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Section 4: Fraud Prevention

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Investigations by the Federal Office of the Inspector General (OIG) and National Highway Traffic Safety Administration (NHTSA) have detected cases of fraud involving some subgrantees receiving federal highway safety grant funds. A comprehensive monitoring program is one of the most effective ways to prevent fraud. Such a program includes the elements outlined in Sections 1-3 of this chapter. Sufficient management oversight is essential to ensure that the monitoring program is fully implemented. On-site monitoring of grants that include personnel services is essential.

NOTE: Personnel services grants, including Selective Traffic Enforcement Program (STEP) grants that include law enforcement overtime and grants containing subcontracts, have been identified as high risk for fraud. These grants require strong internal supervision by the subgrantee and extra attention/supervision by the TxDOT Traffic Operations Division - Traffic Safety Section (TRF-TS).

Based on the results of investigations conducted in Texas and other states, the OIG, NHTSA and the Governors Highway Safety Association (GHSA) have compiled the following information to assist State Highway Safety Offices (SHSOs) in communicating with subgrantees, implementing safeguards, monitoring, and taking action when fraud is detected (See the OIG Memo, May 21, 2012).

Identification of High Risk Grants and Activities

To distinguish grants that may be considered high risk, the Project Manager should:

  • identify law enforcement and other types of grants which contain claims for personnel services that require special attention to detect fraud
  • closely examine and compare personnel log sheets to actual activity documentation (such as date and time worked as recorded on paper tickets and time reports) to ensure that only actual time worked on grant-funded, approved activities is submitted for reimbursement, and
  • ensure that only approved hourly rates for subcontractors and vendors are charged to the grant, and that legitimate original invoices from subcontractors and vendors for actual work completed are available for examination.

Recognition of Risk Factors for Personnel Services Grants

The Project Manager should become familiar with any of the following warning signs that may indicate subgrantee noncompliance or fraudulent activities:

  • lack of communication of specific and clear benchmarks, goals and deliverables for enforcement and other contracts
  • lack of training for supervisors and officers to emphasize unique conditions of grant programs
  • lack of supervision of grant procedures during overtime patrols, time and attendance quality checks, and use of paper forms.

Incorporation of Prevention Strategies into Policies and Monitoring Practices

The following prevention strategies can be incorporated into monitoring practices to help eliminate noncompliance and fraudulent activities:

  • Provide specific pre-award guidance to subgrantees to explain the federal requirements and discuss the need for their own internal control systems.
  • Require subgrantees to submit their policy/internal controls to certify compliance with generally accepted practices. Questions to ask include:
    • Do supervisors sign off on completed work?
    • Do officers check in and out of shifts with a supervisor or dispatch?
    • Do supervisors conduct reviews and spot checks of officer records?
    • Are work schedules prepared in advance?
    • Do managers have access to Global Positioning System (GPS) records or other location records for patrol vehicles?
  • Review original documents (not copies) at the subgrantee or third-party subcontract level and ask the following questions:
    • Could an officer falsify elements like date and time of the violation?
    • Are records retained for review?
  • When conducting on-site monitoring, oversample vouchers.
  • Establish clear performance benchmarks and expectations.
  • Develop an action plan to follow when possible fraud is detected.
  • Use TxDOT auditors to randomly audit selected subgrantees and follow up on fraud allegations.
  • Document and disseminate information on identified cases of fraud and the consequences to law enforcement officers, project personnel, and their departments as a deterrent.

Preventive Oversight for Law Enforcement Agencies

Law enforcement agencies should take the following actions to effectively prevent fraudulent activities.

  • Build supervision into the grant project.
  • Develop and implement an enforcement or project action plan based on the data.
  • Utilize GPS units on patrol vehicles.
  • Use log sheets or Personal Activity Reports (PARs) to verify actual hours worked on shifts.
  • Provide training, including refresher roll call reviews of expectations, and ask the following questions:
    • Are officers informed about requirements and expectations?
    • Are veteran officers asked to complete refresher training?
    • Do managers have adequate training on grant administration?
    • Is there any emphasis placed on detecting fraud or conducting periodic reviews?
    • Are training records maintained?
  • Review the type of ticketing system. Automated systems are less likely to be subject to fraudulent activities than hand-written paper citations.

TRF Review and Actions

All the above information and questions under “Preventative Oversight for Law Enforcement Agencies” have been incorporated into a comprehensive STEP On-Site Monitoring Checklist. This checklist is required to document a Project Manager’s on-site compliance monitoring visit of a STEP site. The checklist can be accessed by viewing a STEP subgrantee’s grant in eGrants. The checklist, under “Subgrantee Monitoring,” can be found under “Examine Related Items.”

To complete the STEP on-site monitoring checklist, follow the steps listed below:

  1. Select “Create New” to create a Monitoring Report.
  2. Under “View, Edit and Complete Forms,” select “On-site Monitoring” (eGrants will automatically pull up the STEP Monitoring Checklist if the “Create New” Monitoring Report is initiated while in a STEP grant).
  3. Complete and save all on-site monitoring forms.
  4. Add additional information and/or attachments by opening and completing the applicable Attachments form page.
  5. Click on “Change the Status” to change the status of the on-site monitoring report to “Subgrantee Monitoring Submitted.”

