Challenge 9: Protecting HHS Grants and Contract Funds From Fraud, Waste, and Abuse
Why This Is a Challenge
HHS is the largest grant-making organization in the Federal Government; over 79,000 grants totaling $389 billion were awarded in FY 2014. That amount comprised $47 billion in discretionary awards and the remaining amount in formula/block grant and entitlement awards.
HHS is also the third largest contracting agency in the Federal Government. In FY 2013, HHS awarded over $20 billion in contracts across all program areas. The Government Accountability Office (GAO) and OIG both have identified weaknesses in HHS contracting processes and contract management throughout the Department. Oversight is a particular concern. An OIG audit of CDC contracts revealed poor execution of required contractor performance assessments by HHS. A recent GAO report identified ineffective contract planning and management as one cause of the problematic rollout of HealthCare.gov. In addition, recent OIG work identified the large number of contractors responsible for aspects of the federal Marketplace and requiring appropriate oversight and management. Under the Affordable Care Act, contractors have a vital role in building, maintaining, and fixing the systems that underpin the federal Marketplace. HHS faces a challenge to ensure proper management and oversight of these and other contracts. (See Management Challenge 1 for more information on management and oversight of the Marketplaces.)
The size and scope of departmental awards make vigilant oversight by the Department crucial to the success of programs designed to improve the health and well-being of the public. Yet OIG has noted weaknesses in the oversight of grantees, as demonstrated by late or absent financial and related reports, insufficient documentation on progress toward meeting program goals, and failure to ensure that grantees obtain required annual financial audits.
A common problem uncovered by our reviews at the grantee level is that grantees have lacked robust financial management systems. Many grantees still do not account for specific costs on a grant-by-grant basis, making it difficult to reliably monitor and account for costs associated with specific grant awards. When combined with frequent findings of significant unallowable expenses, these conditions support the need for more purposeful and consistent oversight.
HHS is the second largest payer under the SBIR and Small Business Technology Transfer (STTR) programs. HHS awarded $13 million in SBIR contracts and $463,000 in STTR contracts in FY 2013. OIG has noted two significant issues with the programs: inconsistent collection of information needed to evaluate commercial success and failures to check for duplicative funding within the Department and across other agencies. (See Management Challenge 8 for more information on administrative oversight of HHS grants and contracts.)
Progress in Addressing the Challenge
HHS has strengthened its program integrity efforts by working with OpDivs and StaffDivs to implement a uniform risk management approach that encompasses developing strategies, plans, and metrics. The Department has established a Program Integrity Coordinating Council, which identifies common program challenges and explores solutions.
The Department has sponsored training for HHS grant and contracting officials to aid them in identifying potential fraud, waste, and abuse, including encouraging contractors to self-report contract fraud and overpayments. Training has also taken place on best practices for investigating fraud in HHS grants and contracts.
The Department has made progress in its Suspension and Debarment program by conducting training, finalizing the HHS Suspension and Debarment Guidance and accompanying Desk Reference, creating a Department-wide referral tracking system, and working with the Office of the General Counsel to streamline the referral review process. The total number of suspension and debarment referrals according to the Office of Recipient Integrity Coordination (ORIC) has increased from 22 in FY 2012 to 42 in FY 2013, and the total number of actions taken by the Suspension and Debarment Officer (SDO) has increased from 0 suspensions or debarments in FY 2012 to 8 debarments and 8 suspensions in FY 2013. The Department is on track to increase the number of suspensions and debarments in FY 2014.
What Needs To Be Done
Sustained focus by the Department is needed to address vulnerabilities in its grant programs and contract administration. For instance, although the Department designed internal controls with features specified by OMB Memorandum M-13-07, this effort must be followed by diligent monitoring to ensure that qualified individuals have access to grants and that recipients use the funds according to the award terms and in a manner consistent with the Disaster Relief Appropriations Act of 2013.
HHS could improve federal contracting by aligning more closely with the Office of Federal Procurement Policy (OFPP) strategy of improving contractor source selection decisions. A key part of OFPP's strategy is contractor performance monitoring. HHS has improved its rate of monitoring from 10 percent to 24 percent in the last two years. However, according to a recent GAO report that rate is less than half the FY 2014 government-wide rate of 49 percent.
OpDivs must be vigilant in monitoring grant resources and take appropriate actions, including: implementing planned program integrity efforts, such as evaluating and mitigating risks and identifying and addressing cross-cutting issues; resolving grantee audit findings; and sharing best practices across the Department to better position HHS to integrate program integrity into all aspects of its operations and culture.
Training on identifying and pursuing misconduct in HHS grants and contracts should continue. HHS contract and grant officers should more actively coordinate with, and refer potential grant and contract fraud to, OIG for investigation. The Department needs to implement a program to actively pursue fraud under the Program Fraud Civil Remedies Act (PFCRA). The Department also needs to continue to refine its suspension and debarment procedures by further streamlining the referral and decision process, continuing to provide training and decreasing the processing time of referrals. Although HHS has begun to take suspension and debarment actions largely in response to conviction-based actions, OpDivs, StaffDivs, OIG, and the SDO need to make effective use of fact-based debarments and suspensions.
Key OIG Resources
- OIG Hurricane Sandy Grants and Contracts Training Videos
- OIG Report, The Department of Health and Human Services Designed Its Internal Controls Over Hurricane Sandy Disaster Relief To Include Elements Specified by the Office of Management and Budget, July 2014
- OIG Report, Vulnerabilities in the HHS Small Business Innovation Research Program, April 2014
Challenge 10: Ensuring the Safety of Food, Drugs, and Medical Devices
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Priority recommendations summarized.
FY 2016 Work Plan
OIG projects planned for 2016.
Significant OIG activities in 6-month increments.