1. CONFLICTS OF INTEREST IN GRANTS TALISHA SEARCY AND ATHENA JONES

2. AGENDA General Overview of COI in Grants Broad View of COI in Grants

3. AGENDA (CONTINUED) View of Specific Grant COI Discussion

4. CONFLICTS OF INTEREST IN GRANTS What is a conflict of interest? “a real or seemingly incompatibility between a person’s private interests and his or her public or fiduciary duties” Black’s Law Dictionary

5. WHY IS COI A CONCERN? 5% of revenue lost to FraudThree Types of Fraud Corruption An employee misuses his or her influence in a business transaction in a way that violates his or her duty to the employer in order to gain direct of indirect benefit ACFE Report to the Nation

6. CORRUPTION VS COI An employee misuses his or her influence in a business transaction in a way that violates his or her duty to the employer in order to gain direct of indirect benefit a real or seemingly incompatibility between a person’s private interests and his or her public or fiduciary duties

7. CORRUPTION OVERVIEW Accounts for 25% of all fraud cases (in US) Median loss for government entity is $84K Median loss for non profit is $100K

8. CORRUPTION AND COI VIOLATIONS Loss of financial assets Loss of goodwill

9. CONFLICTS OF INTEREST Can identify / curb corruption opportunity Common for federal employees to identify COI Public faith in public servants Those in decision making role self identify COI Independent review

10. LARGE GRANT MAKING AGENCIES Health and Human ServicesEducationEnergyHomeland SecurityHousing and Urban DevelopmentLaborTransportation

11. COI IN GRANTS Regulatory guidance agency by agency Defined Self identification Self certification

12. CONFLICTS OF INTEREST IN GRANTS NIH Three major audits looking a grant process HUD Three audits looking a specific grants

13. DEPARTMENT OF HEALTH AND HUMAN SERVICES OFFICE OF INSPECTOR GENERAL OFFICE OF EVALUATION AND INSPECTIONS We conduct national evaluations of HHS programs from a broad, issue-based perspective. The evaluations incorporate practical recommendations and focus on preventing fraud, waste or abuse and encourage efficiency and effectiveness in HHS programs.

14. DISCLAIMER I am not a lawyer; nor do I play one on TV!

15. PRIOR CONFLICTS OF INTEREST WORK Federal employees  Special government employees  Conflicts of interest waivers Federal contractors  Medicare contractors Grantees  NIH

16. CONFLICTS OF INTEREST AT NIH… WHY DO WE CARE? COI can compromise the integrity of NIH Programs and as a result impact Public Health Grantee Grantee Institutions NIH Oversight

17. NIH GRANTEE INSTITUTION RESPONSIBILITY Federal regulation at 42 CFR pt. 50, subpart F, establishes standards to ensure that the design, conduct, or reporting of research funded under NIH grants will not be biased by researchers’ conflicts Pursuant to 42 CFR § 50.604, each grantee institution receiving NIH funds must have written policy for identifying conflicts and must ensure that conflicts are managed, reduced, eliminated

18. COI IN EXTRAMURAL RESEARCH Objective Identify vulnerabilities associated with NIH’s monitoring COI Findings NIH could not account for all COI reports; 89% of reports lacked information; and NIH did not follow up with grantee institutions regarding reported conflicts of interest.

19. HOW GRANTEES MANAGE COI IN RESEARCH Objective Examined nature of reported financial COI and how addressed by institutions Findings Vulnerabilities in identification, management and oversight of COI 90% allowed self identification of what should be reported Most common COI was equity ownership in companies impacted by research COI not verified

20. INSTITUTIONAL COI AT NIH GRANTEES Objective Whether Grantee institutions have written policies and procedures to address institutional financial interests and COI Identify financial interests and financial COI

21. INSTITUTIONAL COI AT NIH GRANTEES Findings 70 of 156 have written policies and procedures addressing institutional interests 69 of 156 have written policies and procedures addressing institutional conflicts 18 grantees identified 38 institutional conflicts

22. RECOMMENDATIONS Recommendations NIH should increase its oversight of grantee institutions; Require grantee institutions to provide details about COI and how they are managed, reduced, or eliminated; and NIH promulgate regulations that address institutional COI Status NIH published final rule (76 Fed. Reg. 53253, 53293) on August 25, 2011 that revises existing financial COI regulations; however NIH has not promulgated regulations that address institutional conflicts.

