# Presentation: 558646

## The Inspectors General are Coming ! 

**The Inspectors General are Coming !**

- Doonesbury, 3 December 2005

## Clemson Presidential Colloquium4 March 2008

*William J. Kilgallin*
*Head, Investigative Legal and Outreach*
*Office of the Inspector General*
*National Science Foundation*

**Ethics and the Public Sector:**
**Achieving Ethical Conduct **
**in the Research Environment**

## The Inspectors General are Here !

- Doonesbury, 5 December 2005

**The Inspectors General are Here !**

## Presentation Outline

- Partners in Oversight of the Research Environment
- Missions, Responsibilities, and Expectations
- Providing Protection
- Examples of Misused Funds
- The “Magic Bullet” ??
- Questions

## National Science Foundation

- Created in 1950 by Harry Truman
- Budget: about $6.0 Billion
- Funds scientific research/education, primarily grants
- We “buy” science (pennies saved = another grant)
- NSF provides 23% of the funding for basic research in America’s universities and colleges
- Over 1800 organizations (colleges, universities, school systems, nonprofit institutions, and small businesses) receive NSF funding  each year
- No labs or research facilities

## National Science Foundation

- 40,000 proposals competitively reviewed each year
- Total awards funded each year: 20,000
- New awards funded each year: 11,000
- Number of merit reviewers yearly: 50,000
- Number of reviews done each year: 250,000

## Partners in Compliance

- The Agency (National Science Foundation)
- Program Officers (science decisions)
- Grants Officers (business managers)
- Office of Inspector General (Oversight)
- Institution/University Officials
- Administrative officials
- Financial (business managers)
- Research Community
- Professors (Principal Investigators), students
- Post-doctorate researchers
- Support staff

## NSF Responsibilities

- Provide funding opportunities
- Establish clear rules and expectations
- Make timely decisions
- Monitor progress (both research and funds)
- Coordinate with other government agencies
- Balance competing interests
- Government
- Institution
- Researcher

## NSF Responsibilities

- Program Officers
- Review proposals
- Recommend awards
- Monitor research portfolio
- Conduct site visits
- Review Cost Share Certifications
- Grants Officers
- Provide award funding
- Review awardee systems
- Monitor award financial activities / commitments
- Conduct site visits to assess internal controls
- Designate “high risk” awards, awardees
- Advance or special payment decisions

## NSF Expectations

- True statements to the Government in proposals and in reports (research and financial)
- Performance of the funded work
- Charge reasonable, allowable, verifiable costs
- Monitor expenditures for appropriate use
- Comply with  all requirements
- Hire qualified individuals
- Ensure rules apply to
- employees & affiliated researchers
- sub-contractors & suppliers
- international collaborators

## NSF OIG Mission

- Prevent and detect fraud, waste, and abuse
- Promote economy, efficiency, and effectiveness
- Features:
- Independent of agency management
- Dual reporting requirements
- Congress
- National Science Board
- Specific jurisdiction (NSF programs and operations)
- Cannot manage programs or make policy
- Source: The Inspector General Act of 1978, as amended, 5 U.S.C. Appendix

## What does NSF OIG investigate?

_**The simple answer**_
**Allegations of:**
- Lying
- Cheating
- Stealing

## NSF OIG : Investigative Efforts

- Respond to allegations
- False statements
- Fraud
- Research misconduct
- Proactively review trends for potential fraud
- Intensive outreach effort
- Results:
- Recovered funds
- Settlement and compliance agreements
- Suspension /  debarment
- Assurances / certifications
- High-risk award / awardee designation
- Prison

## NSF OIG: Tools

- Audits
- NSF financial statement
- Internal NSF performance audits
- External grant audits
- Referrals to Investigations
- Investigations
- Staff of scientists, investigators, auditors, and attorneys
- Criminal, civil, and administrative cases
- Proactive reviews
- Management implication reports
- Referrals to Audit
- Inspections and evaluations
- Educational activities

