Fraud Reporting Requirements: A Guide for Federal Program Participants and Auditors
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Fraud Reporting Requirements: A Guide for Federal Program Participants and Auditors, from the U.S. Department of Education Office of Inspector General. It identifies its target audience as grantees and subgrantees receiving Department funding and the auditors who oversee those funds. It states that the guide summarizes the fraud reporting requirements most relevant to entities receiving pandemic relief funds and their auditors. It states that stakeholders raised questions about how and when to report fraud during OIG outreach focused on identifying fraud indicators and best practices.
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“Fraud Reporting Requirements: A Guide for Federal Program Participants and Auditors.”
Original at oig.ed.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/fraud-reporting-requirements/
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Fraud Reporting
Requirements
A Guide for Federal Program
Participants and Auditors
U.S. Department of Education Office of Inspector General
Target Audience
Grantees and subgrantees receiving U.S. Department of
Education (Department) funding, and auditors who oversee
those funds.
Purpose
This guide summarizes the fraud reporting requirements
most relevant to entities receiving pandemic relief funds and
auditors of those entities. The Office of Inspector General (OIG)
has been conducting outreach with Department stakeholders
focused on identifying fraud indicators and best practices in
Federal education programs. In the course of our outreach,
stakeholders have raised questions about how and when to
report fraud. Therefore, we felt it was important to highlight
the fraud reporting requirements for grantees receiving Federal
education funds and their auditors.
Grant recipients and auditors should also review all laws, regulations, contracts or grant agreements, standards, and
guidance applicable to them to determine whether they have a professional or legal responsibility to report the
occurrence or suspicion of fraud.
Contents
Select a button below to learn more.
Fraud Reporting for Fraud Reporting
Background How to Report Fraud
Grantees and Subgrantees for Auditors
U. S. Department of Education Office of Inspector General i
Fraud Reporting for Fraud Reporting
Background How to Report Fraud
Grantees and Subgrantees for Auditors
Background
The OIG, as the independent oversight arm of the Department,
is responsible for protecting the integrity of Federal education
programs administered by the Department, ensuring vital
funds are used for allowable and intended purposes and in
accordance with all applicable requirements. The OIG relies
on entities that participate in Department programs and their
auditors to be alert to opportunities for fraud involving those
programs.
There has been a significant increase in grant funds for new
and existing programs from pandemic relief laws passed by
Congress. Most significant to the Department is the Education
Stabilization Fund, which provided the Department with more
than $280 billion to assist States, elementary and secondary
schools, institutions of higher education, and other education-related entities in meeting their needs and the needs
of students impacted by the coronavirus pandemic. The following graphic describes the primary types of assistance
established under the Education Stabilization Fund and the amount of funds for each.
U.S. Department of Education Office of Inspector General 1
Education Stabilization
Fund Snapshot
Funded through the CARES Act, the Coronavirus Response and Relief Supplemental Appropriations Act, and the American Rescue Plan
$4.26 $190 $76.2 $5.5
billion billion billion billion
Governor’s Emergency Elementary and Secondary Higher Education Emergency Emergency Assistance
Education Relief Fund School Emergency Relief Fund Relief Fund to Nonpublic Schools
Awarded To: Governor’s Awarded To: State educational Awarded To: IHEs Awarded To: Awarded
offices to provide to local agencies to provide to LEAs and to Governor’s offices
Purpose: Assist students affected
educational agencies charter schools that are LEAs ($2.75 million from
by the coronavirus pandemic with
(LEAs), institutions of higher Governor’s Emergency
Purpose: A wide range of activities, expenses such as food, housing,
education (IHEs), or other Education Relief Fund)
including purchasing and using technology, healthcare, childcare,
education-related entities
technology for online learning, and course materials; help Historically Purpose: Provide services
the Governor deems
coordinating efforts with public health Black Colleges and Universities and or assistance to nonpublic
essential
departments, addressing the needs of Minority Serving Institutions to cover schools that enroll a
Purpose: Support efforts disadvantaged student populations, expenses related to closures and significant percentage of
to provide educational planning for school closures, purchas- transitions to distance education, and low-income students and
services to students and to ing cleaning supplies, providing mental help institutions of higher education are most impacted by the
support ongoing operations. health services, and implementing cover lost revenue, technology, or pandemic. Learn more.
Learn more. summer learning and supplemental other expenses related to the cost of
after-school programs. Learn more. attendance. Learn more.
Fraud Reporting for Fraud Reporting
Background How to Report Fraud
Grantees and Subgrantees for Auditors
Fraud Reporting for Grantees and Subgrantees
Grantees and subgrantees carrying out Department awards are subject to 2 Code of Federal Regulations (C.F.R.)
Part 200, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (Uniform
Guidance). The Uniform Guidance discusses responsibilities for reporting fraud.
