national conference on college cost accounting 2015 annual conference october 13, 2015 national...
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National Conference on College Cost Accounting 2015 Annual Conference
October 13, 2015
National Science Foundation Office of Inspector General Update
Brett M. Baker, Ph.D, CPA, CISA Assistant Inspector General for Audit National Science Foundation
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Overview
NSF OIG overview
Audit update
DATA Act and IPERA
Data analytics in the federal government
Applications in grant oversight
Dr. Brett Baker, AIGA, NSF OIG
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Inspectors General
72 Federal Inspectors General (IGs)
Promote economy and efficiencyPrevent and detect fraud, waste, and abuse
Audit and evaluate agency programs and activitiesInvestigate allegations of wrongdoingOperate a fraud hotline
Review agency compliance with legislation and regulations
Advise agency head and Congress
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Dr. Brett Baker, AIGA, NSF OIG
Inspectors General Do Not….
Operate programs or decide funding
Perform management functions
Make agency employment decisions
Enforce implementation of OIG recommendations
Suspend or debar recipients
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Dr. Brett Baker, AIGA, NSF OIG
Who We Are
Assistant IG for Investigations
Assistant IG forAudit
Inspector General
Counsel to the IG
Administrative Investigations
Civil/Criminal Investigations
Investigative Legal / Outreach
Investigations Specialists and Support Staff
Financial Statement and IT Audit
Performance Audit
External Audit
Audit Services and Data Analytics Expertise in areas of
research, grant, and contract
administration Dr. Brett Baker, AIGA, NSF OIG
OIG Management Support
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Two Sides of the House
Audit External Audit Program
Audits of awardee financial, administrative and internal controls.
Reports findings to NSF for audit resolution (e.g., return of funds).
Internal Audit Program Audits of NSF programs
and operations to determine program compliance and efficiency of operations.
Report findings to Congress, National Science Board, and NSF.
Investigations Civil and Criminal
Cases of Fraud, Theft, Conspiracy, Embezzlement, False Statements, etc.
Consequences:Restitution, Fines, Prison, Compliance Plans.
Administrative Cases of Research
Misconduct; Breach of Confidentiality; Human Subjects, Animal Welfare.
Consequences:Debarment, Certifications and Assurances, Remedial Training, etc.
OU
TR
EA
CH
Semiannual Reports
to Congress
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Audit Planning
Work Required by Law: Agency Financial Statement Audit (CFO Act) Federal Information Security Management Act (FISMA) Improper Payment Elimination and Recovery Act (IPERA) Conference spending and government purchase card
oversight DATA Act
Discretionary Work: OIG Risk-based Assessments
─ Internal NSF operations─ External award oversight
Referrals from Investigations NSF Management Challenges National Science Board and NSF Suggestions Congressional Requests
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Dr. Brett Baker, AIGA, NSF OIG
Distribution of Audit Work8
Mandatory
Con-gres-sional
Request
NSF Re-
quested
OIG Internal
OIG External
Dr. Brett Baker, AIGA, NSF OIG
Greater Attention to Analytics in Government
DATA Act Promotes data sharing across government agencies Treasury data analytics center for OIGs – automated
oversight Government-wide structured data standards for financial
reporting USASpending data should be standardized and machine-
readable OIGs will audit data quality
Improper Payments Elimination and Recovery Act (IPERA)
Amends the Improper Payments Information Act of 2002 IPERIA strengthens estimations Strengthens detection, prevention, and recovery efforts Pre-award and pre-payment checks with Do Not Pay Annual risk assessments of covered programs Published improper payment estimates with reduction
targets Goal to reduce improper payments by $50B and recover
$2B in 2 yrs
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Dr. Brett Baker, AIGA, NSF OIG
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Medicare
Fee-fo
r-Servi
ce
Earned In
come T
ax Cre
dit
Medicaid
Medicare
Adva
ntage (Part C
)
Unemployment In
sura
nce
Supplemental Secu
rity In
sura
nce
Old Age, S
urvivo
rs, and D
isabilit
y Insu
rance
Supplemental Nutrit
ion Ass
istance
Pro
gram
Medicare
Pre
scrip
tion D
rug
School L
unch
Direct
Loan
Public H
ousing/R
ental Ass
istance
$0
$10
$20
$30
$40
$50$45.8
$17.7$17.5$12.2
$5.6 $5.1 $3.0 $2.4 $1.9 $1.7 $1.5 $1.0
Dollars (in billions)
Programs with Improper Payment Estimates Over $1 Billion in FY 2014
Source: GAO
Dr. Brett Baker, AIGA, NSF OIG
Risk Identification for Oversight
Why look for risk? Helps ensure programs are working and funds are being used
properly. Government responsible for all activity, risk-based approaches
help focus effort on things we need to pay more attention to.General risks
