Offices of Inspector General Audit Update

Dr. Brett M. Baker Assistant Inspector General for Audit

National Science Foundation

Kay Daly Assistant Inspector General for Audit

Department of Health and Human Services

March 12, 2013

Department of Heath and Human Services, Office of Inspector General

Presented by: Kay Daly

Agenda

Overview of Office of Inspector General

(OIG)

Five Components of OIG

Work Plan for 2013

- Colleges and Universities

Presence of OIG in Colleges and Universities

Audit Results

Revised Reporting Process

Office of Inspector General

Daniel R. Levinson, Inspector General

Mission - To protect

the integrity of

Department of Health

& Human Services

(HHS) programs as

well as the health

and welfare of

program

beneficiaries.

Who we are

Established- 1976

Largest Inspector General's office in the Federal Government - more than 1,700 employees

OIG's oversight: All programs under other HHS institutions,

including the Centers for Disease Control and Prevention, National Institutes of Health, and the Food and Drug Administration.

National Coverage

Office of Inspector General

Office of Evaluation

and Inspection

s

Office of Investigation

s

Office of Counsel to

the Inspector General

Office of Manageme

nt and Policy

Office of Audit

Services

Office of Evaluation and Inspections (OEI)

Mission- To protect the integrity of HHS programs, as well as the health and welfare of beneficiaries, by conducting evaluations that provide timely, useful, and reliable information and recommendations to decision makers and the public.

Office of Investigations (OI)

Mission- To protect the integrity of the programs administered by the United States Department of Health and Human Services.

Office of Audit Services (OAS)

Mission - Identify and report ways to improve, through a shared commitment with management, the economy, efficiency and effectiveness of operations and services to beneficiaries of HHS programs.

OAS Organization

Gloria L. JarmonDeputy Inspector General for Audit Services

Michael J.

Armstrong

Region I Lori S. Pilcher

Region IV

James P. Edert

Region II

Stephen Virbitsky Region III

Kay L. Daly Assistant Inspector General

for Audit Services

Lori A. Ahlstrand Region

IX

Sheri L. FulcherRegion V

Patricia M.

Wheeler Region VI

Patrick J. Cogley

Region VII

Brian P. RitchieAssistant Inspector General

for Audit Services

HHS OIG Work Plan- FY 2013

http://oig.hhs.gov/

HHS OIG Work Plan- FY 2013

HHS OIG Work Plan- FY 2013

National Institutes of Health College and University Compliance With Cost Principles

Equipment Claims by Grantees

Review of Extra Service Compensation Payments Made by Educational

Institutions

Recharge Centers at Colleges and Universities

Cost Sharing Claimed by Universities

Cross-Cutting and Other Public-Health

Related Reviews Reimbursable Audits

Requested Audit Services

College and University Compliance With Cost Principles

Assess compliance of costs claimed based on select cost principles issued by OMB Circular A-21, Cost Principles for Educational Institutions

Conduct reviews on the basis of: Dollar value of Federal grants received Input from HHS operating divisions and the

offices of Assistant Secretary for Financial Resources, and the Assistant Secretary for Administration

Equipment Claims by Grantees

Assess whether equipment purchases over $25K complied with NIH Grants Policy

Objective: identify unauthorized changes in scope

Review of Extra Service Compensation Payments Made by Educational Institutions

Determine whether extra service compensation charged to federally sponsored grants, contracts, and cooperative agreements: Complied with Federal Regulations; Were calculated properly; and Approved by the sponsoring agency.

Recharge Centers at Colleges and Universities

Determine if specialized service facilities (recharge centers): Have rate schedules that ensure that

amounts charged are reasonable, consistent, and comply with Federal regulations; and

Charge expenses that are reasonable and necessary to function.

Cost Sharing Claimed by Universities

How are universities meeting cost sharing requirements?

Reimbursable Audits

OMB Circular A-133 established cognizance- Designated which Federal agency has

primary responsibility for audit of all Federal funds received by an entity.

