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Doonesbury, 5 December 2005

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Doonesbury, 5 December 2005

Institutional Compliance Institutional Compliance PlansPlans

Why before is better than afterWhy before is better than after

Scott J. Moore, Ph.D., J.D.Investigative Scientist

[email protected]

Offices of Inspectors General

• Provide leadership and coordination to implement policies to:• Prevent and detect fraud, waste, abuse• Promote economy, efficiency, effectiveness• Conduct investigations, audits, inspections, reviews of agency programs (funded activities), operations

• Features:• Independent of agency management • Jurisdiction (NSF activities, programs, operations)• Staff of experts: administrators, attorneys, auditors,

criminal investigators, and scientists

The BasicsThe Basics

A system of responsible administrative, financial, and A system of responsible administrative, financial, and research management and oversight, creating an research management and oversight, creating an environment in which employees can operate with integrity. environment in which employees can operate with integrity.

May be implemented voluntarilyMay be implemented voluntarily

oror

mandated as part of negotiated resolutionmandated as part of negotiated resolution

Does your organization have what Does your organization have what it takes?it takes?

LeadershipLeadership - commitment to do the right thing - commitment to do the right thing

Management Management - ethical environment - ethical environment Focus on high risk areasFocus on high risk areas Provide systematic monitoring, auditing, oversight Provide systematic monitoring, auditing, oversight

TrainingTraining - Communicate facts and expectations - Communicate facts and expectations

ActionAction - Early detection and correction of problems - Early detection and correction of problems

ReportingReporting – Relay information regarding wrongdoing – Relay information regarding wrongdoing

Effective Compliance Program Elements*Effective Compliance Program Elements*

a/k/a 7 Habits of Highly Effective Organizations a/k/a 7 Habits of Highly Effective Organizations

Reasonable Compliance Standards and ProceduresReasonable Compliance Standards and Procedures Specific High-level Personnel ResponsibleSpecific High-level Personnel Responsible Due Care in Assignments with Discretionary AuthorityDue Care in Assignments with Discretionary Authority Effective Communication of Standards and ProceduresEffective Communication of Standards and Procedures Establish Monitoring and Auditing Systems and Reporting System Establish Monitoring and Auditing Systems and Reporting System

(whistleblowing without fear of retaliation)(whistleblowing without fear of retaliation) Consistent Enforcement of Standards through Appropriate Mechanisms Consistent Enforcement of Standards through Appropriate Mechanisms

(including failure to detect)(including failure to detect) Respond Appropriately to the Offense (reporting to law enforcement, modify Respond Appropriately to the Offense (reporting to law enforcement, modify

program, prevention)program, prevention)

*Federal Sentencing Guidelines*Federal Sentencing Guidelines

U.S.S.G. §§ 8B2.1, 8C2.5(f), & 8D1.4(c)(1) (11/1/04)U.S.S.G. §§ 8B2.1, 8C2.5(f), & 8D1.4(c)(1) (11/1/04)

Risk Risk

Auditors Auditors

Squeaky WheelsSqueaky Wheels

WhistleblowersWhistleblowers

InvestigatorsInvestigators

AREARE your friends your friends

(and how to find it)(and how to find it)

One University’s Risk AssessmentOne University’s Risk AssessmentHeat MapHeat Map

IMPACT

High

Moderate

Low

Moderate HighLow

Auxiliary Services

Deferred Maintenance

Technology Licensing

Off-Campus Facilities

Privacy of Information

Human Resource Management

Construction Management

Endowment

Contracts & Grants Management

Property Management

Financial Reporting

PR

OB

AB

ILIT

Y

Acquisition

Environmental, Health & Safety

Immigration & Visa Processing

Executive Benefits

Security

Human Subjects

Student Affairs

Animal Subjects

Gifts & Restricted Funds

Finding RiskFinding Risk

What needs more review?What needs more review?

Where’s your itch? Where’s your itch?

What’s autonomous?What’s autonomous?

Where’s the black hole?Where’s the black hole?

Are your warning bells ringing when you Are your warning bells ringing when you

hear someone else’s problems?hear someone else’s problems?

