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1 © 2008 Venable LLP Government Ethics and Grants Compliance November 2009 Terry Elling firstname.lastname@example.org@venable.com; (202) 344-8251 Ron Jacobs email@example.com@venable.com; (202) 344-8215 Venable LLP
2 © 2009 Venable LLP Organizations should emphasize a culture of ethics: Organizations should aspire to have an ethics program and behavior to exceed compliance requirements. An organization’s ethical commitment is a reflection of the culture of the organization. Managers at all levels should be involved and available to employees to help sort through any ethical dilemmas with which employees may be confronted.
3 © 2009 Venable LLP Today’s Objectives Discuss key issues relating to federal government ethics requirements Identify essential government grants compliance requirements and risks OPPORTUNITY TO ASK QUESTIONS!!!
4 © 2008 Venable LLP Government Ethics Ron Jacobs/Terry Elling
5 © 2009 Venable LLP Government Ethics: An Overview Dealing with government officials and performing Federal grants and contracts differs in many respects from private sector practices. Working under government contracts and grants requires compliance with a whole host of Federal laws and regulations. Failure to comply with these laws and regulations can have serious consequences. –Civil and Criminal Liability –Default or termination of contract or grant –Recoupment of funds –Suspension or Debarment from Eligibility for Federal programs
6 © 2008 Venable LLP Specific Ethics Issues
7 © 2009 Venable LLP Gifts What is a gift? A gift is any “gratuity, favor, discount, entertainment, hospitality, forbearance, or other item having monetary value. The term includes gifts of services, training, transportation, meals, whether provided in kind, by purchase of a ticket, payment in advance, or reimbursement after the expense has been incurred.” To whom are you giving a gift? The rules may be different for: –Members of Congress and their staffers –Senators and their staffers –Other Federal employees
8 © 2009 Venable LLP Gifts to Members of the House and their staffers The old rule: no gift worth $50 or more, unless an exception applied The new rule: no gifts at all from a registered lobbyist or private entity that retains registered lobbyists, unless an exception applies. These exceptions are the same as they were before.
9 © 2009 Venable LLP Gifts to Members of the House and their staffers Exceptions to the “no lobbyist gifts” rule: –Gifts based on “personal friendship” (not to exceed $250) –Campaign contributions and campaign events –Free tickets to widely attended events –Training opportunities
10 © 2009 Venable LLP Gifts to Members of the House and their staffers Remember that these new rules only apply to gifts from registered lobbyists and entities that retain or employ registered lobbyists. If you’re not one of the above, then the “old” rule still applies: –Single gifts worth less than $50 are okay; gifts more than that are okay if they fall under one of the exceptions. –No gifts in any one calendar year that total $100 or more (Gifts of less than $10 don’t count toward the limit).
11 © 2009 Venable LLP Gifts to Senators and their staffers No gifts by lobbyists unless an exception applies. Single gifts by non-lobbyists worth less than $50 are okay; gifts more than that are okay if they fall under one of the exceptions. No gifts in any one calendar year that total $100 or more (Gifts of less than $10 don’t count toward the limit).
12 © 2009 Venable LLP Gifts to other Federal employees Generally, a Federal Government contractor or grantee may not give anything of value to an officer or an employee of the U.S. government. “Gifts” include: –Products –Meals and beverages –Special discounts –Tickets and entertainment –Travel and accommodations –Cash –Anything of value
13 © 2009 Venable LLP Gifts to other Federal employees There are a number of exceptions to the general rule banning gifts to Federal employees from a Government contractor:
14 © 2009 Venable LLP Gifts to other Federal employees – Exclusions Gifts of $20.00 or less. –Per source per occasion. –Less than $50.00 from a single source in one year. –Government employee may not pay for value exceeding $20.00 on any occasion.
15 © 2009 Venable LLP Gifts to other Federal employees – Exclusions Gifts based on personal relationships. –Circumstances must be clear that the gift is motivated by a family relationship or personal relationship rather than the position of the employee.
16 © 2009 Venable LLP Gifts to other Federal employees – Exclusions Discounts and similar benefits. –Reduced memberships or fees in participation in organization activities offered to all Government employees. –Opportunities and benefits, including favorable rates and commercial discounts offered to members of a group or class in which membership is unrelated to Government employment.