23. GRANT COI AT HUD Grants are by Program Each Program has regulatory guidance on COI Example CDBG (Community Development Block Grant)

24. GRANT COI AT HUD No person who is an employee, agent, consultant, officer or elected official of recipient or sub-recipient who: Exercises any functions or responsibilities with respect to CDBG activities Is in a position to participate in the decision making process Or gains inside information with regard to such activities may

25. GRANT COI AT HUD Obtain a financial interest or benefit from a CDBG activity Have any financial interest in any contract with respect to a CDBG activity or its proceeds For themselves or those they have business or immediate family ties Applies during tenure and one year thereafter

26. GRANT COI AT HUD HUD may grant exceptions to COI Recipient must request exception in writing Request must include all COI Exceptions must meet threshold requirements COI disclosed publically Does not violate state of local law (recipients attorney issue opinion to this affect)

27. GRANT COI AT HUD Exceptions – 7 factors considered 1.Significant cost benefit or essential expertise to project 2.Opportunity for open competitive bidding or negotiation 3.Person affected  Member of low or moderate income class of persons intended to be beneficiary of assisted activity  Exception will permit such person to receive same benefits as the class

28. GRANT COI AT HUD Exceptions – 7 factors - continued 4.Person affected has withdrawn from functions and responsibilities or the decision making process (with respect to assisted activity) 5.Interest of benefit existed before affected person was in the conflicting position 6.Undue hardship to recipient or person affected when weighed against public interest served by avoiding the prohibited conflict 7.Any other relevant factors

29. HONOLULU CDBG PROGRAM COI by City Manager not addressed Administrator of the Honolulu Department of Community Services Community-Based Development Division Runs division which makes CDBG funding decisions Also served as Director of the Board of the Hawaii Community Reinvestment Corporation, A non-profit that lends money to developers for affordable housing and consults those applying for CDBG funds

30. AUDIT OF HONOLULU CDBG PROGRAM Majority of members on board tasked with recommending CDBG grantees had COIs 4 out of 7 members disclosed COI 2 did not recuse themselves and ranked projects and organizations with which there appeared to be a COI

31. HONOLULU CDBG PROGRAM HUD ordered corrective action: Update process for screening, selecting and administering CDBG projects to ensure compliance with Federal COI requirements Provide mandatory ethics training for city staff, management and selection –committee members charged with reviewing and awarding CDBG grants

32. HONOLULU CDBG PROGRAM HUD ordered corrective action (continued): Prohibit city management, staff or selection – committee members from acting on CDBG activities with which they have a COI Require city manager to seek ethics advice and recuse himself from oversight of any project or organization with which he has a COI

33. COI IN FAIR HOUSING INITIATIVE PROGRAM Audit of grantee compliance with grant requirements Audit triggered by Congressional request raising COI concerns Audit found the grantee accepted $2.4 million in donations from 10 of 38 organizations it tested (within 1 year of testing period) Violation of grant agreement

34. COI IN FAIR HOUSING INITIATIVE PROGRAM Recommendations: Grantee repay 26% of grant funds Develop and implement controls to detect and avoid COI situations

35. NEIGHBORHOOD STABILIZATION PROGRAM Audit of city identified NSP COI Board members of grant recipient had interests in organizations / companies having contracts with the recipient or subrecipients Grant recipient solicited and received 10 proposals for NSP funding – 7 were approved as subrecipients

36. NEIGHBORHOOD STABILIZATION PROGRAM A three person panel made a recommendation on selection to the mayor One member represented a housing partnership made up of officials from several local banks and community organizations NSP funds were awarded to 2 housing partnership members One partnership member was a bank vice-president who also served on the recipients board (possible conflict would arise if bank secured property were selected for redevelopment)

37. NEIGHBORHOOD STABILIZATION PROGRAM Recommendation City implement policies procedures and controls to ensure compliance with Federal requirements City hire additional staff to administer NSP program HUD Regional Community Planning and Development Director monitor and provide technical assistance to the city

38. DISCUSSION - OIG LOOK AT COI IN GRANTS Broad view of grant process and procedures Narrow view at specific grants

39. DISCUSSION AwarenessIdentification CertificationIndependent Review Conflicts of Interest

40. CONFLICTS OF INTEREST IN GRANTS Questions

41. CONTACT INFORMATION Melinda Golub, Senior Counsel Office of Counsel to the Inspector General HHS Office of Inspector General (202) 205-9428Melinda.Golub@oig.hhs.gov Talisha Searcy, M.P.A., M.A. Office of Evaluation and Inspections HHS Office of Inspector General (202) 619-3409Talisha.Searcy@oig.hhs.gov Athena R. Jones, Senior Attorney Advisor Office of Legal CounselHUD Office of Inspector General (202) 402-3450AJones@hudoig.gov