Doonesbury, 5 December 2005

Institutional Compliance Plans Institutional Compliance Plans Why before is better than after Scott J. Moore, Ph.D., J.D. Investigative Scientist

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 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 Focus on high risk areas Provide systematic monitoring, auditing, oversight 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 Reasonable Compliance Standards and Procedures Specific High-level Personnel Responsible Specific High-level Personnel Responsible Due Care in Assignments with Discretionary Authority Due Care in Assignments with Discretionary Authority Effective Communication of Standards and Procedures Effective Communication of Standards and Procedures Establish Monitoring and Auditing Systems and Reporting System (whistleblowing without fear of retaliation) Establish Monitoring and Auditing Systems and Reporting System (whistleblowing without fear of retaliation) Consistent Enforcement of Standards through Appropriate Mechanisms (including failure to detect) Consistent Enforcement of Standards through Appropriate Mechanisms (including failure to detect) Respond Appropriately to the Offense (reporting to law enforcement, modify program, prevention) 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 Auditors Squeaky Wheels WhistleblowersInvestigators ARE your friends (and how to find it)

One University’s Risk Assessment Heat Map One University’s Risk Assessment Heat Map IMPACT High Moderate Low Moderate High Low 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 PROBABILITY Acquisition Environmental, Health & Safety Immigration & Visa Processing Executive Benefits Security Human Subjects Student Affairs Animal Subjects Gifts & Restricted Funds

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? hear someone else’s problems? What gives you that “Gosh, gotta check that right away” feeling? “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 Lack of adequate documentation travel documentation travel documentation cost-sharing cost-sharing records retention records 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 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

*Includes mail fraud, false identification insurance fraud, impersonating a government officer, and copyright infringement. Data gathered from NSF OIG closed Investigative files (1990 – Present).

* 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

No Problems, Right? “Well, I’m in the clear. I certainly didn’t KNOW that certification was false when I signed it.”

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 the information; or 3) acts in reckless disregard for the truth or falsity of the information. information. 4) And, no proof of specific intent to defraud is required. Knowing and Knowingly Defined

Examples of Misused Funds Examples of Misused Funds 1.Grant Fraud 2.Embezzlement 3.Multi-Agency Fraud 4.False Certifications 5.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

OIG investigation of those expenditures revealed that PI requested award extension to spend remaining funds PI requested award extension to spend remaining funds Request was denied 3X by Program Officer Request was denied 3X by Program Officer Nevertheless, after award expiration, PI drew down and spent the $27K on post-expiration expenses Nevertheless, after award expiration, PI drew down and spent the $27K on post-expiration expenses PI falsely characterized drawdown as reimbursements PI falsely characterized drawdown as reimbursements PI filed Final Project Report falsely reflecting program completion 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 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

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 company officials Interviewed employees Interviewed employees Obtained and reviewed records Obtained and reviewed records Case 2: “ Just Charge It To The Grant With Money In It”

Case 2: “ Just Charge It...” (cont) OIG investigation revealed some of the time charged to the grant should have been charged to overhead 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 shifted charges between various federal grants as 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 grant the company charged grants for costs unrelated to the grant NSF was overcharged $370,000 NSF was overcharged $370,000 other federal agencies were overcharged $970,000 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 $1.55M 4-year Compliance Plan imposed 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 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 Request and review financial records for grant Travel to university Travel to university Interview relevant individuals Interview relevant individuals Coordinate with Department of Justice 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 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 submitted to NSF as cost-share could not document costs claimed as direct expenses could not document costs claimed as direct expenses the university had submitted numerous false cost-share certifications 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. 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. 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). PI copied the thesis into his final report and proposal for the SBIR-2 award ($500K). University notifies OIG of plagiarism allegation University notifies OIG of plagiarism allegation PI denied everything. 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) Plead guilty to a criminal count (1001) but wanted to avoid jail 2) Would pay $240,000 3) 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 Grant, G. Odell, G., and Forrester, R; Creating Effective Research Compliance Programs in Academic Institutions; Academic Medicine, Vol 74, No. 9, September 1999, p Grant, G. Odell, G., and Forrester, R; Creating Effective Research Compliance Programs in Academic Institutions; Academic Medicine, Vol 74, No. 9, September 1999, p Jordan, K. and Murphy, J.; Compliance Programs: What the Government Really Wants. p 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.

Contact Information Fax:(703) Mail: 4201 Wilson Boulevard 4201 Wilson Boulevard Suite II-705 Suite II-705 Arlington, VA Arlington, VA ATTN: OIG HOTLINE ATTN: OIG HOTLINE Scott J. Moore, Ph.D., J.D. Investigative Scientist

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