## Office of Investigations

- OIG’s responsibilities include the detection and prevention of waste, fraud, and abuse involving NSF programs and operations
- OIG investigations conducts civil, criminal, and administrative investigations

## Sources of Allegations**

- Principal Investigators
- NSF Program Officers
- Other NSF Employees
- Review Panelists
- Government Agencies

- Graduate Students
- University Administrators
- Contractors
- Anonymous Hotline Callers or Informants

***** Anyone**** *may confidentially contact OIG to report potential wrongdoing

## Investigative Process

- Conduct preliminary research; determine jurisdiction; identify issues; gather evidence
- Objective investigation of substantive allegations
- As appropriate, refer to audit or other agency OIG
- Prepare written Report of Investigation
- Work with DoJ, NSF, and awardees to develop appropriate resolutions that protect the interests of the Federal government and the U.S. taxpayer

## Expectations

- Of NSF
- Clear articulation of rules / expectations
- Balance compliance, institution responsibility and latitude, reduction of bureaucracy
- Numerous funding opportunities
- Of Institution/University
- An environment in which employees can operate with integrity
- Responsible administrative, financial, and research management and oversight (e.g. Article 1, GC-1)
- Of 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

## Institution/University Responsibilities

- Certify / ensure compliance with terms and conditions
- Maintain environment of integrity
- Effective financial and administrative systems
- Ensure monitoring and oversight of programs
- Charge reasonable, allowable, verifiable costs
- Act as conduit between researchers and funding agency
- Ensure education of future generations of researchers

## Institution/University Role

- Notify OIG
- of allegations of wrongdoing
- of significant financial or administrative problems
- of research misconduct issues
- Take appropriate remedial actions

**Notes:**
Remedial actions are personal and institutional

## Institutional/University Role, cont’d

- Report wrongdoing, financial or administrative problems
- Respond to request or subpoena for documentation
- Provide financial records
- Provide research records
- Provide internal audits
- Permit interviews of employees
- Report research misconduct
- Expect referral of the matter for investigation
- Permit interviews of employees
- Conduct any required institutional investigation

## Research Misconduct (RM)

- Federal-wide definition and procedural framework.
- RM means fabrication, falsification, or plagiarism in proposing or performing research, reviewing research proposals or in reporting research funded by the agency.  45 C.F.R. 689.1.a

- Fabrication:   making up data or results and recording or reporting them

- Falsification: manipulating materials, equipment, or processes, or changing or omitting data or results

- Plagiarism:  appropriation of another person’s ideas, processes, results or words without giving appropriate credit.

## Common Admin Allegations

**Common Admin Allegations**

##                         Trends (x=year, y= relative increase, base year 1995)

## Trends (x=year, y= relative increase, base year 1995)

## Admin Consequences 

- Reprimand
- Training or teaching
- Additional oversight
- Certifications/Assurances
- Dismissal

- Withdrawal of proposal(s)
- Award Suspension/Termination
- Suspension/Debarment
- Exceptional Status
- Disallowed costs

## RM Case Examples from the NSF OIG Semi-Annual Report to the Congress

- Falsification, Fabrication, and Plagiarism Found in a Single Proposal (March 2005)
- PI Ignores Warning to Remove Plagiarized Text From His Proposal (March 2006)
- PI’s Pattern of Plagiarism Continues During OIG Investigation of His Proposals (March 2006)
- PI Provides False Evidence to RefuteAllegation of Plagiarism (March 2006)
- Plagiarism Found in University Professor’s Dissertation (March 2006)

## More RM Case Examples . . .

- NSF Funded Postdoctoral Fellow Falsifies Research Data (September 2006)
- Professor Reviews Proposal for NSF, Then Plagiarizes It Into His Own Proposal (Sept 2007)
- Professor Plagiarizes in Four NSF Proposals (Sept 2007)
- Student Claims “Laziness” Caused Him to Fabricate/Falsify Data in Four Manuscripts (Sept 2007)

