Global Research Addressing Compliance Concerns Johns Hopkins Bloomberg School of Public Health...

Global Research Addressing Compliance Concerns

Johns Hopkins Bloomberg School of Public Health

Alexandra Albinak McKeown, Associate Dean for Research AdministrationDebra Brodlie, Assistant Director, Office of Research Administration

Kellie Klein, International Finance & Operations ManagerKelly L. Welsh, Administrator, Department of Epidemiology

Topics• Contractual Agreements

• Monitoring

• Risk Mitigation & Fraud

CONTRACTUAL AGREEMENTS

ChallengesGeneral Considerations:• Can you work with the entity at all?

Denied Party Screenings (entity, project personnel & bank)(If Federal) DUNS number for FFATA reporting, record retention, FCOI compliance (NIH), etc…!How much experience does the foreign Subrecipient have with contract research?

• Does the foreign Subrecipient have the infrastructure necessary to document payroll, purchases, overhead costs?

• Are there tax restrictions associated with working with that entity?

• Do you have someone “on the inside” who knows the unique rules, restrictions, and challenges of that country?

U.S. Governing law is ideal!


Challenges (cont’d)• You should always seek explicit approval from Sponsor before

issuing a foreign sub. Do not assume it is acceptable just because it was proposed and not expressly disallowed.

• In addition to your sponsor’s approval, you may need the approval of the foreign government before performing work.

• Some countries have complex legal authorities with overlapping jurisdictions.

• How will the language barrier issues be resolved for programmatic and administrative oversight? Have you budgeted for translators?


Challenges (cont’d)Financial Considerations:• How stable is the Subrecipient’ s currency? Some countries (e.g.,

Zimbabwe, Mali) have experienced bizarre currency fluctuations in recent years, so a proposal budget prepared now may be completely inadequate six months from now.

**Always request budget in U.S. dollars**Link your final $ amount to exchange rate specific date.

• How do you intend to verify the Subrecipient’ s expenditures? Consider audit and Subrecipient monitoring responsibilities.

**When in doubt, propose a Firm Fixed Price Subagreement**Keep in mind that increase in $$ must accompany increase in scope of work!

• Avoid asking a foreign subrecipient to cost-share. If the sponsor requires cost-sharing, you are better off shouldering it all yourself.


Challenges (cont’d)• You should always seek explicit approval from Sponsor before

issuing a foreign sub. Do not assume it is acceptable just because it was proposed and not expressly disallowed.

• In addition to your sponsor’s approval, you may need the approval of the foreign government before performing work.

• Some countries have complex legal authorities with overlapping jurisdictions.

• How will the language barrier issues be resolved for programmatic and administrative oversight? Have you budgeted for translators?


NIH unallowable costs for foreign subs and F &A rates• Grants under federal awards provide that the following are

unallowable costs: consular and visa fees, custom surtax, VAT (value added tax).

• Grants under federal awards allow F & A rates of only 8% to foreign subrecipients. These funds should be expended for compliance requirements.

“The provision of F&A costs to foreign and international organizations is to support the costs of compliance with DHHS and NIH requirements including but not limited to, the protection of human subjects, the welfare of animals, financial conflict of interest, and invention reporting.”

www.nih.gov


Federal Compliance Requirements for Foreign Subrecipients1. Drug free workplace (gov’t may give waivers for this if policy is impossible

to enforce within that country).2. New Federal Conflict of Interest laws: Does your subrecipient have a

federally compliant policy? 3. Animal Welfare Laws (OLAW)4. Human Subjects Regulations/Requirements5. Registration of Clinical Trials6. Record Retention 7. Bayh-Dole/IP ownership rights8. A-133 type audit if Sub receives federal funds of over $500,000 ($300,000

for USAID).9. DUNS requirement for complying with FFATA10. Subs DO NOT have to comply with U.S. Civil Rights Act(EAR-anti israel

boycott prohibition)

MONITORING

The regulations that govern the management ofsubrecipients are:

MONITORING

Effective Monitoring Practices• Subgrant – Develop detailed agreement that defines expectations and roles of

both parties

• Accountability and reporting – Clarify expectations on frequencies and requirements

