U'S' Department of Education Office of Inspector General

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U.S. Department of Education Office of
Inspector General

• American Recovery and Reinvestment Act of 2009
• OIG Oversight
• 2009 OSEP Leadership Conference
• Presented by
• Theresa Dollard Auditor
• Doral Hill Auditor

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AGENDA

• ED/OIG Organization and Mission
• Overview of the American Recovery and
  Reinvestment Act (ARRA)
• ED/OIGs ARRA Work
• Prior ED/OIG Audits
• Red Flags and Fraud Indicators

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ORGANIZATIONAL CHART
Part of the Department BUT Independent
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Inspector General Act of 1978
. . . to prevent and detect fraud, waste and
abuse and improve the economy, efficiency and
effectiveness of Department programs and
operations.
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OIG Mission Statement

• To promote the efficiency, effectiveness, and
  integrity of the Department's programs
• and operations, we conduct independent and
  objective audits, investigations, inspections,
  and other activities.

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OIG Components

• Audit Services
• Investigation Services
• Evaluation, Inspection and Management Services
• Information Technology Audits and Computer Crime
  Investigations

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Office of Inspector GeneralRegional Offices
NORTHEASTERN REGION New York, NY Boston, MA

WESTERN REGION Sacramento, CA Long Beach, CA
Denver, CO


CENTRAL REGION Chicago, ILKansas City, MO
Dallas, TX

MID-ATLANTIC REGION Washington, DC Philadelphia,
PA Pittsburgh, PA





SOUTHEASTERN REGION Atlanta, GA Pembroke Pines,
FL San Juan, PR St. Thomas, USVI
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The American Recovery and Reinvestment Act
(Public Law 111-5)

• 787,000,000,000 Package

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ARRA Guiding Principals

• Use Funds to Save and Create Jobs
• Improve Student Achievement Through School
  Improvement and Reform
• Ensure Transparency, Public Reporting, and
  Accountability
• Invest One-Time ARRA Funds Thoughtfully to
  Minimize the Funding Cliff

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EDUCATION ARRA Funding(millions)

• State Stabilization 53,600
• Title I 13,000
• IDEA 12,200
• Ed. Technology 650
• Voc. Rehab. 540
• Indep. Living 140
• Teacher Incentive 200
• Teacher Quality 100
• Impact Aid 100
• Homeless 70

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ARRA Title I, Part A FundsIDEA Parts B and C
Funds

• 50 of Funds Awarded Under Existing State
  Application
• Remaining Funds Awarded After State Submits an
  Amendment to Application Addressing ARRA
  Recordkeeping and Reporting Requirements
• Use of Funds Must Be Consistent With Program
  Requirements
• Some Waivers of Requirements May Be Available

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OIGs Role in ARRA

• Title VIII of ARRA provides funding for OIG
  oversight and audit of programs, projects, and
  activities funded in the Act.
• ARRA 1514 states IGs are required to review
  concerns raised by the public regarding use of
  funds.
• ARRA 1515 reiterates OIGs authority to examine
  and interview contractors and grantees.

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ARRA Audit Work

• Nationwide review guide
• Objective
• Phase I To determine if agencies charged with
  responsibility for overseeing American Recovery
  and Reinvestment Act funds have designed systems
  of internal control that are sufficient to
  provide reasonable assurance of compliance with
  applicable laws, regulations, and guidance.
• Phase II To determine whether prime recipients
  and sub-recipients of education-related ARRA
  funds have properly administered these funds in
  accordance with ARRA and applicable laws,
  regulations, and guidance.

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ARRA Audit Work

• First Round of States Reviewed
• California 8.5B
• Illinois 3.1B
• Tennessee 1.4B
• Texas 6B
• Puerto Rico 1.2B
• Indiana 1.5B
• Pennsylvania 2.8B
• New York 4.8B

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ARRA Audit Work

• Work performed in SEAs, Governors Offices, LEAs,
  State Departments of Health
• ARRA funds reviewed are State Fiscal
  Stabilization Funds, Title I Part A, IDEA Part B
  (State Grants), and Vocational Rehabilitative
  Services
• Review work focused on cash management, use of
  funds, data quality, and sub-recipient monitoring

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Preliminary Issues

• Sub-recipient Monitoring
• Monitoring by SEAs typically does not to include
  fiscal monitoring.
• Cash Management
• SEAs are disbursing ARRA funds to LEAs without
  adequate information on whether LEAs are ready to
  spend the funds.
• SEAs either did not have a process in place for
  LEAs to remit interest earnings or had not
  instructed LEAs to remit interest promptly and at
  least quarterly.

