CONTRACT MONITORING Jennifer Berrios, Luke Madonna, Stephan - - PDF document
10/17/2019 CONTRACT MONITORING Jennifer Berrios, Luke Madonna, Stephan Ramcharran, & Mike Wood 1 1 Why are we here? We are here because we have a duty and mission to carry out. Todays duty and mission: Learn about monitoring 2
1 1
Jennifer Berrios, Luke Madonna, Stephan Ramcharran, & Mike Wood
2
We are here because we have a duty and mission to carry out. Today’s duty and mission:
– Learn about monitoring
3
4
5
– Health & Safety – Goal Achievement – Dollars – Reputation
6
7
Agency Concerns When Trying to Monitor
8
fiscal departments
filings)
9
10
11 11
12
13 13
14
have available?
identify risky contracts?
15
16 16 17 18 18
19 19 20
Sort contracts by:
21
Sort contracts by:
22
– Quality of products and services – Problems with vendors – Current events – Locations – Etc.
23 23
Filter By ‘Contract End Date” to Eliminate Expired Contracts Filter By ‘Contract End Date” to Eliminate Expired Contracts
24 24
Consider Eliminating Fully Expended Contracts Consider Eliminating Fully Expended Contracts
25
Contract Type Sum of Current Contract Amount Sum of Spending to Date Count of Contract Type Commodity 555,001,257.01 $ 172,310,150.97 $ 99 Community Projects Fund (Member Initiative) 13,156,897.00 $ 10,662,947.32 $ 509 Consultant 7,305,957,655.67 $ 5,043,101,076.48 $ 534 Contracts Not Subject to OSC Pre‐Audit 505,364,519.96 $ 405,947,165.41 $ 1,767 Equipment 46,320,955.22 $ 40,967,498.77 $ 38 Grant 14,225,068,221.14 $ 9,538,591,439.48 $ 7,412 Inter‐government ‐ Other 71,797,233.54 $ 33,596,984.98 $ 4 Land Purchase 30,000.00 $ 30,000.00 $ 1 Lease 438,011,159.03 $ 305,212,152.89 $ 80 Printing 273,464,215.00 $ 219,468,473.12 $ 9 Repayment to State 990,969,897.00 $ ‐ $ 5 Revenue Generating 1,263,254,569.75 $ ‐ $ 898 Service 309,972,036,478.61 $ 12,791,498,708.82 $ 521 Grand Total 335,660,433,058.93 $ 28,561,386,598.24 $ 11,877 26 26
Filter on Risky Contract Type and Current Contract Amount Filter on Risky Contract Type and Current Contract Amount
27 27
28 28 29
Payee/Vendor Total Amount Payments Average Payment CENTERS FOR MEDICARE & MEDICAID SERVICES 264,471,731.40 $ 2 132,235,865.70 $ EXCELLUS ‐ DSH‐ BLUE CROSS BLUE SHIELD 86,947,204.78 $ 1 86,947,204.78 $ NEW YORK QUALITY HEALTHCARE CORPORATION 23,704,473.69 $ 1 23,704,473.69 $ DS600 OFFICE OF MENTAL HEALTH 45,237,119.08 $ 3 15,079,039.69 $ NEW YORK EHEALTH COLLABORATIVE INC 12,515,947.64 $ 1 12,515,947.64 $ MONTEFIORE HEALTH SYSTEM INC 23,887,296.00 $ 2 11,943,648.00 $ MAXIMUS INC 21,212,748.10 $ 2 10,606,374.05 $ HEALTHPLUS HP LLC 10,123,589.20 $ 1 10,123,589.20 $ ONE BROOKLYN HEALTH SYSTEM INC 10,000,000.00 $ 1 10,000,000.00 $ UNITEDHEALTHCARE OF NEW YORK INC 9,871,323.37 $ 1 9,871,323.37 $ HEALTH FIRST PHSP INC 16,997,203.77 $ 2 8,498,601.89 $ EXCELLUS ‐PGP‐ BLUE CROSS BLUE SHIELD 30,177,188.27 $ 4 7,544,297.07 $ ROSWELL PARK CANCER INSTITUTE 88,856,488.69 $ 17 5,226,852.28 $ LONG ISLAND JEWISH MEDICAL CENTER 7,358,670.59 $ 2 3,679,335.30 $ MVP HEALTH PLAN 5,024,512.42 $ 2 2,512,256.21 $ EXCELLUS HEALTH PLAN INC 7,370,331.88 $ 3 2,456,777.29 $ ST JOSEPHS HOSPITAL 4,616,442.00 $ 2 2,308,221.00 $ NEW YORK CITY SCHOOL DISTRICT 5,570,959.47 $ 3 1,856,986.49 $ ST JAMES MERCY HOSPITAL 3,406,746.12 $ 2 1,703,373.06 $ CENTERS PLAN FOR HEALTHY LIVING LLC 1,608,694.46 $ 1 1,608,694.46 $ HEALTH INSURANCE PLAN OF GREATER NEW 3,108,638.32 $ 2 1,554,319.16 $ MAXIMUS HEALTH SERVICES INC 9,226,155.40 $ 6 1,537,692.57 $ 30
31
Ongoing activities, special evaluations or a combination of both used to ensure that controls are operating as intended.
