenance and repair servicesto other rail carriers.High-Speed Rail Program State-FreightRailroad Access AgreementsOIG is conducting an audit to (1) evaluate whetheraccess agreements between states and freightrailroads comply with PRIIA requirements andFRA’s June 2009 Interim Guidance and (2) determinewhether the access agreements adequatelyaddress cost, schedule, and performance goalsand thus ensure high-speed intercity passengerrail benefits.Adequacy of Measures Taken ToAddress the Solvency of the HighwayTrust FundAt the request of the Ranking Minority Member ofthe Senate Budget Committee, OIG is conductingan audit to evaluate the reasonableness of theDepartment’s policies and procedures for moni-Work Planned and in Progress • 52

toring the solvency of the Highway Trust Fund,and compare these policies and procedures tothose used by FAA to manage the Airport andAirway Trust Fund.Causes of Amtrak Delays / IntercityPassenger Rail Service BottlenecksOIG is using an econometric model to identifybottlenecks along Amtrak routes and determinethe causes. We plan to determine which of thesebottlenecks are due to congestion or relative lackof capacity, and identify the locations that warrantmore in-depth examination as candidates for railinfrastructure investments.Best Practices in High-Speed RailForecastingOIG is performing an analysis to (1) assess thestrengths and weaknesses of various methodologiesused in developing forecasts of high-speedrail and intercity passenger rail ridership andrevenue, cost estimates, and public benefits valuationsand (2) identify best practices in preparingthese forecasts, estimates, and valuations.Rail Service DisruptionsAs directed by the Conference Report accompanyingthe fiscal year 2008 Consolidated AppropriationsAct, OIG is examining the timelinessand reliability of freight rail service and disruptionssince 2004. We are focusing on the quality of anddisruptions to service received by shippers ofcoal, wheat, ethanol, and lumber.Financial Analysis of TransportationRelated Public-Private PartnershipsOIG is performing an analysis to (1) determinethe extent to which public-private partnerships(PPP) address transportation infrastructure fundingneeds, (2) identify disadvantages to the publicsector of PPP transactions compared to moretraditional financing methods, and (3) identify factorsthat allow both the private and public sectorto derive value from PPP transactions.PLANNEDAmtrak’s Financial Accounting andReporting SystemPursuant to section 203(b) of PRIIA; OIG is planningto conduct a review of Amtrak’s modernfinancial accounting and reporting system.State Capacity to Meet High-SpeedRail DemandsOIG plans to (1) evaluate states’ capabilities forplanning, designing, and managing high-speedrail projects; (2) determine what constitutes astrong state passenger rail department and howthese strong departments develop; and (3) identifystates’ capacity for managing other state-ledFederally-funded programs, such as Federal-aidhighways, and how these capacities developed.Semiannual Report to Congress • 53

FRA and Amtrak Implementation ofPRIIA ProvisionsPursuant to section 221 of PRIIA, OIG, in conjunctionwith the Amtrak OIG, plans to review Amtrak’sand DOT’s progress in implementing PRIIAprovisions. As directed by the act, at a minimumwe will assess FRA’s and Amtrak’s (1) effectivenessin improving annual financial planning; (2)effectiveness in implementing improved financialaccounting; (3) efforts to implement minimumtrain performance standards; and (4) progress inmaximizing revenues, minimizing Federal subsidies,and improving financial results.Work Planned and in Progress • 54

FINANCIAL AND INFORMATION TECHNOLOGYIN PROGRESSInformation Technology VulnerabilityAssessment of FAA’s Operational AirTraffic Control SystemAt the request of the Ranking Members of theHouse Transportation and Infrastructure Committeeand its Subcommittee on Aviation, OIG hascontracted with Clifton Gunderson LLP, an independentpublic accounting firm, to perform aninformation technology vulnerability assessmentof FAA’s Operational Air Traffic Control System todetermine whether operational air traffic controlsystems can be accessed by unauthorized usersfrom inside air traffic control facilities throughFAA’s Mission Support/Administrative SystemNetwork.NextGen Automatic DependentSurveillance Broadcast (ADS-B)Security and ControlsAt the request of the Chairmen and RankingMembers of the House Committee on Transportationand Infrastructure and its Subcommittee onAviation, OIG is determining whether (1) ADS–Bsecurity requirements specified in the contracthave been properly defined and satisfied by thecontractor, (2) the contractor is following FAA’ssecurity architecture in developing ADS–B, and(3) the contractor has identified and mitigatedsecurity risks.DOT Implementation of PersonalIdentity Verification (PIV) CardsOIG is determining if DOT (1) has an effectiveprocess for issuing, maintaining, and terminatingPIV cards for employees and contractors and (2)is adequately protecting the personal informationcollected, stored, processed, and transmittedon PIV systems in accordance with HomelandSecurity Presidential Directive 12, “Policy for aCommon Identification Standard for Federal Employeesand Contractors.”DOT Information Security Program andPractices for Fiscal Year 2010The Federal Information Security ManagementAct of 2002 requires OIG to perform an annualreview of DOT’s information security program andpractices to determine their effectiveness andcomplete OMB’s template for security assessmentsand performance measures.DOT Network Access AccountsManagementOIG is determining if the Department is (1) properlyidentifying all users and network devices for accountmanagement; (2) adequately establishing,activating, modifying, disabling, and removing accounts;and (3) sufficiently authenticating accountusers.Semiannual Report to Congress • 55

