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Management Issue 10:
Grants Management and Administration of Contract Funds

Why This Is a Challenge

HHS is the largest grant-making organization in the federal government, and its funding of health and human services programs touches the lives of almost all Americans. In FY 2010, the Department awarded approximately $370 billion in grants, approximately 30 percent of which funded programs other than Medicaid and CHIP. The Recovery Act provided an additional $31.8 billion for the temporary expansion of these (non-Medicaid/CHIP) programs for FYs 2009 and 2010. Finally, the ACA appropriated billions in additional grant funding. HHS is also the third largest contracting agency in the federal government; in 2010, HHS awarded $19.1 billion in contracts.

Oversight and management of both new and continuing grant programs is crucial to the Department's mission and to the health and well-being of the public. However, our audits of grantees have found internal control deficiencies, problems with financial stability, inadequate organizational structures, inadequate procurement and property management policies, and inadequate personnel policies and procedures. Additionally, in recent reviews of Head Start grantees, we found significant health and safety violations.

Increased concerns by Congress and the Administration regarding transparency of and accountability for agency expenditures is creating heightened scrutiny over the administration of grant and contract dollars. Ongoing oversight by the Recovery and Accountability Transparency Board (RATB) and the results of a recent survey by the Council of the Inspectors General on Integrity and Efficiency on the use of suspension and debarment at federal agencies underscore the importance of vigorous oversight. For example, the Government Accountability Office found that the Department views suspension and debarment as an underused tool and is committed to instituting a more vigorous process, which includes training and sharing best practices.

With respect to contracts, we have focused on NIH's use of appropriations to fund 21 longer term contracts. We found a number of instances of improper funding of these contracts that have resulted in potential and actual violations of the Antideficiency Act.

Progress in Addressing the Challenge

To conduct Recovery Act oversight, OIG worked closely with OPDIVs to perform risk analyses of grantees eligible for Recovery Act funding. In most cases, our recommendations were adopted and high risk grantees did not receive funding or were subject to heightened scrutiny. Additionally, the Department's grant recipients are nearly 100 percent compliant in required reporting to the RATB. With respect to grants oversight, HHS continues to make progress in educating grants management officials. The Department hosted a 2-day symposium in April 2011 for all of its acquisition and grants officers. OIG has also been hosting grant training focused on fraud, waste, and abuse for Department grants officers. With respect to systemic contract funding problems, the Department, as required by law, reported multiple violations of the Antideficiency Act; issued detailed policy guidance; and developed and mandated a Department-wide appropriations law training course for all budget, finance, program, and contracting officials.

What Needs To Be Done

The OPDIVs need to continue to be vigilant in monitoring the ACA, the Recovery Act, and other grant awards. Additionally, through our grants management training efforts, we have found that each OPDIV has a great deal of autonomy over how it oversees its grants and that processes for taking grant actions differ. The processes across the Department should be more consistent. With respect to contract funding, the Department has advised that "[w]e are heavily focused on preventing new violations, but in terms of old contracts that are on-going, we're taking legally appropriate actions to ensure that there are no further violations of the Antideficiency Act." OIG continues to recommend that the Department correct the improper funding of contracts that resulted in appropriations violations and continue to ensure that appropriate officials attend mandated training, that future contracts are funded properly, and that policy guidance is consistently followed.

Key OIG Resources

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