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.
Ready to Improve Your Grant Management?
How about you?
Would you like to be a better grant manager?
We have another grant management training seminar coming soon.
Click here to get all the details!
Hope to see you there!
Lucy Morgan CPA, MBA
CEO, Compliance Warrior
Author of “Decoding Grant Management-The Ultimate Success Guide to the Federal Grant Regulations in 2 CFR Part 200” The 2nd Edition is now available on Amazon in Paperback and Kindle versions.