DOT’s Implementation of Single AuditRecommendations and Cost RecoveryOIG is determining if DOT Operating Administrationshave (1) issued management decisionsapproving grantees’ corrective action plans, (2)ensured the prompt implementation of correctiveactions by grantees, (3) taken timely actionto recover questioned costs, and (4) used singleaudit results to identify grantees requiring closemonitoring.FAA Expenditures for AirportImprovements at the Kabul,Afghanistan International AirportIn response to an FAA request, OIG is performinga review of FAA expenditures at the Kabul,Afghanistan International Airport. In 2006, theUnited States Agency for International Development(USAID), under an agreement with FAA,transferred $25 million to FAA for improvementsat the airport. Our audit objective is to determineif FAA’s costs in support of these improvementswere supported and valid under the terms andconditions of the agreement with USAID.PLANNEDFTA Improper Payment ControlsOIG will review the controls implemented by FTAheadquarters and regional offices to prevent anddetect improper payments to Federal transit grantrecipients.Quality Control Reviews of SingleAudits on DOT GranteesAs mandated by OMB Circular A-133, OIG willconduct quality control reviews of selected singleaudits performed by independent public accountingfirms on grant recipients’ use of DOT funds.Standards for Attestation Engagements(SSAE-16) Review of FAA EnterpriseCenter Security ControlsOIG will conduct a quality control review of the auditperformed by an independent public accountingfirm and determine if the audit was performedin accordance with applicable audit standards.Quality Control Reviews for FiscalYears 2010 and 2011 of DOTConsolidated Financial Statements, FAAFinancial Statements, and NationalTransportation Safety Board FinancialStatementsAs mandated by the Chief Financial Officers Act,OIG will conduct quality control reviews of theaudits by independent public accounting firms todetermine if they were performed in accordancewith applicable auditing standards.Work Planned and in Progress • 56

Implementation of DOT EnterpriseArchitecture for Information TechnologyInvestmentOIG will review DOT’s development and implementationof an enterprise architecture to directfuture information technology system developmentefforts.Security Protection of Airmen RegistrySystemOIG will review FAA’s security protection of airmen’spersonally identifiable information and theintegrity of the data collected.Use of NHTSA Drug Control FundsAs mandated by the Office of National Drug ControlPolicy, OIG will conduct an annual attestationreview to ensure that the Fiscal Year 2010 DrugControl Report submitted to the Office of NationalDrug Control Policy is not materially misstated.DOT Compliance with ReportingRequirements Outlined in ExecutiveOrder 13520, Reducing ImproperPayments and Eliminating Waste inFederal ProgramsAs mandated by Executive Order 13520, OIGwill review Department compliance with the ExecutiveOrder; assess the level of risk associatedwith applicable programs; determine the extentof oversight warranted; and make recommendations,where appropriate.DOT’s Information Security Programand Practices for Fiscal Year 2011As mandated by the Federal Information SecurityManagement Act of 2002, OIG will conduct an annualreview of DOT’s information security programand practices to (1) determine their effectivenessand (2) complete OMB’s template for security assessmentsand performance measures.Semiannual Report to Congress • 57

Work Planned and in Progress • 58

ACQUISITION AND PROCUREMENTIN PROGRESSPlanning for FAA’s AcquisitionWorkforce RequirementsOIG is assessing the adequacy of FAA’s plans fordetermining its acquisition workforce needs andprogress in addressing those needs. Specifically,we are assessing how FAA (1) determined andidentified the required skills and competenciesneeded for its current and future acquisitionworkforce; (2) addressed gaps in the hiring anddevelopment of its acquisition workforce; and (3)identified the programs, policies, and practicesneeded to ensure an adequate workforce.FHWA Oversight of Federal-aid StateARRA Contract Award PracticesOIG is determining whether FHWA’s oversight ofstate-level contract award practices is adequateto ensure compliance with laws and regulations.ARRA designated about $27 billion for theFederal-aid Highway Program to achieve severalgoals, including (1) preservation and creation ofjobs, (2) promotion of economic recovery, and(3) investment in transportation infrastructure toprovide long-term economic benefits.OST’s Acquisition FunctionOIG is assessing OST’s acquisition function toidentify vulnerabilities that could impact OST’sability to manage its acquisitions and implementeffective acquisition processes departmentwide.Specifically, we are assessing OST’s acquisitionfunction against best practices (such as OMBguidelines on conducting acquisition assessmentsunder Circular A–123), including its (1)structure, organization, and support of DOT’smission needs; (2) policies and processes forplanning, awarding, administering and overseeingacquisitions; and (3) internal controls, tools,and data for managing acquisitions.FAA’s Award of Systems Engineering2020 ContractsAt the request of the Ranking Members of theHouse Committee on Transportation and Infrastructureand its Subcommittee on Aviation, OIGis reviewing FAA’s Systems Engineering 2020(SE-2020) contracts. This portfolio of contractsfor support services, which FAA estimates mayhave a maximum value of $7 billion, is being usedto implement NextGen, FAA’s plan to transformthe National Airspace System to meet growth inair traffic operations and an aging infrastructure.OIG is reviewing whether these contracts arebeing planned, structured, administered, andoverseen in accordance with acquisition policyand meet FAA’s mission needs.FAA’s Use of Price Analysis WhenAwarding Noncompetitive ContractsOIG is assessing the adequacy of FAA’s priceanalyses for awarding noncompetitive contractsSemiannual Report to Congress • 59

