Office of Inspector General Guidance:

20 Questions Michael Pritchard, Senior Special Agent

Fara Damelin, Director, Office of Investigations, Legal Division

1: WHO ARE YOU?

• NSF’s Office of Inspector General:

� Office of Investigations: � Special Agents (Federal Law Enforcement Officers) � Investigative Attorneys � Investigative Scientists � Analysts

� Office of Audit

2: WHAT DO YOU DO?

• Investigate allegations of fraud, waste, or abuse involving NSF

• Types of Investigations: � Civil/Criminal � Administrative (including Research Misconduct – Plagiarism, Data Falsification/Fabrication, etc.)

3: WHY SHOULD I LISTEN TO YOU?

• Because it is important for everyone to know the rules • Because SBIR dollars are limited, and less cheaters means more $ for deserving companies • AND, because anybody considering not following the rules should know the consequences!

4: RULES, WHAT RULES?

• You are accountable for requirements set forth in: � The solicitation � Grant conditions � Any other written guidance from NSF’s SBIR/STTR program

• You are held accountable via certifications

5: WHAT ARE CERTIFICATIONS?

• Affirmative statements that the information you are providing is true, and that you will follow, are following, and have followed the various requirements of the program

• The government relies on your certifications when making its decisions, including whether to make an award

• Examples…

Even if correct information has been included in other materials submitted to the Federal government, any action taken with respect to this certification does not affect the Government’s right to pursue criminal, civil or administrative remedies for incorrect or incomplete information given in the certification.

Even if correct information has been included in other materials submitted to the Federal government, any action taken with respect to this certification does not affect the Government’s right to pursue criminal, civil or administrative remedies for incorrect or incomplete information given in the certification.

(1) The principal investigator is/was “primarily employed” by the awardee as defined in the solicitation during the term of the funding agreement, or the awardee has requested and received a written deviation from this requirement from the NSF Program Officer.

(2) All, essentially equivalent work, or a portion of the work performed under this project (check the applicable line): ! Has not been submitted for funding by another Federal agency.

(3) The work is completed and awardee has performed the applicable percentage of work…:

! SBIR Phase I: at least two-thirds (66⅔ %) of the research performed by the awardee.

! STTR Phase I and Phase II: at least 40% of the research performed by the awardee and at least 30% performed by the non-profit research institution.

(4) The work for which payment is hereby requested was performed in accordance with the award terms and conditions and that payment is due and has not been previously requested.

(5) All of the funds committed to this award, including all associated supplemental awards, have been fully expended as designated in the grant budget.

! Yes

! No (Please provide a detailed explanation in the report)

(6) The research/research and development is/was performed in the United States unless a deviation is approved in writing by the NSF Program Officer.

(7) The research/research and development is/was performed at the awardee’s facilities described in the proposal by the awardee’s employees, except as otherwise indicated in the SBIR application and approved in the funding agreement.

(8) ! I will notify NSF immediately if all or a portion of the work proposed is subsequently funded by another Federal agency.

• Read before you sign!

• Ignorance of the rules is no excuse!

6: WHAT HAPPENS IF I FALSELY CERTIFY OR BREAK OTHER AWARD REQUIREMENTS?

• Criminal liability

• Civil liability

• Administrative action

●  Lying in your proposal, report, or emails to NSF

●  Submitting those lies via the internet

●  Submitting those lies via mail/FedEx

●  Submitting lies to get NSF money

●  Using someone’s name, email, or signature without permission

●  Spending NSF money for your personal use

●  Making up records in response to an OIG request

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●  Lying in your proposal, report, or emails to NSF ●  18 U.S.C. § 1001 (false statements)

●  Submitting those lies via the internet ●  18 U.S.C. § 1343 (wire fraud)

●  Submitting those lies via mail/FedEx ●  18 U.S.C. § 1341 (mail fraud)

●  Submitting lies to get NSF money ●  18 U.S.C. § 287 (false claims)

●  Using someone’s name, email or signature without permission ●  18 U.S.C. § 1028A (aggravated identity theft)

●  Spending NSF money for your personal use ●  18 U.S.C. § 641 or 666 (theft)

●  Making up records in response to an OIG request ●  18 U.S.C. § 1519 (falsification of records)

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●  You can go to prison, and have to pay full restitution plus fines ●  Before trial, government can seize assets (bank

accounts, cars, house); after trial, it can keep them if you don’t have enough money to pay restitution

●  If you lie to get an NSF award, you are liable for the total value of that award, even if you perform some work and produce a report.

