Guidelines for the Management and Audit of Public Research Funds In Research Institutions (For Researchers) June 2014

Transcription

1 Guidelines for the Management and Audit of Public Research Funds In Research Institutions (For Researchers) June 2014

2 Introduction "The Guidelines for the Management and Audit of Public Research Funds In Research Institutions (practice standards)" were formulated in February 2007 for the purpose of indicating the necessary matters for the proper management of public offering-type research funding centered around competitive funds distributed by the Ministry of Education,. Culture, Sports, Science and Technology (MEXT) and independent administrative agencies under the jurisdiction of MEXT by the institutions receiving these distributions. However, the Guidelines were revised in February 2014 with the aim of embodying and clarifying the description of the previous Guidelines in response to the cases of fraud that have become a major social problem in recent years. This content is a summary of the matters prescribed by the revised Guidelines that are common to research institutions nationwide from the perspective of management and audit of public research funding. However, it is also necessary for researchers to have an understanding of the rules governing specific procedures enacted by their affiliated research institution. Please acquire a correct understanding of this content and the rules of your research 1 institution and endeavor to properly operate and manage public research funding. Please note that this content may be revised.

3 Table of contents Section 1 Overview of the research funding system Description of the overall picture of the research funding system as well as the research funding system to which the Guidelines apply Section 2 Matters requested in the Guidelines (1) - Fraud prevention initiatives - Description of the major fraud prevention initiatives requested in Section 1 to Section 6 of the Guidelines Section 3 Basic knowledge about fraud and case studies Description of the mechanisms of fraud as well as causes and countermeasures, etc. through case studies of the unauthorized use of research funding Section 4 Matters requested in the Guidelines (2) - Response after the discovery of fraud - Description of the important matters concerning response after the discovery of fraud requested in Section 7 to Section 8 of the Guidelines 2 Section 5 Guideline Q&A Frequently asked questions and answers concerning the Guidelines in a Q&A format.

4 Section 1 Overview of the research funding system 3

5 1-1. Overview of the research funding system The research funding system to which the Guidelines apply is public-type research funding centered around competitive funds distributed by MEXT and independent administrative agencies under the jurisdiction of MEXT. Types of research funding Personal funds External funds Subsidies for operating expenses, etc. Research funding allocated from the national govt. and independent administrative agencies, etc. Research funding from the private sector, etc. Subsidies Commission expenses, etc. Commissioned research expenses Joint research expenses Donations, etc. MEXT and independent administrative agencies under the jurisdiction of MEXT. Research funding systems to which the Guidelines apply Competitive funds system Grants-in-Aid for Scientific Research Strategic Basic Research Program Strategic Promotion of Innovative Research and Development Strategic International Collaborative Research Program, etc. Public offering type-research funding system Funds for integrated promotion of social system reform and research and development World Premier International Research Center Initiative (WPI) Supported Program for the Strategic Research Foundation at Private Universities, etc. 4

6 Section 2 Matters requested in the Guidelines (1) - Fraud prevention initiatives - 5

7 2-1. Clarification of the responsibility system within the institution The Guidelines require institutions to clarify the system of authority and responsibility for the proper operation and management of competitive funds, etc. (Example) A General management structure As a rule, the head of the institution such as the president Head administrative officer Internal audit division Generally, department directors Necessary measures for the development of basic policy Development of specific measures Person in charge of general management Reporting Reporting Prevention plan promotion division Generally the vice president, etc. Compliance promotion officer Compliance promotion officer Compliance promotion officer Implementation of specific measures, attendance management and guidance, monitoring and improvement guidance, reporting Compliance promotion deputy officer Compliance promotion deputy officer Compliance promotion deputy officer Generally the director of a division of a certain size at course or major level 6