NOTE: Once the status has been changed to “Subgrantee Monitoring Submitted,” the subgrantee will be able to view the monitoring report.

TRF Compliance Monitoring

It is TRF-TS’s responsibility to monitor TxDOT federally-funded traffic safety grant agreements and project files of record in order to review compliance with TxDOT’s established project management procedures, and with other state and federal regulations and laws.

TxDOT compliance responsibilities include the Project Manager’s monitoring responsibilities outlined in Sections 1-3 of this chapter. To assist TxDOT in its oversight efforts, TRF will provide an additional level of monitoring and oversight of TRF-TS-managed grants that will assist in the prevention of program mismanagement and fraud. The TRF Compliance Monitor will provide desk reviews of selected projects through the eGrants system. The TRF Compliance Monitor has full access to all files in eGrants, and therefore, can view all projects along with all attached documentation. The TRF Compliance Monitor will review, at a minimum, 10% of the total TRF-TS traffic safety projects for a year.

These periodic program area monitoring reviews help provide operational consistency, ensure that laws and regulations are followed, and that programs and resources are protected from waste, fraud and mismanagement. All subgrantees must be treated fairly and the TRF Compliance Monitor should be watchful for lengthy relationships between subgrantees and the Project Manager which might imply or result in favored treatment. Projects to be reviewed, by program area, will be selected based on the criteria identified below.

In addition to TxDOT’s normal compliance monitoring and management review function, TRF assists Project Managers with procedural compliance and provides appropriate assistance and training.

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To determine the need and frequency of program compliance monitoring reviews, TRF uses a risk assessment process. This process focuses on the following risk factors:

  • the program’s total number of grants
  • the program’s total dollar amount in grants
  • past performance history (eGrants grading system)
  • use of subcontractors
  • size and complexity of project
  • personnel costs (high risk factor)
  • equipment purchase with a value over a specified amount
  • new subgrantees to Traffic Safety
  • potential program income
  • Project Manager request
  • receipt by TRF of adverse audit findings or other adverse information, and
  • a stated combination of frequency and risk factors.

Identifying these risk factors allows the prioritization of grants within TRF-TS program areas representing the greatest need for compliance monitoring, which helps TRF better allocate its resources.

For program areas with a large number of projects, multiple projects may be considered for desk reviews during the year.

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Advance Preparation

Prior to each program area desk monitoring review, the TxDOT TRF Compliance Monitor will:

  • review the list of projects (based on the risk assessment) that have the highest priority
  • determine the list of projects to be reviewed, and
  • notify the Project Manager that his/her project will be reviewed and provide a timeline for the review.
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Review of Project Files

The TxDOT TRF Compliance Monitor will review the contents of grant files for selected projects managed by the TRF-TS Project Manager. Items to be reviewed include:

  • the copy of the signed grant agreement with all required pages, attachments, any amendments, transmittal correspondence, and jurisdiction ordinance or resolution, if appropriate
  • the use of subcontractors
  • the completed grant delivery form
  • on-site monitoring checklists and reports
  • project Performance Reports (to review progress toward objectives and performance measures)
  • RFRs with appropriate backup and/or source documentation (to review status and appropriateness of expenditures)
  • necessary pre-approvals (supplemental approvals)
  • copies of all required documents
  • timely submission of accurate and complete reports
  • time frame of Project Manager review and approval of submitted Performance Reports and RFRs
  • Project Manager review and comments on Project Grading activities for monthly Performance Reports and RFRs
  • traffic safety federally-funded equipment inventory
  • promotional materials directly related to project objective and inventory
  • program income
  • routine correspondence and other records of communication between the Project Manager and the subgrantee organization
  • professional development, training, and assistance needs
  • exemplary projects and best practices (from contacts and reports), and
  • any warning signs.

The TRF Compliance Monitor may contact the Project Manager for any needed assistance during the review, or if there are any problem areas that require detailed scrutiny or questioning.

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Post Review Process

Following the desk review of selected projects, the TRF Compliance Monitor will:

  • complete the desk review compliance monitoring report form in eGrants for each project file reviewed
  • identify the criteria for citing any discrepancies found and potential actions to be taken for acceptable resolution
  • establish a deadline for completion of corrections
  • submit the completed monitoring report in eGrants to the TRF-TS Section Director for review and approval. The TRF-TS Section Director will then disseminate the report to the appropriate TxDOT personnel.

If the TRF Compliance Monitor’s desk review identifies any adverse or severe issues, then a request may be made to the subgrantee to schedule an on-site compliance review with the appropriate Project Manager. The Project Manager will set up all on-site monitoring visits of selected projects. The TRF Compliance Monitor and key subgrantee project management and fiscal staff should attend these reviews. If possible, project activity will also be observed, such as enforcement efforts, ongoing classroom or field training activity, or project personnel performing project-related activities.

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On-Site Monitoring Documentation

If an on-site monitoring visit is conducted, the Project Manager will document the review by completing all applicable on-going monitoring form pages and creating a monitoring report in eGrants (See Section 3 of this chapter.).

The subgrantee is expected to respond in writing within 30 business days to the items identified in the report, with specific actions to be taken and dates.

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