Management Issue 7:
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 2011, the Department awarded over 82,000 grants totaling approximately $382 billion. Of these, approximately 80,000 grants and $91 billion were for programs other than Medicare or Medicaid. These grants include those added to the HHS grant portfolio by the ACA and the Recovery Act, thus expanding the oversight necessary by grant managers and project officers.
HHS is also the third largest contracting agency in the Federal Government; in 2011, HHS awarded over $19 billion in contracts across all program areas. Additionally, four HHS OpDivs fund SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) grants and contracts. In 2010, HHS spent $690 million on these programs. HHS is the second largest funder of grants and contracts under these programs (the Department of Defense is the first).
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, OIG has found internal control deficiencies, problems with financial stability, inadequate organizational structures, inadequate procurement and property management policies, and inadequate personnel policies and procedures among grantees. For example, recent audits of Recovery Act grantees determined that grantees did not (1) maintain financial management systems that accounted for grants separately, (2) appropriately allocate direct and indirect costs, or (3) maintain documentation to support property records and actual personnel costs charged to the grant awards.
The Department also faces challenges with monitoring its HIV/AIDS relief grant funds awarded to foreign and domestic recipients. Through the President's Emergency Plan for AIDS Relief (PEPFAR) program, the Department received over $10 billion in grant funding to prevent, treat, and combat HIV/AIDS, tuberculosis, and malaria-with the majority allocated to the Centers for Disease Control and Prevention (CDC). OIG's review of CDC's oversight found that while some monitoring had been performed, it was not consistent. OIG found that grant-related files and documentation were not maintained in accordance with departmental and other Federal requirements.
With respect to contracts, OIG focused on the National Institutes of Health's (NIH) use of appropriations to fund 21 longer term contracts. We have reported instances of improper funding on 11 of the 18 completed audits. Audits of the remaining three contracts are ongoing. In FY 2011, HHS reported a departmentwide violation of the Antideficiency Act that involved 47 HHS contracts from NIH and other OpDivs that were awarded between 2004 and 2009. As OIG continues to review grants and contracts oversight vulnerabilities across the Department, we plan to assess the effectiveness of the remedial actions taken by the Department to properly fund its contracts and prevent future violations of the Antideficiency Act.
Progress in Addressing the Challenge
To conduct grant oversight, the Department continues to work with OIG to address audit findings, implement recommendations, and provide updated information on recoveries of unallowable costs related to grant programs. In addition, the Department is strengthening its program integrity efforts by working with its OpDivs and StaffDivs to identify programmatic risk utilizing a uniform risk management approach. This approach will enable the Department to look across programs for commonalities and solutions, as well as to consistently evaluate the results. For example, in 2010, the Health Resources and Services Administration (HRSA) launched its Program Integrity Initiative (PII) to identify and reduce risks through new or enhanced oversight activities while sharing new and best practices across programs. In 2011 OIG provided training to 200 HRSA grants management and program officials. In 2012, two PII Webinars were held; one focused on risk and fraud generally and the other addressed risk and fraud within the 340B Discount Drug Program. In total, more than 500 grantee participants and 200 HRSA staff attended the first Webinar and 400 participants including HRSA staff, grantees, and A-133 auditors attended the second Webinar.
With respect to systemic contract funding problems, the Department, as required by law, reported multiple violations of the Antideficiency Act; issued detailed policy guidance; developed and mandated a departmentwide appropriations law training course for all budget, finance, program, and contracting officials; developed an online reference tool for contract funding, formation, and appropriations law compliance; and is conducting appropriations law compliance reviews of all contract actions exceeding $5 million or $10 million, depending on the type of requirement reviewed and the awarding OpDiv or StaffDiv. CMS ensures that all employees involved in the acquisition process receive the necessary training to ensure that grants and contracts management policies and procedures are followed. Additionally, in May 2012, the Department issued Suspension and Debarment Procedures. In June 2012, the HHS Suspension and Debarment Official and her staff began holding monthly coordination meetings with representatives from OIG, the Office of Research Integrity, and the Office of the General Counsel (OGC). These meetings provide an opportunity for discussion of pending referrals as well as other operational and implementation activities either being considered or underway.
The Department has also taken steps to improve monitoring of its HIV/AIDS relief programs. For example, CDC is developing additional standard operating procedures for monitoring recipients. CDC also established a multi-disciplinary team from CDC headquarters to conduct reviews at its offices in various countries.
What Needs To Be Done
Sustained focus by the Department is needed to address vulnerabilities in its grant programs and contract administration. With respect to grant oversight, OpDivs need to continue to be vigilant in monitoring grant resources stemming from the Recovery Act, the ACA, PEPFAR, and other grant programs. Implementation of planned program integrity initiatives, such as evaluating and monitoring risks, identifying and addressing cross-cutting issues, resolving reported grantee audit findings, and sharing best practices across the Department, will better position HHS to integrate program integrity into all aspects of its operations and culture. Additionally, OIG has found that OpDivs vary in their grant oversight processes. The Department should work toward making the grants management function more consistent across OpDivs.
With respect to contract funding, the Department has advised that it is heavily focused on preventing new violations and that it is taking legally appropriate actions to ensure that there are no further violations of the Antideficiency Act among ongoing contracts. 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. The Department also needs to fully implement its Suspension and Debarment Procedures, including operationalizing the referral and decision process and setting up a departmentwide tracking system.
Key OIG Resources
- Review of 83 Early Head Start Applicants Under the American Recovery and Reinvestment Act (A-01-10-02501)
- Review of Centers for Disease Control and Prevention's Oversight of PEPFAR Funds for Fiscal Years 2007 Through 2009 (A-04-10-04006)
- See summary of recent NIH contract audits on pages IV-16-17 of OIG's Spring 2012 Semiannual Report to Congress
Management Issue 8: Protecting Consumers of Food, Drugs, and Medical Devices
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Unimplemented OIG recommendations summarized.
FY 2014 Work Plan
OIG projects planned for 2014.
Significant OIG activities in 6-month increments.