17 © 2009 Venable LLP Gifts to other Federal employees – Exclusions Miscellaneous Exclusions. –Awards and honorary degrees of less than $200.00 in value (including meals and entertainment at awards presentation). –Gifts of free attendance at widely-attended gatherings provided that the agency determines that attendance is in its interest. –Modest refreshments (coffee and donuts), greeting cards, plaques, etc.
18 © 2009 Venable LLP Bribes For all Government employees, it is a crime to give, offer, or promise anything of value to a public official for or because of any official act – whether the intent is explicit or not. There is no “de minimis” exception.
19 © 2009 Venable LLP Bribes Violation will result in a fine of up to three times the amount of the bribe or imprisonment for up to 15 years, or both.
20 © 2009 Venable LLP The Revolving Door What is the “revolving door,” and why is it an issue? –Federal statutes place post-employment restrictions on officers and employees of the Government who revolve in and out of the public sector. Doing so can lead to concerns over impartiality and undue influence. There are several substantive prohibitions, each varying in: –The type of officer or employee affected; –The duration of the restriction; –The individual’s involvement with the program in the Federal Government; and –The scope of the restriction.
21 © 2009 Venable LLP The Revolving Door: Negotiating Future Employment Officers and employees in the Executive Branch are generally prohibited from seeking future employment and working on official acts simultaneously if the official actions may be of significant benefit to the potential employer. Waivers may be granted to this prohibition for a number of reasons, as when the employee’s self- interest is “not so substantial” as to affect the integrity of services provided by the employee, or if the need for the employee’s services outweighs the potential for a conflict of interest, according to Federal regulations.
22 © 2009 Venable LLP The Revolving Door: Negotiating Future Employment Officers and employees in the Legislative Branch are subject to less restrictive rules here. Congressional Rules prohibit members and staff from receiving compensation “by virtue of influence improperly exerted” from their official positions. The Rules advise Congressional employees to recuse themselves from official actions of interest to a prospective employer while job negotiations are underway and for members to seek prior approval from the ethics committee about conducting such job negotiations.
23 © 2009 Venable LLP The Revolving Door: After Switching Sides –A former Executive Branch employee may not, with the intent to influence, make any communication or appearance before the U.S. Government, on behalf of any other person, in connection with a particular matter in which he participated personally and substantially as an employee. –This is a lifetime restriction. –Such an employee may work “behind the scenes.”
24 © 2009 Venable LLP The Revolving Door: After Switching Sides “Personally and substantially” means “active and significant involvement” in certain activities “directly related” to the particular matter in question. Participating “personally” means participating “directly” and includes direct and active supervision of subordinates. Participating “substantially” means that the official’s involvement is “of significance to the matter,” i.e., more than perfunctory or on an administrative or peripheral issue.
25 © 2009 Venable LLP The Revolving Door: After Switching Sides –For two years after service, a former Executive Branch employee is prohibited from communicating or appearing with the intent to influence a particular matter, on behalf of anyone other than the Government when: 1.The Government is a party or has a direct interest in the matter 2.The former employee knew or should have known that the matter was pending under his/her responsibility during the one year prior to leaving Government service and 3.At the time of the employee’s participation in the particular matter, specific parties other than the Government were involved.
26 © 2009 Venable LLP The Revolving Door: After Switching Sides –For one year after service, employees in the Senior Executive Service and General/Flag Officers: are prohibited from making direct lobbying contacts with former colleagues or with any political appointee in the Executive Branch. are prohibited from making direct lobbying contacts with their former agency.
27 © 2009 Venable LLP The Revolving Door: After Switching Sides –For those in the Executive Branch, this means: For one year after leaving public office, employees in the Senior Executive Service are prohibited from making direct lobbying contacts with any political appointee in the Executive Branch. For one year after leaving public office, employees in the Senior Executive Service are prohibited from making direct lobbying contacts with their former agency.
28 © 2009 Venable LLP The Revolving Door: After Switching Sides –For those in the Legislative Branch, this means: Members of Congress, for one year after leaving public office, may not communicate with any Member, officer or employee of either house of Congress with the intent to influence official action.
29 © 2009 Venable LLP The Revolving Door: After Switching Sides Senior Congressional staff (those making at least 75 percent of a Member’s salary, which currently would be about $125,000 a year), for one year after leaving public office, may not make direct lobbying contacts with Members of Congress they served, or the Members and staff of legislative committees or offices in which they served.