• Training and technical assistance – Identify needs and invest time to orient and train subrecipients; provide training on requirements consistently and continuously; provide assistance as needed

• Best practices – Identify and share effective practices with others to increase effective management

• Risk assessment – Conduct pre-award and post-award assessment to identify levels of risk and monitoring priorities

• Monitoring methods – Conduct continuous and scheduled monitoring using appropriate methods and tools

MONITORING

Possible Assessment Areas• Organization’s size, age, and experience with Federal funding, any recent changes• Award - size, complexity, multiple awards• Financial – weaknesses; too many or too few invoices; improper, unallowable or

over expenditures; large unexpended balances; concerns with meeting match requirements

• Compliance – noncompliance with award requirements; incomplete, inaccurate or late financial or program reports

• Staff – new, experience with similar awards, • Changes - key staff, budget, major project design or scope• Issues - audit issues, previous monitoring reviews; cooperation or response to

inquiries; serious staff or member issues; expenditure and match documentation• Program – multi-site; partners or subcontractors; innovative/untested

program/project design; performance/progress; inadequate performance measures; participant enrollment/retention

MONITORING

Monitoring Methods• Consider need, level of risk, priorities, available resources,

frequency• Utilize range of activities

–Continuous - Routine – Scheduled – Special–Examples - desk monitoring, on-site reviews, phone calls, emails, financial reports, audit and other report reviews, approval requests, memos, letters, meetings, conferences, trainings, technical assistance, etc.

Categories of Monitoring & Audit IssuesQuestioned Costs

• Check for unallowable, unnecessary, unsupportedCompliance

• Check for non-compliance with grant and regulatory requirements, policies and proceduresInternal Controls

• Check for weaknesses that affect safeguarding of funds and grant compliance such as in systems, policies, procedures, and practices

MONITORING

Invoice processing & PI CertificationSubrecipient Invoice Checklist

• Documents to support reimbursement requests (expense reports and invoice forms)

• Supporting or source documentation for randomly selected expenses and cost share

Subrecipient Payment and Performance Certification

• The PI is ultimately responsible for ensuring compliance by reviewing all invoices and the technical progress of work completed by the subrecipient, before payments are authorized. The PI is also responsible for monitoring requests for rebudgeting and reviewing the technical and financial reports of the subrecipient.

MONITORING

Subrecipient Invoice Checklist Yes [ ] No [ ] Are the expenditure amounts on the invoice reasonable in relation to the scientific progress of project performed by the subcontractor to date, based upon input from the PI?

Yes [ ] No [ ] Has the PI at the subrecipient institution provided the required technical reports / milestones in a timely manner, under the terms of the subagreement?

Yes [ ] No [ ] Does the invoice contain the required data elements? Name of subrepient (e.g. letterhead of institution/entity)Date of invoicePeriod of performance covered by invoice Final invoice for the project must be marked “Final”Description of services reflected by billing (e.g., major expenditure categories) Current and cumulative period costsSignature of institutional official (e.g., individual from accounting, finance, sponsored projects accounting…) Contact person with respect to the invoice (e.g., name, e-mail address and phone number)

Yes [ ] No [ ] Does the invoice contain expenditure categories that were not included in the subrecipient’s budget (e.g., equipment, foreign travel, animal purchases)?

Yes [ ] No [ ] Does the invoice contain large amounts in “Misc” or “Other Expenses” categories?

MONITORING

Subrecipient Invoice Checklist (con’t) Yes [ ] No [ ]

Does the invoice contain any potential unallowable items (e.g., food, entertainment, alcohol, administrative salaries/supplies…)?

Yes [ ] No [ ] Does the current amount due on the invoice appear reasonable and consistent? Is the current amount due significantly higher/lower than the previous invoice amount? Is the current amount due exactly the same as the previous invoice amount?Is the Final invoice amount substantially higher that previous monthly invoices?

Yes [ ] No [ ] Has the invoice been submitted in a timely manner? Has the subrecipient combined multiple months into one invoice (e.g., January 200X through April 2008)?Was there a significant delay in the submission of the invoice (July expenses are invoiced in November)?Does the date of the invoice appear reasonable based upon the time period billed (e.g., invoice for month ended July 31, 200X with an invoice date of 8/3/200X)?