and its reasons for awarding noncompetitivecontract awards.PLANNEDFTA’s Oversight of ARRA Grantees’Contract Award and AdministrationPracticesOIG plans to determine whether FTA’s oversightof transit administration-level contracting practicesby ARRA grantees is adequate to ensurecompliance with laws and regulations and topromote the delivery of infrastructure investmentsat appropriate prices.FHWA’s Oversight of State DOT ARRAContract Administration PracticesOIG plans to determine if FHWA’s oversight ofstate-level ARRA contract administration practicesis adequate to ensure that states promotethe delivery of infrastructure investments at appropriateprices and comply with ARRA biddingrequirements and contract procedures. Theserequirements and procedures call for awardingfixed-price contracts through competitive proceduresto the maximum extent possible.Planning for the Department’sAcquisition Workforce RequirementsOIG plans to determine whether DOT and itsOperating Administrations, other than FAA, havemade adequate progress developing a strategicplan for the acquisition workforce. Specifically,we plan to determine whether the Departmenthas (1) identified its current acquisition workforceand sufficiently estimated workforce needsbased on expected acquisitions; (2) assessedcapabilities of the current workforce and identifiedthe required skills and competencies neededfor its future acquisition workforce; and (3) developedpolicies and procedures to effectivelyrecruit, train, and retain an adequate workforceto accomplish agency missions.FHWA Oversight of Award andAdministration of Contracts toDisadvantaged Business EnterprisesOIG plans to determine whether FHWA’s oversightof state-level contract administration practicesis adequate to ensure proper award andadministration of DOT-assisted DBE contracts.Specifically, we will assess the adequacy ofFHWA’s oversight procedures for systematicallyensuring that only bona fide, small firms ownedand controlled by socially and economicallydisadvantaged individuals are performing workunder the program.FAA’s Acquisition FunctionOIG will assess FAA’s organizational structure,policies, and processes for complying with OMBCircular A-123 guidelines on effective acquisitionfunctions. Specifically, we plan to assess whetherFAA has (1) structured and aligned its acquisitionfunction to best support FAA’s mission needs; (2)implemented clear and transparent policies andprocesses for governing its acquisition planning,awards, administration, and oversight; and (3)developed internal controls for managing itsacquisition data.Work Planned and in Progress • 60

Statistical Performance DataSummary of PerformanceOffice of Inspector GeneralApril 1, 2010 - September 30, 2010(Dollars in Thousands)Reports Issued 78Recommendations Issued 234Congressional Testimonies 4Total Financial Recommendations $633,259That Funds Be Better Used $449,200Questioned Costs (includes Unsupported Costs) $184,059Indictments 53Convictions 41Semiannual Report to Congress • 61

Statistical Performance Data • 62

AuditsCompleted OIG ReportsApril 1, 2010 - September 30, 2010(Dollars in Thousands) *Number ofNumber ofQuestionedUnsupportedFunds to BeType of ReviewReportsRecommendationsCostsCostsPut to Better UseInternal AuditsPerformance Audits 11 75 $0 $140,600 $449,200Financial Audits 0 0 $0 $0 $0Attestation Engagements 0 0 $0 $0 $0Other OIG Reports 0 0 $0 $0 $0Total Internal Audit Reports 11 75 $0 $140,600 $449,200Grant AuditsAudits of Grantees underSingle Audit Act 67 159 $43,459 $0 $0Total Completed OIG Reports 78 234 $43,459 $140,600 $449,200*The dollars shown are the amounts reported to management. The actual amounts may changeduring final resolution.Department of Transportation programs and operations are primarily carried out by Departmentpersonnel and recipients of Federal grants. As a result, audits by DOT’s Office of Inspector Generalgenerally fall into three categories: internal audits of departmental programs and operations, auditsof grant recipients, and other OIG reports.Semiannual Report to Congress • 63

OIG Reports with Recommendations that Questioned CostsApril 1, 2010 - September 30, 2010(Dollars in Thousands)Number ofNumber ofQuestionedUnsupportedReportsRecommendationsCostsCostsA. For which no managementdecision had been madeby the start of the reportingperiod8 13 $3,829 $0B. Which were issued duringthe reporting period36 57 $43,459 $0Totals (A+B) 44 70 $47,288 $0C. For which a managementdecision was made duringthe reporting period36 59 $45,140 $0(i) dollar value of disallowedcosts*28 48 $41,307 $0(ii) dollar value of costs notdisallowed*9 11 $3,835 $0D. For which no managementdecision had been madeby the end of the reportingperiod10 11 $2,147 $0* Includes reports and recommendations where costs were both allowed and disallowed.Statistical Performance Data • 64

OIG Reports Recommending Changes for Safety, Economy or EfficiencyApril 1, 2010 - September 30, 2010Number of ReportsNumber ofRecommendationsA. For which no management decision had beenmade by the start of the reporting period11 36B. Which were issued during the reporting period 51 173Totals: (A+B) 62 209C. For which a management decision was madeduring the reporting period *50 157D. For which no management decision had beenmade by the end of the reporting period *20 56* Includes reports where management both made and did not make a decision on recommendations.Semiannual Report to Congress • 65

Management Decisions Regarding OIG RecommendationsApril 1, 2010 - September 30, 2010(Dollars in Thousands)Number of Number of Questioned Unsupported Funds to BeReports Recommendations CostsCosts Put to Better UseUnresolved as of 4/01/2010 19 49 $3,829 $0 $0Audits with Findings DuringCurrent Period73 234 $184,059 $140,600 $449,200Total to be Resolved 92 283 $187,888 $140,600 $449,200Management Decisions:Audits Prior Period ‡ 14 32 $3,819 $0 $0Audits Current Period ‡ 62 188 $41,321 $0 $449,200Total Resolved 76 220 $45,140 $0 $449,200Aging of Unresolved Audits: *Less than 6 months old 20 46 $142,738 $140,600 $06 months – 1 year 2 7 $0 $0 $01 year – 18 months 3 4 $10 $0 $018 months – 2 years 1 2 $0 $0 $0Over 2 years old 3 8 $0 $0 $0Unresolved as of 03/31/2010 29 67 $142,747 $140,600 $0‡ Includes reports and recommendations where costs were both allowed and disallowed.* Considered unresolved if management decisions have not been made on all report recommendations.Statistical Performance Data • 66