What an institution is…. Some contract and grant awards are riskier than others -- Smaller institutions tend to have weaker internal controls
Activity-based risks What an institution does…. Award actions that stand out from normal activity -- Large drawdown on a single date – end of a fiscal year -- Spending out remaining award fund just before and after the award
Challenges General risks can be more obvious Activity-based risks are more revealing, but can be harder to see
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Dr. Brett Baker, AIGA, NSF OIG
Focus on Risk Many to the Few
600,000 Grant award drawdowns annually totaling $7 billion
Each assigned a risk score Spikes, near award expiration charges
40,000 Active awards Each assigned a risk score Summarize drawdown risks by award
2,000 Institutions Each assigned a risk score Summarize award risk and add CCR, EPLS, FAC risks
20 Audits of higher risk institutions Each audit tests all expenditures for all awards with automated risk indicators
15,000,000 Transaction-level expenditures tested Each assigned a risk score Dr. Brett Baker, AIGA, NSF OIG
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Forensic Audit Framework
Set Objectives and Define UniverseStructured brainstorming with subject matter
expertsMap out End-to-End Process
Identify systems, key processes and controls
Obtain Transaction-Level Data
Build Targeted Business Rules and Run Against Data
100% review with automated business rules based on risk Award/institution anomalies and changes in patterns over
time
Examine Anomalies
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Dr. Brett Baker, AIGA, NSF OIG
Risk Identification through Automated Oversight
Improved risk identification 100% transaction review – limited statistical sampling Automated business rules based on risks Focus review on higher risks
Key data analytics software techniques Join databases (need linking field) Summarize data (many to the few) Apply risk indicators using computed fields Develop risk profiles by institution, award-type, transaction-
type Summarize risk into one number
Agencies and recipients can use similar data analytics techniques
Monitor grant spending Identify anomalies early
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Comparing Data Files(Three Bucket Theory)
DisbursingTransactions
Vendor Table(Valid vendors)
VendorsNot Paid
Yet
VendorsPaid andIn Vendor
Table
VendorsPaid but not
In VendorTable
Dr. Brett Baker, AIGA, NSF OIG
Linking field allowsfor comparison
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Normal Distribution
Normal Activity AnomalousActivity
AnomalousActivity
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Building a Forensic Capability
Develop organizational capability All staff should have basic skill with data analysis
tools Forensic units perform more sophisticated analyses Targeted reviews are more efficient in time and cost
Phased development Hardware and software Access to internal and external data Staff: system savvy, analytical, business process
knowledge Training, then immediate application to work
Very important component is tone at the topDr. Brett Baker, AIGA, NSF OIG
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Dat
a D
ownl
oad
Framework for Data Analytics Using Government and Publicly Available Data
Federal Reserve System
Disbursing Systems
CommercialBank
AwardSystems
Data Analytics
PaymentSystems
Federal AuditClearinghouse
Master DeathFile (SSA)
Dr. Brett Baker, AIGA, NSF OIG
Oversight Review by
• Auditors• Investigators• Agencies
CPARS, FPDS SAM(CCR, EPLS)
GuideStar(non-profits)
Dat
a D
ownl
oad
Transaction-level Data Payee, Contract No, CLINs, Payment Amount, Date
Examples of systems that can be used to help understand payment transactions
Award-level Data Grants, Contracts
Dat
a D
ownl
oad
Dat
a D
ownl
oad
Dat
a D
ownl
oad
Dat
a D
ownl
oad
Dat
a D
ownl
oad
Dat
a D
ownl
oad
Dat
a D
ownl
oad
Contract Invoices
Grant Pmt Req’s
Join databasesApply risk indicators
Risk rank transactionsIdentify anomalies for testing
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U.S. Financial Assistance Overview
$600 billion in awards 88,000 awardees and 26 Federal grant making agencies Project and research, block, and formula
Outcomes are designed to promote public goodChallenges
Limited visibility of how Federal funds are spent by awardees Support for funding requests much less than for contracts
American Recovery and Reinvestment Act (2009) $840 billion of assistance to stimulate the economy Greater accountability and transparency over spending than
everOpportunities to enhance oversight with less
Automated oversight
Dr. Brett Baker, AIGA, NSF OIG
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Framework for Grant Oversight
Data analytics-driven, risk-based methodology to improve oversight
Identify institutions that may not use Federal funds properly
Techniques to surface questionable expendituresLife cycle approach to oversight