Uniform Guidance Requirements
• Recipients, subrecipients, and applicants for a Federal award must disclose, timely and in writing to the Federal
award agency or pass-through entity, all violations of Federal criminal law involving fraud, bribery, or gratuity
violations potentially affecting the Federal award. (2 C.F.R. § 200.113)
• If the recipient’s or subrecipient’s total value of currently active grants, cooperative agreements, and procurement
contracts from all Federal agencies exceeds $10 million, it must also report certain civil, criminal, or administrative
proceedings to the System for Award Management.
• A recipient, subrecipient, or applicant that fails to make these disclosures may be subject to remedies such as the
withholding of cash payments or further Federal awards, suspension or termination of the award, and suspension
or debarment from Federal assistance programs or activities.
Many entities receiving Education Stabilization Fund awards also receive funds under Title IV of the Higher Education
Act of 1965, as amended (Title IV, HEA), or the Elementary and Secondary Education Act of 1965, as amended, (ESEA).
U.S. Department of Education Office of Inspector General 3
Fraud Reporting for Fraud Reporting
Background How to Report Fraud
Grantees and Subgrantees for Auditors
Title IV HEA Requirements
• Institutions of higher education that enter into a Program
Participation Agreement with the Department agree to refer
to the OIG Investigation Services any credible information
indicating possible fraud related to Title IV program funds that
an applicant, employee, third-party servicer, or other agent
of the institution may have engaged in. (34 C.F.R. § 668.16(g))
ESEA Requirements
• Recipients of a grant or subgrant under the ESEA must display
OIG’s hotline contact information so that any individual who
observes, detects, or suspects improper use of taxpayer
funds can easily report such improper use. (Section 9203
of the Every Student Succeeds Act, which amended the
ESEA in 2015)
U.S. Department of Education Office of Inspector General 4
Fraud Reporting for Fraud Reporting
Background How to Report Fraud
Grantees and Subgrantees for Auditors
Fraud Reporting for Auditors
Auditors should respond appropriately to fraud or suspected fraud identified during the engagement. Although the
auditor may suspect fraud or identify indicators of fraud, the auditor does not make legal determinations of whether
fraud has occurred. Therefore, it is important that auditors refer indications of fraud to the proper authorities.
Fraud reporting requirements for auditors depend on the type of engagement being performed and the standards
under which the engagement is performed. Audits of States, elementary and secondary schools, and public or private
nonprofit institutions of higher education are performed in accordance with standards for financial audits. Audits
of for-profit institutions of higher education receiving Higher Education Emergency Relief Fund (HEERF) grants are
performed in accordance with attestation standards for examination engagements.
Government Auditing Standards
The standards applicable to financial audits and examination engagements found in Government Auditing Standards
address communicating and reporting on internal control, compliance, and fraud. Below we have summarized those
requirements applicable to fraud reporting.
• Investigations or Legal Proceedings. Auditors may be required to communicate indications of certain types of
fraud to law enforcement or investigatory authorities. However, auditors should avoid interference with investigations
or legal proceedings when pursuing indications of fraud. Withdrawing from or deferring further work to avoid
interference may be appropriate. (6.13–6.14 and 7.15–7.16)
• Reporting on Instances Fraud. When auditors identify or suspect fraud that is material, they should include
relevant information in their report on internal control or compliance or their examination report. If the fraud is less
than material but warrants the attention of those charged with governance, auditors should communicate relevant
information about the fraud in writing to the audited entity officials. Auditors may consult with authorities or legal
counsel about whether publicly reporting such information would compromise investigative or legal proceedings
U.S. Department of Education Office of Inspector General 5
Fraud Reporting for Fraud Reporting
Background How to Report Fraud
Grantees and Subgrantees for Auditors
and may limit their public reporting to matters that would not
compromise those proceedings. (6.41, 6.44, 6.49 and 7.44-7.47)
• Direct Fraud Reporting to Parties Outside the Audited
Entity. Even if the auditor has resigned or been dismissed from
the audit or engagement before its completion, the auditor should
report identified or suspected fraud directly to parties outside the
audited entity in two circumstances:
• when audited entity management fails to satisfy legal or
regulatory requirements to report fraud to external parties or
• when audited entity management fails to take timely and
appropriate steps to respond to fraud that is likely to have a
material effect on the subject matter and involves funding
received directly or indirectly from a government agency.
Before reporting to outside parties, the auditor should first
communicate these circumstances to those charged with
governance. (6.53–6.56 and 7.51–7.54)
Generally Accepted Auditing Standards
Auditing standards generally accepted in the United States of America are codified in the AU-C sections of the
American Institute of Certified Public Accountants (AICPA) Professional Standards. “Consideration of Fraud in a
Financial Statement Audit,” AU-C section 240, addresses the auditor’s responsibilities relating to fraud in a financial
statement audit. The appendix to “Compliance Audits,” AU-C section 935, indicates that most of the AU-C section 240
requirements also apply to compliance audits. These sections address the following considerations related to fraud
reporting during a financial statement audit or compliance audit.
