In 2019, a Chicago software developer submitted bank statements from a bogus investor to get a small business award. The developer was then sentenced to jail and $ 200,000 in restitution. The case, among others like it, underscores the importance of monitoring small business rewards to prevent fraud, waste and abuse.
Eleven federal government agencies provide federal dollars to small businesses through 2 grant programs: the Small Business Innovation Research Program and the Small Business Technology Transfer Program. These programs are designed to encourage research and development, including the commercialization of technology. The programs, combined, awarded small businesses nearly $ 4 billion in fiscal 2019. The Small Business Administration is responsible for overseeing these grant programs to detect and prevent fraud, waste and abuse .
In today’s WatchBlog article, we take a look at our recent report on how the SBA oversees these awards and its requirements for verifying recipient eligibility.
What are the indicators of fraud?
Federal agencies that award small business awards have established a set of indicators to identify potential fraud.
Among them, a fraudulent small business may submit duplicate claims, may not have a physical location, or may not have a website. These and other factors are early indicators that a Reward Claim may be fraudulent and deserves a closer look.
Examples of indicators used by agencies to identify potential fraud in research grants
How does the SBA help prevent fraud?
The SBA has a number of requirements in place to prevent fraud, waste and abuse for agencies participating in 2 small business rewards programs.
Among them, agencies must collect certificates of ownership and other eligibility requirements from the winner when they receive their award and during the lifetime of the award.
Another requirement is that agencies establish and communicate a written policy that all agency staff involved in rewards programs notify the agency’s office of the inspector general if anyone suspects fraud, waste or abuse.
We found that all 11 federal agencies participating in rewards programs have largely implemented the SBA requirements.
What else can be done to prevent fraud, waste and abuse?
To help government managers better protect taxpayers’ money, we have identified best practices for managing fraud risks and organized them into a conceptual framework.
The fraud risk management framework
The fraud risk management framework includes control activities to prevent, detect and respond to fraud, with an emphasis on prevention, as well as environmental structures and factors that help managers achieve their goal of mitigate the risk of fraud.
Based on this framework, we made 21 recommendations to the agencies included in our report on how to detect and prevent fraud, waste and abuse in these programs.
To learn more about our framework and the fraud in these fellowship programs, check out our new report.
- Questions about the content of this article? Contact the WatchBlog team at [email protected]