Docstoc

Fostering Integrity in the Research Environment The Value of

Document Sample
Fostering Integrity in the Research Environment The Value of Powered By Docstoc
					  Fostering Integrity in the
 Research Environment: The
Value of Effective Compliance
          Programs
          SCCE 7th Annual Conference
       For Effective Compliance Programs
               In Higher Education
                    Austin, TX
                   2 June 2009

                   Dr. James Kroll
          Head, Administrative Investigations
             Office of Inspector General
            National Science Foundation
              Case Study # 1

Allegation:

• In two separate instances, a University 
  accountant and a program coordinator 
  use university purchase cards to pay for 
  personal expenses
                Case Study # 1
• Accountant
  • State auditors notice excessive, unallowable 
    purchases during audit of purchase cards 
  • Over 5 yrs makes 3800 purchases ‐ over $316K
  • Mostly internet vendors; shipped to home or 
    relatives
  • Concealed by submitting forged receipts to her 
    supervisor
             Case Study # 1
• Purchases include groceries, clothing, football 
  tix, digital cameras, 32” HDTV, lawn tractor, jet 
  ski, frozen drink machine, frozen steaks, double 
  wall over, dishwasher, RV air conditioners.
• Indicted on 17 counts of mail fraud and 5 counts 
  of theft of gov’t funds
• sentenced to federal prison for 32 months, 3 
  years supervised probation, 250 hours of 
  community service, and payment of restitution 
  and fees totaling $319,074 
             Case Study # 1
• Program Coordinator
   • Again, state auditors find discrepancies in 
     purchase card expenses
   • Over 5 yrs, $173K fraudulently spent
   • Purchases include auto insurance, jewelry, auto 
     repairs, groceries.
   • Altered receipts to disguise her efforts.
   • Indicted for theft
   • Balks at 3 yr plea……gets 10 yrs

              SAME UNIVERSITY
                    Why am I here?
   Offices of Inspector 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

Responsible for ensuring the integrity in NSF’s programs and operations
        The Partnership
•   National Science Foundation
         • Program Officers
         • Grants Officers
         • OIG
•   Institution Officials
         • Administrative
         • Financial
         • Education
•   Researchers
         •   Students
         •   Colleagues
         •   Postdocs
         •   Administration
                           Expectations
• NSF
      • Clear articulation of rules/expectations
      • Balance compliance, institution responsibility and latitude,
        reduction of bureaucracy
      • Numerous funding opportunities
• Institution
      • An environment in which employees can operate with integrity
      • Responsible administrative, financial, and research
        management and oversight (e.g. Article 1, GC-1)
• Investigators
      •   Overall -- Uphold ethics and standards of community
      •   Submit quality proposals and conduct the funded activity
      •   Know and adhere to rules, regulations and ethics
      •   Ensure compliance and education of staff, students
        NSF’s Requirements (GC-1)
•   The awardee has full responsibility for the conduct of the project or
    activity supported under this award and for adherence to the award
    conditions. Although the awardee is encouraged to seek the advice and
    opinion of NSF on special problems that may arise, such advice does not
    diminish the awardee’s responsibility for making sound scientific and
    administrative judgements and should not imply that the responsibility
    for operating decisions has shifted to NSF. The grantee is responsible
    for notifying NSF about: (1) any allegation of research misconduct that it
    concludes has substance and requires an investigation . . . (2) any
    significant problems relating to the administrative or financial aspects of
    the award.

•   By accepting this award, the awardee agrees to comply with the
    applicable Federal requirements for grants and cooperative
    agreements and to the prudent management of all expenditure and
    actions affecting the award.