32
33
Control Environment Risk Assessment Control Activities Monitoring
34
Ongoing activities, special evaluations or a combination of both used to ensure that contractors are operating as intended.
35
How do agency employees and contractors know what’s intended?
36 36
37
38
– How can I verify whether something has occurred, based on how the contract specification is written?
39
40
– Description – Benchmarks
41
Performance measures
– Licenses – Degrees – Certifications
42
Payment provisions
– Description of deliverables – Services
43
– Is the vendor able to meet specific terms set forth?
– Producing Records – Reports – Electronic/Paper
44
– Specify monitoring in contract language – Consequences for non‐compliance
45
The vendor shall submit a properly executed application for payment, together with appropriate backup supporting the amount billed.
46
The vendor shall submit a properly executed application for payment, together with appropriate backup supporting the amount billed.
47
The vendor shall submit a properly executed application for payment, together with appropriate backup supporting the amount billed. Improved Specification????
48 48
Specification
Administer the pre‐tax transportation program for eligible employees. Auto‐answer customer service calls within 7 seconds (99% annual compliance), with a representative on the line within 2 minutes (90% annual compliance). Fares mailed to recipients to use by the first of the month. Monthly billing rate on a sliding scale based on the number of enrollees.
49 49
50
– What can prevent the goal accomplishment?
– How can the contractor get money they didn’t earn?
51
– Mistake vs. Fraud
52
Fraud is any intentional act or omission designed to deceive others, resulting in the victim suffering a loss and/or the perpetrator achieving a gain.
Source: “Managing the Business Risk of Fraud: A Practical Guide” ‐ IIA, AICPA, ACFE 53
The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.
Source: 2018 Report to the Nation on Occupational Fraud & Abuse 54
– $200,000 for small businesses – $75,000 for not for profit – $118,000 for government
Source: 2018 Report to the Nation on Occupational Fraud & Abuse
55
Source: 2018 Report to the Nation on Occupational Fraud & Abuse 56
Corruption Asset Misappropriation Financial Statement Fraud
Bribery
Fraudulent Disbursements
Asset/Revenue Over‐ and Understatements
Conflict of Interest
Noncash
Most Common Least Common Most $$$ Least $$$
Source: 2018 Report to the Nation on Occupational Fraud & Abuse
Source: 2018 Report to the Nation on Occupational Fraud & Abuse 57 57 Source: 2018 Report to the Nation on Occupational Fraud & Abuse
58 58 Source: 2018 Report to the Nation on Occupational Fraud & Abuse 59
More than 77% of the frauds in the study were committed by individuals in 1 of 8 departments, including:
billing, financial statement fraud, expense reimbursement
Source: 2018 Report to the Nation on Occupational Fraud & Abuse 60
Source: 2018 Report to the Nation on Occupational Fraud & Abuse
61
Rationalization
62
63
High debt Significant financial losses Excessive alcohol, drugs or gambling Extramarital affair Perceived organizational inequities Job frustration or resentment
64
65
Familiarity with operations Ability to override controls No periodic rotation of key employees No uniform personnel policies Lack of strong internal controls Management does not prosecute or punish fraud perpetrators
66
67
They owe me I’m overworked I do the work of two people They’ll never miss it I’ll just borrow it; I’ll pay it back I’m not really hurting anyone Everyone is a little dishonest
68
69
Position/function Brains Confidence/ego Coercion skills Effective lying Immunity to stress
70
71 71
72
Age
Source: 2018 Report to the Nation on Occupational Fraud & Abuse
73
Education
