FRAUDCAST: OMB Uniform Guidance Revision & EPA Grant Terms and Conditions Update TRANSCRIPT KELLYJUNE: Hello and thank you for tuning into the 2nd Fraudcast by the U.S. Environmental Protection Agency Office of Inspector General. I’m KellyJune spokesperson for the EPA OIG. In February of this year our inspector General Sean W. O’Donnell dubbed 2024 the year of fighting fraud. Soon after the EPA OIG Fraudcast series was born. Separate from OIG podcast that shine a light on EPA OIG work and resources, Fraudcasts bring you content focused on scams or scheme affecting the EPA and the Chemical Safety and Hazard Investigation Board. Today’s Fraudcast topic is a fraud alert recently issued by the EPA OIG. The fraud alert highlights updates made to the Office of Management and Budget mandatory grant disclosure language. These updates require grant recipients and subrecipients to disclose both civil and criminal violations of federal law to the Office of Inspecto General. Here with me is Special Agent in Charge Garrett Westfall of the Office of Investigations’ Western Division. Garrett, thank you for speaking with us today. GARRETT: Thanks for inviting me, KellyJune. I am excited to be joining you to highlight an important issue during our Year of Fighting Fraud. KELLYJUNE: So, let’s start why the update to the Office of Management Budget mandatory grant disclosure language. Can you explain why this is important? GARRETT: The Office of Management and Budget, or OMB, updated mandatory grant disclosure language in the “Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” section of 2 C.F.R. part 200, also known as the Uniform Guidance. For the first time, the revision to the Uniform Guidance mandates disclosure of suspected fraud by the grant recipient or subrecipient. The revisions by OMB are updates to codified grant regulations under 2 CFR Part 200, meaning that all federal grant awards are subject to the same provisions. KELLYJUNE: If this affects all federal grants, can you expand on what it means for EPA grants specifically? GARRETT: The EPA OIG Office of Investigations is charged with investigating fraud related to EPA programs and monies including grant fraud. Every year, EPA awards more than $4B in in grant funding. With the unprecedented amount of $100B of federal funds allocated to EPA for infrastructure and climate related programs under Infrastructure Investment and Jobs Act and the Inflation Reduction Act, the majority of those funds will be allocated through grants, rebates, and assistance agreements. Like many federal grant programs, EPA’s grant funds are passed down to multiple layers of subawards to recipients that carry out the intended activities. I have been conducting grant fraud investigations for over 23 years and the federal grant program is open and ripe for fraud, especially at the subrecipient level. KELLYJUNE: So, how do you think these changes will affect the work here at the EPA OIG? GARRETT: The mandatory disclosure language is a key addition. The new regulatory requirements for EPA grant recipients and subrecipients to disclose both civil and criminal violations of federal law to the OIG brings grant regulations inline with disclosure requirements under federal contracts in Federal Acquisition Rule. Specifically, the mandatory disclosure language was revised to include: • First. A requirement that disclosure now be filed with both the cognizant OIG and grantor agency. Previously, this requirement was just to the grantor agency. With this revision, all grant recipients must disclose suspected fraud to the cognizant OIG. • Second. New language to emphasize that requirements apply not just to prime recipients but also to any subrecipients, such as city governments, and non-profit organization. To reiterate, this update requires all EPA subrecipients to notify EPA OIG of any suspected criminal or civil violations of law. KELLYJUNE: It sounds like the new language will require increased disclosures to the EPA OIG and at various levels of funding. GARRETT: That is correct, and the revision includes a requirement to report potential civil False Claims Act violations, not just criminal violations. There is also an addition of a “credible evidence” standard. Using this standard means that grant recipients, subrecipients, and applicants do not need to make a firm legal determination that a criminal or civil law has been violated before they are required to disclose a violation to the cognizant OIG. KELLYJUNE: Now you mentioned the False Claims Act. Can you explain further why the addition of violations to the civil False Claims Act or FCA is important? GARRETT: The Civil False Claims Act or FCA is a federal law that imposes liability on persons and entities that defraud government programs. The FCA imposes treble damages and penalties on those who knowingly and falsely claim money from the United States or knowingly fail to pay money owed to the United States. The False Claims Act thus serves to safeguard government programs such as EPA’s State Revolving Fund. In fact, in February, DOJ announced the highest number of settlements and judgments in history, exceeding $2.68 billion in the fiscal year 2023. Further, in 1986, Congress strengthened the False Claims Act by increasing incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government. These whistleblowers, or qui tam, actions comprise a significant percentage of the False Claims Act cases that are filed. Qui tam cases may be pursued by the government or the whistleblower. When a qui tam action is successful, the whistleblower, also known as the relator, typically receives a portion of the recovery ranging between 15% and 30%. Whistleblowers filed 712 qui tam suits in fiscal year 2023, and this past year the Justice Department reported settlements and judgments exceeding $2.3 billion from these suits. KELLYJUNE: Okay. So, why did the EPA OIG find it necessary to highlight this regulatory revision and alert the public with a fraud alert and, frankly, this Fraudcast? GARRETT: That is a great question, KellyJune. At EPA OIG, we’re working hard to deter and detect fraud, and mitigate any potential negative impact to our programs and operations. However, the very best fraud fighting organizations rely on complainants and whistleblowers to provide detailed information on suspected fraud. This is where these updates and revisions to regulations are important. KELLYJUNE: