How to Spot the Warning Signs of Waste, Fraud and Abuse on Your Grant

October 4, 2016

How to Spot the Warning

As federal grant recipients, we know that ensuring federal funds are spent on our awards as intended is part of managing our grants.

But can you may be wondering what constitutes fraud waste and abuse of your government program or award?

I’ve put together mini-training on waste, fraud and abuse to show you common examples and risks associating with grant mis-management.

2 Key Areas of Risk

There are two focus areas for grant recipients where the bulk of the grant mismanagement occurs:

Time and effort reporting (aka labor charging)
Procurement of Goods and Services

These are the places you hear about major money being repaid to the federal government.

It’s no great surprise, because this is where the vast majority of federal funds are spent on an award Warning Signs of Waste.

With the implementation of 2 CFR Part 200 (aka the Uniform Guidance or UG) the focus on internal controls is designed to reduce much of the risk to your federal grant in these two areas.

Taking the steps to monitor and ensure adequate compliance now can save you the heart-ache of disallowed costs later.

Types of Fraud, Waste and Abuse: 7 Warning Signs

Here are seven common warning signs that fraud, waste or abuse could be occurring:

#1 Unethical relationship

Example: The bidder is inappropriately close to a procurement officer, program official or directly participated in writing the specifications

Potential risks: Uncompetitive Practices, Conflict of Interest Violations

#2 Undue Personal Gains

Example: Staff member accepts gifts-especially high-value ones from vendors, contractors and subgrantees

Potential risks: Bribery, Kickbacks, Ethics Violations. Standards of Conduct Violations.

#3 Improper Time-charging Processes

Example: Timecards are completed by managers or administrative staff instead of the individual employees

Potential risks: Mischarging of Costs, False Statements and Claims,

#4 Ignoring Award Terms and Conditions

Example: Vendor provides foreign-made goods where domestic production is required. Contract provisions ignored. Required notifications for violations skipped.

Potential risks: Product Substitution, Defective Pricing. Violations of Law.

#5 Insufficient Monitoring

Example: Labor and time charging is inconsistent with project progress, or lack of subrecipient monitoring prior to awarding funds

Potential risks: Mischarging of Costs. False Statements and Claims.

#6 Inappropriate Transfers between Budget Categories

Example: Grantee or contractor fails to disclose changes that significantly reduce the projects costs, or transfer costs to cover other areas of overspending

Potential risks: Defective Pricing, Cost Mischarging, Disallowed Costs

#7 Disclosure of Confidential Information

Example: Proprietary information is provided to one or just a few contractors, protected personally identifiable information disclosed deliberately or inadvertently to public

Potential risks: Conflict of Interest Violations, Uncompetitive Practices, Violations of Privacy Protections

Prevention of Fraud, Waste and Abuse

Preventing fraud, waste and other forms of abuse in federal programs, requires an active commitment by the highest levels of management at the organization in addition to adequate internal controls, training and policies.

But it is also important to realize that the cost of fraud waste and abuse are even greater than just the repayment of questioned spending. For every dollar lost to mismanagement and fraud, there is a loss to the people who were supposed to be served with those funds.

Some examples of the consequences of fraud waste and abuse of government programs include the senior citizen who misses adequate nutrition, the job-seeker who no longer has safe child care to look for a work and the important cancer research that is stopped before the latest breakthrough.

So when you think of stopping waste, fraud and abuse of federal funds, be strong! Have a game plan and a “Not in MY house” approach. And take that first step by being aware of the common warning signs.