Management Issue 8: Grants Management

Topics on this page:

• Management Challenge
• Assessment of Progress in Addressing the Challenge

Management Challenge:

The Department’s public health and human service agencies rely on grants and cooperative agreements to meet mission objectives, such as providing health and social services safety nets, preventing the spread of communicable diseases, and researching causes and treatments of diseases. In FY 2008, the Department expects to issue grants totaling $270 billion ($38 billion discretionary and $232 billion mandatory). Medicaid, which constitutes the largest portion of mandatory grants ($204 billion in grants expected in FY 2008), is discussed under Issues 3, 4, and 5, where its program vulnerabilities are identified.

Grants management remains a challenge because of the very nature of a grant. A grant is financial assistance for an approved activity with performance responsibility resting primarily on the grantee, with little or no Government involvement in the funded activity. This expectation of minimal Government involvement is compounded by the fact that many HHS grantees have limited experience in managing Federal funds. New, inexperienced grantees are particularly likely to receive funding when new grant programs are created or existing programs are expanded. In addition, even experienced grantees sometimes allegedly use grant funds for nonapproved purposes, as evidenced by recent grant-fraud-related settlements between DOJ and several major universities.

To ensure the integrity of HHS’s grant programs, OIG will continue to examine grants management, including the agencies’ grant selection and oversight processes, program performance and results, implementation of information technology efforts to increase program access and operational efficiency, and accountability for Federal funds. OIG continues to direct particular attention to vulnerabilities associated with expanded grant programs, newly funded initiatives, and first-time Federal grantees.

Discretionary Grants

Inadequate grant oversight and monitoring continues to be a concern of OIG. In 2007, OIG issued two reports on HRSA’s distribution and use of Ryan White Comprehensive AIDS Resources Emergency (CARE) Act funding to grantees. Contrary to the CARE Act, HRSA did not recoup certain unobligated funds from States and reallocate them. HRSA also authorized States to carry over unobligated funds beyond one budget period and did not use its offset authority as provided by the Act. OIG has initiated a nationwide review of CARE Act AIDS Drugs Assistance Program funds. The review will examine compliance with the payer of last resort provision which requires that grant funds be used for payment only after reimbursement has been obtained from other Federal, State, or private sources.

In 2006, OIG completed a review of the Agency for Healthcare Research and Quality’s (AHRQ) monitoring of its patient safety grants, which totaled $128 million in FYs 2001 through 2003. OIG found that although grantee performance reports generally complied with Federal requirements, most Financial Status Reports were not received or were late and Federal requirements for closeout were not met. OIG recommended that AHRQ require submission of interim financial information, establish a tracking system for Financial Status Reports, require grantees with nocost extensions to submit Financial Status Reports in compliance with Federal requirements, and ensure that grants awaiting closeout are closed promptly.

HHS agencies have historically had several grants management tools at their disposal, including the Department Alert List. Failure to use these tools increases the risk that grant funds will be used for purposes other than those intended. In 2005 and 2006, OIG completed two related reviews examining HRSA’s and CDC’s adherence to departmental policies governing placement on and use of the Alert List. The Alert List contains the names of highrisk grantees and is used by the Department to ensure that such grantees are known to the HHS grant-making agencies and to safeguard Department funds. OIG found that HRSA and CDC did not consistently follow Alert List policies for placing grantees on the list and monitoring their status. OIG also found that HRSA grants officers did not use the information on the list to make grant decisions. OIG recommended that both HRSA and CDC develop methods to ensure that grants officers follow Alert List policies. As of FY 2007, the HHS Office of Grants suspended the use of Department Alert List, pending a major redesign to increase internal control over its usage and to better support post-award monitoring and oversight.