8 2-2. Clarification and unification of rules The Guidelines require institutions to clarify and uniformly operate the rules concerning the administrative processing of competitive funds, etc. Clarification of rules: Effective and easy-to-understand rules are required. Unification of rules: Unless there is a specific reason otherwise, rules should be operated uniformly across departments, etc. Systematization of the overall picture of the rules and making rules well known to members: It is necessary to make the rules well known in an easy-to-understand manner such as handbooks and manuals Matters required of researchers Understand and comply with the content of handbooks and manuals, etc. created by the institution. Seek advice from the institution's consultation service, etc. if you cannot understand the handbooks and manuals, etc. created by the institution or if something is unclear. If there are rules within the institution that are incongruous with research realities or fund system regulations, raise the issue with a compliance promotion officer, etc. Cooperate and provide feedback for the development of effective rules. 7

9 2-3. Clarification of administrative authority The Guidelines require institutions to clearly set the authority and responsibility of persons involved in the administrative processing of competitive funds, etc. and make this authority and responsibility well known. Organizations can prevent fraud through a checking function which includes a mutual check by other parties Checks within the institution must be carried out properly in order to prevent fraud. Clear approval procedures in accordance with the administrative authority prescribed in the segregation of duties, etc. must be applied to the use of research funding as an appropriate check system Authority and responsibility in the event an order within a certain amount of money made by a researcher 8 Authority to place an order within a certain amount of money Authority Responsibility Accountability for the fairness of order destination selection Accountability for the appropriateness of the order amount Responsibility to provide reimbursement in the event of unauthorized use

10 Code of conduct 2-4. Enhancing stakeholder awareness The Guidelines require institutions formulate a code of conduct, implement compliance education, and have members submit a oath, etc. as initiatives to prevent fraud. Institutions must develop a code of conduct for all members involved in the operation and management of competitive funds, etc. The code of conduct is an ethical decision-making flow embodying the philosophy of the institution which serves as the foundation of fraud risk management. Compliance education Institutions must provide compliance education to all members involved in the operation and management of competitive funds, etc. to ensure they have an understanding of what constitutes fraud. The compliance education can include specific case studies, the effect of fraud on the institutions, matters to be complied with such as operating rules, procedures and the system for handling accusations, measures in the event fraud is discovered such as disciplinary action and the responsibility of reimbursement, restrictions on application and eligibility for competitive funds of institutions allocating the research funds, the return of research funding, and fraud prevention measures in the institution. Requirement of a oath, etc. Institutions must acquire written oaths from all members involved in the operation and management of competitive funds, etc. The written oaths must contain the following content as a bare minimum: Guarantee to comply with the regulations of the institution, etc. 9 Guarantee not to engage in fraud Acceptance of punishment from the institution and institution allocating the research funds as well as legal responsibility in the event of fraud

11 2-5. Transparency in the development and operation of regulations concerning the handling of accusations, etc. The Guidelines require institutions establish an office for handling accusations, etc. as well as closely protect whistleblowers. Matters required by the Guidelines Each institution must establish an office for handling accusations, etc. both from within and outside the institution The following measures must be taken within the accusation system enacted by the institution Closely protect whistleblowers Ensure whistleblowers know that they will be protected The Guidelines mandate the close protection of whistleblowers. Please contact the institution's office for handling accusations in the event you see or hear about a suspicious act. 10

12 2-6. Activities for the proper operation and management of research funding The Guidelines require institutions prevent the occurrence of collusion with business operators as well as create and manage a system with effective third-party checks to ensure issues that could led to fraud are discovered. (Example) General goods order and acceptance inspection system General rule Researcher Purchase order Acknowledgment Ordering division Acceptance inspection center Delivery acceptance inspection Order Business operator Exception Researcher Direct transaction Business operator Manage ordering based on clear rules that limit the order amount, etc. In the exceptional cases where third-party acceptance inspection is difficult and acceptance inspection is omitted, it is necessary to determine an appropriate extraction method and percentage, etc. taking into account the quantity and risks, etc., and check the order after the fact. Business operators who primarily transact with researchers are more likely to conspire to commit fraud. It is possible to reduce the risk of fraud by making separate divisions responsible for the ordering function and acceptance inspection function and implementing mutual checks. In principle, the administrative affairs division should carry out ordering and acceptance inspection operations as well as employment management operations such as confirmation of the work situation of part-time employees. If orders by researchers are acknowledged from the viewpoint of smooth and efficient implementation of research, manage ordering based on clear rules that limit the order amount, etc. 11

