Recommendation Followup: Vulnerabilities Continue To Exist in the HHS Small Business Innovation Research Program

WHY WE DID THIS STUDY

We conducted this review to determine whether the Department of Health and Human Services (HHS) had addressed known vulnerabilities in its oversight of the Small Business Innovation Research (SBIR) program to ensure that program funds were being spent appropriately. In 2014, we reported vulnerabilities within HHS's SBIR program and made four recommendations to improve HHS's oversight. HHS implemented two recommendations from our 2014 report prior to this review. However, HHS had not formally notified OIG of any actions to implement the two outstanding recommendations-with which HHS had concurred-regarding awardee eligibility and duplicative funding. Since implementation of the SBIR program in 1982, HHS has obligated or awarded nearly $13 billion in awards to small businesses pursuing innovative research ideas.

HOW WE DID THIS STUDY

To assess HHS's progress in implementing the two outstanding recommendations, we reviewed information from HHS regarding actions it had taken specific to these recommendations. Specifically, we collected information from HHS to assess its current policies, procedures, and practices to ensure that awardees are eligible and that awards are not duplicative. We determined the extent to which these policies, procedures, and/or practices addressed the vulnerabilities identified in the 2014 report and whether we should consider the two recommendations to be implemented.

Approximately 800 awardees received HHS SBIR funds in 2015 or 2016. Of these awardees, we identified 32 as high risk and conducted further analysis to determine potential vulnerabilities. To determine whether the two outstanding recommendations should be considered implemented, we weighed any improvements HHS made to its policies, procedures, and/or practices against any concerns that we identified in the award files and the significance of those concerns.

WHAT WE FOUND

HHS has taken minimal action to improve policies and procedures for ensuring awardee eligibility and has taken no action to improve policies and procedures for preventing duplicative funding. To better gauge the impact of these continued vulnerabilities, OIG conducted a risk assessment, and we identified 32 awardees as high risk. We conducted further analysis on this small sample of awardees and determined that over two-thirds of them-22 of the 32 awardees that we found to be high risk-were potentially ineligible or potentially receiving duplicative funding. Because of the significance of the vulnerabilities we identified, OIG and HHS initiated investigations or audits of over half of these awardees (13 of 22).

WHAT WE CONCLUDE

The two outstanding OIG recommendations-regarding awardee eligibility and duplicative funding-remain unimplemented, and HHS's SBIR program continues to have weaknesses in these two areas. To assist HHS in implementing these recommendations, we suggest a number of actions that the Department could take to address these weaknesses. In response to this report, HHS stated that it considers both outstanding recommendations to be implemented because its policies and procedures are compliant with applicable requirements. However, meeting the minimum requirements does not fulfill OIG's outstanding recommendations, nor does it appear that it sufficiently prevents fraud, waste, and abuse in the SBIR program.