## When Administrative cases turn Civil/Criminal . . .Case 1:  Plagiarizing the Thesis

- PI submitted his student’s thesis chapter as an SBIR-1 proposal ($100K, 6 months) from a non-existent company
- When awarded, PI used the money to pay his child’s tuition at an ivy leagueinstitution and other personal expenses
- PI copied the thesis into his final reportand proposal for the SBIR-2 award ($500K)
- University notifies OIG of plagiarism allegation
- PI denied everything

## NSF suspended the award 
OIG issued subpoenas; reviewed records; presented the case to DoJ
DoJ accepted the case for prosecution
Professor pleaded guilty to a criminal count (1001)
Repaid NSF $240,000
NSF OIG recommended RM finding and debarment. 
3 year debarment

- OIG issued subpoenas; reviewed records; presented the case to DoJ
- DoJ accepted the case for prosecution
- Professor pleaded guilty to a criminal count (1001)
- Repaid NSF $240,000
- NSF OIG recommended RM finding and debarment.
- 3 year debarment

**When Administrative cases turn Civil/Criminal**** . . .**_Case 1: Plagiarizing the Thesis (cont.)_

## When Administrative cases turn Civil/Criminal . . .Case 2:  “No” Means “No”

- PI asked for a second No Cost Extension on the Award
- NSF program officer declined the request in FastLane, in writing, and by telephone
- PI directed the finance officer to draw-down the award balance of $32K although the costs had not been incurred
- OIG presented case to DoJ for prosecution.
- DoJ settled case.
- $52K returned to NSF as restitution and investigative costs.
- Five-year Compliance Plan imposed.
- PI debarred for five years.
- “NSF Proposes to Debar PI for Five Years” (NSF OIG SA Sept 2007)

## Other Civil and Criminal Misconduct 

- Over-Charging Grants results in $1.55M to NSF and imposed 4-year compliance agreement
- False Certifications result in $1.4M to NSF and imposed 5-year compliance agreement
- False Certifications result in $3M to NSF and imposed  5-year compliance agreement

**Notes:**
Overcharging Grants-A company received a grant under NSF’s SBIR program; A source provided information to NSF OIG, alleging the company charged time to the NSF grant for work she did not perform; NSF OIG opened investigation and interviewed company officials and employees.  We obtained and reviewed records. OIG investigation revealed some of the time charged to the grant should have been charged to overhead; the company shifted charges between various federal grants as money was available; the company charged grants for proposal preparation; the company charged grants for costs unrelated to the grant; NSF was overcharged $370,000; other federal agencies were overcharged $970,000. Presented case to AUSA. Proceeded as civil false claims case. DOJ settled case $1.55M and 4-year Compliance Plan imposed.

False Certifications - Allegation received:A Principal Investigator complained that he was not receiving the cost-share monies he was promised by the university. Investigation opened: Request and review financial records for grant. Traveled to university/Interviewed individuals/Coordinated  with DOJInvestigation revealed:the university did not have a system for tracking cost-share; could not document costs submitted to NSF as cost-share; could not document costs claimed as direct expenses; the university had submitted numerous false cost-share certifications. Presented case to AUSA; Proceeded as civil false claims case; DOJ settled case. Imposed a 5-year Compliance Plan. NSF OIG recovered $1.4M

False Certifications - University administrator embezzled >$450K ($415K NSF funds from two awards). Long-term scheme of stipend checks to a ghost employee. Administrator sentenced to 4 years in prison and full restitution. Administrator debarred by NSF for 3 years. Investigation suggested weak internal controls. Investigation revealed: University applied for NSF grant, falsely certifying it had necessary financial systems to record, monitor, and report cost share; University received grant ($5M) and committed to $15M in cost-share; Numerous false/misleading statements to NSF during course of grant life; Failure to monitor / track funds provided to subrecipients (CPAD); 11 false cost-share certifications and 28 false FCTR certifications

## Common Types of Civil/Criminal Allegations 

- *Includes mail fraud, false identification insurance fraud, impersonating a government officer, and      copyright infringement.
- Data gathered from NSF OIG closed Investigative files (1990 – Present).

