HHS OIG, GAO Identify Grant Management Challenges
In recent congressional testimony, representatives from both the Department of Health and Human Services (HHS) Office of Inspector General (OIG) and the Government Accountability Office (GAO) focused on their offices’ continuing activities to ensure the proper oversight of federal grant funds.
HHS Inspector General Christi A. Grimm said that since 2019, OIG has increased its oversight of the National Institutes of Health (NIH) grants programs and operations using supplemental funding that Congress provided specifically for that purpose. HHS OIG has conducted, and continues to conduct, reviews focused on NIH’s management of grants, contracts and operations; award recipients’ compliance with federal requirements; and cybersecurity protections, Grimm noted.
“Our work has highlighted how NIH can make progress … [in] improving fundamental aspects of its grants programs and operations that any grantmaking agency should strive to get right,” Grimm said. For example, a January 2023 report that examined grants monitoring at NIH found that the agency did not exercise rigorous oversight over potentially high-risk research (see “GAO Finds Gaps in Framework for Pathogen Research,” March 2023).
Grants management is a fundamentally important role of NIH and its recipients, according to Grimm and “is one way NIH ensures that the public and the scientific community get the benefit of research funded by American taxpayer dollars. … Although the issues related to specific types of research and science may be complex, improving grants management — getting the basics right — need not be.”
Beware of Fraudsters
Over the years, OIG has identified risks to HHS grants — including fraud, unallowable costs charged to award programs and inadequate systems of internal control — that may impede reasonable assurance that the grant recipient is managing the award in compliance with all appropriate federal requirements.
In her testimony before the House Committee on Energy and Commerce Subcommittee on Oversight and Investigations, Grimm focused on fraud, which she defined as “the intentional deception for personal gain or to cause harm.” “In grant programs, fraudsters may lie, cheat and steal,” she said. “Grant fraud can be hard to identify for a multitude of reasons, including that fraudsters scheme to keep their actions undetected, fraud schemes can be complex and difficult to unravel, and grants are usually governed by complex terms and conditions. Effectively fighting grant fraud requires sustained resources focused on preventing problems from occurring in the first place, detecting problems promptly when they occur, and rapidly remediating detected problems through investigations, enforcement and corrective actions.”
In coordination with the Department of Justice and HHS, Grimm said OIG has pursued criminal actions, civil fraud remedies and administrative actions to combat misuse of grant funds, help restore stolen funding, prevent bad actors from continuing harm and deter future fraud. “Identifying and referring bad actors for suspension and debarment when appropriate is an important tool for sound grants management,” Grimm emphasized.
Unallowable costs are costs that do not comply with regulations or are excessive, unreasonable or unsupported. In its work, OIG has “commonly identified” unallowable charges to HHS grants for salary, travel, donations, supplies, construction and renovation, and rent, Grimm told the committee. In addition, HHS recipients have improperly used funds to pay for expenditures unrelated to the grant or for personal purposes. “We have found that some grant recipients lack robust financial management systems, did not always adhere to federal requirements, and did not maintain adequate documentation of expenditures,” Grimm said. “OIG has also identified deficiencies in internal controls at the recipient level (e.g., ensuring that grant costs are supported by documentation) and the operating division level (e.g., timely grant closeout).”
GAO: Challenges Persist
A number of “common themes” have emerged from the various reports resulting from decades of GAO’s work on federal grants management. In recent testimony before the Senate Committee on Homeland Security and Governmental Affairs, Jeff Arkin, GAO’s director of strategic issues, said that “the landscape of federal grants continues to change and evolve, but some challenges have persisted over many years,” and his remarks focused on four of these longstanding challenges: capacity, streamlining, transparency, and internal control and oversight.
Arkin said that over recent years, GAO has made many recommendations to improve the management and oversight of federal grants. Although agencies often agree with GAO’s recommendations, “work remains to fully implement” some of them to help address grant management challenges.
