Welcome to PREVENTING FRAUD

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Welcome toPREVENTINGFRAUD MISUSE of ARRA
FundsTraining
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PRESENTATION OVERVIEW
WELCOME!

• What is ARRA?

• Transparency Accountability

• Fraud Red Flags

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What is ARRA?
A. Americans For Responsible
Recreational Access
B. Arizona Radiation Regulatory Agency
C. Annapolis Royal Regional Academy
D. American Recovery and Reinvestment Act of 2009

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What is ARRA?
President Barack Obama signed the American
Recovery and Reinvestment Act (ARRA) into law on
February 17, 2009.  The ARRA provides California
85 billion in federal spending increases to
accelerate the nations economic recovery and
preserve and create jobs. The Inspector General
states that the typical rate of loss to fraud is
5-7, and we must be vigilant to ensure this does
not occur.
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Whats ARRA mean to DOR?

• The Department of Rehabilitation (DOR) has been
  awarded 61.8 million in federal stimulus funds
  for its programs, as follows
• 56.5 million for vocational rehabilitation,
• 1.6 million for independent living, and
• 3.7 million for older blind programs.

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Criteria for ARRA Projects

• Three main criteria for ARRA projects are
• To assist Californians with disabilities to
  prepare for, obtain, and maintain employment,
• To promote integration and full inclusion of
  individuals with disabilities into the mainstream
  of society,
• To invest in the future of the DOR through
  increased capacity.

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Transparency Accountability
ARRA will be implemented with an unprecedented
level of transparency and accountability
President Obama
Source Spoken, ARRA
Signing 21709 http//www.whitehouse.
gov/blog/09/02/17/signed-sealed-delivered-arra/
protecting taxpayer dollars requires a high
degree of accountability and transparency
Gov. Schwarzenegger
Source ARRA Executive Order S-04-09
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Transparency Accountability at DOR
the DOR has identified implementation
strategies in compliance with federal
regulations. it is the DOR's intent to utilize
the funds based on the guidance received from the
federal Rehabilitation Services Administration
(RSA).
Source http//www.dor.ca.gov/arra/
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Fraud Red Flags
All that follows was issued (in Inspector General
Advisory No. 09-05) by the (ARRA) Inspector
General, a new position created by Gov.
Schwarzenegger to safe-guard the spending of ARRA
funds.
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Fraud Against the Public
1. The government does not telephone people or
send unsolicited letter to offer grants.   2.
The government does not issue grants just because
someone is a good taxpayer.   3. There are no
fees when you apply for government grants.   4.
For further information see Federal governments
website at http//www.grants.gov/
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Fraud by Grantee in Application/Bid Process
1. Has the grant applicant recently been
incorporated or filed a fictitious business
statement? Query http//kepler.sos.ca.gov/list.h
tml.   2. Does the grant applicant hold
him/herself out as a professional, e.g., an
accountant, a contractor, or someone else
required to maintain special licensing status?
If so, query the relevant state agency to
ascertain licensing status of grant applicant.
  3. Has the grantee paid all applicable
federal or state income and sales taxes?
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Fraud by Grantee in Application/Bid Process
4. Does the grantee have a business or similar
permit to operate in the city or county where the
grantee is domiciled? 5. How long has the
grantee maintained a banking relationship at its
current bank? How long have the funds in the
account been on deposit? 6. Does the
grantee resist providing agency with tax records,
financial statements, bank account statements,
articles of incorporation or by laws?  
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Fraud by Grantee in Performance
Common fraud schemes involving false business
expenses   1. Using grant funds for personal
expenses.   2. Submitting expenses that have not
been incurred for payment.   3. Submitting
expenses that are not directly tied to the
grant/contract.   4. Submitting false claims
for travel vouchers and expense reports.   5.
Forging documents/invoices that disguise
kickbacks.   6. Double billing.   7. Using
company credit card for personal use
purchases.    
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Fraud by Grantee in Performance
Common fraud schemes involving false
employment-related costs 1. Ghost
employees.   2. Fictitious contractors.   3.
Over charging labor costs, hours or rates.   4.
Inflating enrollment/attendance records or other
cost drivers.
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Potential Fraud Indicators
1. One person is in control of grantees check
book and same person also reconciles financial
or bank accounts statements.    2. There is
a lack of separation of duties within grantees
business.   3. Grantee/employee is living
beyond his or her means.   4. Lack of
procedures to control expenditures.   5. Lack
of supporting documentation to justify
expenditures.
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Potential Fraud Indicators
6. Records or grantee are not subject to
independent audit. 7. Grantee has no prior
experience administering grants. 8. Grantee
formed business/non-profit entity solely for
purpose of submitting bid/proposal for ARRA
grant. 9. On grant application, grantee
states responses to questions calling for
factual information in vague or imprecise terms,
e.g., instead of stating what percentage of
past grants were used for overhead grant states
something likeGrantee strives to keep overhead
costs below 5 of total contract value . . . 
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Potential Fraud Indicators
10. Grantee offers agency auditor (or grant
administrator) gifts, tickets to ball games,
etc., that are beyond a de minimis level in
value.   11. Grantee delays or procrastinates
when asked to submit required supporting
documentation justifying costs and
expenses.   12. Grantee (or spouse, family
member or business associate) works for agency
conferring grant.
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Potential Fraud Indicators
  13. When questioned about the propriety of a
cost or expense grantee threatens to escalate
issue outside ordinary decision-making process,
e.g., I am going to contact the Mayors office
unless you stop bothering me with these
questions.   14. Grantee has a large number of
even dollar disbursements to the same or similar
vendor, e.g., 50,000.00.
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Spot Checking for Fraud
  1. Sort check disbursements alphabetically to
identify vendor-look alikes. Test for shell
company payments by querying public information
to identify who controls company receiving
payments. 2. Sorting the total payments to
each vendor in descending order of value can you
help you target possible fraud or kickback
payments. 3. Sorting payments by frequency can
help you identify possible fraud or collusion
payments. 4. Sorting payments with 000.00
as the last five digits can help identify
possible fraud or collusion payments.
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Spot Checking for Fraud
5. Search for similar or same addresses.
Different vendors showing the same mailing
address can indicate fraudulent payments to a
mail drop or other location controlled by the
grantee.   6. Talk to employees of grantee.
What tone does the grantee set? What value
system/code of conduct exists? Is the working
environment a positive one? What ethics
training has the employee received? Is the
grantee making the employee aware of the ARRA
Whistleblower Program? How are employee
complaints handled by grantee? Does the
employee have any examples of where co-workers
were disciplined for complaints?
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Reporting Fraud

• Any instances of potential fraud, waste, and
  abuse
• should be promptly reported to one of the
  following
• The Office of the Inspector General (OIG)
  
• Hotline 1-800-MIS-USED (1-800-647-8733)
• Email oig_hotline_at_ed.gov
• Online complaint form http//www.ed.gov/about/off
  ices/list/oig/hotline.html
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• The Bureau of State Audits (BSA)
  
• Online http//www.bsa.ca.gov/stimulus/report_frau
  d
• Waste Watchers
  
• Call 1-877-49-CALL-CA (1-877-492-2552)
• Online http//www.wastewatchers.ca.gov

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QuestionsAnswers
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