In grant award audits, fraud is a key consideration. This post addresses audit findings related to defrauding government funds. This information is based off my recent SRA International North Carolina Chapter Meeting presentation entitled “Review of Recent Audits and Fraud Cases,” in which I outlined audit findings-related unallowable expenses, late purchases/cost transfers, and other areas.
Detecting Grant Fraud
According to the National Science Foundation (NSF), fraud related to grant awards is often difficult to detect and is typically determined after a careful examination of all the facts and circumstances.
The NSF publication “Possible Grant Fraud Indicators” handbook includes a generally accepted definition of fraud, along with possible indicators which may be indicators of fraud.
Fraudulent schemes are as varied and unique as the individual perpetrators, their motives, and the situations they seek to exploit. Some examples of possible fraudulent activity might include the misappropriation of funds for personal purposes, commingling grant funds with other funds, and submitting false or altered documents when requesting reimbursement from the funding source.
Grant Fraud: Examples of Recent Audits
Unfortunately, grant fraud occasionally takes place within research institutions, although it is certainly not typical. For the most part, our nation’s research-focused institutions are excellent stewards of the grant funds they receive. However, two recent findings summarized below illustrate that in rare occasions, grant fraud does exist.
A professor at Morgan State University was found to have fraudulently obtained research grants from the National Science Foundation.
According to the findings, the faculty member received $200,000 in grant funds for a highway project. It was found that the faculty member used the money to pay personal expenses, and he was sentenced to three years in prison.
A former University of Florida nuclear engineering professor fraudulently obtained government contracts from NASA. The funds were part of research conducted by FSU’s Innovative Nuclear Space Power and Propulsion Institute. Documents allege the researchers submitted fraudulent invoices that included intentional overpayments to the main faculty member, underpayments to researchers, and non-payments to some workers. He was sentenced to six months in prison.
Preventing Grant Fraud Audit Findings
Again, it’s important to note that defrauding government funds is certainly not typical. The majority of the nation’s research focused institutions manage grant award without any incident.
Fraudulent activities such as misappropriating funds, commingling grant funds with other funds, or submitting false or altered documents when requesting reimbursement can be prevented by adopting specific practices, such as:
- Bank statement reconciliations
- Developing a compliance program
- Regular conflict of interest disclosures and reviews
- Data analysis
- Keeping thorough documentation
- Internal controls
- Ensuring there are open lines of communication
- Risk assessment
- Suspension and debarment
Throughout a grant award life, it’s critical to carefully review all aspects of financial reporting, from bank statements to internal controls and communications. Training is also key, so all involved can have a shared understanding of appropriate behaviors.
Many institutions turn to a research management system to help track and manage this process and help avoid unfavorable audit findings. Automated systems offer built-in controls, documentation, and compliance reporting. To learn more about Cayuse’s solutions, including compliance software to make processes easier, contact us today.