Arkin testified that having the capacity to oversee grant funding — both at the recipient and the awarding agency level — can affect program success. “Capacity involves both the maintenance of appropriate resources and the ability to effectively manage those resources,” he said, and encompasses human capital (i.e., organizational staff with the knowledge and skills to meet grant goals and objectives); organizational readiness (i.e., the appropriate leadership, management structure and size to effectively manage a program); and financial commitment (i.e., internal funds for grants that require matching funds or maintenance of effort provisions).
“A lack of capacity” on the part of either a funding agency or a grant awardee “can adversely affect their ability to successfully manage and implement grant programs,” Arkin said. “Federal agencies can help organizations mitigate capacity limitations through technical assistance and by making available federal or other revenue dedicated to covering the cost of grant administration and oversight.”
Streamline Requirements
Arkin also discussed the burden that results when both agencies and awardees must satisfy duplicative or overly burdensome grants management requirements. This can make the agency’s programs and services less cost-effective overall, according to Arkin.
In recent reports, GAO’s work “has shown that numerous federal grant programs created over time without coordinated purposes and scope can result in grants management challenges. Addressing these challenges may achieve cost savings and result in greater efficiencies in grant programs. Our work has underscored the importance of identifying fragmentation, overlap or duplication in a number of federal programs, including grants management practices.”
Arkin noted that the federal government has continued efforts to examine and implement methods to streamline grants management and reduce recipient burden, but more needs to be done.
Refine Data Transparency
In an effort to improve transparency in how the government spends its funds, the DATA Act (Pub. L. 113–101) was passed to require the Office of Management and Budget (OMB) and the Treasury Department to establish data standards, and other federal agencies to increase the types of information available on federal spending, especially grant spending (see ¶101 in the Federal Grants Management Module). However, according to Arkin, GAO has previously reported on challenges related to the timeliness, completeness and accuracy of grant data on USAspending.gov. Likewise, GAO and other relevant federal entities have identified problems with the completeness and accuracy of subaward data displayed on USAspending.gov.
“If the accuracy of data available on USAspending.gov can be improved,” Arkin said, “policy makers should be better able to make data-driven decisions to address ongoing government management challenges and improve the effectiveness and efficiency of government programs. Similarly, additional efforts to disclose known data limitations can help users of the data on USAspending.gov understand the extent to which the data are timely, complete, accurate and comparable over time.”
Oversight Ensures Effectiveness
GAO’s prior work has shown that when awarding and managing federal grants, effective oversight and internal control are critical to demonstrating reasonable assurance to federal managers and taxpayers that grants are awarded properly and federal grant funds are used as intended and in accordance with laws and regulations.
Both GAO and agency inspectors general, through their work, have found that “when such controls are weak, federal grantmaking agencies face challenges in achieving grant program goals and assuring the proper and effective use of federal funds to help avoid improper payments,” Arkin said.
One important way that federal agencies oversee nonfederal grantees is through the single audit, which is an important tool in identifying whether recipients have complied with their award’s provisions, and may have a “material effect on each of the recipients’ major programs,” Arkin added.
Stakeholders have expressed a need for the single audit guidance, the annual OMB Compliance Supplement, to be released by no later than April of each year to effectively plan their audits and conduct interim testing for entities with June 30 fiscal year-ends. Arkin noted that although OMB published the 2022 Compliance Supplement in May 2022 (according to OMB, the earliest issuance in the past 15 years), Arkin said that “OMB should incorporate appropriate measures, such as establishing formal written policies and procedures, for ensuring timely issuance of future Compliance Supplements and other single audit guidance that is responsive to users’ input and needs.”
For More Information
Grimm’s testimony is available at https://oig.hhs.gov/documents/testimony/1112/christi-grimm-testimony-04182023.pdf.
“Grants Management: Observations on Challenges with Access, Use and Oversight” (GAO-23-106797) is available at https://www.gao.gov/products/gao-23-106797.