Information on whistleblower protection is also included in the fraud alert. Can you talk a little more on the role of the whistleblower and whistleblower protections? GARRETT: Part of this Fraudcast and fraud alert is to educate our recipients and subrecipients of their whistleblower protections under 41 USC 4712. Whistleblowers perform an important service to EPA and the public when they come forward with what they reasonably believe to be evidence of wrongdoing. They should not be subject to reprisal for doing so. Let me reiterate. It is illegal for an employee of a recipient or subrecipient of a grant to be discharged, demoted, or discriminated against for making a protected disclosure. The EPA OIG has the authority to investigate such allegations of reprisal. If you are such an employee and you believe you have been retaliated against for making a protected whistleblower disclosure, you may submit a retaliation complaint to the OIG Hotline. You can also obtain additional information on whistleblower protections on our website. KELLYJUNE: Yes, whistleblowers do play an immeasurable role within the OIG community. It’s wonderful that the OMB is recognizing this in the new revisions. Are there any additional revisions that you think are important or that you would like to highlight? GARRETT: Yes. Thank you, KellyJune. While it does not directly relate to OIG, I would like to highlight a revision that recipients may use Federal funds to undertake a wide range of data gathering and analysis-related activity. The guidance also makes clear that allowable costs include many types of expenditures such as staff, materials, contractors, subawards and other expenses that support the effective use of data throughout the program life cycle from planning and implementation to evaluation and closeout. Data and analytics have become an increasingly great tool to deter and detect fraud, waste, and abuse. This is the first time in my career that data and analysis in a grant cycle is being highlighted and valued at the recipient and subrecipient level. KELLYJUNE: Wow. That is great. Now, if someone wanted to find the OMB revisions online, where are those located? GARRETT: For the mandatory disclosure revision and more information on other changes to the Uniform Guidance, please refer to the OMB’s website at www-dot-cfo-dot-gov. KELLYJUNE: Thank you, Garrett. I do have one more question which is not necessarily related to the fraud alert but is important for whistleblower protection. Would you provide an update to the Management Implications Report on Grant Vulnerabilities the EPA OIG issued in March 2023? GARRETT: Yes, in March of 2023, the OIG issued a Management Implication Report on the Mitigation of Grant Fraud Vulnerabilities. I am pleased to report that effective October 2023, EPA revised their general grant terms and conditions and incorporated all the recommendations outlined in our report. The report provided several recommendations to EPA in an effort to strengthen general grant terms and conditions, two of which relate to reporting fraud and whistleblower protections. • First, Reporting of Fraud, Waste, and Abuse to the EPA OIG. In a timely manner, recipients and subrecipients must report a violation of criminal law involving fraud affecting the award to the EPA Project Officer and to EPA OIG. The revised general terms and conditions also required recipients receiving an EPA award or subaward of $1 million or more to display an EPA OIG Hotline poster in facilities where work is performed under the grant. • Secondly, whistleblower protections. The revision emphasized whistleblower protections established under 41 USC 4712, providing that an employee of the recipient or subrecipient may not be discharged, demoted, or otherwise discriminated against as a reprisal for disclosing to a covered person or body information that the employee reasonably believes is evidence of gross mismanagement of a Federal grant or subaward, a gross waste of Federal funds, an abuse of authority relating to a Federal grant or subaward, a substantial and specific danger to public health or safety, or a violation of law, rule, or regulation related to a Federal grant or subaward. The revised terms and conditions make it a requirement that recipients and subrecipients will inform their employees in writing of employee whistleblower rights and protections. Other important revisions made by the EPA based on our MIR were: • Revised payment certification. The required payment certification was revised to include an acknowledgement and attestation that any false or omission of any material facts would be subject to criminal, civil, or administrative penalties. • Finally, access to records. The revision reiterates that both EPA and EPA OIG have the right to access any document, papers, or other records of the recipient and subrecipient which are pertinent to the award. KELLYJUNE: Thank you for that update. The fact is the EPA made these vital changes based on suggestions from an Office of Investigation Management Implication report which only accentuates the important role of the EPA OIG. And yet, funding levels for the EPA OIG in this fiscal year are very low when compared to the all-time high funding appropriated to the EPA. Do you see any issues with this new regulatory revision requiring disclosure to the OIG and the EPA OIG funding for this fiscal year? GARRETT: Well, the new regulations require an increase in reporting to the OIG. The EPA OIG received funding for IIJA projects but in the case of the $41 billion allocated under the Inflation Reduction Act, EPA OIG did not receive any money for IRA oversight. This means that core funding used for things such as, oversight audits, evaluations, and other proactive investigations outside of IIJA will be limited. The small appropriation of core funding will have to be strategically rationed to cover both core and IRA work. KELLYJUNE: Special Agent in Charge Garrett Westfall of the Office of Investigations’ Western Division thank you for time. The EPA OIG’s fraud alert about the uniform guidance update, can be found on our website at www-DOT-epaoig-DOT-gov. We urge anyone with information about fraud involving an EPA or Chemical Safety Board operation or program to contact the EPA OIG hotline by calling 888-546-8740, emailing OIG-DOT-hotline-AT-epa-DOT-gov, or submitting a complaint form through our website.