13 2-7. Information dissemination and sharing The Guidelines require institutions to establish a consultation service that researchers can use to check whether their actions in their day-to-day research activities will violate rules, etc. in advance. Construction of a system to ensure the transmission of information required by the Guidelines By giving researchers the chance to utilize a consultation service established in advance, it is possible for institutions to prevent unintentional unauthorized use of research funds by researchers. The division responsible for the consultation service will accumulate cases through researchers' active use of the consultation service. These accumulated cases can then be used in the formulation of the institution's basic policies and internal rules as well as in the content of compliance education. Sharing of Accumulated knowledge 12 Consultation services are established so that researchers can check whether their actions in their day-to-day research activities will violate rules, etc. in advance. If you have any question concerning rules, etc., please, by all means utilize the consultation service in the institution to which you are affiliated.

14 2-8. Formulation of a fraud prevention plan The Guidelines require institutions to systematically organize and evaluate factors behind fraud, and formulate a specific fraud prevention plan in response to these factors. An effective fraud prevention plan cannot be loosely formulated. Institutions must organize and evaluate their entire organization in a systematic manner to determine the location and form in which the factors behind fraud lie. After doing so, they must formulate a specific fraud prevention plan in response to these factors. What are the factors behind fraud? Examples of the risks that must be given attention as factors that generally result in fraud Ordering by researchers without authorization to order, and divergence from the rules such as routine exception to the general goods order and acceptance inspection system. Confusing approval procedures and unclear responsibilities. Bias towards expenditure at specific times Problems concerning the non-payment of business operators, etc. 13 Researchers cooperation is essential to in order to grasp the factors behind fraud. Researchers are required to cooperate and share information with administrators, always have an awareness of where the risks of fraud lie, and strive for voluntary improvement.

15 2-9. The way of monitoring The Guidelines require institutions construct and implement an effective monitoring system, and enhance and strengthen organizational checking functions through the implementation of a reality-based risk approach audit. Institutions must construct and implement an effective institution-wide monitoring system aimed at minimizing the possibility of fraud. Institutions must regularly enhance and strengthen organizational checking functions by analyzing the factors behind fraud and implementing focused and flexible risk approach audit. What is a risk approach audit? Examples of specific methods of risk approach audit in the Guidelines Target some researchers. Extract their travel expenses over a certain period, confirm them with the other party (the destination) and compare them against their attendance record, and conduct surprise interviews asking about the purpose and summary of business trips. Target some of the part-time employees, and interview them about their work conditions, etc. The cooperation of researchers is essential for institutions to carry out effective monitoring. Researchers must actively cooperate with administrators and provide information during audits. 14

16 2-10. A thorough PDCA cycle in fraud prevention measures The Guidelines require institutions to promote effective initiatives through the implementation of a thorough PDCA cycle. The understanding and cooperation of researchers is essential in order for the PDCA cycle to effectively function and suppress the inappropriate use of research funding and thus prevent the risk of research discontinuation as a result of fraud. Action (improve) Improve related regulations and systems Review the fraud prevention plan Action Plan Plan Develop related regulations and systems Formulate a fraud prevention plan Check (inspect and evaluate) Review the operation of related regulations and systems, and inspect their effectiveness Understand and evaluate the risks and challenges that have manifested through monitoring, etc. Check Do Do (implement and execute) Enforce related regulations and implement related systems Implement the fraud prevention plan Feedback from researchers is essential in gaining an understanding of risks and challenges and improving related regulations and systems. The understanding and cooperation of researchers is also essential to the operation of new related regulations and systems to prevent fraud, etc. 15