OIG Published ReportsApril 1, 2010 - September 30, 2010DEPARTMENTWIDEInternal Audits: Performance/Attestation – 1 reportReport Date Title Focus of Report/ RecommendationsZA-2010-092 8/25/2010 Improvements in Cost-Plus Award-FeeProcesses Are Needed To EnsureMillions Paid in Fees Are JustifiedPerformance evaluation plans did not includemeasurable criteria to evaluate contractorperformance, and descriptions defining ratingswere vague. In addition, payment structures allowfor average or below-average performance.Contracting officers did not adequately justifythe cost effectiveness of selecting cost-plusaward-fee contracts. Funds put to better usetotal $4,600,000; unsupported costs total$140,600,000.FEDERAL AVIATION ADMINISTRATIONInternal Audits: Performance/Attestation – 5 reportsReport Date Title Focus of Report/ RecommendationsAV-2010-049 04/01/2010 Review of Screening, Placement, andInitial Training of Newly Hired Air TrafficControllersFAA needs to evaluate and redesign its currentscreening test to consider candidates’ skillsets, assign candidates to a facility based ontheir Academy performance and improve itsAcademy training program.AV-2010-068 06/16/2010 Timely Actions Needed To Advancethe Next Generation Air TransportationSystemFAA has made some progress in engaging theprivate sector to develop NextGen and shaperelated policies; however, it must better definethe role of the NextGen Institute and ensuredemonstration projects are more outcomefocused.Semiannual Report to Congress • 67

Report Date Title Focus of Report/ RecommendationsFI-2010-069 06/18/2010 Information Security and PrivacyControls Over the Airmen MedicalSupport SystemsPersonally identifiable information of airmenwas not properly secured to prevent unauthorizedaccess due to serious security lapsesin FAA’s management of user access to thesystem. Only limited progress has been madein identifying airmen who receive disabilitybenefits while holding medical certificates.AV-2010-071 07/21/2010 Review of FAA’s Call to Action Plan forRunway SafetyWhile FAA’s plan has helped reduce someserious incidents, other factors may havecontributed to the decrease, such as fewerrunway incursions, key safety improvementsat major airports made prior to the plan, andinconsistencies in FAA’s runway incursionseverity rating process.AV-2010-126 09/30/2010 FAA’s Air Traffic Controller OptimumTraining Solution Program: SoundContract Management PracticesAre Needed To Achieve ProgramOutcomesFAA faces significant challenges in achievingthe goals of the Air Traffic Control OptimumTraining Solution program due to failure tomitigate staffing and cost issues, determinecontroller staffing needs, and ensure contractorservices controls. Although funds are only sufficientto support existing training, innovationsto reduce training time and cost have not beenimplemented. Funds put to better use total$444,600,000.Grant Audits: Audits of Grantee Under Single Audit Act – 12 reportsReport Date TitleFocus of Report/RecommendationsSA-2010-056 05/07/2010 Collier County, Florida $183,452 questionedSA-2010-059 05/07/2010 State of Wisconsin (also listed under the Federal HighwayAdministration)Improve grantee oversightSA-2010-061 05/07/2010 Antonio B. Won Pat International Airport Authority, Guam Improve grantee oversightStatistical Performance Data • 68

SA-2010-063 05/07/2010 State of Texas (also listed under the Federal HighwayAdministration, the Federal Transit Administration, and theNational Traffic Safety Administration)$788,771 questionedSA-2010-079 07/22/2010 City of Cle Elum, Washington $21,435 questionedSA-2010-081 07/22/2010 City of St. Louis, Missouri $1,449,492 questionedSA-2010-086 07/27/2010 County of Sacramento, California Improve grantee oversightSA-2010-088 07/27/2010 City of San Diego (also listed under the Federal HighwayAdministration)$281,149 questionedSA-2010-115 09/21/2010 Federated States of Micronesia Government $252,411 questionedSA-2010-122 09/27/2010 Augusta, Georgia (also listed under the Federal TransitAdministration)SA-2010-124 09/27/2010 City and County Denver, Colorado - ARRA (also listed underthe Federal Highway Administration)SA-2010-125 09/29/2010 State of Illinois - ARRA (also listed under the FederalHighway Administration)$30,702 questionedImprove grantee oversightImprove grantee oversightFEDERAL HIGHWAY ADMINISTRATIONInternal Audits: Performance/Attestation –1 reportReport Date Title Focus of Report/RecommendationsMH-2010-050 04/20/2010 The Commonwealth of Massachusetts’Safety Review of the Central Artery/Tunnel Project Was Comprehensive,but FHWA’s Oversight Approach HasShortcomingsThe Commonwealth’s safety review wascomprehensive and rigorous. Actions toaddress safety risks identified in the reviewhave been taken; however, FHWA’s approachhas shortcomings.Grant Audits: Audits of Grantee Under Single Audit Act – 31 reportsReport Date Title Focus of Report/RecommendationsSA-2010-052 04/22/2010 Wilmington Area Planning Council, Delaware (also listedunder the Federal Transit Administration)SA-2010-053 04/22/2010 City of Tracy, California (also listed under the FederalTransit Administration)$15,523 questioned$52,723 questionedSA-2010-055 05/07/2010 State of Nebraska Improve grantee oversightSemiannual Report to Congress • 69

