Research Administration Office

University of California

Memo Operating Guidance

No. 88-3

February 16, 1988

Subject: Internal Reporting of Suspected Financial Misconduct on DOD Contracts Over $5 Million

Background

On September 11, 1987, the Department of Defense issued a final rule regarding improper business practices at DFARS Subpart 203.70 (see Enclosure 1). This Subpart called for a new clause (252,203-7003, Display of DOD Hotline Posters) to be inserted in DOD contracts expected to exceed $5 million. The new clause requires DOD contractors to display hotline posters "in common work areas within business segments performing work under DOD contracts," unless the contractor has established a mechanism "by which employees may report suspected instances of improper conduct, and instructions that encourage employees to make such reports."

Scope

This C& G Memo concerns financial misconduct on extramurally funded contracts. For purposes of this Memo, the definitions of "financial misconduct" and "improper conduct" are identical to the definition of "misappropriation of University assets" given in Section III of Business and Finance Bulletin G-29, Procedures and Responsibilities Pertaining to Known or Suspected Losses Resulting from Misappropriation of University Assets (see Enclosure 2).

Current University Policy

Existing University policy on the subject of reporting suspected financial misconduct under extramural awards is contained in Business and Finance Bulletin G-29. Section IV.A.3. of G-29 states:

Each Chancellor shall take steps to inform employees of their responsibility to report known or suspected misappropriations University assets. Such notification should describe campus reporting procedures.

Clause Acceptance Guidance

The clause at DFARS 252.203-7003 does not apply to DOD contracts under $5 million and should not be included in such contracts.

Before accepting the subject clause in a DOD contract expected to exceed $5 million, campus C& G Officers should review the campus implementation of G-29 to make sure appropriate procedures are in place for employee reporting of financial misconduct. These procedures should, in order to comply with the new DOD clause, inform employees of their responsibility to report, and designate individuals or offices to receive reports in confidence. Such procedures would constitute the mechanism required under the subject clause. C& G Officers should coordinate this review with other appropriate campus offices, including the campus internal audit office. It is not recommended that DOD Hotline Posters be displayed in lieu of the normal campus implementation of University policy.

After it has been determined that there is a mechanism to inform employees of their responsibility to report suspected financial misconduct and which designates individuals or offices to receive reports in confidence, the DOD clause may be accepted.

Refer: Bill Sellers

(415) 642-3045

ATSS 8-582-3045

Subject Index: 04

Organization Index: F-175

David F. Mears

University Contracts and Grants Coordinator

Enclosure

cc:

Bob Tuffnell

Steve Selby

Don Alter

Campus Internal Audit Managers