17 Section 3 Basic knowledge about fraud and case studies 16

18 3-1. Mechanisms of fraud Professor Cressey, a US criminologist, explained that fraud occurs when the three factors of "motivation," "opportunity" and "justification" align. "Motivation" that triggers the fraud "Motivation" refers to the psychological trigger to actually commit fraud. Examples include financial problems that can not be shared with others and pressure to achieve performance quotas, etc. "Opportunity" which allows the execution of fraud "Opportunity" refers to the existence of circumstances in which committing the fraudulent acts is possible. Examples include a situation when there is a departure from authority and division of duties, such as when a person in charge carries out multiple important duties over a long period of time that should really be performed by several people, and in which the necessary checking function for these duties is not performed properly. Motivation Opportunity Justification "Justification" to excuse ones own acts "Justification" refers to the lack of ethics to discourage the execution of the fraud. As construction of a perfect management structure is impossible, individual ethics can be considered important in the prevention of fraud. 17

19 3-2. Case study (1): Fraud through fictitious orders and deposits The act of depositing money with a business operator by placing fictitious orders is tantamount to the unauthorized use of research funds. Researcher University Complicity Fictitious goods purchase using forged invoices Payment from research funding Business operator Analysis of the factors behind the fraud Deposit Used for other purposes such as research facility expenses and honorariums, etc. in the following fiscal year Desire to freely use research funding regardless of the purpose of use and the fiscal year (Motivation) System in which the process from order to delivery is carried out by the researcher him/herself (Opportunity) Lack of desire to comply with the rules, and lack of recognition that these are public funds (Justification) Treated as unauthorized use without exception, regardless of the presence or absence of misappropriation for private use! Measures in response to the fraud 18 Order to repay the grant Restrictions on application and eligibility for competitive funds for the next 4 years (5 years, after revision) Suspension of trading with the relevant business operator for a certain period of time Disciplinary action such as punishment administered within the institution Important point If the researcher was able to use and properly utilized the carry-over system, it would be possible to use the research funds the following fiscal year without resorting to fraud

20 3-3. Case study (2): Fraud through fictitious personnel expenses (honorariums) The act of having research collaborators overstate their hours worked in their attendance book and issue an invoice for an exaggerated salary is tantamount to the unauthorized use of research funds. Students (Research collaborators) Invoice Instruction to create a false attendance book Payment Collection Researcher Pool Treated as unauthorized use without exception, regardless of the presence or absence of misappropriation for private use! University Used for student participation in academic societies, etc. Analysis of the factors behind the fraud Desire to freely use research funding regardless of the purpose of use and the fiscal year (Motivation) Attendance management is left to the laboratory, and the administrative affairs division does not have an understanding of the actual work situation (Opportunity) Lack of desire to comply with the rules, and lack of recognition that these are public funds(justification) Measures in response to the fraud Order to repay the grant Restrictions on application and eligibility for competitive funds for the next 4 years (5 years, after revision) Disciplinary action such as punishment administered within the institution 19

21 3-4. Case study (3): Fraud through fictitious travel and transportation expenses The act of applying for more expenses that you actually used is billpadding and tantamount to the unauthorized use of research funds. University Application for travel expenses equivalent to the regular flight ticket Researcher The researcher pockets the difference Payment by rough estimate Purchase of discounted flight ticket Travel agency The money is used for the researcher's entertainment expenses and the travel expenses of his/her accompanying spouse Analysis of the factors behind the fraud Desire to use research funding for personal expenses (Motivation) Inadequacy of the system to check whether business trips are taken as applied for (Opportunity) Lack of desire to comply with the rules, and lack of recognition that these are public funds (Justification) Measures in response to the fraud Order to repay the grant Restrictions on application and eligibility for competitive funds for the next 5 years (10 years, after revision) Disciplinary action such as punishment administered within the institution 20