                                 Deceased PI
   What IS a Compliance Program?
• Use of internal controls to effectively monitor
  adherence to applicable statutes, regulations, and
  program requirements.
• Finding your risks and minimizing the danger of abuse
• HHS Integrity Agreements in Medicare
• HHS Guidance
• Council on Government Relations Guidance
• University Programs
• Sarbanes Oxley
Why Have a Compliance Program?
• Proactive prevention of abuse

• “Protects” University when abuse is found

The Antithesis of the Rationale:  
         – Too expensive
         – Not enough staff
         – Hard to organize
         – No authority
         – No need
         – Too much trouble 
     Effective Compliance Program Elements*
          a/k/a    7 HABITS OF EFFECTIVE ORGANIZATIONS

1)   Reasonable Compliance Standards and Procedures
2)   Specific High-level Personnel Responsible
3)   Due Care in Assignments with Substantial Discretionary
     Authority
4)   Effective Communication of Standards and Procedures
5)   Establish Monitoring and Auditing Systems and Reporting
     System (whistleblowing without fear of retaliation)
6)   Consistent Enforcement of Standards through Appropriate
     Mechanisms (including failure to detect)
7)   Respond Appropriately to the Offense (reporting to law
     enforcement, modify program, prevention)

                     *FederalSentencing 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
        Finding Risk
• What needs more review?
• Where’s your itch?
• What’s autonomous?
• Where’s the black hole?
• Are your warning bells ringing madly when
  you hear someone else’s problems?
• What gives you that “Gosh, gotta check
  that!” feeling?
         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, equipment
•   Staffing Characteristics
         • Junior, independent, “senior and wise”
•   Training Profile
         • Comprehensive administrative, financial, oversight, fit the issues
                                One University’s Risk Assessment

                                                      Heat Map

               High


                                                                                   Contracts & Grants
                                                   Immigration &
PROBABILITY




                                    Student                                        Management
                                                   Visa Processing
                                    Affairs
                                                Deferred                     Environmental,
                                 Privacy of                                                   Endowment
                                                Maintenance                  Health & Safety
                                 Information
                                                       Human           Animal
              Moderate          Auxiliary Services
                                                       Subjects        Subjects
                                       Off-Campus                                         Security
                                       Facilities              Gifts &
                                                                              Construction Management
                                                               Restricted
                                                    Human      Funds
                               Executive            Resource
                                                                   Acquisition
                               Benefits    Property Management                  Financial Reporting
                                           Management
                                                         Technology Licensing




               Low



                         Low                       Moderate                                    High

                                                IMPACT
            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)
Ethical Issues Your Researchers WILL confront

  •   Data Selection
  •   Sharing and Using Ideas
  •   Balancing Priorities
  •   Making Financial Decisions
  •   Authorship and Acknowledgements
  •   Collaborations
  •   Conflicts of Interest
  •   Paraphrasing and Plagiarism
  •   Mentorship/Advisor Problems
  •   Merit Review
  •   Obtaining Oversight Reviews
The Magic Bullet Does NOT exist.

Tailor your program: Where are your risks?
Consequences of Significant Errors

    Special Oversight/Review Status
    Administrative Sanctions
    Suspension or Termination of Awards
    Civil/Criminal Violations
    Suspension/Debarment/Exclusion
    Corrective Action Plans
    Compliance Plans
    Fines, Penalties
    Exceptional Status
  May apply to either individual or entire institution
Government Imposed Compliance Plans
•   $15 M; overcharging IDC
•   $30 M, exceptional status and oversight program; misuse of
    federal grant funds
•   $12 M; overbilling
•   $650,000; research fraud and abuse
•   $1.5 M, 5-year compliance program; cost-sharing
•   $1.2 M; inflated research grant costs
•   $150,000, 5-year compliance program; misuse of federal funds
•   $2.5 M, 5-year compliance program; cost-sharing, salaries, double
    charging
•   $6.5 M, increased oversight; mischarging awards
•   $3.4 M, 5-year compliance program; misuse of federal funds
                               Policies and procedures
                               inadequate or absent. 24%
Most Frequent Audit Findings   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%
                           Lack of source documentation to
                           support costs. $26.1 M
Questioned Cost Findings
                           Policies and procedures
                           inadequate or absent. $3.4 M


                           Inadequate record retention and
                           retrieval. $3.4 M


                           Lack of proper approval,
                           certification, or authorization.
                           $2.6 M

                           Costs claimed exceed amounts
                           allowed by award provisions or
                           Federal regulations. $1.7 M

