On May 15, 2017, the Ninth Circuit affirmed the conviction of Karen Olson, a former Alaska executive director of the USDA Farm Service Agency, who had been convicted of concealing and failing to notify authorities of her business partner’s submission of false statements to the USDA Rural Development Program in connection with a federal grant application, in violation of 18 U.S.C. § 4 (misprision of a felony). See United States v. Olson, Case No. 15-30022 (9th Cir. May 15, 2017). The USDA had awarded Robert Wells a grant to open a milk processing facility. Olson and Wells had an informal partnership in which Olson signed Wells’ grant application and was entitled to 50% of the profits from the facility. At about the same time, Kyle Beus received a separate USDA grant to establish an ice cream and cheese manufacturing facility. Both grant applications cautioned that anyone who made false or fraudulent statements could be fined or imprisoned for up to five years.
Establishing an ethical culture is one of the most important characteristic of a responsible organization. The government expects that grantees can demonstrate how they tangibly live out an ethical culture. Grantees must go beyond merely responding to an issue, but rather, must ferret out fraud, waste, and abuse. Incorporating the appropriate internal controls is particularly important where noncompliance with a regulation or grant term could lead to liability under the False Claims Act, or worse yet, suspension or debarment.
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We typically spend a good portion of our monthly newsletter focused on federal grant and contract issues; however, a recent development in Florida underscores the need for nonprofits to keep an eye on compliance issues as they arise with states and local governments with which they do business. In particular, in late March, Governor Rick Scott signed a state law (H.B. 7071), which, among other things, expanded the state’s public corruption laws to include “public contractors,” a term that is inclusive of nonprofits so long as they contract with the State of Florida.
In a memorandum issued on April 5, 2016, the DOJ’s Criminal Division, Fraud Section unveiled a one-year pilot program under which organizations can receive substantial mitigation credit for self-reporting violations of the Foreign Corrupt Practices Act (FCPA). However, to be eligible for such credit, borrowing heavily from the Yates Memo, organizations must meet a prescriptive set of requirements—voluntary self-disclosure, full cooperation, and remediation:
As nonprofit federal grantees begin to live out policies and procedures that conform to the Uniform Guidance, compliance and legal departments are faced with an unprecedented number of real-world issues that arise from the implementation of those new policies. This program will feature both public (USAID Inspector General’s Office) and private (Venable LLP and BDO) practitioners in a discussion on how to create trust with your federal partners in working through some of the trickiest compliance scenarios.
Although we all aim to prevent it, it can happen to any organization. When prepared for and handled properly it can be a learning opportunity and a chance to strengthen controls. When handled improperly it can pose an existential threat to your organization. The primary focus of this presentation will be on detection, investigation, and closure with viewpoints and experiences provided by sector senior leaders, government representatives, legal and audit firm professionals. Topics will touch on all key aspects of handling an instance of fraud, from ensuring you gather all indicators from your global team, to when and how to report to donors through to determining whether and how to blacklist a staff member or contractor after the investigation.
Seasoned nonprofit federal grant and contract practitioners from the Venable law firm will discuss—and answer your questions about—how to identify and manage some of the greatest areas of risk facing nonprofit grantees of federal funds. This presentation will highlight notable recent activity by suspension and debarment officials involving federal grantees, the increasing need for federal grantees to establish a culture of ethical compliance in their organizations, and what nonprofits can do to get there.
Earlier this summer, the former chief of staff for the Illinois Department of Public Health was sentenced to eight years in federal prison for obstruction of justice and accepting kickbacks or bribes in relation to more than $13 million in federal grants and contracts she awarded. Unfortunately, recent reports such as these are not uncommon, and serve as a stark reminder to nonprofits of the serious consequences of misconduct and malfeasance with federal funds. Further, while this case was rather clear-cut, we take this opportunity to point out that bribes and kickbacks are not always so easy to recognize, sometimes may not strike the average person as being inappropriate at all, and to discuss what you can do to identify hazards and ultimately avoid civil, criminal or administrative consequences for giving bribes or kickbacks—even inadvertently.
As a condition to receiving federal funds, nonprofit federal grant recipients and subrecipients agree to comply with the applicable federal requirements, which include the prudent management of all expenditures. These requirements apply regardless of where the nonprofit federal grantee conducts its operations; however, working abroad presents unique challenges, which can create additional compliance issues. In this month’s newsletter, we discuss some of the most prevalent issues facing nonprofit recipients of federal grants for overseas programs and provide tips for addressing and mitigating such issues and their risks.
As the end of fiscal year 2014 approaches and the beginning of fiscal year 2015 draws near, nonprofit organizations must begin to prepare for the implementation of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (commonly known as the “Super Circular“). One of the Super Circular’s seminal purposes is to curb waste, fraud, and abuse. To that end, the Super Circular seeks to strengthen oversight of federal awards by requiring that federal agencies and pass-through entities obtain disclosures of conflicts of interests from prospective recipients of federal funds. This guidance markedly differs from that of predecessor circulars, particular Circular A-110, in ways that have not been fully clarified.
Working with the federal government can seem intimidating, and it can be. However, there are several simple steps a nonprofit can take to better understand its obligations and avoid allegations of non-compliance, or worse yet, fraud. Join us for a discussion of ten of the most common pitfalls that nonprofits experience when serving as a grant recipient or contractor on behalf of the federal government. Some of these pitfalls include: not knowing the terms and conditions of a grant or contract; misunderstanding the authority and responsibilities of the various contracting officers and their respective representatives; not taking advantage of the advice and input of the government; and keeping accurate and complete records.