Why This Is a Challenge
HHS is the largest grant-making organization in the Federal Government, with more than $400 billion awarded in FY 2016. The Patient Protection and Affordable Care Act (Affordable Care Act) provided additional grants funding, adding to HHS's oversight responsibility. Responsible stewardship of these program dollars is vital to public health and well-being. Operating a financial management and administrative infrastructure that employs appropriate internal controls to minimize risk and protect resources remains a challenge for HHS.
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Vulnerabilities exist in grants management throughout HHS. For example, awarding agencies lack effective mechanisms to share information about problematic grantees. Intra-department communication is critical, especially because awarding agencies are now required to assess risks posed by grant applicants. Additionally, awarding agencies' monitoring of grantee progress over the life of the grant continues to need improvement. Once funds are awarded, effective oversight is key in ensuring that grantees expend Federal funds properly and efficiently. Lastly, many HHS grantees lack effective internal controls, including robust financial management systems required to provide effective accountability for Federal funds. To fulfill grant responsibilities and ensure accountability of Federal funds, grantees are required to maintain internal controls that provide reasonable assurance that operations are effective and efficient, ensure reliable reporting for internal and external use, and comply with laws and regulations. In addition to its usual grants administration and oversight activities, HHS faces the challenge of updating its internal and external grants policies and systems in accordance with 45 CFR part 75, its new regulation governing grants administration and the establishment of cost principles.
Examples of specific vulnerabilities in HHS grant programs include misuse of funds, inadequate oversight of programs for children, and inadequate oversight of preparedness and response to emergencies and infectious diseases.
Key Components of the Challenge
Misuse of Grant Funds. Misuse of Federal funds poses significant risks to the integrity of HHS programs. For example, in 2015 the University of Florida entered into a $19.875 million settlement agreement with OIG and HHS to resolve allegations that the University overcharged hundreds of HHS grants for the salary costs of its employees, charged some of these grants for administrative costs for equipment and supplies when those items should not have been directly charged to the grants under Federal regulations, and inflated costs charged to HHS grants. In another example, five individuals from Montana were convicted of fraud and sentenced in 2015 after improperly receiving Temporary Assistance for Needy Families (TANF) funds from the Blackfeet Tribe of the Blackfeet Nation in Montana and from the Federally funded State welfare program simultaneously. The Administration for Children and Families (ACF) worked with OIG to pursue a misuse of funds penalty against the Tribe for lack of oversight of HHS funds in its TANF program.
Oversight of Programs for Children. For HHS block grants, States are given broad flexibility to oversee and monitor funds and determine the fraud-prevention activities they will use to help ensure program integrity. OIG found that States differed in the scope and method of their program integrity and antifraud activities. For the Child Care and Development Fund (CCDF)-a $5.7 billion program that services nearly 1.4 million children every month-OIG identified weaknesses in the fiscal controls over CCDF funds in various States and, in total, reported more than $39.4 million in fund expenditures for FYs 2004-2010 that did not comply with Federal requirements. ACF has been working in the CCDF Block Grant structure to encourage States to adopt more uniform program integrity policies. The CCDF final rule, published on September 30, 2016, requires States to have effective procedures and practices to ensure integrity and accountability in the CCDF program. In addition, HHS oversees a variety of grantees providing for the care and services for unaccompanied children entering the United States from foreign countries and must maintain vigilance against fraud. For example, a grantee case manager in Florida defrauded more than 10 family members and/or potential sponsors of unaccompanied children who were in the custody of the Office of Refugee Resettlement by falsely representing that failing to send the case manager a requested amount of money might delay reunification with their children or result in the child's deportation. The case worker was sentenced to 18 months of imprisonment and ordered to pay $11,100 in restitution.
