Department of Community and Economic Development
Reimbursement Requests by Authorized Trade Representatives
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.
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
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
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
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.
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:
lack of consistent translation of the documentation and receipts submitted by
ATRs to support monthly expense reimbursement requests; and,
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.
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:
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.
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.