Yes [ ] No [ ] For cost-reimbursable awards, is the invoice an advance or through a future period?

Yes [ ] No [ ] Does the invoice from an international institution/entity contain the following items: Invoice printed in EnglishAmounts billed are in US dollarsCurrency exchange (conversion) rate and/or methodology (and does this look reasonable and accurate)

MONITORING

PI CertificationSubrecipient’s Name: ______________________________________ Invoice Date: __________________________

Invoice No. ________________ Grant/Award No. _________________ Sponsor Name: ______________________

Prime Project Title: ____________________________________ Period Covered: _____________________________

Amount Due: _________________ Amount Remaining on Subgrant/award for Payment: _________________

Description of Services Performed During the Billing Period: Please describe any steps you have taken to verify that the Subrecipient has performed as stated on its invoice (e.g. site visits, technical/progress reports, sample deliverables, meeting notes/agenda, time expense reports, etc.).

I hereby authorize payment for the attached invoice and certify that I have received and reviewed all due reports and/or deliverables from the Subrecipient that are the basis of this invoice. I am satisfied with the Subrecipient’s performance to date. To the best of my knowledge, the Subrecipient’s invoice reflects expenditures that are reasonable, allowable and allocable and are in compliance with the terms and conditions of the subaward/subgrant.

____________________________________________________________ Date: ___________Authorized Program Representative/Principal Investigator ____________________________________________________________ Date: ___________Authorized Financial Analyst (in Baltimore, Maryland, USA)

MONITORING

Monitoring Review Areas

• Financial Status Reports (FSRs) from subrecipients

• Policies and procedures – HR, Finance, Admin, procurement, logistics, etc.

• A-133 and other audit reports

• Other reports, e-mails, correspondence, files

MONITORING

Review of Audit Reports• Develop and track schedule of subrecipient audit due dates (A-

133 or other)• Collect and review when completed – follow-up, if not received• Assess subrecipient’ s financial position• Address prior audit issues • Review management letter• Identify findings and issues• Coordinate corrective action plan for programs and organizational

findings (if applicable)• Ensure all relevant findings are addressed• Recognize audit’s limitations

RISK MITIGATION & FRAUD

Grantees play an important role in fighting fraud, waste and abuse related to taxpayer funded programs. Offices of Inspectors General exist to help prevent and investigate fraud, waste, abuse and misconduct related to government operations. It is in everyone’s best interest to ensure government operates at optimum efficiency and effectiveness and that grant funds are used properly.

Fraud Assumptions• Fraud can and does happen. The best strategy to mitigate the risks is to increase awareness of the

common fraud schemes and encourage appropriate risk management efforts to prevent issues or detect them as early as possible.

Fraud Consequences• The consequences of fraud can include debarment from receiving future funding, administrative

recoveries of funds, civil law suits and criminal prosecution – or a combination of all or some of these remedies.

What is Grant Fraud?• Grant funds are awarded for a specific “public purpose” and grantees must use those funds as

agreed and within certain parameters including the Office of Management and Budget Circulars and granting agency guidelines. Most issues of fraud, including grant fraud, essentially relate to “lying, cheating, and stealing.”

www.justice.gov


Grant Recipient's Responsibilities• Recipients of federal grants have been awarded funds to carry out the

goals and objectives identified in the grant. These funds are subject to certain regulations, oversight, and audit.1. Grant recipients are stewards of federal funds.2. Grant dollars must be used for their intended purpose.3. Where applicable, grant recipients must account for costs and

justify expenditures.

• Using federal grant dollars for unjust enrichment, personal gain, or other than their intended use is a form of theft, subject to criminal and civil prosecution under the laws of the United States

www.justice.gov


Grant Fraud Statutes• Federal grant dollars are susceptible to several forms of financial

theft, most commonly in the form of specific federal violations, including:1. Embezzlement2. Theft or Bribery concerning programs receiving Federal funds3. False Statements4. False Claims5. Mail Fraud and Wire Fraud

• Each of these violations of law are subject to criminal prosecution, fines, restitution, and civil penalties.

www.grants.gov


Who Commits Grant Fraud?• When business entities, individuals, communities, and other organizations

receive federal grant dollars, they are entrusted with their appropriate expenditure.