HHS OIG holds audit cognizance over all State governments and most major research colleges and universities.

HHS OIG received reimbursement for audits that it performs on non-HHS funds.

Types of Audits

Types of audits: Recipient capability audits; Contract and grant closeouts; Indirect cost audits; Bid proposal audits; and Other reviews designed to provide

specific information requested by management.

Presence of OIG in Colleges and Universities

OIG is currently wrapping up two major types of reviews:

American Reinvestment and Recovery Act (ARRA) grant audits; and

Direct cost audits.

OIG ARRA Audits at Educational Institutions

Rutgers University Georgetown University University of Central

Florida Thomas Jefferson

University Wayne State University University of Wisconsin-

Madison

ARRA GRANT REVIEWS: Northwestern University University of Texas- Health

Science Center Iowa State University of Utah University of Washington-St

Louis Claremont McKenna College University of Colorado

OIG Direct Cost Audits at Educational Institutions

Thomas Jefferson University

Florida State University

Ohio State University University of Texas-

Southwestern Medical Center

Dartmouth University of South

Florida

DIRECT COST REVIEWS:

University of Colorado, Denver

University of California, San Diego

State University of New York - Albany

State University of New York - Stony Brook

University of North Carolina – Chapel Hill

Findings

• Undocumented administrative costs• Cost did not solely benefit sponsored

agreement• Admin costs improperly charged as direct

costs• Clerical salaries improperly charged as

direct• Extra Service Compensation – not provided

for in the sponsored agreement or approved by sponsoring agency

Reporting Process- ARRA Grant Audits

Draft Report- -Issued to Auditee-Provided 5 days to comment on audit findings

Draft Report- -Comments are provided to OIG-Auditors review and summarize Auditee’s comments

Draft Report- -Issued to OPDIV with Auditee’s comments-Provided 30 days to comment on recommendations

Final Report--All comments are attached as an appendix

Draft Report- - OPDIV comments are provided to OIG- Summarize all comments

Final Report--Addressed and Issued to OPDIV-PDF version provided to the Auditee

Reporting Process- Non- ARRA Grant Audits

Draft Report- -Issued to Auditee-Provided 30 days to comment on audit findings and recommendations

Draft Report- -Comments are provided to OIG-Auditors review and summarize Auditee’s comments

Final Report--All comments are attached as an appendix

Final Report--Addressed and Issued to the Auditee

OMB’s Proposed Uniform Cost Principles (Jan 2013)

Joint HHS-NSF OIG review of four universities

Demonstration Project on Time and Effort Reporting

Questions?

NCURA FINANCIAL RESEARCH ADMINISTRATION CONFERENCE

MARCH 12, 2013

NSF OIG Update

Brett M. Baker, Ph.D, CPA, CISA Assistant Inspector General for Audit National Science Foundation

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Overview

NSF Audit Planning

Audit Analytics

Federal Initiatives

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Office of AuditOffice of NSF Inspector General

• Audit NSF-funded grants, contracts, and cooperative agreements

• Determine whether claimed costs are allowable, reasonable, and allocated properly

• Oversee annual audit of NSF’s financial statement• Promote economy and efficiency in NSF’s financial,

administrative, and program operations

OIG Semiannual Report http://www.nsf.gov/oig/pubs.jsp

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Audit Planning

Work Required by Law:• Agency Financial Statement Audit (CFO Act)

• Federal Information Security Management Act (FISMA)

• Improper Payment Elimination and Recovery Act (IPERA)

• American Recovery and Reinvestment Act of 2009 (ARRA)

Other:• OIG Risk-based Assessments• Referrals from Investigations • NSF Management Challenges• National Science Board and NSF Suggestions• Congressional Requests

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Distribution of Audit Work34