Report Date Title Focus of Report/RecommendationsSA-2010-057 05/07/2010 State of Minnesota (also listed under the Federal TransitAdministration)$30,353,000 questionedSA-2010-058 05/07/2010 State of Nevada Improve grantee oversightSA-2010-059 05/07/2010 State of Wisconsin (also listed under the Federal AviationAdministration)SA-2010-060 05/07/2010 State of Maryland (also listed under the Federal TransitAdministration)Improve grantee oversightImprove grantee oversightSA-2010-062 05/07/2010 Commonwealth of Kentucky Improve grantee oversightSA-2010-063 05/07/2010 State of Texas (also listed under the Federal AviationAdministration, the Federal Transit Administration, and theNational Highway Traffic Safety Administration)SA-2010-065 05/10/2010 State of Hawaii, Department of Transportation, HighwayDivision$788,771 questionedImprove grantee oversightQC-2010-070 07/19/2010 State of Nevada Improve grantee oversightSA-2010-073 07/22/2010 State of Louisiana Improve grantee oversightSA-2010-074 07/22/2010 State of North Carolina Improve grantee oversightSA-2010-077 07/22/2010 State of Utah Improve grantee oversightSA-2010-080 07/22/2010 Puerto Rico Highways and Transportation Authority Improve grantee oversightSA-2010-082 07/22/2010 State of West Virginia Improve grantee oversightSA-2010-083 07/22/2010 State of Connecticut $483,642 questionedSA-2010-084 07/22/2010 State of Washington (also listed under the Federal TransitAdministration)SA-2010-088 07/27/2010 City of San Diego, California (also listed under the FederalAviation Administration)$740,889 questioned$281,149 questionedSA-2010-089 07/27/2010 State of New Jersey Improve grantee oversightSA-2010-090 07/29/2010 State of Georgia (also listed under the Federal TransitAdministration)$394,529 questionedSA-2010-091 08/05/2010 State of Iowa Improve grantee oversightStatistical Performance Data • 70

Report Date Title Focus of Report/RecommendationsSA-2010-098 08/26/2010 State of Ohio Improve grantee oversightSA-2010-099 08/26/2010 City of Wichita, Kansas (also listed under the FederalTransit Administration)$397,842 questionedSA-2010-101 08/26/2010 State of Rhode Island and Providence Plantations $25,391 questionedSA-2010-103 08/30/2010 State of South Dakota $150,146 questionedSA-2010-104 08/30/2010 Oglala Sioux Tribe, South Dakota $374,581 questionedSA-2010-107 08/30/2010 American Road and Transportation Builders Association,Washington, DC$90,760 questionedSA-2010-120 09/27/2010 Snoqualmie Indian Tribe, Washington $52,042 questionedSA-2010-124 09/27/2010 City and County of Denver, Colorado - ARRA (also listedunder the Federal Aviation Administration)SA-2010-125 09/29/2010 State of Illinois - ARRA (also listed under the FederalAviation Administration)Improve grantee oversightImprove grantee oversightSemiannual Report to Congress • 71

FEDERAL MOTOR CARRIER SAFETY ADMINISTRATIONInternal Audits: Performance/Attestation –1 reportReport Date Title Focus of Report/RecommendationsZA-2010-093 08/24/2010 The Federal Motor Carrier SafetyAdministration Lacks Core Elementsfor a Successful Acquisition FunctionFMCSA lacked adequate contract pre-awardprocesses in place, leaving it vulnerable tousing ineffective business arrangements andultimately hindering its ability to maximizecompetition. Also, FMCSA lacked effectiveadministration and oversight of its contractsto ensure the Agency’s needs were met in themost efficient and economical manner.Grant Audits: Audits of Grantee Under Single Audit Act – 2 reportsReport Date Title Focus of Report/RecommendationsSA-2010-106 08/30/2010 American Association of Motor VehicleAdministrators and Affiliates, Virginia(also listed under the National HighwayTraffic Safety Administration)$19,408 questionedSA-2010-114 09/21/2010 Commonwealth of Pennsylvania $15,519 questionedFEDERAL RAILROAD ADMINISTRATIONInternal Audits: Performance/Attestation –1 reportReport Date Title Focus of Report/RecommendationsCR-2010-117 09/23/2010 Amtrak Cascades and Coast Starlight While the Coast Starlight and Amtrak CascadesRoutes: Implementation of New Metrics lines experienced significant delays fromand Standards Is Key to ImprovingOn-Time Performance2004 through 2009, total minutes of delay onboth lines dropped after 2006. Several factorscontributed to the decrease in delays—andultimately the lines’ improved on-time performance,including improved operations by thehost railroads, and Amtrak and reduced freighttraffic caused by the depressed economy.Statistical Performance Data • 72