                           Unallowable costs. $1.4 M



                           Award obligation not met. $1.4
                           M


                           Incorrect calculation of claimed
                           costs. $1.3 M
   Common Types of Civil/Criminal Allegations
                        3%
               9%



                                               31%           Theft/Embezzlement (31%)
    13%
                                                             False or Fraudulent Statements (24%)
                                                             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%


                                                  8%                    Unsubstantiated Allegations* (32%)
                                                                        Restitution (21%)
21%                                                                     Referral (11%)
                                                       6%
                                                                        Termination of Grant (8%)
                                                                        Miscellaneous** (8%)
                                                        6%              Incarceration/Probation (6%)
                                                                        Termination of Employment (6%)
                                                      4%
                                                                        Civil Action (4%)
                                                 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 Types of Administrative Allegations

            2%   2% 2%
                         5%
                                          Animal /Permit / Biohazard / Humans (2%)
                                          Conflict of Interests (2%)
                                          Data sharing (2%)
                                    16%   Fabrication (5%)
 42%
                                          Falsification (16%)
                                          Fraud (7%)
                                          Impeding Research Progress (2%)
                                          Abuse of Collegues/Students (5%)
                                          Mishandled Investigations /Retaliation (4%)
                                    7%
                                          NSF Procedures (8%)
                                          Merit Review (6%)
                               2%
                                          Plagiarism (verbatim, Intellectual theft) (40%)
                              5%
       6%                3%
            8%
                               Trends 
(x=year, y= relative increase, base year 1995)

                                            Total


   4

   3

   2

   1

   0
         95    96    97   98   99    00     01      02      03   04   05




                                    Total FFP Allegations


   3.5
     3
   2.5
     2
   1.5
     1
   0.5
     0
          95    96   97   98   99     00    01      02      03   04   05
                             Trends 
         (x=year, y= relative increase, base year 1995)

                                  Plagiarism


9
8
7
6
5                                                                  Plagiarism
4
3
2
1
0
    95   96   97   98   99   00       01       02   03   04   05


    When you start looking, you can find interesting things!
  Developing Effective Compliance Programs
  requires tough choices and firm decisions




A well-structured compliance program can reduce
         your risk and guide your decisions
                      Fraud Triangle
Opportunity – ability to commit                 Pressure – causes drive
              fraud                                        to commit
                                                           fraud



                            Opportunity

                               Pressure

                          Rationalization

         Rationalization – reconciling ones behavior which is
                          in conflict with the basic ethical norms
Pressure – often financial;  medical, mortgage, 
  gambling, addictions, divorce, lifestyle; many 
  times it is a private problem they must resolve 
  in secret
Opportunity – no fraudster wants to get caught; 
  must believe they can go undetected; internal 
  controls – this is where institutions have the 
  greatest ability to impact
Rationalization – no help available; have nothing 
  to loose; label act as “borrowing”; justified for 
  job satisfaction
              Common Traits

•   Wheeler/dealer
•   Beat the system attitude
•   Live beyond means
•   Close relationship with vendor
•   Don’t take sick days or vacation
•   Excessive OT
•   On outside, appear trustworthy
•   Don’t like people reviewing their work
             Behavior Changes

• Increased purchases of material goods – living 
  beyond their apparent means
• Territorial over work related responsibilities
• Turn down promotions
• Arrive early/stay late
• May mention family or financial problems
• Signs of additions
• Sense of job dissatisfaction
               Case Study # 2

• NSF awarded a 5‐year $3.8 million grant to 
  an institution to create a center to enhance 
  science teaching in public schools
• Subject was hired to be a Co‐PI 
  – Had prior conviction for burglarizing the 
    homes of his and his mother’s friends
  – He lied on his Institution application about his 
    criminal history
                    Case Study # 2
• Subject habitually used the VISA card issued to 
  him for the project as if it were his own — for 
  example:
   – Groceries:  85 times at stores such as Safeway
   – Garden supplies, hardware, and pet supplies:  90 times 
     at stores such as Home Depot
   – Expensive clothing and jewelry for his wife, and 
     clothing and toys for his children:  dozens of times
• He submitted paperwork to Institution that lied 
  about the items and their purpose
                Case Study # 2

