Offices of Inspector General Audit Update Dr. Brett M. Baker Assistant Inspector General for Audit National Science Foundation Kay Daly Department of Health and Human Services March 12, 2013

Department of Heath and Human Services, Office of Inspector General Presented by: Kay Daly Department of Heath and Human Services, Office of Inspector General

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 Mission - To protect the integrity of Department of Health & Human Services (HHS) programs as well as the health and welfare of program beneficiaries. Daniel R. Levinson, Inspector General

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 Inspections Office of Investigations Office of Management and Policy Office of Counsel to the Inspector General 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. Jarmon Deputy 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. Fulcher Region V Patricia M. Wheeler Region VI Patrick J. Cogley Region VII Brian P. Ritchie Assistant 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?

OMB Circular A-133 established cognizance- 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 ARRA grant reviews: Rutgers University Georgetown University University of Central Florida Thomas Jefferson University Wayne State University University of Wisconsin-Madison 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 Direct cost reviews: Thomas Jefferson University Florida State University Ohio State University University of Texas- Southwestern Medical Center Dartmouth University of South Florida 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- - OPDIV comments are provided to OIG - Summarize all comments Final Report- -All comments are attached as an appendix 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- -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 NSF OIG Update NCURA Financial Research Administration Conference March 12, 2013 Brett M. Baker, Ph.D, CPA, CISA Assistant Inspector General for Audit National Science Foundation

Overview NSF Audit Planning Audit Analytics Federal Initiatives

Office of Audit Office 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

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

Distribution of Audit Work

End to End Process for Grant Oversight CASH DISBURSEMENTS PAY/ ENTITLEMENT PRE-AWARD REVIEW CASH REQUEST AWARD CLOSE-OUT SOLICITATIONS PROPOSALS POST AWARD AWARD PRE-AWARD RISKS ACTIVE AWARD RISKS AWARD END RISKS No /Late Final Reports Cost Transfers Spend-out Financial Adjustments Unmet Cost Share 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 Funding Over Time Conflict of Interest False Statements False Certifications Duplicate Funding Inflated Budgets Candidate Suspended/Debarred DATA ANALYSIS Dr. Brett Baker 2010 35

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

Identification of Questionable Costs Phase I Identify High Risk Institutions Phase II Identify Questionable Expenditures Agency Award Data Award proposals Quarterly expense reports Cash draw downs Agency Award Data Award proposals Quarterly expense reports Cash draw downs Awardee Transaction Data General ledger Subsidiary ledgers Subaward data Data Analytics Continuous monitoring of grant awards and recipients Data Analytics Apply fraud indicators to GL data and compare to Agency data Review Questionable Transactions External Data A-133 audits (FAC) D&B, Recovery Board SAM/CCR, and EPLS External Data A-133 audits (FAC) D&B, Recovery Board SAM/CCR, and EPLS

Risk Assessment and Management Identify systems and key processes Map out End-to-End Process Identify key controls Brainstorm Risk factors Continuous Monitoring Set Objectives and Define Universe Build Targeted Business Rules, Run Against Data Examine Anomalies in Transaction-Level Data

Federal Initiatives and Coordination Recovery Accountability and Transparency Board (RATB) Government Accountability and Transparency Board (GATB) OMB Grant Reform Federal Coordination Council of Inspectors General for Integrity and Efficiency Federal Audit Executive Council Suspension and Debarment Working Groups

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 Board Sunsets on September 30, 2013 Maintains websites for public information - Recovery.gov - FederalTransparency.gov - EducationJobsFund.gov

Government Accountability and Transparency Board (GATB) Apply lessons from Recovery Act oversight Support collection and display of government spending data Build upon RATB capabilities and techniques Identify implementation guidelines for integrating systems Ensure the reliability of data Broaden fraud detection technologies Members 5 Inspectors General: - Education, NSF, HHS, Transportation, USPS 5 Agency representatives: - OMB, HHS, Treasury, Defense, VA

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

Questions? Dr. Brett M. Baker, CPA, CISA Assistant Inspector General for Audit National Science Foundation 703-292-7100 bmbaker@nsf.gov