Mapping of end-to-end process to identify controls 100% review of key financial and program information Focus attention to award and expenditure anomalies
Complements traditional oversight approaches Techniques to review process and transactions are
similar Transactions of questionable activities are targeted
Recipients and Agency Officials can use data analytics
Identify high risk activities through continuous monitoring
Dr. Brett Baker, AIGA, NSF OIG
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Grants Differ From Contracts
GRANTS Promote services for the Public Good Merit review
(competitive)Multiple awardeesAward budgetNo government
ownershipGrant payments
Summary drawdowns No invoices for claims Expenditures not easily
visibleSalary percentages
CONTRACTS Specified deliverables (Goods and Services)Competitive processOne awardeeContract PriceGovernment
ownershipContract payments
Itemized payment requests
Invoices to support claims
Detailed costs Salary hourly rates
Dr. Brett Baker, AIGA, NSF OIG
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End to End Process for Grant Oversight
PROPOSALSPRE-AWARD
REVIEW AWARD
CLOSE-OUTPOST AWARDCASH
DISBURSEMENTSPAY/
ENTITLEMENT
AWARDSOLICITATIONS
CASH
REQUEST
• Funding Over Time
• Conflict of Interest• False Statements• False
Certifications• Duplicate Funding• Inflated Budgets• Candidate Suspended/Debarred
• Unallowable, Unallocable, Unreasonable Costs
• Inadequate Documentation• General Ledger Differs from Draw
Amount• Burn Rate• No /Late/Inadequate Reports• Sub-awards, Consultants, Contracts• Duplicate Payments• Excess Cash on Hand/Cost transfers• Unreported Program Income•
• No /Late
Final Reports• Cost
Transfers• Spend-out• Financial Adjustments• Unmet Cost
Share
D A T A A N A L Y S I S
PRE-AWARD RISKS
ACTIVE AWARD RISKSAWARD END
RISKS
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Prop
osal
s
Solic
itati
ons
Recipient
Project System
Pay System
Acctg System
HR System
Reports
Internal Grants Portal
Acctg Syste
m
Awards System
Proposal System
External GrantsPortal
Award Close-Out
Post Award Monitoring
Award Notificatio
n
Pre-Award Review
Look at Red Flag
Areas
RISK
RISK
The more red flags, the higher the risk.
The less red flags,the lower the risk.
Use Data Analytics to identify anomalies that are potential fraud indicators, such as:
• breaks in trends, outliers…
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2 3
4
5
7
8
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Funding
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Data Sources
Internal Proposals: budgets, panel scores Agency award systems, recipient reporting
External Excluded Parties List System (EPLS) Central Contractor Registration (CCR/SAM) Public tax filings Federal Audit Clearinghouse (A-133 audits)
Recipient financial system records General ledger and subsidiary ledgers Effort reporting Property Travel and purchase card Subaward monitoring
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Dr. Brett Baker, AIGA, NSF OIG
Identification of Higher Risk Institutions and Transactions
Dr. Brett Baker, AIGA, NSF OIG25
Anomalous Drawdown Patterns
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Normal drawdown pattern
SpendingRemaining
Grant funds(before expiration)
Grant Expiration
SpendingRemaining
Grant funds(after expiration)
Grant Award
Start upcosts
$$
DrawdownSpike
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Early Drawdown
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Draw Spike
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Spend out Pattern
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Does this drawdown pattern look okay?
Dr. Brett Baker, AIGA, NSF OIG
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Common Audit Findings
Data Analytics Audits (actual transactions)
Unallowable, unallocable, unreasonable costs
Excess salary Indirect Costs Equipment
Pre-Data Analytics Audits (stat sampling projections)
Unsupported costs Effort reporting Effort reporting (subaward) Pre-award charges
Dr. Brett Baker, AIGA, NSF OIG
When should you contact OIG?
Report significant administrative or financial problemsReport allegations of wrongdoing
Research misconduct Fraud / theft involving NSF funds Violation of regulation, directive, or policy
1-800-428-2189 (anonymous hotline) 703-292-7100 (business hours), or 703-328-3932 (non-business hours)Online hotline through our website webform.
www.nsf.govEmail: [email protected]
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Dr. Brett Baker, AIGA, NSF OIG
OIG Outreach
Presentations at conferences and seminars For students, PIs, and administrators OIG outreach visit can be requested
Fact sheets and brochures, briefings, conference presentations www.nsf.gov/oig/outreach_all.jsp
OIG Semiannual Reporthttp://www.nsf.gov/oig/pubs.jsp
Requests: [email protected]
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Dr. Brett Baker, AIGA, NSF OIG
Questions?
Dr. Brett M. BakerAssistant Inspector General for Audit
National Science Foundation Office of Inspector General
Phone: 703-292-7100
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