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        “Before trusting anyone who claims to be an advocate or activist, consider these warnings and guidelines as fraud does take place



        Grantees and government employees 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.”
        Overview of the Grant Process
        The grant process is an “Integrity Based System”—we rely on everyone to act with honesty in using public
        funds and in reporting on their use of such funds. Any concern about a lack of integrity anywhere in the
        process requires careful analysis and follow-up.
        The “Fog of Fraud”—what is really happening?
        Indicators of fraud, waste & misuse of grant or other public funds can be due to a variety of causes and are
        rarely a simple “black and white” issue– we must follow-up on all such concerns to determine what is really
        The Keys to Success
        The keys to preventing, detecting and stopping fraud are professional skepticism and communication. We
        must all follow-up on issues that cause concern and share such information with the appropriate officials.
        Common Grant Fraud Risks
        Conflicts of Interest
        Grantees are required to use funds in the best interest of their program. Decisions about the use of funds must
        be free of undisclosed personal or organizational conflicts of interest– both in appearance and fact. Typical
        issues include:
         Less than Arms-Length Transactions: purchasing goods or services or hiring an individual from a
        related party such as a family member or a business associated with an employee of a grantee.
         Sub grant award decisions and vendor selections must be accomplished using a fair and transparent
        process free of undue influence. Most procurements require full & open competition.
         Consultants can play an important role in programs; however, their use requires a fair selection
        process, reasonable pay rates, and specific verifiable work product.
        “Lying” or Failing to Properly Support
        A grant agreement is essentially a legally binding contract and grantees are obligated to use their grant funds
        as outlined in the agreement and to act with integrity when applying for and reporting their actual use of funds.
        Grantees are also obligated to properly track the use of funds and maintain adequate supporting
        Typical issues include:
         Unilaterally redirecting the use of funds in a manner different than outlined in the grant agreement.
         Failing to adequately account for, track or support transactions such as personnel costs, contracts,
        subcontracts, indirect cost rates, matching funds, program income, or other sources of revenue.
         Grantee’s must accurately represent their eligibility for funding and cannot provide false or misleading
        information in their application or subsequent narrative progress or financial status reports.
        Theft is the most common issue in almost all organizations– including those that receive federal grant funding.
        Some considerations:
         People that embezzle funds can be extremely creative and appear very trustworthy– precisely why they
        can do so much damage to an organization and remain undetected for extended periods of time.
         Poor or no internal controls equal virtually inevitable theft. A lack of appropriate separation of duties is
        one of the most common weaknesses.
         Checks routinely written to employees as “reimbursement” of expenses and the use of ATM / Debit /
        Gift / Credit Cards must be carefully controlled and require robust oversight.
        Risk Mitigation
        We cannot stop all fraud, but there are ways to reduce the risk. They include:
         Examine your specific operations & programs to identify fraud vulnerabilities.
         Implement specific fraud prevention strategies including educating others about the risks– the more
        people are aware of the issues, the more they can help prevent problems or detect them as early as
         Maintain a well designed and tested system of internal controls. Consider the benefits of a fiscal agent.
         Ensure all financial or other certifications and progress reports are adequately supported with
        appropriate documentation and evidence.
         Identify any potential conflicts of interest issues and disclose them to the appropriate officials for
        specific guidance and advice. Ensure everyone involved in the grant process understands the conflict
        of interest prohibitions.
         Ensure there is a fair, transparent, and fully-documented procurement process especially when utilizing
        consultants. Ensure the rate of pay is reasonable and justifiable and that the work product is welldefined and documented.
         Follow-up with unsuccessful or unresponsive grant-funded programs– what is really occurring?
        Communicate Your Concerns
        Share your concerns related to fraud, waste, and abuse of government funds with others including the
        appropriate Office of the Inspector General.
        U.S. Department of Justice, Office of the Inspector General
        Federal Offices of Inspectors General




        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.

        Grant Fraud Awareness Handout › sites › default › files › Gra…
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