**Common Types of Civil/Criminal Allegations**** **

## * 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 Statutory Violations

- Embezzlement/Theft
- Fraud
- False Statements or Claims
- Conflict of Interests
- Obstruction of Justice
- Civil False Claims

- 18 USC §§ 641, 666
- 18 USC §§ 1030, 1341-3
- 18 USC §§ 287, 1001
- 18 USC §§ 207-9
- 18 USC § 1505
- 32 USC § 3729

## DOJ Prosecutorial Options

- Pursue civil or criminal case
- Prosecute criminal cases
- Fines, penalties, restitution
- Imprisonment
- Subsequent debarment by agency
- Decline in lieu of agency action
- Decline

## Possible Outcomes

- Institutional Sanctions
- Letter of Reprimand
- Ban from Service as Reviewer
- Ethics Training
- Certifications
- Assurances
- Federal-wide Debarment
- Fines / Restitution
- Prison

## DANGER, 	Will Robinson, 			DANGER

- 	**Our numbers are going up.**
- WHY?

## The Bad News

- Ethical misconduct in business is back to pre-Enron levels; about half of employees witnessed misconduct
- Employees don’t report misconduct when they see it due to fear of retribution
- The number of companies with effective enterprise-wide ethics programs has declined since 2005
-                            *National Business Ethics Survey, Ethics Resource Center, 2007 Report

## More Bad News

- Misconduct across government as a whole is very high; about 60% of employees witnessed misconduct
- One in four government employees works in an environment deemed conducive to misconduct
- The strength of ethical culture in government workplaces is declining, while pressure to commit misconduct is growing
- Absent effective interventions, misconduct is likely to rise more in the future
-                                            *National Government Ethics Survey, Ethics Resource Center, 2007 Report

## So, what is the answer?

## 
    The Magic Bullet Does NOT exist.

-     **The Magic Bullet Does **_**NOT**_** exist.**

**                   **_**AN**_** Answer: **
**    ****Effective Compliance Programs**
**           ****Will you have a program?  **
**               ****Will it be voluntary?**
**                        ****or**
**           ****Will it be imposed?**
**	**

## One Way To Get There:  Imposed Compliance Plans

- $15 M; overcharging IDC
- $30 M, exceptional status; oversight program; misuse of federal grants
- $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, oversight program; mischarging awards
- $3.4 M, 5-year compliance program; misuse of federal grants

## NSF’s Requirements

- 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.
- 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.
- 		Reference:     NSF’s Grant General Conditions, Article 1.

**You already have the responsibility**

## Compliance Programs Offer An Integrated Approach to Oversight in the Research Environment 

- 			      Government
- 			 *Institution/University*
*	**	*
- 			       Researcher

## What IS a Compliance Program?

- Use of internal controls to effectively monitor adherence to applicable statutes, regulations, and program requirements.
- Finding risks and minimizing the danger of abuse
- HHS Integrity Agreements in Medicare
- HHS Guidance
- Council on Government Relations Guidance
- University Programs
- Sarbanes Oxley

## What IS a Compliance Program?

- Implemented voluntarily or mandated
- Mandated programs are based on US Sentencing Guidelines
- Address laws, regulations, rules, or agreements
- Holds organization responsible for employees actions
- Requires Leadership  - commitment to do the right thing
- Requires Management  - ethical environment
- Focus on high risk areas
- Provide systematic monitoring, auditing, oversight
- Requires Training  - Communicate facts and expectations
- Requires Action  - Early detection /correction

## Why Have a Compliance Program?

- To foster an environment where employees can operate with integrity and where ethical conduct is the norm
- Serves as mitigating factor with DoJ
- The Antithesis of the Rationale:
- Too expensive
- Not enough staff
- Hard to organize
- No authority
- No need
- Too much trouble

**Notes:**
Some commentators suggest “moving from compliance to ethics.”  Dr. Mike Kalichman, UC SanDiego gave a great talk at last SRA on this.  I believe the compliance based environment establishes a baseline of acceptable conduct; makes clear the institutional expectations for conduct; and fosters an environment where such ethical conduct is the norm.