Source: 2018 Report to the Nation on Occupational Fraud & Abuse 74
Criminal
History
Source: 2018 Report to the Nation on Occupational Fraud & Abuse 75
Occupation
Source: 2018 Report to the Nation on Occupational Fraud & Abuse
76
Tenure
Source: 2018 Report to the Nation on Occupational Fraud & Abuse 77
Gender
Source: 2018 Report to the Nation on Occupational Fraud & Abuse 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
World Middle East and North Africa United States
Male Female 78
Age
31‐50 56+
Education
University Degree Postgraduate Degree
Criminal History
None None
Occupation
Employee/Manager Owner/Executive
Tenure
1‐5 years 6+ years
Gender
Male Male
79
12% 24% 33% 52% 68% 77% 84% 93% 99%
In ___ percent of profiles, the perpetrators did not leave it at one single fraudulent act, but committed repeated acts of fraud.
Source: KPMG Global Profile of the Fraudster Survey 2013
93%
Source: KPMG Global Profile of the Fraudster Survey 2013 80
81
A one‐year study conducted by the Association of Certified Fraud Examiners (ACFE) consisting of 2,690 cases world‐wide
fraud continued for __ months before being detected.
Source: KPMG Global Profile of the Fraudster Survey 2013
16 6 months 10 months 12 months 16 months 18 months 22 months 24 months
Source: 2018 Report to the Nation on Occupational Fraud & Abuse
82
Source: 2018 Report to the Nation on Occupational Fraud & Abuse 83
Source: 2018 & 2016 Report to the Nation on Occupational Fraud & Abuse 84
Source: 2018 & 2016 Report to the Nation on Occupational Fraud & Abuse
85
A warning or sense that something isn’t right Should lead you to take a closer look at the transaction
86
Inadequate, copied or apparently altered documents Invoice figures do not add up No letterhead Misspellings on document Vague information
87
Hand written endorsement No phone number or fake phone number Altered payee name PO Box, suite number, mail drop address Company name includes initials or personal name
88
Round amounts or amounts under approval
levels
Large dollar payments made with cash Vendor address is not local, but check is
cashed locally
89
Fake Vendors
Agency staff created bids in some cases
Real Vendors
No knowledge of bid submission Shared owner with favorable vendor
Rescind bid
90
Restrictive or vague specifications Bids/quotes received from the same fax Similar letterheads of bidders Unreasonable bid amounts (prevailing wage)
91
Unable to confirm bids with losing vendors Lowest bidder does not receive award Lack of vendor contact information on bids Signature on bid is the company name
92
Relationships between awardee and agency
staff Address or identification number match
Unexplained or unusual favoritism of a
particular vendor
Close socialization with or acceptance of
gifts from the awardee
93
Unjustified favoritism of a certain vendor Unexplained increase in wealth of employee Close socialization with or acceptance of
inappropriate gifts from a vendor
94 95
Billed for services – more difficult to verify No supporting documentation submitted
with payment request
Relationships between the sponsoring
legislator and NFP Executive(s)
96
– NFP’s 990 ‐ www.guidestar.org – For Profit – Published
– www.seethroughny.net
97
98
Prohibits a public employer from taking disciplinary action against a public employee because that employee reveals information to a governmental body regarding a violation of a law, rule or regulation which presents a substantial and specific danger to public health and safety or reveals information which the employee reasonably believes is an improper governmental action (i.e., violation of Federal, State or Local laws, rules or regulations).
99
To be protected by this law, you must make a good faith effort to inform your employer and give them reasonable time to take appropriate action.