30 © 2009 Venable LLP The Revolving Door: After Switching Sides For most other legislative employees: a one-year restriction from lobbying any current member of the office in which the former employee worked.
31 © 2009 Venable LLP The Revolving Door: After Switching Sides Procurement Related Restrictions –A former Government employee may not accept compensation from a contractor for one year after the employee: 1.Served as the procuring contracting officer, the source selection authority, a member of the source selection board, or as the chief of the technical or financial evaluation team in which the contractor was awarded a contract greater than $10 million; 2.Served as the program manager, deputy program manager or administrative contracting officer for a contract awarded to the contractor in excess of $10 million; or 3.Personally made certain decisions regarding a contract held by the contractor in excess of $10 million.
32 © 2009 Venable LLP Personal Conflicts of Interest What give rise to personal conflicts of interest? –Family or other personal relationships –Financial conflicts of interest
33 © 2009 Venable LLP Financial Conflicts of Interest Usually applies to Government personnel But can also apply to contractors and contractor personnel –Organizational Policies –Government contracts and grant agreements may also impose specific requirements
34 © 2009 Venable LLP Financial Conflicts of Interest The most common problems result from an employee’s acceptance of gifts or anything else of value from either a person or another organization that results in a conflict between the organization’s best interests and the employee’s best interests. The solution is to ensure that your organization’s best interests are given priority in all your business dealings. Do not – without your organization’s explicit, written permission – accept rebates, commissions, profit-sharing arrangements or compensation in any form from a third-party that is dealing with the organization.
35 © 2009 Venable LLP Protection of Information Applies to contractors or grantees that gain access to confidential Government information or proprietary information of other organizations in performing Government work. “Confidential” and “proprietary” are defined broadly and should be so construed.
36 © 2009 Venable LLP Types of Information meant by “Proprietary” or “Confidential” Accounting or Financial Records Pricing or salary data Marketing data Business plans and strategies Negotiations and contracts Employee records Customer or vendor lists Technical information Drawings Development or business activities Research activities
37 © 2009 Venable LLP Protection of Information No employee should request confidential information, unless it is necessary to do one’s job. When a staff member receives information that may be considered confidential, the employee should ask the member whether the information is publicly available. If the information is not publicly available, an employee must not disclose the information to the public or to other members. As a general rule, you should not discuss specific names or facts unless required.
38 © 2009 Venable LLP Protection of Information What regulation applies? –Review the contract or grant itself for applicable provisions. –Federal Acquisition Regulation (“FAR”) 9.505-4(b) requires that contractors that have access to confidential information: Enter agreement with the other orgnaizations to protect the information from unauthorized use or disclosure for as long as it remains proprietary. Refrain from using the information for any purpose other than that for which it was furnished. Provide a copy of such agreements with these other private entities to the designated Contracting Officer. –Most Agency Grants policies have similar requirements
39 © 2008 Venable LLP Federal Government Grant Compliance Terry Elling
40 © 2009 Venable LLP Government Grants – Sources of Compliance Requirements OMB Cir. A-110 (2 CFR Part 215), Uniform Administrative Requirements for Grants and Agreements OMB Cir. A-122 (2 CFR Part 230), Cost Principles for Non-Profit Organizations OMB Cir. A-133, Audits of States, Local Governments, and Nonprofit Organizations Statutes and Regulations that Establish Specific Grant Programs (e.g, American Reinvestment and Recovery Act) Agency-specific Grants regulations and policies
41 © 2009 Venable LLP OMB Cir. A-110 and Common Agency Requirements Reporting Requirements –Project Performance –Financial Grantee Code of Conduct Procurement Standards –Competition –Conflict of Interest Policy –Cost and Price Reasonableness –Contract Administration and Documentation Equal Employment Opportunity and Other Labor and Employment Standards Requirements
42 © 2009 Venable LLP OMB Cir. A-110 and Common Agency Requirements (Cont.) Effective control over and accountability for all funds, property, and other assets Comparison of outlays with budget amounts for each award Written procedures to minimize the time elapsing between the transfer of funds to the recipient Written procedures for determining the reasonableness, allocability, and allowability of costs Accounting for and use of Program Income Accounting records with supporting documentation
43 © 2009 Venable LLP OMB Cir. A-122 – Cost Principles Costs expended with grant funds must be: –Reasonable in amount; –Allocable to the purpose or object of the grant program; and, – Allowable under government cost principles Grant application budgets and financial reports are scrutinized for compliance with cost principles Compliance with Cost Principles is primary area of interest in audits
44 © 2009 Venable LLP OMB Cir. A-122 – Cost Principles Areas of Concern Indirect Costs (aka “Facilities and Administrative Costs”) Fee (Profit) Direct Costs (Examples) Personnel Compensation Advertising and Public Relations Fundraising and Investment Management Professional Services Travel Alcoholic Beverages
45 © 2009 Venable LLP OMB Circular A-133 The Single Audit Act Applicable to any grant recipient or subrecipient that expends more than $500,000 in federal awards When available, program-specific audits provide audit guidance, which must be complied with. Non-program-specific audits shall include, at a minimum: –A schedule of expenditures of Federal awards for the program; –Notes that describe the significant accounting policies used in preparing the schedule; –A summary schedule of prior audit findings; and –A corrective action plan.