## Compliance Program Elements

- Reasonable standards and procedures
- High-level personnel responsible
- Careful delegation of authority
- Effective training
- Monitoring and auditing systems; whistleblowing system
- Consistent enforcement
- Respond appropriately to wrongdoing
- Report wrongdoing
- Source:  Federal Sentencing 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

## 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

## 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?

## 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)

## More 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

## What do you look like?

- Funding Characteristics
- Grants, contracts, and with what entities
- 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, or “senior and wise”
- Training Profile
- Comprehensive administrative, financial, oversight, fit the issues

**Notes:**
LTER – Long term ecological research

##    One University’s Risk AssessmentHeat Map

**IMPACT**

**High**

**Moderate **

**Low **

**Moderate**

**High**

**Low  **

_**Auxiliary Services**_

_**Deferred **_
_**Maintenance**_

_**Technology Licensing**_

_**Off-Campus Facilities**_

_**Privacy of **_
_**Information**_

_**Human **_
_**Resource **_
_**Management**_

_**Construction Management**_

_**Endowment**_

_**Contracts & Grants **_
_**Management**_

_**Property Management**_

_**Financial Reporting**_

**  ****PROBABILITY**

**Acquisition**

_**Environmental, Health & Safety**_

_**Immigration & Visa Processing**_

_**Executive Benefits**_

_**Security**_

_**Human Subjects**_

_**Student Affairs**_

_**Animal Subjects**_

_**Gifts & Restricted Funds**_

## Risk-Based Compliance Programs

- Require Leadership  - commitment to do the right thing
- Require Management  - ethical environment
- Focus on high risk areas
- Provide systematic monitoring, auditing, oversight
- Require Training  - Communicate facts and expectations
- Require Action  - Early detection and correction
- Require MEASURABLE indicators of success

## Compliance Programs:Providing Protection

**       ****Government **
**Institution/University **
**          ****Researcher**

## Successful Programs

- Address enforceable aspects (Rules)
- Address intangible aspects (Ethics)
- Address all essential elements
- Are applicable across institutional efforts / communities
- Have effective vehicles for delivery
- On line
- Separate classes
- Embedded in other classes (micro-insertion)
- Laboratory training
- Contain measurable benchmarks
- Mandatory or Elective?
- A one-time, optional, on-line, canned program?
- Perhaps not the ideal vehicle

## The Bottom Line

- “Good governance is a mixture of the **enforceable** and the **intangible**. Organizations with strong governance provide discipline and structure; instill ethical values in employees and train them in the proper procedures; and exhibit behavior at the board and executive levels that the rest of the organization will want to emulate.”

- _The Unexpected Benefits of Sarbanes-Oxley_,
- Stephen Wagner and Lee Dittmar,
- Harvard Business Review, April 2006, Online Version

**Notes:**
The enforceable is compliance.  The intangible is ethics.  Ethical conduct is, of course, the desired state.  Many schools and professional societies are moving ahead with programs to teach ethics and instill ethical decision making into the professional practices of their students, faculty, and staffs.  We believe that compliance programs offer the framework within which such ethical conduct can become the norm.

## Contact Information

- Internet:		http://www.nsf.gov/oig/
- E-mail:		oig@nsf.gov
- Telephone:  	703-292--4993 (Bill)
- Anonymous:	1-800-428-2189
- Write:		4201 Wilson Blvd. Suite II-705
- 				Arlington, VA  22230

## 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/VickyNemersonMarch2005/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
- _http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?ml_action=get-article&articleID=R0604J&ml_page=1&ml_subscriber=true_

## QUESTIONS

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