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●  The False Claims Act ● Treble damages plus a fine of up to $21,563 for each

false claim

●  “False Claims” include false information in the SBIR proposal, the Certification of Current Cost or Pricing Data, the payment requests, and progress reports ●  For example, a false Phase I final report is a false claim for the final

Phase I payment AND for the full Phase II award

●  FCA multiple damages & fines are in addition to criminal sentence and full restitution C

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●  Suspension followed by termination of current awards

●  NSF recovery of funds ●  Program Fraud Civil Remedies Act: double

damages ●  Suspension and Debarment ●  Prohibited from receiving federal awards or working under

someone else’s awards ●  Suspension during investigation and prosecution, then debarment,

generally for 3+ years ●  Debarment is in addition to FCA multiple damages, which are in

addition to criminal sentence and full restitution ●  45 SBIR/STTR awardees (companies and/or individuals) have been

suspended or debarred by NSF in the past 5 years AD

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7: ALL THAT… REALLY?

• Yes.

8: HOW CAN I AVOID ALL THAT?

• Don’t lie. • Don’t steal.

• And, if you are unsure about any of the rules, or if circumstances change:

• Email your PO with all relevant facts,

• Get written guidance from the PO, and

• Follow it.

9: CAN I GET MULTIPLE AGENCIES TO PAY FOR THE SAME WORK?

●  NSF will not make awards that duplicate or substantially overlap research funded by other federal agencies (or anyone else)

●  You must disclose whether your company has:

●  Received awards for related work, or

●  Submitted or intends to submit proposals for similar work to any other program, and…

No!

●  You submit Current and Pending Support (CPS) in your proposals ●  Must provide information about ALL research to which the PI and

other senior personnel either have committed time or plan to commit time, even if that time is not paid for – this includes federal AND non-federal work

●  Intended to show that the PI and senior personnel have time available to perform the proposed research during the grant period

(If you lie about duplicative proposals/awards, you’ll probably have to lie about CPS too)

10: DO I HAVE TO KEEP RECORDS?

●  Document your budget estimates ●  Retain subcontractor/vendor quotations ●  Notify your program officer if circumstances change

●  Post-Award: document your expenditures ●  If any budget items were disapproved upon award, do not spend grant

funds on those items ●  Account for award funds - separately tracked from other funds! ●  Keep good records: receipts, invoices, statements, time records ●  Track your NSF project time separately from other time!

●  Subcontracts or equipment purchases above $5,000 not in approved budget must be pre-approved by NSF before you spend the money

●  Under Phase II, report actual expenditures accurately!

Yes!

Your Award Conditions require:

Keep in mind if you get to Phase II:

● You will undergo a financial capability review where you describe your accounting and timekeeping systems – if NSF does not deem them adequate…no award!

●  In your semiannual progress reports, you will submit milestone and expenditure charts where you provide specific information about progress on tasks, who worked, and how much money you actually spent!

11: CAN’T I BUY WHATEVER – AREN’T THESE FIXED AMOUNT AWARDS?

●  You are responsible for the proper use of funds ●  “NSF anticipates that the full award amount will be paid

without regard to the actual cost subsequently incurred. Payment of this amount, however, is subject to compliance with the award terms and conditions...” ●  “If estimated total expenditures are significantly less than the

award amount, NSF reserves the right to renegotiate the amount of this award.”

●  You can only spend NSF award funds on the project and allowable costs!

●  Your profit is capped by the budget, ≤ 7%

Fixed Amount Award ≠ Free Money

ALLOWABLE COSTS DO NOT INCLUDE: •  Personal credit card debt

•  Vacations

•  Home mortgage payments

•  Childcare bills

•  Your spouse’s speeding tickets

•  A new home

•  Personal investments

•  Personal car repairs and maintenance

•  Jewelry and clothing

Indirect Costs

●  Indirect costs are not a piggybank

●  You can spend your legitimate indirect cost money on any general business expenses not prohibited by the solicitation or grant conditions

●  However, legitimate indirect costs are a percentage of your legitimate direct costs

●  You cannot charge indirect costs on bad direct costs

●  You cannot charge fringe benefits for bad salary charges

Don’t forget, you must certify:

• You can’t check “Yes” if you: � Misspent award funds � Reallocated the budget 5% or more - without NSF

approval!! � Underspent the award

12: DOES MY COMPANY HAVE TO DO ALL OF THE WORK?

●  SBIR: at least two-thirds of the work must be performed by the grantee company

●  STTR: at least 40% of the work must be performed by the grantee company

●  Work performed in a university lab is NOT performed by the grantee company – even if it is performed by the PI – unless there is a formal agreement in place!

13: MY COMPANY PI - WORKS 20 HOURS PER WEEK SOMEWHERE ELSE… IS NOT ELIGIBLE TO WORK IN THE U.S. UNTIL HALFWAY THROUGH THE AWARD PERIOD… WANTS TO BE PAID AS A 1099… IS THAT OK?

