Doonesbury, 5 December 2005
Institutional Compliance
Plans
Why before is better than after
Scott J. Moore, Ph.D., J.D.
Investigative Scientist
smoore@nsf.gov
703-292-4991
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 Basics
A system of responsible administrative, financial, and
research management and oversight, creating an
environment in which employees can operate with integrity.
May be implemented voluntarily
or
mandated as part of negotiated resolution
Does your organization have what
it takes?
Leadership - commitment to do the right thing
Management - ethical environment
 Focus on high risk areas
 Provide systematic monitoring, auditing, oversight
Training - Communicate facts and expectations
Action - Early detection and correction of problems
Reporting – Relay information regarding wrongdoing
Effective Compliance Program Elements*
a/k/a







7 Habits of Highly Effective Organizations
Reasonable Compliance Standards and Procedures
Specific High-level Personnel Responsible
Due Care in Assignments with Discretionary Authority
Effective Communication of Standards and Procedures
Establish Monitoring and Auditing Systems and Reporting System
(whistleblowing without fear of retaliation)
Consistent Enforcement of Standards through Appropriate Mechanisms
(including failure to detect)
Respond Appropriately to the Offense (reporting to law enforcement, modify
program, prevention)
*Federal Sentencing Guidelines
U.S.S.G. §§ 8B2.1, 8C2.5(f), & 8D1.4(c)(1) (11/1/04)
Risk
(and how to find it)
Auditors
Squeaky Wheels
Whistleblowers
Investigators
ARE your friends
One University’s Risk Assessment
Heat Map
High
PROBABILITY
Privacy of
Information
Deferred
Maintenance
Environmental, Health
& Safety
Human
Auxiliary Services
Subjects
Off-Campus Facilities
Moderate
Executive
Benefits
Contracts & Grants
Management
Immigration & Visa
Processing
Student Affairs
Property
Management
Human
Resource
Management
Endowment
Animal
Subjects
Gifts &
Restricted
Funds
Acquisition
Security
Construction Management
Financial Reporting
Technology Licensing
Low
Low
Moderate
IMPACT
High
Finding Risk
What needs more review?
Where’s your itch?
What’s autonomous?
Where’s the black hole?
Are your warning bells ringing when you
hear someone else’s problems?
What gives you that
“Gosh, gotta check that right away” feeling?
Risk Areas
Allowable activities supported
Allowable costs and cost principles
Cash management
Eligibility for awards
Equipment and real property management
Period of availability of funds
Procurement suspension and debarment
Program income
Participant support
Timely required reporting
Special tests and provisions
Holding accounts
Summer salaries
Other Risk Areas
Lack of adequate documentation

travel documentation

cost-sharing

records retention

credit card receipts do not constitute adequate documentation
Time and effort reporting and procedures
Separate financial administration for each award, no pooling
Abuse or violations of institutional conflict of interest disclosure
policies and procedures.
Updated/adequate RM policies and procedures
Subawardee monitoring (and A-133s)
Residual funds
Oversight activities (Conflict of Interest, Humans, Animals)
What do you look like?
Funding Characteristics
Grants, contracts and with what entity
Organizational Profile
Decentralized
Control Profile
Rainmakers, President, staff
Audit Profile
How easily can you get down into the weeds?
Activities Location
On-site, off-site, another country, LTER, SBIR, SGER
Activity Description
Animals, humans, collection, collaboration, toxins, radiation; staffing
characteristics
“Junior, independent” or “senior and wise”
Training Profile
Comprehensive administrative, financial, oversight, fit the issues
Common Types of
Civil/Criminal Allegations
3%
9%
31%
Theft/Embezzlement (31%)
False or Fraudulent Statements (24%)
13%
Miscellaneous* (20%)
False or Fraudulent Claims (13%)
Conflicts of Interest (9%)
20%
Computer Fraud (3%)
24%
*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
11%
8%
Unsubstantiated Allegations* (32%)
8%
Restitution (21%)
21%
6%
Referral (11%)
Termination of Grant (8%)
Miscellaneous** (8%)
6%
Incarceration/Probation (6%)
Termination of Employment (6%)
4%
4%
Civil Action (4%)
Debarment (4%)
32%
* 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
Cost Share
Program Income
Subrecipient Monitoring
Effort Reporting
Participant Support
Travel
Signature Responsibilities
“GRANTS GONE BAD”
Proposal Signatures
Compliance with award terms and conditions
Accuracy and completeness of statements
COI Policy
Drug-Free Workplace
Debarment and Suspension
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
Agreements
AUTHORIZED ORGANIZATIONAL REPRESENTATIVE SIGNATURE DATE
Page 2 of 2
“Well, I’m in the clear. I certainly
didn’t KNOW that certification was
false when I signed it.”
No Problems, Right?
Knowing and Knowingly
Defined
31 U.S.C. 3729(b)
1) acts with actual knowledge of the information;
2) acts in deliberated ignorance of the truth or falsity of
the information; or
3) acts in reckless disregard for the truth or falsity of the
information.
4) And, no proof of specific intent to defraud is required.
Examples of Misused Funds
1.
2.
3.
4.
5.
Grant Fraud
Embezzlement
Multi-Agency Fraud
False Certifications
Overcharging Grants
Case Study 1: “No” Means “No”
NSF OIG conduct a Proactive Review
Proactive Review identified questionable entries in
General Ledger of a small institutional awardee.
Investigation initiated
Obtained and reviewed all financial records
Identified improper drawdown
Revealed $27K expenditures incurred after
expiration of award
Case Study 1: “No” Means “No” (cont)
OIG investigation of those expenditures revealed that






