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Fraud Reporting Guidance for USAID Implementing Partners

The inspector general of USAID has issued a very useful two pager on fraud reporting requirements for contracts and grants.  With the emphasis on fraud detection nowadays, implementing partners and contractors are under greater scrutiny than ever before to ensure fraud is detected and reported. From the two-pager:
USAID contractors and implementing partners have an affirmative obligation to report allegations of fraud related to USAID projects under both the Federal Acquisition Regulations (FAR) and USAID regulations. The timely reporting of fraud allegations allows the OIG, USAID, and the implementing partner to efficiently protect taxpayer funds while moving forward with important program activities. Examples of schemes uncovered in USAID funded projects include: corruption (bribery, kickbacks, and gratuities), collusive behavior between vendors and/or procurement staff, product substitution, false claims (billing for goods and services not provided), embezzlement or theft, and other types of procurement fraud.
 
The document makes reference to several Federal Regulations such as the U.S. Code, the Codified Federal Regulations (CFR) and Federal Acquisition Regulations (FAR):
  • FAR 52-203-13 Reporting Requirements (Pertains to Contracts/Subcontracts);
  • 22 CFR 226 (Administration of Assistance Awards to US. Non Governmental Organizations);
  • Title 18 U.S. Code Section 4— Misprision of a Felony.
 
Initial Notification Requirement

Perhaps one of the most important procedural steps when fraud is detected, is the obligation to inform the office of the inspector general as soon as possible.

The notification requirement of USAID contractors is introduced by 73 Fed. Reg. 67064, FAR Case 2007-006, Contractor Business Ethics Compliance Program and Disclosure Requirements (published in Nov. 12, 2008). FAR Case 2007-006 amended the Federal Acquisition Regulation (FAR) to amplify the requirements for a contractor code of business ethics and conduct, an internal control system, and disclosure to the Government of certain violations of criminal law, violations of the civil False Claims Act, or significant overpayments.

Specifically, the new requirements are applicable to a contract with a value of more than $5 million and that takes longer than 120 days to perform and require contractors to (among other requirements):

  • Establish a written code of business ethics and conduct;
  • Making the code available to employees involved in the performance of the contract;
  • Exercising "due diligence" to prevent and detect improper conduct;
  • Promoting an organizational culture that encourages ethical conduct and a commitment to compliance with the law;
  • Display a hotline poster;
  • Timely disclosure, in writing, to the agency OIG, with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of any Government contract performed by the Contractor or a subcontractor thereunder, the Contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 U.S.C. or a violation of the civil False Claims Act (31 U.S.C. 3729-3733).

Sources: FAR Case 2007-006 - Dustin Monokian (2009). The Expansion of US Contractor Compliance and Manadatory Disclosure Rules, Journal of Contract Management.

Mandatory Disclosure Requirements

The mandatory disclosure requirements are described in more detail by the OIG. From the guidance:

"When a USAID implementing partner becomes aware of a potential situation involving fraud, corruption, or false claims related to a USAID project, the OIG should be notified as soon as possible. The notification should be made to:

http://www.usaid.gov/oig/hotline/contractor_complaint_frm2.html

In the event the allegations relate to an ongoing contract, the notification should also be sent to the contracting officer in accordance with FAR 52-203-13.

This form is provided as a convenience to allow contractors to comply with the reporting requirements in FAR Subpart 3.10, updated as of December 12, 2008 (Federal Acquisition Circular 2005-28, 73 FR 67090).

Specifically, contractors may use this form to satisfy the requirement that they notify, in writing, the agency (USAID) Office of the Inspector General, whenever the contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed a violation of the civil False Claims Act or a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations in connection with the award, performance, or closeout of a contract or any related subcontract.  

The individual completing this form must be an authorized representative empowered to speak for the company.  When you submit this electronic form an email will automatically be generated to send you a tracking number and a copy of what you have submitted so you may forward it to the Contracting Officer. "

Source: Fraud Reporting Guidance - FAR Case 2006-007.

The Fraud Reporting Guidance can be downloaded here:

 Download Fraud Reporting Guidance for USAID Implementing Partners Office of the Inspector General PDACR319.pdf
File Title: Fraud Reporting Guidance for USAID Implementing Partners Office of the Inspector General PDACR319.pdf (Details)
File Type: pdf
File Size: 135.6 KB


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