What gives you that What gives you that

“ “Gosh, gotta check Gosh, gotta check thatthat right away” feeling? right away” feeling?

Risk AreasRisk AreasAllowable activities supportedAllowable activities supported

Allowable costs and cost principlesAllowable costs and cost principles

Cash managementCash management

Eligibility for awardsEligibility for awards

Equipment and real property managementEquipment and real property management

Period of availability of fundsPeriod of availability of funds

Procurement suspension and debarmentProcurement suspension and debarment

Program incomeProgram income

Participant supportParticipant support

Timely required reportingTimely required reporting

Special tests and provisions Special tests and provisions

Holding accountsHolding accounts

Summer salariesSummer salaries

Other Risk AreasOther Risk AreasLack of adequate documentation   Lack of adequate documentation  

travel documentation travel documentation cost-sharingcost-sharing records retentionrecords retention credit card receipts do not constitute adequate documentation credit card receipts do not constitute adequate documentation

Time and effort reporting and procedures  Time and effort reporting and procedures  

Separate financial administration for each award, no poolingSeparate financial administration for each award, no pooling

Abuse or violations of institutional conflict of interest disclosure Abuse or violations of institutional conflict of interest disclosure policies and procedures.policies and procedures.

Updated/adequate RM policies and proceduresUpdated/adequate RM policies and procedures

Subawardee monitoring (and A-133s)Subawardee monitoring (and A-133s)

Residual funds Residual funds

Oversight activities (Conflict of Interest, Humans, Animals)Oversight activities (Conflict of Interest, Humans, Animals)

What do you look like?What do you look like?Funding CharacteristicsFunding Characteristics

Grants, contracts and with what entityGrants, contracts and with what entity

Organizational ProfileOrganizational ProfileDecentralizedDecentralized

Control ProfileControl ProfileRainmakers, President, staffRainmakers, President, staff

Audit ProfileAudit ProfileHow easily can you get down into the weeds?How easily can you get down into the weeds?

Activities LocationActivities LocationOn-site, off-site, another country, LTER, SBIR, SGEROn-site, off-site, another country, LTER, SBIR, SGER

Activity DescriptionActivity DescriptionAnimals, humans, collection, collaboration, toxins, radiation; staffing characteristicsAnimals, humans, collection, collaboration, toxins, radiation; staffing characteristics

““Junior, independent” or “senior and wise”Junior, independent” or “senior and wise”

Training ProfileTraining ProfileComprehensive administrative, financial, oversight, fit the issuesComprehensive administrative, financial, oversight, fit the issues

31%

24%

20%

13%

9%3%

Theft/Embezzlement (31%)

False or Fraudulent Statements (24%)

Miscellaneous* (20%)

False or Fraudulent Claims (13%)

Conflicts of Interest (9%)

Computer Fraud (3%)

Common Types of Civil/Criminal Allegations

*Includes mail fraud, false identification insurance fraud, impersonating a government officer, and copyright infringement.

Data gathered from NSF OIG closed Investigative files (1990 – Present).

Investigation Outcomes

32%

21%

11%8%

8%

6%

6%

4%

4%

Unsubstantiated Allegations* (32%)

Restitution (21%)

Referral (11%)

Termination of Grant (8%)

Miscellaneous** (8%)

Incarceration/Probation (6%)

Termination of Employment (6%)

Civil Action (4%)

Debarment (4%)

* Allegation was preliminarily investigated but found to be insufficiently material to warrant further action.** Includes monitoring, enacting new guidelines, letters of reprimand, etc.Data gathered from NSF OIG closed Investigative files (1990 – Present).