22 3-5. Improvement of the competitive funds system Carry-over system It is possible to use Grants-in-aid for Scientific Research the following fiscal year for any reason. Researchers can also use competitive funds other than Grants-in-aid for Scientific Research the following fiscal year so long as they fill out one A4-sized page on their "reason why carry-over is necessary Unused amounts are used the following fiscal year by performing an adjustment payment. List of reasons for carry-over and carry-over application examples Inquire the Administration Office Even if researchers fail to use the full amount of research funding within the fiscal year and return the surplus, this will not have any negative impact on the subsequent adoption of their requests for funding! Combined use of competitive funds Certain competitive funds systems allow the purchase of common facilities by combining multiple systems of research funding in principle. A single researcher may also draw upon multiple systems of research funding to purchase equipment. For details concerning the combined use of competitive funds including a list of systems under which the purchase of common facilities by combining multiple systems is possible Inquire the Administration Office 21

23 Section 4 Matters requested in the Guidelines (2) - Response after the discovery of fraud- 22

24 4-1. Response and impact in the event of accusations concerning fraud Fraud can tarnish the credit of the entire organization and have a significant impact in all aspects. From the establishment of an investigative committee upon discovery of the fraud to reporting The institution must determine whether investigation is necessary and report to the institution allocating the research funds within 30 days In the event the institution deems investigation necessary, it shall establish an investigative committee and conduct an investigation If necessary, the institution will put a moratorium on research funding The institution will submit a final report within 210 days In the event this process has been delayed without reasonable grounds Reduction of the indirect research budget in the relevant competitive fund Suspension of adoption or grant decisions of the competitive fund used by the researcher, suspension of issue, or order for the institution to put a moratorium on research funding 23 The loss of credit when fraud is discovered The unauthorized use of research funding, a valuable national tax, is an act that betrays public expectations. If fraud is discovered, the institution will be subject to the merciless condemnation of society. In recent years, the high speed information society has meant that an act of fraud, no matter how trivial the individual who committed the act thought it to be, can easily tarnish the credit of the entire organization. It is not easy for an organization to restore its credit after it has been tarnished as a result of fraud; the act of fraud has a significant lasting impact on the organization and the individuals who are affiliated with it.

25 4-2. Monitoring, etc. by MEXT and measures in response to institutions with deficiencies Under the Guidelines, MEXT will monitor institutions. If the institution has failed to improve deficiencies in system development, etc. discovered in the course of MEXT monitoring, MEXT will take measures such as reducing the amount of the indirect research budget or suspending the allocation of competitive funds. Monitoring by MEXT (1) Performance survey (extract a certain number each year) (3) Follow-up survey (survey on improvement) (4) Special investigation (situational awareness (2) Mobility survey (flexible response to emergency and and guidance after the discovery of fraud) extraordinary cases) MEXT deems there to be deficiencies in system development, etc. based on the results of (1) and (2) Granting of management conditions Implementation deadline of 1 year, with a follow-up survey to be conducted If performance of the management conditions is not observed, MEXT will gradually cut the amount of the institution's indirect research budget in competitive funds (up to a maximum of 15%) suspension of distribution and step-by-step measures (FY 2014 Guideline revision) MEXT can revoke the grant decision for competitive funds in relation to which fraud has been confirmed, and seek the return of all or part of the research funding 24

