DOJ - Inspector General - Grant Fraud Awareness

8/8/2019 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

DOJ - Inspector General - Grant Fraud Awareness

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