Offices of Inspector General Audit Update

1. 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

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

3. 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

4. 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

5. 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.

6. National Coverage

7. 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

8. 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.

9. Office of Investigations (OI) Mission- To protect the integrity of the programs administered by the United States Department of Health and Human Services.

10. 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.

11. OAS Organization Gloria L. Jarmon Deputy Inspector General for Audit Services Kay L. DalyAssistant Inspector General for Audit Services Brian P. RitchieAssistant Inspector General for Audit Services Michael J. Armstrong Region I James P. Edert Region II Sheri L. Fulcher Region V Patricia M. Wheeler Region VI Stephen Virbitsky Region III Lori S. PilcherRegion IV Patrick J. CogleyRegion VII Lori A. Ahlstrand Region IX

12. HHS OIG Work Plan- FY 2013 http://oig.hhs.gov/

13. HHS OIG Work Plan- FY 2013

14. 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

15. 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

16. Equipment Claims by Grantees • Assess whether equipment purchases over $25K complied with NIH Grants Policy • Objective: identify unauthorized changes in scope

17. 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.

18. 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.

19. Cost Sharing Claimed by Universities • How are universities meeting cost sharing requirements?

20. 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.

21. 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.

22. 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.

23. OIG ARRA Audits at Educational Institutions 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 • Rutgers University • Georgetown University • University of Central Florida • Thomas Jefferson University • Wayne State University • University of Wisconsin-Madison

24. 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

25. 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

26. 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’scomments -Provided 30 days to comment on recommendations Final Report- -Addressed and Issued to OPDIV -PDF version provided to the Auditee

27. 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

28. OMB’s Proposed Uniform Cost Principles (Jan 2013) • Joint HHS-NSF OIG review of four universities • Demonstration Project on Time and Effort Reporting

29. Questions?

30. 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

31. Overview • NSF Audit Planning • Audit Analytics • Federal Initiatives

32. 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

33. 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

34. Distribution of Audit Work

35. End to End Process for Grant Oversight CASH DISBURSEMENTS PAY/ ENTITLEMENT AWARD CLOSE-OUT PRE-AWARD REVIEW CASH REQUEST SOLICITATIONS POST AWARD PROPOSALS 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

36. 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

37. Identification of Questionable Costs Phase II Identify Questionable Expenditures Phase I Identify High Risk Institutions 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

38. 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

39. Federal Initiatives and Coordination Federal Initiatives 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

40. 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

41. 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 Members5 Inspectors General: - Education, NSF, HHS, Transportation, USPS5 Agency representatives: - OMB, HHS, Treasury, Defense, VA

42. 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

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