•   Institution hired subject’s wife to work on the
                      subject’s
    project
•   For 2½ years, she was employed part time and paid
         2½
    for the hours worked at an hourly rate based on a
    hand-written timesheet submitted twice each month.
    hand-written
•   She never filled out her timesheets — instead,
    subject filled them out with exaggerated hours,
    forged her signature, and submitted them to
    Institution to receive fraudulently larger paychecks
                   Case Study # 2
•   Institution became suspicious of subject and 
    began an internal review
•   He acknowledged the $108,497 fraud Institution 
    uncovered, but did not inform them of any of his 
    additional fraudulent activities
•   Institution allowed subject to continue working 
    on the grant project, though it removed his ability 
    to charge expenditures to the grant and required 
    him to repay the $108,497 — of which it repaid 
    him to repay the $108,497 —
    $56,676 to NSF 
                Case Study # 2

•   We and defense counsel submitted sentencing 
    memoranda, argued in sentencing hearing
•   The court rejected a request for a reduction, 
    sentenced him to: (1) 1 year in prison; (2) 2 years 
    of supervised release following prison; and (3) 
    pay restitution to NSF in the amount of $93,503 
    (in addition to the $56,676 previously repaid to 
    NSF) 
•   NSF may recover additional funds from 
    Institution, for unallowable costs above $202,000
             Case Study # 3
      Tale of two University Administrators
Administrator # 1:

   Had a gambling problem
   Had discretionary authority/responsibility to review
requisitions and invoices
   No check and balance oversight
   Had signatory authority for four bank accounts of
companies that did not exist
   A-133 audit identified problems
            Case Study # 3
   Falsely authorized the “purchase” of goods and
equipment from these companies
   Forged faculty signatures to authorize purchases
   Then approved authorizations as grant administrator
   Received checks at three separate PO Boxes
   Total fraud -- $235K over a 5 year period
   FBI involved—convicted on mail fraud charges
   Sentenced to 18 months and to reimburse
   University changed reimbursement system and
instituted better oversight policy
            Case Study # 3
Administrator # 2:

   Well known and well liked administrator
   Fellow employee notices that he is picking up
disbursement checks instead of normal mailing policy
   Administrator oversaw several NSF grants
   Scheme involved cutting stipend and honorarium
checks to his wife who had a different last name
   Checks were then cashed at the local CU where he
was a well known customer
             Case Study # 3
    Over a 5 year period, he embezzled $480K
    Once confronted, he resigned in lieu of being fired
    Did not cooperate in the investigation until he was
jailed—cooperation involved a plea to waive action
against his wife
    Ordered to restore monies and is serving a 5-year
sentence
             Other significant Cases

• University fails to keep adequate records of 
  expenses associated with multiple NSF grants ‐‐
  $1.4 M settlement
• University fails to adequately monitor participant 
  support cost monies  ‐‐ $100K reimbursement
• University fails to adequately monitor participant 
  support and travel costs – reimburses $79K
• University fails to monitor NSF summer salary 
  restriction – reimburses $273K
INTEGRITY STARTS WITH YOU!
   If you are aware of, or suspect
          research misconduct
                  fraud
                  waste
                  abuse
   Issues of economy or efficiency
    or if you just have questions,
           Please contact the
 NSF Office of Inspector General
                        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
•   http://ethicspoint.sitestream.com/Webinar%20fulfillment/VickyNemers
    onMarch2005/EthicsPoint_FSG%20Whitepaper‐Feb05.pdf
•   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.S.; and Murphy, J.E.; Compliance Programs:  What the 
    Government Really Wants. Page 121.
•   A variety of University web sites
•   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
              Contact Information


• Internet:            http://www.nsf.gov/oig/

• E‐mail:              oig@nsf.gov

                       jkroll@nsf.gov (Jim)    

• Telephone:   703‐292‐5012 (Jim)

• Anonymous: 1‐800‐428‐2189

• Write:               4201 Wilson Blvd. Suite II‐705
                       Arlington, VA  22230

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:1
posted:4/27/2012
language:
pages:47