Sneak Preview: LSC OIG Alert Calls for Effective Conflict of Interest Policies

June 12, 2015 | By Jerry Ashworth | Post a Comment

xsass_bookshot(The following was excerpted from a recent article in the Single Audit Information Service.) The Legal Services Corporation (LSC), Office of Inspector General (OIG) recently issued a fraud alert advisory to its grant recipients encouraging them to develop conflict of interest policies that prohibit related party transactions and protect them from any potential charges of impropriety.

Under the general procurement provisions in the Office of Management and Budget’s (OMB’s) uniform grant guidance, nonfederal entities must maintain written standards of conduct covering conflicts of interest that govern the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer or agent may participate in the selection, award or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest (§200.318(c)). In addition, nonfederal entities must establish and maintain effective internal control over federal awards that provide reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations and the terms and conditions of the award (§200.303).

The advisory stems from recent OIG investigations in which grant recipient executive directors and fiscal offices have entered into related party transactions with family members, friends and associates, thereby creating conflicts of interest. Such transactions are those in which an employee conducts business with a related party (e.g., immediate family, friend, etc.) that has a financial or material interest. Prior business relationships or former client/employee relationships can also qualify individuals as related parties, the OIG said.

For example, the advisory cited a recent OIG investigation found that an executive director for a subrecipient of LSC funds entered into a secret contract with her husband for janitorial services at an inflated cost. Using a fictitious business name, the subrecipient paid 66 percent more for janitorial services than the local going rate. The executive director issued 48 checks to her husband’s fictitious business totaling nearly $47,000.

(The full version of this story has now been made available to all for a limited time on Thompson’s Grants Compliance Expert site).

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