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Fiscal Issues Reported in Prior ED-OIG Work
Related to SEAs and LEAs

• Unallowable Personnel
• Unallowable Non-personnel
• Inadequately Documented Personnel
• Inadequately Documented Non-personnel
• Inventory Control
• Supplanting
• Failure to Meet Program Requirements
• Unable to Demonstrate Program Requirements
  Fulfilled
• Ineligibility for Program
• Inadequate Documentation of Program Eligibility

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Issues Reported in Prior ED-OIG Work Related to
IDEA

• Inadequately Documented Non-personnel
• Payments for contracts processed without
  verifying whether services were provided.
• Inadequately Documented Personnel
• Time cards of teachers were not reviewed or
  certified prior to payment.
• Semi-annual certifications for teachers were not
  maintained.

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Issues Reported in Prior ED-OIG Work Related to
IDEA

• Unallowed Costs
• LEA overcharged salaries and non-salaries for its
  summer school program that served eligible and
  ineligible IDEA students.
• Cost for conference attendance improperly
  allocated.
• Inventory Control
• SEA and LEA did not maintain adequate inventory
  and management controls over inventory.

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Red Flags

• Failure to maintain documentation
• Use of funds for unallowable purposes
• Charging obligations to the wrong grant/contract

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Red Flags

• No written policies and procedures
• Lack of controls over computer systems and
  computer equipment
• Inadequate financial management systems

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Fraud

• LEGAL DEFINITION
• Acts, omissions, or concealment involving a
  breach of legal or equitable duty. In most
  cases, results in damage to another, either
  monetary or in another form.
• LAYMANS DEFINITION
• Lying, cheating and/or stealing.

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Fraud Indicators

• One Person in Control
• No Separation of Duties
• Lack of Internal Controls/Ignoring Controls
• No Prior Audits
• Multiple Audit Findings/Repeat Findings
• No Audit Trail/Inability to Support Questioned
  Costs
• High Turnover of Personnel
• Unexplained Entries in Records
• Unusually Large Amounts of Payments for Cash
• Inadequate or Missing Documentation
• Altered Records
• Non-Serial Number Transactions
• Inventories and Financial Records not Reconciled,
  
• Unauthorized Transactions
• Unreasonable Costs (As Outlined in OMB Circular
  122)
• Related Party Transaction

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How You Can Help

• Ensure that staff receive necessary training
• Review documents thoroughly
• Question documents/Verify authenticity
• Request additional information from the vendors
  or administration
• Compare information on different documents
• Contact ED-OIG
• A Guide to Grant Oversight and Best Practices for
  Combating Grant Fraud http//www.usdoj.gov/oig/spe
  cial/s0902a/ final.pdf

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Watch for Anomalies

• Inflated invoices
• Payments to unknown vendors for unknown services
• Funding for a counselor, but no counselor
• Funding for equipment, but no equipment
• Invoices for services or equipment not provided
• Administrator cuts you a check and asks for a
  portion of proceeds
• Consulting contracts-costs get buried under this
  area

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Why Report Fraud?

• OMB Guidance on ARRA Accountability and Reporting
  Requirements
• Mandatory Reporting to the Inspectors General
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• Agencies must include in all grants the
  requirement that each grantee or sub-grantee
  awarded funds made available under the Recovery
  Act shall promptly refer to an appropriate
  inspector general any credible evidence that a
  principal, employee, agent, contractor,
  sub-grantee, subcontractor, or other person has
  submitted a false claim under the False Claims
  Act or has committed a criminal or civil
  violation of laws pertaining to fraud, conflict
  of interest, bribery, gratuity, or similar
  misconduct involving those funds.

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OFFICE OF INSPECTOR GENERAL HOTLINE

• 1-800-MISUSED
• E-MAIL OIG.HOTLINE_at_ED.GOV
• FAX [phone]

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QUESTIONS FOR US?