• Communications to Management and Those Charged with Governance. Auditors identify fraud or indicators
of fraud should timely communicate these matters to the appropriate level of management. Auditors should use
professional judgment to determine the appropriate level of management for reporting, but ordinarily it is at
least one level above the person who appears to be involved with the suspected fraud. Auditors identifying or
U.S. Department of Education Office of Inspector General 6
Fraud Reporting for Fraud Reporting
Background How to Report Fraud
Grantees and Subgrantees for Auditors
suspecting fraud involving management, employees with significant roles in internal control, or others when the
fraud is material, should timely communicate these matters, or any others matters related to fraud that the auditor
considers relevant, to those charged with governance. (AU‑C § 240.39–41 and 240.A68)
• Communication to Regulatory and Enforcement Authorities. If auditors have identified or suspected fraud,
they should determine whether they have a professional or legal responsibility to report the occurrence or
suspicion to a party outside the entity. Although the auditor’s professional duty to maintain the confidentiality of
client information may preclude such reporting, the auditor’s legal responsibilities, especially those requirements
of audits of entities that receive government financial assistance, may override the duty of confidentiality in some
circumstances. The auditor may consider it appropriate to seek legal advice when determining the appropriate
course of action, including the possibility of reporting to regulators or others. (AU-C § 240.38, 240.42, 240.A66,
and 240.A73–A74)
Attestation Standards
Attestation standards established by the AICPA, including those applicable to examination engagements of for-profit
institutions of higher education receiving HEERF grants, are codified in AT-C sections of AICPA’s Professional Standards.
• Practitioners should respond appropriately to fraud or suspected fraud identified during an examination engagement.
(AT-C § 205.33)
• Examples of possible appropriate actions include discussing the matter with appropriate parties, obtaining legal
advice about the consequences of different courses of action, and communicating with third parties including
regulators, among others. (AT-C § 205.A29)
• Practitioners should communicate fraud or suspected fraud identified during the engagement to the responsible
party or to the engaging party when the engaging party is not the responsible party. (AT-C § 205.85)
Uniform Guidance
Auditors performing single audits in accordance with Subpart F of the Uniform Guidance must report known or likely
fraud affecting a Federal award as an audit finding, unless the fraud was reported outside the auditor’s report under
the direct reporting requirements of Government Auditing Standards, as discussed above. However, the auditor is not
required to publicly report information that could compromise investigative or legal proceedings. (2 C.F.R. § 200.516)
U.S. Department of Education Office of Inspector General 7
Fraud Reporting for Fraud Reporting
Background How to Report Fraud
Grantees and Subgrantees for Auditors
OIG Audit Guides
Examination engagements of for-profit institutions of higher education spending HEERF grants
are performed in accordance with the “Guide for Compliance Attestation Engagements of
Proprietary Schools Expending Higher Education Emergency Relief Fund Grants,” developed
by the OIG. This audit guide requires auditors to immediately report to OIG’s Investigation
Services when they detect indications of fraud related to HEERF funds or situations where the
auditor learned that management identified possible fraud related to HEERF funds and failed
to report the possible fraud as required. After reporting, the auditor is required to prepare
a separate written report concerning the fraud or fraud indicators. The report should be
submitted to OIG’s Investigation Services no more than 30 days after discovery of the act. The
separate written report should not be submitted with the audit or examination report, and
the contents of the report should not be reflected in the audit or examination report, unless
OIG Investigation Services has advised the auditor that they may do so.
U.S. Department of Education Office of Inspector General 8
Fraud Reporting for Fraud Reporting
Background How to Report Fraud
Grantees and Subgrantees for Auditors
How to Report Fraud
Help Us Identify and Stop Coronavirus Response Fraud
We all have a responsibility to help deter fraud, waste, and abuse and report it when
discovered. If you suspect fraud or something that could be fraud, report it to OIG’s
Investigation Services. Working together is the best way to stop those who seek to
enrich themselves with pandemic relief funds. Together, we can help ensure that this
funding is used as intended: helping our nation’s schools and students impacted by the
coronavirus pandemic.
More Resources Report Allegations of Fraud or Other Criminal Activity to
Check out these brochures with Our Hotline
more information on identifying and
reporting fraud to the OIG. You may report identified or suspected fraud on our website at http://oighotline.ed.gov.
You may also call toll-free or write the Office of Inspector General.
• Info for student aid administrators
• Info for Governors’ offices, State Inspector General Hotline Inspector General Hotline
educational agencies, and local 1-800-MISUSED U.S. Department of Education
educational agencies (1-800-647-8733) Office of Inspector General
400 Maryland Ave., S.W.
Washington, D.C. 20202
Click Here to Report
Fraud to Our Hotline
U.S. Department of Education Office of Inspector General 9
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