PI requested award extension to spend remaining funds
Request was denied 3X by Program Officer
Nevertheless, after award expiration, PI drew down and
spent the $27K on post-expiration expenses
PI falsely characterized drawdown as reimbursements
PI filed Final Project Report falsely reflecting program
completion
PI and awardee made false statements to OIG – claimed lack
of knowledge regarding Program Officer’s 3 denials of
request
Case Study 1: “No” Means “No” (cont)
Presented case to AUSA (civil and criminal)
Proceeded as civil false claims case
DOJ settled case
Imposed a 3-year Compliance Plan
NSF OIG recovered $52K from institution
NSF debarred PI for 5-years
Case 2: “Just Charge It To The Grant
With Money In It”
A company received a grant from NSF
A source provided information to NSF OIG, alleging that the
company charged time to the NSF grant for work she did not
perform
NSF OIG opened investigation
 Interviewed company officials
 Interviewed employees
 Obtained and reviewed records
Case 2: “Just Charge It . . .” (cont)
OIG investigation revealed






some of the time charged to the grant should have been
charged to overhead
the company shifted charges between various federal grants
as money was available
the company charged grants for proposal preparation
the company charged grants for costs unrelated to the grant
NSF was overcharged $370,000
other federal agencies were overcharged $970,000
Case 2: “Just Charge It . . .” (cont)
Presented case to AUSA
Proceeded as civil false claims case
DOJ settled case


$1.55M
4-year Compliance Plan imposed
Case 3: Know what you are signing
Allegation received:

A Principal Investigator complained that he was not
receiving the cost-share monies he was promised by
the university
Investigation opened:




Request and review financial records for grant
Travel to university
Interview relevant individuals
Coordinate with Department of Justice
Case 3: Know what you are signing
(cont)
Investigation revealed:




the university did not have a system
for tracking cost-share
could not document costs submitted
to NSF as cost-share
could not document costs claimed
as direct expenses
the university had submitted
numerous false cost-share
certifications
Case 3: Know what you are signing
(cont)
Presented case to AUSA
Proceeded as civil false claims case
DOJ settled case
Imposed a 5-year Compliance Plan
NSF OIG recovered $1.4M
Case 4: Plagiarizing the Thesis
a/k/a Watch out for the CPS and COI





PI submitted his student’s thesis chapter as an
SBIR-1 proposal ($100K, 6 months)
from a non-existent company.
When awarded, PI used the money to
pay his child’s tuition at an ivy league
institution and other personal expenses.
PI copied the thesis into his final report
and proposal for the SBIR-2 award ($500K).
University notifies OIG of plagiarism allegation
PI denied everything.
BUT
His wife admitted everything
Case 4: Plagiarizing the Thesis
a/k/a Watch out for the CPS and COI
NSF suspended the award
OIG issued subpoenas.
OIG referred the case to DOJ, who accepted it for
prosecution.
Case 4: Plagiarizing the Thesis
a/k/a Watch out for the CPS and COI
At a meeting with DOJ, the professor through his attorneys
agreed
1)
2)
3)
Plead guilty to a criminal count (1001)
but wanted to avoid jail
Would pay $240,000
No action against wife
NSF OIG recommended RM
finding and debarment.
Professor and NSF settled for
3 years voluntary exclusion from Federal funding.
Could a proactive compliance plan have prevented the loss?
References
http://oig.hhs.gov/fraud/complianceguidance.html
http://www.nacua.org/documents/FedSentencingGuidelines.pdf
http://www.ussc.gov/corp/Murphy1.pdf
http://www.usdoj.gov/dag/cftf/corporate_guidelines.html
Grant, G. Odell, G., and Forrester, R; Creating Effective Research Compliance
Programs in Academic Institutions; Academic Medicine, Vol 74, No. 9, September
1999, p. 951.
Jordan, K. and Murphy, J.; Compliance Programs: What the Government Really
Wants. p. 121.
Managing Externally funded Research Programs; A Guide to Effective Management
Practices; Council on Government Relations, June 2005
DHHS Draft OIG Compliance Program Guidance for Recipients of PHS Research
Awards; Fed. Reg. Monday Nov 28, 2005, vol. 70#227, p:71312
Ingram, Ginna; Corporate Compliance Programs: More Than Window Dressing.
Journal of Public Inquiry, Spring/Summer 2007, p. 5.
http://www.ignet.gov/randp/sp07jpi.pdf
Contact Information
www.oig.nsf.gov
Hotline:1-800-428-2189
E-mail:oig@nsf.gov
Fax:(703) 292-9158
Mail:




4201 Wilson Boulevard
Suite II-705
Arlington, VA 22230
ATTN: OIG HOTLINE
Scott J. Moore, Ph.D., J.D.
Investigative Scientist
smoore@nsf.gov
703-292-4991
?