Common Issues Common Issues

Cost ShareCost Share

Program IncomeProgram Income

Subrecipient MonitoringSubrecipient Monitoring

Effort ReportingEffort Reporting

Participant SupportParticipant Support

TravelTravel

Signature ResponsibilitiesSignature Responsibilities

““GRANTS GONE BAD”GRANTS GONE BAD”

Proposal SignaturesProposal Signatures

Compliance with award terms and conditions Compliance with award terms and conditions

Accuracy and completeness of statementsAccuracy and completeness of statements

COI PolicyCOI Policy

Drug-Free WorkplaceDrug-Free Workplace

Debarment and SuspensionDebarment and Suspension

Lobbying (proposal >$100,000)Lobbying (proposal >$100,000)

Certification for Authorized Organizational Representative or Individual Applicant:

By signing and submitting this proposal, the individual applicant or the authorized official of the applicant institution is: (1) certifying that statements made herein are true and complete to the best of his/her knowledge; and (2) agreeing to accept the obligation to comply with NSF award terms and conditions if an award is made as a result of this application.

Willful provision of false information in this application and its supporting documents or in reports required under an ensuring award is a criminal offense (U. S. Code, Title 18, Section 1001).

In addition, if the applicant institution employs more than fifty persons, the authorized official of the applicant institution is certifying that the institution has implemented a written and enforced conflict of interest policy that is consistent with the provisions of Grant Policy Manual Section 510; that to the best of his/her knowledge… . . .

Debarment Certification

Certification Regarding Lobbying

Certification for Contracts, Grants, Loans and Cooperative AgreementsAUTHORIZED ORGANIZATIONAL REPRESENTATIVE SIGNATURE DATE

Page 2 of 2

No Problems, Right?No Problems, Right?

““Well, I’m in the clear. I certainly Well, I’m in the clear. I certainly didn’t KNOW that certification was didn’t KNOW that certification was

false when I signed it.”false when I signed it.”

31 U.S.C. 3729(b)31 U.S.C. 3729(b)

1) acts with 1) acts with actual knowledgeactual knowledge of the information; of the information; 2) acts in 2) acts in deliberated ignorancedeliberated ignorance of the truth or falsity of of the truth or falsity of

the information; or the information; or 3) acts in 3) acts in reckless disregardreckless disregard for the truth or falsity of the for the truth or falsity of the

information.information.4) And, 4) And, no proof of specific intentno proof of specific intent to defraud is required. to defraud is required.

Knowing and Knowingly Defined

Examples of Misused FundsExamples of Misused Funds

1.1. Grant FraudGrant Fraud

2.2. EmbezzlementEmbezzlement

3.3. Multi-Agency FraudMulti-Agency Fraud

4.4. False CertificationsFalse Certifications

5.5. Overcharging GrantsOvercharging Grants

Case Study 1: “No” Means “No”Case Study 1: “No” Means “No”

NSF OIG conduct a Proactive Review NSF OIG conduct a Proactive Review

Proactive Review identified questionable entries in Proactive Review identified questionable entries in General Ledger of a small institutional awardee.General Ledger of a small institutional awardee.

Investigation initiatedInvestigation initiated

Obtained and reviewed all financial records Obtained and reviewed all financial records

Identified improper drawdownIdentified improper drawdown

Revealed $27K expenditures incurred Revealed $27K expenditures incurred afterafter expiration of awardexpiration of award

OIG investigation of those expenditures revealed thatOIG investigation of those expenditures revealed that PI requested award extension to spend remaining fundsPI requested award extension to spend remaining funds Request was denied 3X by Program OfficerRequest was denied 3X by Program Officer

Nevertheless, Nevertheless, afterafter award expiration, PI drew down and spent the award expiration, PI drew down and spent the $27K on post-expiration expenses$27K on post-expiration expenses

PI falsely characterized drawdown as reimbursementsPI falsely characterized drawdown as reimbursements PI filed Final Project Report falsely reflecting program completionPI filed Final Project Report falsely reflecting program completion PI and awardee made false statements to OIG – claimed lack of PI and awardee made false statements to OIG – claimed lack of

knowledge regarding Program Officer’s 3 denials of requestknowledge regarding Program Officer’s 3 denials of request

Case Study 1: “No” Means “No” (cont)Case Study 1: “No” Means “No” (cont)

Case Study 1: “No” Means “No” (cont)Case Study 1: “No” Means “No” (cont)

Presented case to AUSA (civil and criminal)Presented case to AUSA (civil and criminal)