●  The PI’s primary employment must be with the small business at the time of award, and throughout the award period

●  “Primary employment is defined as 51% employed by the small business. NSF considers a full time work week to be normally 40 hours and considers employment elsewhere of greater than 19.6 hours to be in conflict with this requirement.”

●  Change of PI requires advance written request via FastLane and approval by NSF

No!

14: CAN I REUSE MY OLD LETTERS OF SUPPORT?

No! ●  Letters of support should refer to a specific proposal,

and should typically be dated

●  If we contact the support letter writer, he/she should be reachable at the contact address provided, and be aware that they supported the proposal where their letter appeared

●  Fabricated letters of support, or letters modified without the signatory’s knowledge or consent, are false statements

15: DO PEOPLE REALLY GET IN TROUBLE FOR LYING AND STEALING?

Yes! •  In fact, in the past 5+ years, NSF

OIG SBIR/STTR cases have resulted in 16 convictions, 12 civil settlements, and over $10 million in recovered funds

16: DO YOU HAVE EXAMPLES?

ATRC, Inc. ●  Owner of small business used STTR funds for personal

expenses, such as mortgage payments and credit card debt

●  Submitted $100,000 in checks to NSF to prove outside investment, to obtain Phase IB supplement, which he never intended to cash—and he didn’t: we found the checks when we executed a search warrant

●  PI was a full time university professor with a DoD grant, under which he arranged stipend payments to students and required them to repay most of the money to him

●  When we first asked for T&E records, he created false ones

ATRC, Inc. ●  Convicted of: ●  Wire Fraud ●  Mail Fraud ●  Theft ●  Falsification of Records

●  Sentenced to:

●  Three years in prison ●  Followed by three years supervised release ●  $105K restitution

17: ANY OTHERS?

Agiltron, Inc. ●  Civil case, where the government alleged:

●  Agiltron and its President engaged in a scheme in which they directed and allowed employees to charge labor hours to multiple SBIR/STTR awards, even when those hours did not correspond with the employees’ actual time and effort. They also directed and allowed employees to alter their completed timesheets, with the goal of maximizing charges to each grant or contract.

Agiltron, Inc.

● The company and its president did not admit wrongdoing, but agreed to pay $2.25 million to resolve the allegations

18: ONE MORE?

SPRC/Fractal Systems, Inc. ●  A husband and wife team used two companies to

fraudulently obtain over $10 million in SBIR awards by:

●  Submitting fabricated and altered letters of support

●  Lying about their company facilities

●  Lying about the PI’s primary employment for some awards

●  During the investigation they falsified records, including timesheets, in response to an OIG request

SPRC/Fractal Systems, Inc. ●  Convicted of: ●  Conspiracy ●  Wire Fraud ●  Aggravated Identity Theft ●  Falsification of Records

●  Sentenced to: ●  13 and 15 years imprisonment ●  $10.6 million money judgment ●  $10.6 million in restitution

19: ANY PARTING DO’S AND DON’TS?

DO: ●  Include only truthful information in proposals re: company

size, facilities, personnel, consultants, subawards, supporters, etc.

●  Include only truthful certifications as to eligibility requirements at each phase of the award, from proposal to reports.

●  Read the applicable rules. You are responsible for following them and are required to certify on multiple occasions that you have done so.

●  Make sure that your Current and Pending Support is up to date and includes ALL federal and non-federal projects to which key personnel are assigned.

DO: ●  Make sure you fit SBA’s definition of a small business (U.S.

ownership, <500 employees).

●  In Phase II, maintain the accounting system and timekeeping system you indicated you had when you got the award.

●  Make sure your Phase II milestone and expenditure charts are accurate and supported by accounting and timekeeping records.

●  Get written advice from your program director and grants manager if you have any questions…and follow their advice!!

DON’T:

●  Certify to things you aren’t sure about (or know to be false).

●  Make up bios or publications for people in your proposals.

●  Plagiarize, fabricate, or falsify text or figures in proposals or reports.

●  Describe facilities or equipment or employees in your proposals that you don’t have.

DON’T:

●  Alter or fabricate letters of support for your proposals.

●  Pretend to be someone else in emails to NSF.

●  Create and backdate timesheets, or fabricate fake accounting documents in response to an IG subpoena or request for information.

●  Use award funds for personal expenses (except for allowed profit, and legitimately earned salary).

20: WHO ARE YOU AGAIN AND HOW DO I REACH YOU?

Michael Pritchard, Senior Special Agent

mpritcha@nsf.gov

703-292-7533

Fara Damelin, Director, Office of Investigations, Legal Division

fdamelin@nsf.gov

703-292-8873