• Grant fraud is most often committed by:

• Grant recipients, company officers, business partners, board members, and managers.

• Bookkeepers, financial staff, and employees.• Contractors and subcontractors engaged with the

recipient.• Recipient consultants.

www.grants.gov


Examples of Fraud• Amounts on receipts that are inflated over actual amount paid

(fuel, lodging, meetings, supplies)• Receipts submitted for lodging for which no accommodation was

used• Invoices submitted for trainings and seminars that never

happened• Bids from vendors who have colluded in order to raise the price

paid by the organization• Invoices for repair work to vehicles which was never performed• Drivers picking up passengers for fee


Review

• If there is sufficient evidence which would result in a reportable event, staff should be selected to review the case, compile all of the information and present the information to leadership with a recommendation for action.

• Select review staff that have no stake in the outcome and ensure there is no conflict of interest.

• Usually the review is headed by the compliance, audit or legal department staff

• Depending on the extent and severity of the incident, immediate corrective action may be necessary to ensure the safety of university staff, property, or that of the donor.

• Decide if a preliminary disclosure to the donor is necessary or if the OIG should be contacted for advice on how to proceed further with the internal investigation

IRD/Insidengo


Evaluate1. Determine what specifically happened

• Who? What? When? Where? How?

• Which project? Which office? During what time period?

• Are the allegations specific to a person, a department, an organization or government institution?

• Did it occur during an opportunistic period such as a natural disaster or urgent humanitarian aid event, etc.

Merceycorps/Insidengo


Evaluate (cont’d)

2. How probable is it that the incident occurred?• Did the incident happen within the internal control environment and

if so how was it able to be accomplished?

• Was the incident the result in a lapse in internal control?

• If internal controls seem to have been functioning, could there have been collusion?

3. What is the financial impact to your organization and did it affect any third parties?

• Financial impact should be based factual evidence and not estimated. • Use financial information and program reports in order to understand the

total potential transactions at risk.Merceycorps/Insidengo


Review Results• Based on the initial investigation, decide what the corrective actions

should be, if required. If a disclosure is required to the Inspector General (IG) per FAR 52.203-13, and/or if additional review is required

• Be careful about what you consider credible evidence. Consider the source. Was it from an auditor, a staff member, a subrecipient, anonymous, etc? Ensure that the reporter does not have a personal stake in the outcome (such as possible promotion to a position that the accused has been relieved from and especially familial or tribal ties within the community. At what point in the award period did the fraud occur? (Start-up? Close-out? Which program? Whose Money?)

• If disclosure is necessary ensure you are timely.• Determine the next steps and who will be responsible for the incident

until the time when the incident is resolved.IRD/Insidengo


Reporting Fraud

FAR 52.203-13(b)(3):(i) The Contractor shall timely disclose, in writing, to the agency

Office of the Inspector General (OIG), with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of this contract or any subcontract thereunder, the Contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed —

1. A violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code; or

2. A violation of the civil False Claims Act (31 U.S.C. 3729 - 3733)


Reporting Fraud• Most government agencies have an Office of Inspector General (OIG)

that is responsible for investigating allegations of fraud, waste, and abuse, and can be located at: WWW.IGNET.GOV

• Specifically, allegations of fraud can and should be made directly to your awarding agency’s OIG - Office of Investigations, or a designated Hotline Office within many of the OIG offices.

• Credible Evidence: Reasonable steps the contractor considers sufficient to determine that the evidence is credible. Documentation of internal investigation is key

• Timely Disclosure: Implies contractors will take some time for preliminary examination of the evidence to determine its credibility

http://www.ignet.gov/


Reporting Fraud• Principal, employee, or agent subcontractor

Violation of: federal criminal law involving fraud, conflict of interest,

bribery, or gratuity violations (Title 18 USC) Significant overpayment Violation of the Civil False Claims Act

• OIG and Contract/Agreement Officer

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