46 © 2009 Venable LLP Grant Compliance By accepting a federal grant (or subgrant), the recipient agrees to comply with the applicable Federal requirements and to the prudent management of all expenditure and actions affecting the award. Every submission (e.g., Grant application, performance and financial reports, periodic certifications) is a statement to a government official Every request for payment is viewed as a certification that the awardee is complying with all material requirements and terms
47 © 2009 Venable LLP Grant Compliance – Approval Requirements Most Agencies require that Grant Recipients obtain prior written approval prior to making significant project changes, such as: –Transfer of the project effort –Change in objective or scope –Change in the amount of cost sharing reflected on Line M of the grant award budget –Absence or change of Principal Investigator –Rearrangement/alterations from budget aggregating $25,000 or over
48 © 2009 Venable LLP Common Sources of Compliance Problems Overly ambitious objectives in grant application Failing to ensure that subrecipient and subcontractor agreements “flow-down” all required terms Failing to ensure that required reports are accurate and submitted on time Failing to obtain required Agency approvals of changes in grant program Failing to timely report problems affecting program or financial performance
49 © 2009 Venable LLP Grant Compliance Most frequent adverse audit findings (National Science Foundation Study): –Policies and procedures inadequate or absent: 24% –Lack of source documentation to support costs: 18% –Inadequate system to track, manage, or account for costs and/or assets: 14% –Unallowable costs: 7% –Lack of proper approval, certification, or authorization: 6% –Lack of subrecipient monitoring: 6% –Inadequate or absent project or technical report: 6% –Reconciliations inadequate or not performed: 4% –Inadequate or absent financial report or proposal: 4% –Costs claimed exceed amounts or rates allowed by award provisions or Federal regulations: 4% –Lack of segregation of duties: 4%
50 © 2009 Venable LLP Grant Compliance – Most Common Offenses (NSF Study) Theft/Embezzlement (31%) False or Fraudulent Statements (24%) Miscellaneous/Other* (20%) False or Fraudulent Claims (13%) Conflicts of Interest (9%) Computer Fraud (3%) * Includes mail fraud, false identification insurance fraud, impersonating a Government officer, and copyright infringement.
51 © 2009 Venable LLP Grant Compliance – Risk Areas Adequate documentation Travel documentation Cost-sharing Records retention Separate financial administration for each award Violations of institutional conflict of interest rules Sub-awardee monitoring Residual funds
52 © 2009 Venable LLP Grant Compliance – Consequences Special oversight/review status Administrative sanctions –Reduction in payments –Termination of Grant Suspension/debarment/exclusion Corrective action plans Mandatory compliance plans Criminal and Civil Penalties –False Statements –Criminal and Civil False Claims
53 © 2009 Venable LLP In sum: Ethics and compliance policy requires that we exercise the highest degree of honesty and integrity in our dealings with others. Committed to maintaining the highest standard of ethical conduct in all of its activities and conducting our business in accordance with the law. Each employee is expected to avoid practices that may create even the appearance of impropriety or conflict of interest.
54 © 2009 Venable LLP In sum: Each employee is expected to know the rules or learn the rules. Normally, no employee can rely on a Government employee’s representation regarding the applicable rule (no matter who the Government employee is). Violations of these policies will result in disciplinary action, up to and including termination of employment and other legal action.
55 © 2009 Venable LLP And remember: If you are unsure how to proceed, do not hesitate to ask for guidance It’s always easier to prevent a problem than to fix one
56 © 2009 Venable LLP Questions? Comments? Thank you!
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