Oversight of Grants for Emergency Preparedness and Response and for Infectious Diseases. Effective protection against public health threats requires a well-coordinated public health infrastructure that can rapidly respond to emergencies at home and internationally. In dealing with infectious diseases such as Zika and Ebola, proper grant mechanisms need to be in place to foster effective response coordination with domestic and international partners. Once policies are in place, awarding agencies must also ensure that funds are effectively awarded and managed. OIG found that the Centers for Disease Control and Prevention (CDC) did not always adequately document its funding decisions to award $1.9 billion in President's Emergency Plan for AIDS Relief funds over a 5-year project period. OIG also found that CDC may have considered applications that it should not have or treated applicants inconsistently. HHS must also ensure that grant programs allow appropriate funding flexibility to best address response needs. For example, five States received almost $475 million in Social Services Block Grant (SSBG) funding to help cover social service and reconstruction expenses resulting directly from Superstorm Sandy. Although Sandy SSBG funds assisted States' recovery by supporting reconstruction and social service activities, ACF's guidance limited the effectiveness of State planning and use of the funds.
Progress in Addressing the Challenge
HHS has worked to strengthen its grants program integrity efforts. New grant regulations were codified at 45 CFR part 75, implementing Office of Management and Budget's Uniform Guidance requirements. Pursuant to those rules, the Assistant Secretary for Financial Resources (ASFR) is implementing a single audit resolution tracking system-scheduled for completion by September 30, 2017. These rules are intended to ensure that all grant closeout activities are completed within 270 days. (For more information on the DATA Act, see TMC #4.) Further, ASFR issued the Grants Policy Administration Manual in December 2015, which compiles all internal grants policies in a single location.
HHS has made efforts to assess grant program performance and improve grant oversight along with identifying and reporting potential fraud, waste, and abuse in its programs. For example, the Indian Health Service partnered with OIG to provide training for employees of HHS and tribal facilities on identifying and reporting potential fraud, waste, and abuse. HHS has increased its use of suspension and debarment authorities, resulting in an increase from 32 debarments and 7 suspensions in FY 2014 to 26 debarments, 28 proposed debarments, and 37 suspensions in FY 2015-thus preventing prohibited businesses and individuals from receiving Federal funding. HHS is actively training awarding agencies on the suspension and debarment process. In addition, HHS has partnered with OIG in presenting suspension and debarment training.
What Needs To Be Done
HHS needs to take more aggressive action to identify poorly performing grantees and those at risk of misspending Federal dollars and either provide increased technical assistance and monitoring or prevent them from continuing to receive grant funds. Sustained focus and information sharing is needed to monitor and address vulnerabilities, and HHS must diligently continue efforts to ensure that recipients use funds consistent with legal requirements and Departmental policies and procedures.
As HHS moves forward to implement requirements related to the new grant regulations at 45 CFR part 75 and the DATA Act, it must ensure that the HHS awarding agencies have processes and appropriate internal controls in place to effectively award, monitor, and report on grants management activities. These include the development of:
- a framework to evaluate risks posed by grant applicants that is then included in funding opportunity announcements;
- a process to correlate grantee financial data to performance accomplishments to demonstrate effective practices and improve program outcomes; and
- a system to standardize grant data elements and publicly report financial spending data for grant awards.
In addition, HHS will need to successfully implement a system to track, monitor, and resolve single audit findings to effectively carry out new management responsibilities under 45 CFR part 75.
HHS should continue to provide training on identifying and pursuing misconduct in grants. Grant officers should more actively coordinate with and refer potential fraud to OIG for investigation. HHS should continue to pursue other avenues of training beyond the classroom setting, such as webinars or podcasts, to reach a broader range of HHS staff that are located domestically and internationally. HHS also needs to continue to refine its suspension and debarment procedures by streamlining the referral and decision process, to continue providing training and decrease the processing time of referrals. Moreover, HHS needs to implement a program to actively pursue fraud under the Program Fraud Civil Remedies Act.
Key OIG Resources
- OIG Report, "HHS Oversight of Grantees Could Be Improved Through Better Information Sharing," September 2015.
- OIG Report, "Puerto Rico Improperly Claimed Some Child Care and Development Targeted Funds," January 2016.
- OIG Report, "More Effort is Needed to Protect the Integrity of the Child Care and Development Fund Block Grant Program," July 2016.
- OIG Report, "CDC Did Not Award President's Emergency Plan for AIDS Relief Funds for 2013 in Compliance with Applicable HHS Policies," May 2016.
- OIG Report, "Link2Health Solutions, Inc., Budgeted Costs That Were Not Appropriate and Claimed Some Unallowable Hurricane Sandy Disaster Relief Act Funds," March 2016.
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