Proceeded as civil false claims caseProceeded as civil false claims case

DOJ settled case DOJ settled case

Imposed a 3-year Compliance PlanImposed a 3-year Compliance Plan

NSF OIG recovered $52K from institutionNSF OIG recovered $52K from institution

NSF debarred PI for 5-yearsNSF debarred PI for 5-years

A company received a grant from NSFA company received a grant from NSF

A source provided information to NSF OIG, alleging that the A source provided information to NSF OIG, alleging that the company charged time to the NSF grant for work she did not company charged time to the NSF grant for work she did not perform perform

NSF OIG opened investigationNSF OIG opened investigation Interviewed company officials Interviewed company officials Interviewed employeesInterviewed employees Obtained and reviewed recordsObtained and reviewed records

Case 2:Case 2: “ “Just Charge It To The Grant Just Charge It To The Grant With Money In It” With Money In It”

Case 2:Case 2: “ “Just Charge It . . .” (cont)Just Charge It . . .” (cont)

OIG investigation revealedOIG investigation revealed some of the time charged to the grant should have been some of the time charged to the grant should have been

charged to overhead charged to overhead the company shifted charges between various federal grants the company shifted charges between various federal grants

as money was availableas money was available the company charged grants for proposal preparation the company charged grants for proposal preparation the company charged grants for costs unrelated to the grantthe company charged grants for costs unrelated to the grant NSF was overcharged $370,000NSF was overcharged $370,000 other federal agencies were overcharged $970,000other federal agencies were overcharged $970,000

Case 2:Case 2: “ “Just Charge It . . .” (cont)Just Charge It . . .” (cont)

Presented case to AUSAPresented case to AUSA

Proceeded as civil false claims caseProceeded as civil false claims case

DOJ settled case DOJ settled case $1.55M $1.55M 4-year Compliance Plan imposed4-year Compliance Plan imposed

Case 3: Know what you are signingCase 3: Know what you are signing

Allegation received:Allegation received: A Principal Investigator complained that he was not A Principal Investigator complained that he was not

receiving the cost-share monies he was promised by receiving the cost-share monies he was promised by the university the university

Investigation opened:Investigation opened: Request and review financial records for grantRequest and review financial records for grant Travel to universityTravel to university Interview relevant individualsInterview relevant individuals Coordinate with Department of JusticeCoordinate with Department of Justice

Case 3: Know what you are signing Case 3: Know what you are signing (cont)(cont)

Investigation revealed:Investigation revealed: the university did not have a system the university did not have a system

for tracking cost-sharefor tracking cost-share could not document costs submitted could not document costs submitted

to NSF as cost-share to NSF as cost-share could not document costs claimed could not document costs claimed

as direct expenses as direct expenses the university had submitted the university had submitted

numerous false cost-share numerous false cost-share certificationscertifications

Case 3: Know what you are signing Case 3: Know what you are signing (cont)(cont)

Presented case to AUSAPresented case to AUSA

Proceeded as civil false claims caseProceeded as civil false claims case

DOJ settled case DOJ settled case

Imposed a 5-year Compliance PlanImposed a 5-year Compliance Plan

NSF OIG recovered $1.4MNSF OIG recovered $1.4M

Case 4: Plagiarizing the ThesisCase 4: Plagiarizing the Thesisa/k/a Watch out for the CPS and COI a/k/a Watch out for the CPS and COI

PI submitted his student’s thesis chapter as an PI submitted his student’s thesis chapter as an SBIR-1 proposal ($100K, 6 months) SBIR-1 proposal ($100K, 6 months) from a non-existent company.from a non-existent company.

When awarded, PI used the money to When awarded, PI used the money to pay his child’s tuition at an ivy leaguepay his child’s tuition at an ivy leagueinstitution and other personal expenses.institution and other personal expenses.

PI copied the thesis into his final reportPI copied the thesis into his final reportand proposal for the SBIR-2 award ($500K).and proposal for the SBIR-2 award ($500K).

University notifies OIG of plagiarism allegationUniversity notifies OIG of plagiarism allegation PI denied everything. PI denied everything.