FEDERAL TRANSIT ADMINISTRATIONInternal Audits: Performance/Attestation –1 reportReport Date Title Focus of Report/RecommendationsMH-2010-066 05/17/2010 Actions Needed To Mitigate RisksAssociated with the Access to theRegion’s Core ProjectFTA’s oversight activities provided reasonableassurance that significant project risks havebeen identified and has taken proactive stepsto increase its oversight of the Access to theRegion’s Core project. However, New JerseyTransit needs to address certain fundingresource challenges, including the uncertaintyover the long-term availability of local funding.Grant Audits: Audits of Grantee Under Single Audit Act – 30 reportsReport Date TitleFocus of Report/RecommendationsSA-2010-051 04/22/2010 Alameda-Contra Costa Transit District, California Improve grantee oversightSA-2010-052 04/22/2010 Wilmington Area Planning Council, Delaware (also listedunder the Federal Highway Administration)SA-2010-053 04/22/2010 City of Tracy, California (also listed under the FederalHighway Administration)SA-2010-057 05/07/2010 State of Minnesota (also listed under the Federal HighwayAdministration)SA-2010-060 05/07/2010 State of Maryland (also listed under the Federal HighwayAdministration)SA-2010-063 05/07/2010 State of Texas (also listed under the Federal AviationAdministration, the Federal Highway Administration, and theNational Highway Traffic Safety Administration)$15,523 questioned$52,723 questioned$30,353,000 questionedImprove grantee oversight$788,771 questionedQC-2010-067 05/19/2010 Washington Metropolitan Area Transit Authority, Washington, Improve grantee oversightD.C.QC-2010-072 07/21/2010 Port Authority of Allegheny County, Pennsylvania Improve grantee oversightSA-2010-074 07/22/2010 State of North Carolina $206,564 questionedSA-2010-075 07/22/2010 Los Angeles County Metropolitan Transportation Authority,California$351,793 questionedSemiannual Report to Congress • 73

Report Date TitleFocus of Report/RecommendationsSA-2010-076 07/22/2010 Wyoming Department of Transportation $31,923 questionedSA-2010-078 07/22/2010 City of Roanoke, Virginia $543,307 questionedSA-2010-084 07/22/2010 State of Washington (also listed under the Federal HighwayAdministration)$740,889 questionedSA-2010-085 07/22/2010 San Joaquin Regional Rail Commission, California $1,635,151 questionedSA-2010-087 07/27/2010 Miami-Dade County Transit Department, Florida $528,217 questionedSA-2010-090 07/29/2010 State of Georgia (also listed under the Federal HighwayAdministration)$394,529 questionedSA-2010-094 08/26/2010 Metropolitan Transit Authority of Harris County, Texas Improve grantee oversightSA-2010-095 08/26/2010 Chicago Transit Authority, Illinois Improve grantee oversightSA-2010-096 08/26/2010 City of Brownsville, Texas Improve grantee oversightSA-2010-097 08/26/2010 Lakeland Area Mass Transit District, Florida Improve grantee oversightSA-2010-099 08/26/2010 City of Wichita, Kansas (also listed under the FederalHighway Administration)$397,842 questionedSA-2010-100 08/26/2010 City of Fort Collins, Colorado $684,281 questionedSA-2010-102 08/30/2010 Kansas City Area Transportation Authority, Missouri $61,754 questionedSA-2010-105 08/30/2010 Puerto Rico Metropolitan Bus $2,460,001 questionedSA-2010-108 09/01/2010 City of Wilkes-Barre, Pennsylvania $448,000 questionedSA-2010-111 09/21/2010 Metropolitan Transportation Authority, New York $14,756 questionedSA-2010-118 09/27/2010 South Tahoe Transit Authority, California $293,500 questionedSA-2010-119 09/27/2010 Lorain County, Ohio Improve grantee oversightSA-2010-122 09/27/2010 Augusta, Georgia (also listed under the Federal AviationAdministration)$30,702 questionedSA-2010-123 09/27/2010 Yuma Metropolitan Planning Organization, Arizona $11,948 questionedStatistical Performance Data • 74

NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATIONInternal Audits: Performance/Attestation –1 reportReport Date Title Focus of Report/RecommendationsMH-2010-054 04/29/2010 Consumer Assistance to Recycle andSave Program: Most Transactions MetProgram Requirements, but ProgramCompletion Activities ContinueImmediate consumer response and the infusionof additional program dollars presented significantchallenges to NHTSA’s implementation ofthe Consumer Assistance to Recycle and Saveprogram. NHTSA has begun to take action toevaluate program compliance and determinetotal program costs.Grant Audits: Audits of Grantee Under Single Audit Act – 2 reportsReport Date Title Focus of Report/RecommendationsSA-2010-063 05/07/2010 State of Texas (also listed under theFederal Aviation Administration, theFederal Highway Administration, andthe Federal Transit Administration)SA-2010-106 08/30/2010 American Association of Motor VehicleAdministrators and Affiliates, Virginia(also listed under the Federal MotorCarrier Safety Administration)$788,771 questioned$19,408 questionedPIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATIONGrant Audits: Audits of Grantee Under Single Audit Act – 1 reportReport Date Title Focus of Report/RecommendationsSA-2010-064 05/10/2010 State of New Mexico Public Regulation $14,000 questionedCommissionSemiannual Report to Congress • 75

OIG Congressional TestimoniesApril 1, 2010 - September 30, 2010Control No. Date Subject BeforeCC-2010-066 07/21/2010 FHWA Has Taken Actions but Could Do Moreto Strengthen Oversight of Bridge Safety andStates’ Use of Federal Bridge FundingCommittee on Transportation andInfrastructureSubcommittee on Highways andTransitU.S. House of RepresentativesCC-2010-050 04/29/2010 Federal Railroad Administration Faces Challengesin Carrying Out Expanded RoleCommittee on AppropriationsSubcommittee on Transportation,Housing and Urban Development, andRelated AgenciesU.S. SenateCC-2010-044 04/22/2010 Actions Taken and Needed To Improve Managementand Oversight of PHMSA’s HazardousMaterials Special Permits and ApprovalsProgramCommittee on Transportation andInfrastructureU.S. House of RepresentativesCC-2010-048 04/21/2010 Challenges in Meeting FAA’s Long-Term Goalsfor the Next Generation Air TransportationSystemCommittee on TransportationInfrastructureSubcommittee on AviationU.S. House of RepresentativesStatistical Performance Data • 76