10 10
Specification What can go wrong?
Administer the pre‐tax transportation program for eligible employees.
Program services provided to ineligible employees.
Auto‐answer customer service calls within 7 seconds (99% annual compliance), with a representative on the line within 2 minutes (90% annual compliance).
Calls answered outside these time periods on average, with some exceeding the 2 percent penalty variance in the contract.
Fares mailed to recipients to use by the first of the month.
Employees don’t receive their fares – have to pay retail.
Monthly billing rate on a sliding scale based on the number of enrollees.
Vendor bills at a higher rate than entitled to, either by inflating the rate
10 1 10 1
10 2
IV Area of Most Concern II Area of Minimal Concern III Area of Moderate Concern I Area of Least Concern
HIGH LOW Impact Likelihood LOW HIGH
10 3
IV Area of Most Concern II Area of Minimal Concern III Area of Moderate Concern I Area of Least Concern
HIGH LOW Impact Likelihood LOW HIGH
10 4 10 4
10 5
II Area of Minimal Concern III Area of Moderate Concern IV Area of Most Concern I Area of Least Concern
HIGH LOW Impact Likelihood LOW HIGH
10 6
– Revise administrative procedures – Improve control systems – Increase auditing – Other
10 7 10 7
10 8
Design steps to mitigate risks
documentation to?
10 9
Objective
not things are happening the way they are supposed to be.
11
11 1
– Testimonial – Physical – Documentary
11 2
Degree of Reliability Evidence Type More reliable Less reliable More reliable
Physical
direct physical examination,
inspection
indirect means
Less Reliable
Documentary
received from independent parties
the contractor Testimonial
unbiased persons with direct knowledge under conditions in which the persons may speak freely
persons who
knowledge
11 3 11 3
Specification What can go wrong? How agency can monitor?
Administer the pre‐tax transportation program for eligible employees. Program services provided to ineligible employees.
Compare vendor’s monthly employee registry to OSC report of eligible employees. Review all variances with vendor.
Auto‐answer customer service calls within 7 seconds (99% annual compliance), with a representative on the line within 2 minutes (90% annual compliance). Calls answered outside these time periods on average, with some exceeding the 2 percent penalty variance in the contract.
Review monthly and annual reports
determine the need to assess penalties.
Fares mailed to recipients to use by the first of the month. Employees don’t receive their fares – have to pay retail.
Obtain database of vendor incoming calls to identify complaints of not receiving fares timely.
Monthly billing rate on a sliding scale based on the number of enrollees. Vendor bills at a higher rate than entitled to, either by inflating the rate or by charging a rate for a higher strata of number of enrollees.
Verify number of enrollees based on item 1 above, compare rate charged to the rate in the contract based on the appropriate volume strata.
11 4
Contractor Concerns
11 5
OP P P F P F F C F A O
11 6
11 7
behavior
11 8
behavior
– 55% body language/facial expressions – 38% tone/voice
Source: Mehrabian, Albert (1971). Silent Messages (1st ed.) 11 9
12
12 1
12 2
12 3
An attitude that includes a questioning mind and critical assessment of information. An attitude that includes a questioning mind and critical assessment of information.
12 4
12 5
12 6
12 7
12 8
Qualities of an Effective Monitor
12 9 12 9
13
Degree of Compliance Agency Response High
Moderate
Low
increase the frequency of follow‐up monitoring activities
13 1 13 1
13 2
Review: The 7 Step Process
7 6 5 4 3 2 1
13 3
have available?
identify risky contracts?
13 4
13 5
– What can prevent the goal accomplishment?
– How can the contractor get money they didn’t earn?
13 6
II Area of Minimal Concern III Area of Moderate Concern IV Area of Most Concern I Area of Least Concern
HIGH LOW Impact Likelihood LOW HIGH
13 7
– Revise administrative procedures – Improve control systems – Increase auditing – Other
13 8
Design steps to mitigate risks
documentation to?
13 9
Degree of Compliance Agency Response High
Moderate
Low
the frequency of follow‐up monitoring activities
14
Guide to Financial Operations ‐ XI.11.F Contract Monitoring
14 1
Margaret Mead