Even when grantees are providing the intended services, they may not comply with all programmatic or financial requirements. A series of reviews of HRSA’s Ryan White HIV/AIDS service providers completed in 2004 and 2005 indicated that the intended services were generally being provided but that certain aspects of grantee or subrecipient operations, such as service delivery and fiscal management, could be improved. For example, a provider of emergency housing served some clients beyond the time period established in agency guidelines, while other potential clients were on waiting lists. OIG also identified a number of grantees that claimed costs at budgeted levels, rather than actual costs as required by Federal cost principles.

At NIH and university grantee sites, OIG has several additional ongoing initiatives aimed at evaluating the allowability of costs charged to NIH grants, focusing primarily on administrative and clerical costs charged to NIH grants. OIG also plans to evaluate the extent to which the National Cancer Institute (NCI) monitors its research project grants. This work will focus primarily on the extent to which NCI evaluates required reports, initiates actions in response to these evaluations, and ensures grantee responsiveness to action requests to comply with regulatory requirements and grant terms and conditions.

Mandatory Grants

Since 2002, OIG has performed reviews in 13 States that have focused on the appropriateness of Federal reimbursement related to Foster Care and Adoption Assistance training and administrative costs and maintenance claims. These reviews identified approximately $58 million in unallowable, improperly allocated, and unsupported costs. During FY 2007, OIG performed reviews in three States to identify erroneous payments in the Administration for Children and Families (ACF) Temporary Assistance for Needy Families (TANF) program, which had a FY 2006 funding level of $17.2 billion. Preliminary results in these three States have identified substantial improper payments. In addition, during FY 2008, OIG will perform an eight-State review to develop a nationwide improper payment rate for the TANF program.

Assessment of Progress in Addressing the Challenge:

Through the governmentwide Federal Grant Streamlining Program, the HHS grants management environment is continually undergoing significant changes. The program is intended to implement the Federal Financial Assistance Management Improvement Act of 1999 (Public Law 106-107), which requires agencies to improve the effectiveness and performance of their grant programs, simplify the grant application and reporting process, improve the delivery of services to the public, and increase communication among entities responsible for delivering services. The initiative requires grant officials to examine the way they do business, focusing not only on streamlining the grant process but also on ensuring that results are achieved and that Federal funds are used appropriately for the maximum benefit of program recipients. It is crucial that HHS agencies adequately manage and monitor their grantees’ and, to the extent possible, their subgrantees’ program performance and require fiscal accountability through the life of the grants. A critical part of this streamlining process involves the consistent use of departmentwide grants management policies. Over the next fiscal year, OIG will continue to address departmentwide efforts to improve the streamlining of Federal assistance programs, grants management, and program oversight and monitoring.

In response to OIG’s report on the Alert List, in FY 2007 the Office of Grants suspended the alert listing it maintained pending a major redesign to increase internal control over its usage. This management decision was based in large part on critical concerns documented by OIG. AHRQ indicated that the recommendations in OIG’s 2006 review of patient safety grants reinforce ongoing improvements begun subsequent to the years that we reviewed or support ongoing improvement activities. And, in response to recent OIG reviews of the TANF program, ACF indicated that it plans to use the findings and recommendations from OIG’s review to provide technical assistance to the State grantees.

Other Management Issues:

• Management Issue 1: Oversight of Medicare Part D
• Management Issue 2: Integrity of Medicare Payments
• Management Issue 3: Appropriateness of Medicaid and SCHIP Payments
• Management Issue 4: Medicaid Administration
• Management Issue 5: Quality of Care
• Management Issue 6: Public Health Emergency Preparedness and Response
• Management Issue 7: Oversight of Food, Drug, and Medical Device Safety
• Management Issue 8: Grants Management
• Management Issue 9: Integrity of Information Technology Systems and Infrastructure
• Management Issue 10: Ethics Program Oversight and Enforcement

AFR Section III Links

• Top Management & Performance Challenges
• Summary of Financial Statement Audit and Management Assurances
• Improper Payment Information Act Report
• Other Financial Information
• Consolidating and Combining Statements
• Management Report on Final Action
• Other Required Reporting