NSF Request28%

Required8%

Cong. Re-

quest8%

ARRA18%

OIG38%

End to End Process for Grant Oversight

PROPOSALSPRE-AWARD

REVIEW AWARD

CLOSE-OUTPOST AWARDCASH

DISBURSEMENTSPAY/

ENTITLEMENT

AWARDSOLICITATIONS

CASH

REQUEST

• Funding Over Time

• Conflict of Interest• False Statements• False

Certifications• Duplicate

Funding• Inflated Budgets• Candidate Suspended/Debarred

• Unallowable, Unallocable, Unreasonable Costs

• Inadequate Documentation• General Ledger Differs from Draw

Amount• Burn Rate• No /Late/Inadequate Reports• Sub-awards, Consultants, Contracts• Duplicate Payments• Excess Cash on Hand/Cost transfers• Unreported Program Income•

• No /Late

Final Reports• Cost

Transfers• Spend-out• Financial Adjustments• Unmet Cost

Share

D A T A A N A L Y S I S Dr. Brett Baker 2010

PRE-AWARD RISKS

ACTIVE AWARD RISKSAWARD END

RISKS

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Data Sources

Internal• Proposals: budgets, panel scores• Agency award systems, recipient reporting

External Excluded Parties List System (EPLS) System for Award Management / Central Contractor

Registration Dun and Bradstreet risk scores Tax filings and public records OMB A-133 Single Audit Act reports Recipient financial system records General ledger and subsidiary ledger(s) Property, travel, and purchase card

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Agency Award DataAward proposals

Quarterly expense reportsCash draw downs

External DataA-133 audits (FAC)

D&B, Recovery BoardSAM/CCR, and EPLS

Data AnalyticsContinuous monitoring of

grant awards and recipients

Awardee Transaction DataGeneral ledger

Subsidiary ledgersSubaward data

Phase IIdentify High Risk Institutions

Data AnalyticsApply fraud indicators to GL data

and compare to Agency data

Agency Award DataAward proposals

Quarterly expense reportsCash draw downs

External DataA-133 audits (FAC)

D&B, Recovery BoardSAM/CCR, and EPLS

Phase IIIdentify Questionable Expenditures

ReviewQuestionableTransactions

Identification of Questionable Costs

Risk Assessment and Management

Identify systems and key processesMap out End-to-End ProcessIdentify key controlsBrainstorm Risk factorsContinuous MonitoringSet Objectives and Define UniverseBuild Targeted Business Rules, Run Against

Data Examine Anomalies in Transaction-Level

Data

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Federal Initiatives and Coordination

Federal Initiatives Recovery Accountability and Transparency Board

(RATB)Government Accountability and Transparency

Board (GATB)OMB Grant Reform

Federal CoordinationCouncil of Inspectors General for Integrity and

EfficiencyFederal Audit Executive CouncilSuspension and Debarment Working Groups

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Recovery Accountability and Transparency Board (RATB)

American Recovery and Reinvestment Act 2009

To provide transparency of Recovery-related funds

To detect and prevent fraud, waste, and mismanagement

11 Inspectors General on the BoardSunsets on September 30, 2013Maintains websites for public information

- Recovery.gov - FederalTransparency.gov - EducationJobsFund.gov

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Government Accountability and Transparency Board (GATB)

Apply lessons from Recovery Act oversightSupport collection and display of government

spending dataBuild upon RATB capabilities and techniquesIdentify implementation guidelines for integrating

systemsEnsure the reliability of dataBroaden fraud detection technologiesMembers5 Inspectors General: - Education, NSF, HHS, Transportation, USPS5 Agency representatives: - OMB, HHS, Treasury, Defense, VA

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OMB Grant Reform

To streamline the OMB circulars for financial assistance oversight

• Cost compliance• Administrative principles• Audit monitoring and follow-up

Areas under discussion:• Single Audit threshold and testing• Annual time and effort reporting• Cost accounting requirements

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Questions?

Dr. Brett M. Baker, CPA, CISAAssistant Inspector General for Audit

National Science Foundation 703-292-7100 bmbaker@nsf.gov

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