doj - inspector general - grant fraud awareness
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GRANT FRAUD
AWARENESS
SA Laura Rousseau202-353-2975
U.S. Department of JusticeOffice of Inspector General
Fraud Detection Office
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What is the DOJ OIG?
Responsibility & Authority
Focus
Components
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American Recovery and
Reinvestment Act of 2009 $787 B. includes approximately $400 B. for
grants / cooperative agreements, $60 B. forprocurements, $327 B. for tax cuts and otherfederal spending programs
Emphasis: Job Creation; Transparency;Accountability; and Oversight
Multiple Oversight Mechanisms: 68 FederalOIGs, Recovery Accountability and
Transparency Board / Recovery.gov; OMB;GAO; 56 State Administering Agencies
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Feb 18, 2009 OMB Guidance
Disclosure RequirementAgencies must [i]nclude the requirement that each grantee
or sub-grantee awarded funds made available under the
Recovery Act shall promptly refer to an appropriate
inspector general any credible evidence that a principal,employee, agent, contractor, sub-grantee, subcontractor,
or other person has submitted a false claim under the
False Claims Act or has committed a criminal or civilviolation of laws pertinent to fraud, conflict of interest,
bribery, gratuity, or similar misconduct involving those
funds.
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What is
Grant Fraud?
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Fraud Assumptions
It Happens
Prevent / or Detect it Early
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Frauds Consequences
Organizational Reputation /Survival
Administrative
Civil
Criminal
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The Keys to Preventing, Detecting and Stopping Fraud:
PROFESSIONAL SKEPTICISM
&
COMMUNICATION
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Grant Process
ApplicationBudgetAssurances
Grant ConditionsEligibility
PerformanceDraw DownsMonitoring
Govt ManagementFSR Certifications
INTEGRITY BASED SYSTEM
OMB Circulars
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Process Safeguards
Grant Management / Desk Audits
Grantor Monitoring
OIG Audits
A-133 / Single Audit Act
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Mistakes GrossNegligence
CriminalFraud
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Common Grant Fraud
Schemes
1. Conflicts of Interest
2. Lying About the Use of Funds
3. Theft
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Conflicts of Interest Typical Issues:
Related Party Transactions (Grantee or Board
Member)
Grant / Sub Grant Award Decisions
Consultants: Who, What, How, How Much?
Grant Writer Fees / Contingent Fees
Know your Grantee Conflict of Interest Statement
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Chapter 3, OJP Financial Guide
In the use of agency project funds, officials or employees
of State or local units of government and nongovernmentalrecipient/subrecipients shall avoid any action, which mightresult in, or create the appearance of:
Using his or her official position for private gain;
Giving preferential treatment to any person;
Losing complete independence or impartiality;
Making an official decision outside official channels; or
Affecting adversely the confidence of the public in theintegrity of the government or the program.
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Preventing Conflicts of Interest
Educate every employee and board member on
the defined COI prohibitions. Ensure procurement procedures are well-
designed and followed.
Consultants: Who, What, How, How Much? Document the facts and have another party review
them.
If in doubt about a potential COI situation, seekwritten guidance from the grantor.
A fully disclosed and approved potential COI probably
ceases to be a COI.
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Lying Typical Issues:
Labor Hours / Wages; Types of Equipment / Supplies / Events;Indirect Cost Rates; Level of Effort
Program Income / Matching Funds
Other Grants Fund the Same Program
Political changes to use of funds
Financial Certifications & Draw Downs must be supported with
evidence such as receipts, expense reports or cancelled checks.
Progress reports must be factually accurate.
Signed grant agreement is a contract: changes to budgets and
program must be approved.
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Preventing Lying About the
Use of Funds Ensure interested parties read the grant agreement;
maintain written correspondence with grantor about anyprogram or budget changes.
Keep well-organized and complete accounting books and
records (consider using financial software or spreadsheets). Practice logical and supportable expense recording
procedures time sheets, draw down calculations, etc...
The person who signs grant award, FSRs and otherdocuments is personally liable support all assertions.
Pay close attention to: indirect cost rates; program income;multiple awards; expiring money.
Fully disclose problems with grantor and seek assistance.
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Theft Single most common risk for every entity It can and
does happen.
Poor or no internal controls = Virtually inevitable theft.
Trust is not part of the equation.
Checks routinely written to employees as
reimbursement of expenses should be carefully
analyzed.
Gift Cards / ATM / Debit / Credit Cards are easily abused.
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Preventing Theft Ensure internal controls are well-designed and properly implemented
and tested.
Separation of Duties: receipt, disbursement, recording, custody, &
audit / review functions should be done independently.
Consider using a fiscal agent or bookkeeper.
Carefully control debit / credit / gift cards and checks.
Pay close attention to: payroll advances; employee reimbursement
checks; IRS tax withholding payments & other payroll issues; past-duevendor invoices.
To increase deterrence and detection, educate every employee, board
member, and coalition partner about this risk.
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Questions?SA Laura [email protected]
202-305-9615
www.usdoj.gov/oig800-869-4499202-353-2975