26 4-3. Measures of institutions and institutions allocating the research funds against fraud in the competitive funds system Researchers may be punished within the institution, be subject to criminal and civil action, have their name published in the findings related to the fraud, be forced to return some or all of the research funding from the institution allocating the research funds, and have restrictions placed on application and eligibility Measures of the institution As punishment within the institution: Disciplinary action such as disciplinary dismissal, suspension or pay cut based on the rules of employment, etc., or supervision measures such as reprimand and stern warning, etc. As legal measures: Civil or criminal complaint (depending on the rules and regulations of the institution to which the researcher is affiliated) Unless there is a valid reason for not doing so, the institution will publish its fraud investigation findings which include the researcher's name. Measures of the institution allocating the research funds Depending on the case, the institution allocating the research funds can revoke the decision to allocate the grant to the researcher / institution and seek the return of all or part of the research funding. Depending on the case, the institution allocating the research funds may place restrictions on application to and eligibility for competitive funds upon researchers who have committed fraud as well as those complicit to the fraud "Guidelines for the proper enforcement of competitive funds": points revised in October 2012 Measures of the institution allocating the research funds Stricter restrictions on application and eligibility for those who have misappropriated research funds for private purposes: 5 years > revised to 10 years Stricter / more proper restrictions on application and eligibility for those who have misappropriated research funds for non-private purposes: 2-4 years (determined on a uniform basis according to the purpose of the unauthorized use) > revised to 1-5 years (determined in accordance with the details of the unauthorized use) Establishment of restrictions on application and eligibility for those violating their duty of care: No penalty > revised to a maximum of 2 years 25

27 Section 5 Guideline Q&A 26

28 5-1. Guideline Q&A (1) Submission of a written oath Why is the submission of a written oath from members requested? Answer While members generally already have the obligation to comply with the regulations of the institution based on the employment contract or upon equitable principles associated with the employment contract, having members submit a separate written oath that explicitly states this content is likely to further enhance their awareness of fraud. For that reason, and in light of the important of the fraud problem, the Guidelines require institutions to have members submit a oath. 27

29 5-2. Guideline Q&A (2) Handling of accusations, etc. What are the conditions for accusations that need to be investigated? Answer In principle, accusations made onymously, in which the person(s) involved in the fraud, the period during which the fraud was committed and the name of the misused research fund, etc. can be identified, and which demonstrate reasonable grounds for fraud all need to be investigated. However, institutions, as managers of competitive funds which are a valuable national tax, are also required to investigate in good faith accusations in which all of the above conditions are not fulfilled such as accusations made anonymously, etc. wherever possible. 28

30 5-3. Guideline Q&A (3) About the acceptance inspection system Why do the Guidelines require the avoidance of acceptance inspections conducted by persons within the same laboratory or group having an hierarchical relationship with the researcher, etc? Answer Looking at past fraud cases, the fraud has occurred entirely within the lab, etc. If there is a hierarchical relationship, a subordinate who is a aware of fraud has no choice but to go along with it if instructed to do so. So the Guidelines require the avoidance of checks conducted by persons within the same laboratory or group as they are considered extremely ineffective. 29

31 And finally.. Even if fraud is hidden, it will eventually be discovered either through fraud prevention measures such as the delivery acceptance inspection system and risk approach audit, or other various monitoring such as national tax investigations and accusations, etc. In addition, the longer it takes to discover the fraud, the bigger risk it becomes to the presence of the institution itself when it is actually discovered. Systems to prevent fraud are essential for the management of institutions, and everybody is protected from unexpected situations such as a scandal by having such systems in place. Please understand this fact and cooperate in order for the fraud prevention systems to function effectively. The high speed information society has meant that an act of fraud, no matter how trivial the individual who committed the act thought it to be, can easily tarnish the credit of the entire organization. Fraud cannot be written off as the action of a single individual; always be aware of how your actions can effect the entire organization and endeavor to behave ethically. 30

32 Editing: MEXT Research Promotion Bureau Promotion Policy Division, Office of Research Funding Administration Content Production: Deloitte Tohmatsu Financial Advisory Co., Ltd., Deloitte Touche Tohmatsu LLC 31

33 NOTICE: This document was originally edited in Japanese by MEXT and translated into English by Meiji University. If there are differences between the Japanese version and the English version, the Japanese version will take precedence.