COMMONWEALTH OF PENNSYLVANIA

OFFICE OF INSPECTOR GENERAL

OIG-14-0301-I-DCED

Pennsylvania Department of Community and Economic Development

Submission of Reimbursement Requests by Authorized Trade Representatives

General Investigation Report Summary

Approved for Public Release

            In June of 2014, the Pennsylvania Office of Inspector General (OIG) initiated an investigation of requests for reimbursement presented to the Pennsylvania Department of Community and Economic Development (DCED) by Pennsylvania Authorized Trade Representatives (ATR).  OIG investigated the process through which the ATRs, who contract with DCED, submit invoices to DCED for expense reimbursements and the manner in which the invoices are reviewed and approved for payment.  In May of 2015, OIG completed its investigation and provided information to DCED.

Background

DCED, through its Office of International Business Development, oversees the international trade representative program (Program), which has been in existence since the mid-1980’s.  The Program attempts to “bridge the gap” between Pennsylvania companies and international business opportunities.  ATRs are located within foreign countries and act as business consultants to DCED clients (small and mid-sized companies who are not engaged internationally in business).  ATRs provide guidance and assist DCED clients in getting those businesses’ products and services into each ATR’s respective foreign market.  As of February 2015, the Program had 19 international ATRs.

Investigation

            ATRs submit an invoice to DCED for monthly operating expenses, including a monthly expense report and supporting documentation and receipts.  Often, the supporting information submitted by ATRs is in the foreign languages spoken or used within the particular country in which the documentation or receipt was generated.  For example, documentation submitted to seek reimbursement of parking expenses may be from the parking operator located in the foreign country and, therefore, in that country’s language.

Because documentation and receipts in support of the claimed expenses are often in a foreign language, DCED staff responsible for processing ATR invoices may consult with DCED employees who speak and read the languages to assist in translating the documents.  A web-based translator may be used if DCED employees cannot translate the information.  However, translation of the documentation and receipts did not always occur.  The staff in the Commonwealth’s Office of the Budget, responsible for processing payments to the ATRs, also do not translate the ATRs documentation and relied on DCED to have completed that function prior to approving the invoice for payment.

During its investigation, OIG also discovered that monthly expense reports submitted by ATRs include the total amounts spent in each reimbursable expense category during that month, in a particular country’s currency, and an “exchange rate” to convert the total expenses into United States (U.S.) dollars.  Expense reports are audited to confirm the foreign currency amounts match the documentation submitted by the ATR.  However, DCED staff could not identify from where ATRs obtained the exchange rates included in the expense reports and did not themselves confirm the exchange rates used by the ATR.  Additionally, a single exchange rate is used on each monthly report, though expenses may have been incurred at different times of the month and fluctuations in the exchange rates may have occurred during that time period.  Neither DCED staff responsible for reviewing and approving the invoices for payment nor staff at the Office of the Budget, responsible for processing the payments to the ATRs, confirmed the exchange rates or made adjustments for fluctuations that may have occurred during the month.

In the course of the investigation, DCED informed OIG that the process for reimbursing expenses incurred by ATRs would be revised.  Specifically, staff in DCED’s Office of International Business Development informed OIG that DCED would no longer require ATRs to submit receipts for their monthly operating expenses and would instead provide reimbursement based on an average of their monthly expense receipts over a three-year period.  DCED would evaluate whether it would continue to contract with an ATR based on the ATR’s ability to meet or exceed established performance measures.

Conclusion

            OIG’s investigation did not reveal any evidence of fraud, waste, or abuse within the Program or reimbursements made to ATRs; but, OIG did identify potential shortcomings regarding the overall Program and reimbursements.  In particular, OIG informed DCED of the findings concerning:

1)      the lack of consistent translation of the documentation and receipts submitted by ATRs to support monthly expense reimbursement requests; and,

2)      the use of a single, unverified exchange rate on each ATRs monthly expense reports.

Based on its findings, OIG recommended that DCED review policies applicable to reimbursement of foreign-travel expenses for Commonwealth employees, which require use of verified exchange rates for the day the reimbursable expense was incurred, and determine whether a similar policy would be appropriate for ATRs.  OIG also recommended that DCED review the Federal Acquisition Regulation System used by the U.S. government and adopt relevant provisions dealing with submission of expense information in U.S. currency or conversion of foreign currency into U.S. currency using specific criteria and formulas.  OIG recommended that DCED not implement the proposed changes for reimbursements to ATRs – through which DCED would provide reimbursement based on an average of their monthly expense receipts over a three-year period and continue relationships with ATRs based on performance metrics – until DCED could evaluate OIG’s other recommendations.

Department/Agency Response

            DCED had already commenced the process of revising its reimbursement policies for ATRs prior to receiving the results of OIG’s investigation and several changes were made to create overall improvements in the Program.

            DCED will pay ATRs under a set fee-for-services model, as opposed to a fee-plus-expenses model.  The fee-for-services model is successfully used by other states engaged in the same international program and the change would put Pennsylvania in line with the other states, some of which contract with the same ATRs used by Pennsylvania.  Generally, DCED was satisfied with the performance of the ATRs, but the agency did eliminate large amounts for trade shows and events when calculating the services fees.  The changes implement by DCED permit nearly 100 percent of Commonwealth funds to require a return on investment.  The ATRs are still required to provide detailed monthly reports for the agency to review.  The renewal or continuation of service with the ATR is based on a thorough review of DCED’s performance metrics.  Also, in accordance with OIG’s recommendations:

·         DCED will request copies of receipts be submitted in the original foreign language and also translated in English.  Staff with foreign language expertise or staff using Google Translator will confirm the accuracy of the receipt.

·         DCED will continue to use OANDA (www.oanda.com) as the official exchange rate and use another official website only if OANDA’s site is experiencing difficulties, and ATRs would be notified of the revised procedures.  Reimbursement will be based on the exchange rate on the date of each transaction.  DCED will notify contractors that they will no longer be permitted to use one rate for the month.