Unresolved Recommendations Over 6 Months OldCited in Semiannual Report for October 1, 2005 – March 31, 2006Title Report Number Final Issue DateAir Carriers’ Use of Non-Certificated Repair Facilities AV-2006-031 12/15/2005Cited in Semiannual Report for April 1, 2007 – September 30, 2007Title Report Number Final Issue DateAmtrak’s Board of Directors Provides Leadership tothe Corporation but Can Improve How It Carries OutIts Oversight ResponsibilitiesCR-2007-074 9/14/2007Cited in Semiannual Report for April 1, 2008 – September 30, 2008Title Report Number Final Issue DateFAA’s Safety Oversight of Airlines and Use of RegulatoryAV-2008-057 6/30/2008PartnershipProgramsCited in Semiannual Report for October 1, 2008 - March 31, 2009Title Report Number Final Issue DateFAA’s Process for Reporting andAV-2009-045 3/24/2009Investigating Operational ErrorsSemiannual Report to Congress • 77

Cited in Semiannual Report for April 1, 2009 - September 30, 2009Title Report Number Final Issue DateAir Traffic Control: Potential Fatigue Factors AV-2009-065 6/29/2009City of Fort Worth, Texas QC-2009-058 5/19/2009FAA Is Not Realizing the Full Benefits of the AviationSafety Action ProgramAV-2009-057 5/14/2009Cited in Semiannual Report for October 1, 2009 - March 31, 2010Title Report Number Final Issue DateFAA’s Oversight of American Airlines’ MaintenanceAV-2010-042 02/16/10ProgramsState of Illinois SA-2010-021 11/16/09Statistical Performance Data • 78

InvestigationsStatistical OutcomesApril 1, 2010 - September 30, 2010Financial ImpactFines (and Special Assessments) $38,260,225Restitution $6,405,892Recoveries $7,261,327Cost Avoided $3,200,000Total $55,127,444ReferralsReferred for Prosecution 44Accepted for Prosecution 28Declined for Prosecution 35Civil Prosecution Referral 8Civil Prosecution Acceptance 5Civil Prosecution Declination 10Judicial and Administrative ActionsIndictments 53Convictions 41Years Incarceration 82Years Supervised Release 79Years Probation 72Hours Community Service 5,290Debarment 4Decertification MBE/DBE 2Disallowance of DBE Credit 4Reduction in Federal Funding 3Certification/License/Permit application denied 1Semiannual Report to Congress • 79

Investigative WorkloadCurrent Investigations Inventory 419Investigations Opened 86Investigations Closed 95OIG Hotline ContactsEmail 1,882Fax 50Letters 30Web 158Telephone 399Total 2,519Statistical Performance Data • 80

Profile of All Pending Investigations as of September 30, 2010Types of CasesNumber ofInvestigationsProcurementFraudEmployeeIntegrityGrantFraudHazmatMotorCarrierOtherTransportationSafetyDepartmentwide 1 0 1 0 0 0 0 0 0FAA 148 95 3 17 21 6 0 5 1FHWA 119 0 0 2 112 1 0 4 0FMCSA 55 0 0 2 0 7 46 0 0FRA 4 0 0 1 0 2 0 1 0FTA 33 0 1 0 31 0 0 0 1MARAD 6 0 2 1 1 1 0 1 0NHTSA 14 0 0 1 5 0 1 7OIG 1 0 0 1 0 0 0 0 0OST 6 0 3 2 0 0 0 1 0Other 1 0 1 0 0 0 0 0 0PHMSA 27 0 0 1 0 26 0 0 0RITA 3 0 2 1 0 0 0 0 0SLSDC 1 0 0 1 0 0 0 0 0Total 419 95 13 29 170 43 46 13 9Percent of total 23% 3% 7% 41% 10% 11% 3% 2%Within the Office of Investigations, the Special Investigations staff investigates disclosures of possible (1)violations of a law, rule, or regulation; (2) gross mismanagement; (3) gross waste of funds; (4) abuse ofauthority; and/or (5) a substantial and specific danger to public health or safety that the Office of SpecialCounsel (OSC) refers to the Transportation Secretary. The results of these investigations are used by DOT’sGeneral Counsel as the basis for the Secretary’s response to OSC referrals. The Secretary’s response mustinclude a list of any apparent violations Special Investigations found and a description of any action to betaken as a result of the investigation. Our current inventory consists of 10 investigations of OSC whistleblowercomplaints in the area of aviation safety.Semiannual Report to Congress • 81

Statistical Performance Data • 82

Peer Review ActivityOIG was not the subject of a Council of theInspectors General on Integrity and Efficiency(CIGIE) peer review during this reporting period.The last peer reviews conducted on our Officeof Audits and Office of Investigations were performedin fiscal year 2010 by the Department ofVeterans Affairs (VA) OIG and the General ServicesAdministration (GSA) OIG, respectively. VAOIG determined the system of quality control forour audit function has been suitably designed andcomplied with to provide reasonable assuranceof performing and reporting in conformity withapplicable professional standards in all materialrespects. Accordingly, VA OIG provided a “pass”rating, and no recommendations were made. Thereport was released on March 3, 2010. GSA OIGconcluded that our Office of Investigations was incompliance with quality standards established bythe CIGIE and Attorney General Guidelines, andno recommendations were made. The report wasreleased on January 4, 2010.For the reports of the peer reviews conductedon our office, go to http://www.oig.dot.gov/peerreview.Our Office of Audits and Office of Investigationsalso did not conduct a CIGIE peer review duringthis reporting period. The last peer review thatour Office of Audits conducted was in fiscal year2010 on the Department of Labor OIG. We provideda “pass” rating, and no recommendationswere made. Our report was released February23, 2010. The last peer review that our Office ofInvestigations conducted was in fiscal year 2009on the Small Business Administration (SBA) OIG.We found that the SBA OIG was in compliancewith quality standards established by the CIGIEand Attorney General Guidelines, and no recommendationswere made. Our report was releasedMay 7, 2009.Semiannual Report to Congress • 83

