Part 4 of 4: Now What? Liaising with the Federal Agency
This month's newsletter is the fourth of a four-part discussion regarding an organization's response to a potential noncompliance. The following case study is the basis of our continued analysis, which outlines basic steps for reviewing and investigating a reported noncompliance. Last month, we discussed the anatomy of a written disclosure and the various considerations that go into it. Once the disclosure is submitted, the effort turns to discussions with government officials in an attempt to resolve the matter.
Case Study Reminder
The in-house general counsel of a national educational nonprofit organization receives a report that several employees in its office in Central City, Middle State allegedly inflated and/or estimated their time cards on various educational programs. In previous newsletters, we walked through the investigation, in which we confirmed that the timekeeping noncompliance occurred and that it was limited to three individuals across four programs. The investigation also revealed that these individuals were not purposely inflating their time, but rather were routinely rounding it up (against organization policy) and sometimes estimating their time because they did not understand the importance of accurate timekeeping. Because all three of the individuals at issue were relatively new to the organization, the noncompliance dated back only eight months. In response, the organization took immediate steps to train these individuals on the importance of timekeeping policies and reviewed and updated its new hiring training program to better emphasize accurate timekeeping. The organization has maintained all of the documents it collected in the course of the investigation.
Last month, we discussed the written disclosure, and now we will walk our readers through some of the steps and issues an organization is confronted with after it has submitted its disclosure and works toward resolution.
Set Your Goals
As in any negotiation, it is critical for an organization to consider its goals before initiating the conversation. In our experience, there are typically two main objectives once a disclosure has been submitted: 1) expediency and 2) a favorable resolution. Unfortunately, these are not always compatible and are often at odds. For example, in order to work through all of the details that would lead to the most favorable resolution for the organization, time is required on both sides. Conversely, if the government has a settlement number early on, it might be far more expedient to agree to the number to resolve the matter, even though it is not likely the most favorable or lowest number that the agency would settle for. As a consequence, before starting a dialog with the government, it is critical to discuss and consider which of these goals, or others, are most important to the organization and why. The answer to these questions will likely shape how you approach discussions and negotiations.
One can take any number of approaches when liaising with the government following a disclosure. When the government responds with questions or further inquiry, one's initial inclination may be to be defensive; however, if you put yourself in the government's shoes, you may see that their follow-up inquiry may be nothing more than an attempt to better understand the matter. As a result, we commonly have to combat an instinct to be defensive. Rather, in our experience we strive to adhere to three key concepts:
- Be proactive;
- Be cooperative and transparent; and
- Be creative.
After all, while you are working toward resolution of the instant matter, you must also keep in mind that, regardless of the severity of the noncompliance, should your government counterpart find your conduct to be unhelpful or even misleading, they could recommend the organization for far more disastrous action, such as a review by a suspension and debarment official.
There is sometimes a natural reaction after a disclosure is submitted to let it lie until the government reaches out to the organization. This makes sense for a time, but it may not always be the best approach. Reaching out to the agency to introduce oneself and orally introduce the issues at play can often shape how the government views the disclosure. This is also often an opportunity for the organization to make a first impression, expressing how the organization understands the severity of the issue, its desire to be cooperative, and its commitment to compliance going forward. Moreover, it establishes a connection between the individuals speaking, which helps to facilitate communication from the government. After all, the worst-case scenario is one in which the government has questions but does not feel that the organization is interested, available, or open to their feedback. In these situations, we often see far more onerous outcomes, including referrals to suspension and debarment officials.
Be Cooperative and Transparent
Although it may seem simple, cooperation can be harder than one imagines. Often the response from the government can be critical or skeptical. This response may then beget an equally uncooperative and defensive response from the organization. These cascading reactions do not lend themselves to quick or favorable resolutions. In fact, the consequence is usually the opposite, and may ultimately be far greater action by the government, such as the issuance of a subpoena for records or the involvement of an Assistant United States Attorney to examine the matter under the federal False Claims Act. Alternatively, even though the government's assessment may be critical or its allegations ill founded, cooperation will usually help to assuage government skepticism.
Cooperation, however, is more than just a friendly or helpful demeanor; it also means being transparent to the greatest extent possible. This means being prepared to allow the government to examine all relevant records, documents, emails, and personnel, as needed. As explained before, there are necessary limitations to cooperation and transparency, but having the matter well understood before the disclosure may allow the organization to recognize where it can be transparent and where it must be more protective. This then gives the organization the ability to showcase its transparency while working toward a resolution. How it arrives at what is best to showcase for the government often relies upon the third key concept—being creative.
Your ability to think outside the box can help you to be proactive and cooperative. Indeed, the concept of cooperation often runs counter to other important considerations, such as attorney-client privilege or self-incrimination. Certainly we do not advocate that an organization waive any of these rights. Rather, the organization should come up with creative options or solutions to inquiries that ask for a waiver of these rights. For example, rather than argue over the absurdity of a government request or simply acquiesce by producing a privileged report, proactively offer to provide the documents (that are not privileged) that the report is based upon. After all, the government would typically have a right to these documents anyway; therefore, you are just refocusing their interest on materials that are not as controversial, in order to avoid a dispute with them while also not waiving a Constitutional right.
Another approach, especially when it is clear that the government will want documents or data, is to proactively present to them various options for targeted and manageable document or data production, rather than having them issue a document request or a subpoena that essentially asks for every piece of information created under the grant or contract. The offer is typically well received, furthering their comfort with the organization, and will save the organization time and expense otherwise spent on collecting and preparing what would have undoubtedly been a larger document or data request.
Creativity also can assist in resolving a matter. While the government may be justified in seeking repayment of certain amounts, organizations do not always have those amounts at their fingertips; yet you also do not want to let the settlement offer slip away. In this vein, consider alternative means of resolution—a payment plan, offsetting, increasing one's cost share, adding no-cost work or program activities to a contract or program, etc.
The Case Study
Given the foregoing and applying it to our case study, where noncompliant overcharges were due to inexperience and insufficient training, we were able to discuss the matter freely and openly with the government. More importantly, however, we would have spent a good deal of time discussing how the insufficient training was not indicative of the organization as a whole and that this particular deficiency has been rectified. Furthermore, as noted in our prior newsletters, because we were proactive in our disclosure, we provided the government with the overcharge calculations and the back-up calculations, we answered a few follow-up questions posed by the government auditor to clarify the calculations, the numbers we presented were accepted, and the organization repaid each of the four grants directly.
It has been a great exercise for us to present this series over the last four months of the year. We hope you found it useful. We also hope you will consult our new Government Grants Resource Library, which will include each of the articles from this series, as well as a host of other articles and materials for receipts of government grants and cooperative agreements. We wish you the very best in your endeavors and a happy and safe holiday season.