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Fraud, Waste and Abuse of FDA Grants/Grant Funds

Any individual who becomes aware of the existence or apparent existence of fraud, waste or abuse as it relates to FDA grants or grant funds should contact:

  • Your institution’s Office of Sponsored Programs or other responsible office.
  • The FDA CGMO listed in the NoA.

In addition, allegations of criminal offenses should be reported to the Department of Health and Human Services, OIG Hotline.

The OIG has authority within HHS to conduct criminal investigations.  The HHS OIG maintains a post office box and a toll-free hotline for receiving information from individuals concerning fraud, waste or abuse under HHS grants and cooperative agreements.  The identity of the caller is kept confidential, and callers are not required to give their names.  

Further allegations of non-criminal misuse of grant funds and recipient conflict of interest should be reported to the FDA Grants Office.
Examples of fraud, waste, and abuse that should be reported include, but are not limited to, embezzlement, misuse, or misappropriation of grant funds or property, and false statements, whether by organizations or individuals. Other examples include theft of grant funds for personal use; using funds for non-grant-related purposes; theft of federally owned property or property acquired or leased under a grant; charging the Federal government for the services of "ghost" individuals; charging inflated building rental fees for a building owned by the recipient; submitting false financial reports; and submitting false financial data in bids submitted to the recipient (for eventual payment under the grant).

The Federal government may pursue administrative, civil, or criminal action under a variety of statutes relating to fraud and making false statement or claims. Part II includes administrative and other remedies the Federal government may use if a recipient deliberately withholds information or submits fraudulent information or does not comply with applicable requirements. Even if a grant is not awarded, the applicant may be subject to penalties if the information contained in or submitted as part of an application, including its certifications and assurances, is found to be false, fictitious, or fraudulent.

The Program Fraud Civil Remedies Act of 1986, 31 U.S.C. 3801 et seq., provides for the administrative imposition by HHS of civil penalties and assessments against any person who knowingly makes false, fictitious, or fraudulent claims to the Federal government for money, including money representing grants, loans, or benefits. A civil penalty of not more than $5,500 may be assessed for each such claim. If a grant is awarded and payment is made on a false or fraudulent claim, an assessment of not more than twice the amount of the claim, up to $150,000, may be made in lieu of damages. Regulations established by HHS at 45 CFR Part 79 specify the review process for imposing civil penalties and assessments, including hearing and appeal rights.

The Criminal False Claims Act, 18 U.S.C. 287, and 18 U.S.C. 1001, provides for criminal prosecution of a person who knowingly makes or presents any false, fictitious, or fraudulent statements or representations or claims against the United States. Violations of these statutes carry a maximum sentence of five and eight years imprisonment, respectively.

The Civil False Claims Act, 31 U.S.C. 3729(a), provides for imposition of penalties and damages by the United States, through civil litigation, against any person who knowingly makes a false or fraudulent claim for payment, makes or uses a false record or false statement to get a false claim paid or approved, or conspires to defraud the Federal government to get a false claim paid. A "claim" includes any request or demand for money or property made to the United States or to a contractor, recipient, or other recipient, if the Federal government provides or will reimburse any portion of the funds claimed. Civil penalties of $5,500 to $11,000 may be imposed for each false claim, plus damages of up to three times the amount of the damages the government sustains because of the violation, and the costs of any civil action brought to recover such penalties and damages.
NIH also may administratively recover misspent grant funds pursuant to the authorities contained in 2 CFR Part 200.

1 ABOUT FRAUD – FDA GRANTS MONITORING MANUAL
 

1.1 DEFINITION

Section 75.435, paragraph (a)(3) of 45 CFR 75:
Fraud means:

  • Acts of fraud or corruption or attempts to defraud the Federal Government or to corrupt its agents,
  • Acts that constitute a cause for debarment or suspension (as specified in agency regulations), and
  • Acts which violate the False Claims Act (31 U.S.C. 3729-3732) or the Anti-kickback Act (41 U.S.C. 1320a-7b(b)).

1.2 RED FLAGS

1.2.1 Misuse of grant funds

  • Grant funds drawn down in excess of actual needs
  • Grant funds drawn down well before end of year
  • Using Federal funds for non‐grant expenditures
  • Consistently late financial reports
  • Making expenditures without grant approval (i.e., budgeted)
  • Charging non‐approved staff salary to grant
  • Payments to family members
  • Payments for personal expenditures

1.2.2 Embezzlement

  • Not allowing access to the records
  • Lack of documentation for payment of invoices
  • Double payments
  • Ghost employees
  • Payments to family members
  • Boilerplate reports/receipts
  • Checks being made out to cash

1.2.3 False Statements

  • Consistently late progress reports
  • Consistently late financial reports
  • Lack of documentation
  • Numerous versions/submissions

1.2.4 Theft

  • Lack of controls on petty cash (no receipts for expenditures)
  • Checks being made out to cash
  • Payments for personal expenditures
  • No inventory controls
  • Purchasing item not used by organization

1.2.5 Timesheet Fraud

  • None or missing signatures
  • Approval signatures by unauthorized individuals
  • Claimed 100% to grant, but working on non‐grant projects
  • Hours claimed don’t match service performed
  • Holiday/weekend hours recorded when site is closed
  • Alteration and obliterations (whiteout/eraser marks)

1.3 HANDLING

While some red flags are probably errors or mistakes (for example, an unsigned timesheet), some other are clearly violations (payments for personal expenses, payments to family members). GMOs uses professional judgement to decide to:

  • Review additional transactions and supporting documents, or
  • Report to the CGMO and request permission to conduct desk review, or
  • Report to the CGMO and request permission to conduct site visit, or
  • Report to the CGMO and recommend the case to the OIG for further investigation

Please note: FDA may also administratively recover misspent grant funds pursuant to the authorities contained in 2 CFR Part 200.

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