BUTBUT

His wife admitted everythingHis wife admitted everything

Case 4: Plagiarizing the ThesisCase 4: Plagiarizing the Thesisa/k/a Watch out for the CPS and COI a/k/a Watch out for the CPS and COI

NSF suspended the award NSF suspended the award OIG issued subpoenas.OIG issued subpoenas.

OIG referred the case to OIG referred the case to DOJ, who accepted it for DOJ, who accepted it for prosecutionprosecution..

Case 4: Plagiarizing the ThesisCase 4: Plagiarizing the Thesisa/k/a Watch out for the CPS and COI a/k/a Watch out for the CPS and COI

At a meeting with DOJ, the professor through his attorneys At a meeting with DOJ, the professor through his attorneys agreed agreed

1)1) Plead guilty to a criminal count (1001) Plead guilty to a criminal count (1001) but wanted to avoid jailbut wanted to avoid jail

2)2) Would pay $240,000Would pay $240,0003)3) No action against wifeNo action against wife

NSF OIG recommended RM NSF OIG recommended RM finding and debarment. finding and debarment. Professor and NSF settled for Professor and NSF settled for 3 years voluntary exclusion from Federal funding.3 years voluntary exclusion from Federal funding.

Could a proactive compliance plan have prevented the loss?Could a proactive compliance plan have prevented the loss?

ReferencesReferenceshttp://oig.hhs.gov/fraud/complianceguidance.htmlhttp://oig.hhs.gov/fraud/complianceguidance.html

http://www.nacua.org/documents/FedSentencingGuidelines.pdfhttp://www.nacua.org/documents/FedSentencingGuidelines.pdf

http://www.ussc.gov/corp/Murphy1.pdfhttp://www.ussc.gov/corp/Murphy1.pdf

http://www.usdoj.gov/dag/cftf/corporate_guidelines.htmlhttp://www.usdoj.gov/dag/cftf/corporate_guidelines.html

Grant, G. Odell, G., and Forrester, R; Grant, G. Odell, G., and Forrester, R; Creating Effective Research Compliance Creating Effective Research Compliance Programs in Academic InstitutionsPrograms in Academic Institutions; Academic Medicine, Vol 74, No. 9, September ; Academic Medicine, Vol 74, No. 9, September 1999, p. 951. 1999, p. 951. 

Jordan, K. and Murphy, J.; Jordan, K. and Murphy, J.; Compliance Programs: What the Government Really Compliance Programs: What the Government Really Wants.Wants. p. 121. p. 121.

Managing Externally funded Research Programs; A Guide to Effective Management Managing Externally funded Research Programs; A Guide to Effective Management Practices; Council on Government Relations, June 2005Practices; Council on Government Relations, June 2005

DHHS Draft OIG Compliance Program Guidance for Recipients of PHS Research DHHS Draft OIG Compliance Program Guidance for Recipients of PHS Research Awards; Fed. Reg. Monday Nov 28, 2005, vol. 70#227, p:71312 Awards; Fed. Reg. Monday Nov 28, 2005, vol. 70#227, p:71312

Ingram, Ginna; Ingram, Ginna; Corporate Compliance Programs: More Than Window DressingCorporate Compliance Programs: More Than Window Dressing. . Journal of Public Inquiry, Spring/Summer 2007, p. 5. Journal of Public Inquiry, Spring/Summer 2007, p. 5. http://www.ignet.gov/randp/sp07jpi.pdfhttp://www.ignet.gov/randp/sp07jpi.pdf

Contact InformationContact Information

www.oig.nsf.gov

Hotline:1-800-428-2189Hotline:1-800-428-2189E-mail:[email protected]:[email protected]:(703) 292-9158Fax:(703) 292-9158

Mail:Mail: 4201 Wilson Boulevard 4201 Wilson Boulevard Suite II-705Suite II-705 Arlington, VA 22230 Arlington, VA 22230 ATTN: OIG HOTLINEATTN: OIG HOTLINE

Scott J. Moore, Ph.D., J.D.Scott J. Moore, Ph.D., J.D.Investigative ScientistInvestigative [email protected]

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