Peer Review Activity • 84

Mission and OrganizationThe Office of Inspector General for the Department of Transportation was created by Congress throughthe Inspector General Act of 1978 (Public Law 95-452). The Act sets several goals for OIG:• To conduct or supervise objective audits and investigations of the Department’s programs andoperations;• To promote economy, effectiveness, and efficiency within the Department;• To prevent and detect fraud, waste, and abuse in the Department’s programs;• To review existing and proposed laws or regulations affecting the Department and make recommendationsabout them;• To keep the Secretary of Transportation and Congress fully informed about problems in departmentalprograms and operations.The Inspector General is committed to fulfilling its statutory responsibilities and assisting membersof Congress, the Secretary, senior Department officials, and the general public in achieving a safe,efficient, and effective transportation system.OIG’s audits and investigations offices and three support offices work together to fulfill its mission:The Office of the Principal Assistant Inspector General for Auditing and Evaluation supervisesand conducts all audit activities related to DOT programs and operations through its five suboffices,which are divided according to specific DOT program areas: Aviation and Special Programs; Highwayand Transit; Rail, Maritime, and Economic Analysis; Financial and Information Technology; and Acquisitionand Procurement. Audit staff are located in headquarters and field offices across the country.The Office of the Principal Assistant Inspector General for Investigations supervises and conductsOIG investigative activities related to DOT programs and operations through its headquarters andseven major regional offices. The headquarters office conducts nationwide special investigations andanalysis as well as manages the OIG Hotline Complaint Center and activities generated by complaints.The Office of the Assistant Inspector General for Legal, Legislative, and External Affairs providesa full-range of professional legal services and advice, facilitates communications with Congress, andmanages public and external affairs.Semiannual Report to Congress • 85

The Office of the Assistant Inspector General for Administration is divided into four suboffices: theOffice of Procurement and Administrative Services, the Office of Budget and Financial Management,the Office of Human Resources, and the Office of Information Technology Management.The Office of Quality Assurance Reviews and Internal Affairs, under the direction of the DeputyInspector General, ensures that internal operations and functions are performed objectively and in anefficient and effective manner.Mission and Organization • 86

Inspector GeneralDeputyInspector GeneralQuality AssuranceReviews and InternalAffairsChief of StaffPrincipal AssistantInspector Generalfor InvestigationsPrincipal AssistantInspector Generalfor Auditing andEvaluationAssistantInspector Generalfor Legal, Legislative,and External AffairsAssistantInspector Generalfor AdministrationDeputy AssistantInspector Generalfor InvestigationsAssistantInspector Generalfor Aviation andSpecial ProgramsAssistantInspector Generalfor Highway andTransitAssistantInspector Generalfor Rail, Maritime,and EconomicAnalysisAssistantInspector Generalfor Financial andInformationTechnologyAssistantInspector GeneralFor Procurementand AcquisitionDeputy AssistantInspector Generalfor Aviation andSpecial ProgramsDeputy AssistantInspector Generalfor Highway andTransitSemiannual Report to Congress • 87

ContactsInspector GeneralCalvin L. Scovel III ……………………………………………………………… (202) 366-1959Deputy Inspector GeneralAnn Calvaresi-Barr ……………………………………………………………… (202) 366-6767Principal Assistant Inspector General for InvestigationsTimothy Barry …………………………………………………………………… (202) 366-1967Principal Assistant Inspector General for Auditing and EvaluationLou Dixon………………………………………………………………………… (202) 366-1427Assistant Inspector General for Legal, Legislative, and External AffairsBrian A. Dettelbach …………………………………………………………… (202) 366-8751Assistant Inspector General for AdministrationSusan Dailey …………………………………………………………………… (202) 366-1748Chief of StaffMadeline Chulumovich ………………………………………………………… (202) 366-6767Deputy Assistant Inspector General for InvestigationsRobert Westbrooks …………………………………………………………… (202) 366-1972Assistant Inspector General for Aviation and Special Programs AuditsJeffrey Guzzetti ………………………………………………………………… (202) 366-0500Deputy Assistant Inspector General for Aviation and Special Programs AuditsMatt Hampton …………………………………………………………………… (202) 366-1987Assistant Inspector General for Highway and Transit AuditsJoe Come ……………………………………………………………………… (202) 366-5630Deputy Assistant Inspector General for Highway and Transit AuditsTom Yatsco (Acting) …………………………………………………………… (202) 366-5630Assistant Inspector General for Rail, Maritime, and Economic AnalysisMitchell Behm …………………………………………………………………… (202) 366-9970Assistant Inspector General for Financial and Information Technology AuditsRebecca C. Leng ……………………………………………………………… (202) 366-1407Assistant Inspector General for Procurement and Acquisition AuditsVacant …………………………………………………………………………… (202) 366-5225Contacts • 88

U.S. Department of TransportationOffice of Inspector General1200 New Jersey Avenue, S.E.Washington, D.C. 20590Hotline to report fraud, waste, and abuse:Phone: 800-424-9071Email: hotline@oig.dot.govOIG Website: http://www.oig.dot.gov