Federal agency accused of fraud could lose majority of contracts

Feds investigating premier work program for disabled
Feds investigating premier work program for disabled

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Feds investigating premier work program for disabled 07:06

Washington (CNN)The federal agency in charge of helping the disabled find work may lose the vast majority of its contracts after a CNN investigation found it mired in widespread fraud, mismanagement and corruption.

The newly introduced Senate National Defense Authorization Act states strong concerns about the integrity of the agency, called the AbilityOne program, and its outsourced management agency, SourceAmerica. Sources have told CNN SourceAmerica unfairly awards contracts based on inside connections, such as granting lucrative deals to companies with executives who also sit on the board of SourceAmerica.
A former SourceAmerica lawyer even characterized the organization's leadership as the "mafia" in reference to what she described as rampant bid-rigging.
    And instead of helping the severely disabled find work, the agency and its management is at times allowing jobs to be taken away from the disabled, numerous sources said.
    AbilityOne has not returned requests for comment from CNN. Previously, SourceAmerica has denied the accusations.
    "No one involved in making award recommendations to the commission is employed by an organization seeking those contracts," read a statement sent to CNN last summer. "We want to be very clear, SourceAmerica board members are not involved in the evaluation of contract bids or recommendations to the AbilityOne Commission."
    The NDAA directed the Department of Defense for the first time to stop working with AbilityOne until the concerns about fraud and mismanagement at SourceAmerica can be alleviated.
    The new instructions come after a series of CNN investigative reports detailed potential violations of the law so pervasive it's being called the biggest fraud case ever in a federal agency, the sources said.
    The U.S. Department of Justice is working on its own investigation into the various allegations. In addition, at least four separate inspectors general offices have active investigations into AbilityOne and SourceAmerica. The OIG from the General Services Administration, Department of Defense, the Veterans Administration and the State Department are among those investigating; their investigation is being led by the State Department IG.
    Earlier this year, CNN revealed that a federal grand jury is examining the program and that subpoenas have been issued.
    The new language in the Defense Authorization Act is specific and harsh, demanding that:
    "The Secretary of Defense shall not contract with the AbilityOne nonprofit agency ... until such time that the Inspector General for the Department of Defense certifies to Congress ... the internal controls and financial management systems of the AbilityOne non-profit agency ... are sufficient to protect the Department of Defense against waste, fraud, and abuse."
    The Department of Defense represents a the vast majority of the taxpayer dollars which flows through the agency.
    "Given that DOD spent over $2.3 billion through the program in fiscal year 2015, and that DOD funds comprise the majority of those spent through the AbilityOne program, the committee is very concerned about the lack of transparency and effectiveness in vetting vendors and subvendors," stated language from the Senate Armed Services committee obtained by CNN.
    The committee's language stated that CNN's reports "have raised allegations of corruption, financial fraud, and legal violations with SourceAmerica the central nonprofit agency responsible for selecting vendors who employ blind and severely disabled."
    Arizona Sen. John McCain introduced the bill last week. It must be passed by the Senate and the House before any changes takes place.
    The AbilityOne program funnels about $3 billion per year of taxpayer money to fund contracts for goods and services across the country. For a company to get a contract with AbilityOne, 75% of that company's work must be performed by blind or severely disabled employees, who cannot get work elsewhere.
    The AbilityOne program that manages contracts for the blind, the National Industries for the Blind, is not named in or affected by the legislation. The committee said it "expects the DOD's operations with NIB will continue under current practices."