The Fraud Examiner

The Challenge of Material False Statements in Grant Fraud
 

Ken Dieffenbach, CFE

Assistant Special Agent in Charge, U.S. Department of Justice, Office of the Inspector General

As outlined in the May/June 2019 edition of Fraud Magazine, U.S. government grants annually provide more than $700 billion in funding that impacts every aspect of society. Additionally, private foundations and other entities provide substantial grant funding in a variety of areas.

No matter the funding source, grants are one of the most potent and commonly used tools to shape society and improve lives. However, these dollars carry with them traditional fraud risks, including conflicts of interest, material false statements (aka “lying” or failing to support claims) and theft — as well as unique issues such as commingling and research misconduct. To compound these challenges, the outcomes of many grant awards are sometimes hard to objectively measure and the oversight mechanisms common in contracts are often not present, or at times less effective, in a typical grant program.

One of the more persistent and common grant fraud challenges is fraudsters “lying” or failing to support claims. At its core, a grant agreement is essentially a legally binding contract, and grantees are obligated to act with integrity when applying for grant funds and reporting on the actual use of their award and their accomplishments. 

Grantees are also obligated to properly track the use of funds, maintain adequate supporting documentation and abide by all requirements and conditions of the award. The typical issues in this area include:


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