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DEPARTMENT OF HEALTH & HUMAN SERVICES OFFICE OF INSPECTOR GENERAL OFFICE OF AUDIT SERVICES 150 S. INDEPENDENCE MALL WEST SUITE 316 PHILADELPHIA, PENNSYLVANIA 19106-3499 JUN 21 2005 Report Number: A-03-04-00353 Ms. Monica Lamboy, Chief Operating Officer Dear Ms. Lamboy: Enclosed are two copies of the Department of Health and Human Services (HHS), Office of Inspector General (OIG) final report entitled "Audit of Costs and Reporting of Funds Under the Public Health Preparedness and Response for Bioterrorism Program District of Columbia Department of Health." A copy of this report will be forwarded to the HHS action official noted below for review and any action deemed necessary. The HHS action official will make final determination as to actions taken on all matters reported. We request that you respond to the HHS action official within 30 days. Your response should present any comments or additional information that you believe may have a bearing on the final determination. In accordance with the principles of the Freedom of Information Act (5 U.S.C. § 552, as amended by Public Law 104-23 1, OIG reports issued to the Department's grantees and contractors are made available to members of the press and general public to the extent the information is not subject to exemptions in the Act which the Department chooses to exercise (see 45 CFR part 5) If you have any questions or comments about this report, please do not hesitate to contact me at (215) 861-4470 or through email at stephen.virbitsky@oig.hhs.gov or Robert Baiocco, Audit Manager, at (215) 861-4486 or through email at robert.baiocco@oig.hhs.gov. Please refer to report number A-03-04-00353 in all correspondence. Sincerely yours, Enclosure Direct Reply to HHS Action Official:
Department of Health and Human Services AUDIT OF COSTS AND REPORTING OF FUNDS UNDER THE PUBLIC HEALTH PREPAREDNESS AND RESPONSE FOR BIOTERRORISM PROGRAMDISTRICT OF COLUMBIA DEPARTMENT OF HEALTHDANIEL R. LEVINSON JUNE 2005 TABLE OF CONTENTSEXECUTIVE SUMMARY
Office of Inspector General The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as amended, is to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the health and welfare of beneficiaries served by those programs. This statutory mission is carried out through a nationwide network of audits, investigations, and inspections conducted by the following operating components: Office of Audit ServicesOIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by conducting audits with its own audit resources or by overseeing audit work done by others. Audits examine the performance of HHS programs and/or its grantees and contractors in carrying out their respective responsibilities and are intended to provide independent assessments of HHS programs and operations in order to reduce waste, abuse, and mismanagement and to promote economy and efficiency throughout HHS. Office of Evaluation and InspectionsOIG's Office of Evaluation and Inspections (OEI) conducts short-term management and program evaluations (called inspections) that focus on issues of concern to HHS, the Congress, and the public. The findings and recommendations contained in the inspections reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, and effectiveness of departmental programs. OEI also oversees State Medicaid fraud control units, which investigate and prosecute fraud and patient abuse in the Medicaid program. Office of InvestigationsOIG's Office of Investigations (01) conducts criminal, civil, and administrative investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment by providers. The investigative efforts of 01 lead to criminal convictions, administrative sanctions, or civil monetary penalties. Office of Counsel to the Inspector Generalhe Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering advice and opinions on HHS programs and operations and providing all legal support in OIG's internal operations. OCIG imposes program exclusions and civil monetary penalties on health care providers and litigates those actions within HHS. OCIG also represents OIG in the global settlement of cases arising under the Civil False Claims Act, develops and monitors corporate integrity agreements, develops compliance program guidances, renders advisory opinions on OIG sanctions to the health care community, and issues fraud alerts and other industry guidance. NoticesTHIS REPORT IS AVAILABLE TO THE PUBLIC at http://oig.hhs.gov In accordance with the principles of the Freedom of Information Act (5 U.S.C. 552, as amended by Public Law 104-231), Office of Inspector General, Office of Audit Services reports are made available to members of the public to the extent the information is not subject to exemptions in the act. (See 45 CFR Part 5.) OAS FINDINGS AND OPINIONS The designation of financial or management practices as questionable or a recommendation for the disallowance of costs incurred or claimed, as well as other conclusions and recommendations in this report, represent the findings and opinions of the HHS/OIG/OAS. Authorized officials of the HHS divisions will make final determination on these matters. EXECUTIVE SUMMARYBACKGROUNDStates and major local health departments receive Centers for Disease Control and Prevention (CDC) funding to improve bioterrorism preparedness and response capabilities under the Public Health Preparedness and Response for Bioterrorism Program (program). Program funding awarded to the District of Columbia Department of Health (District) has increased from $135,000 in 1999 to $11,492,799 in 2004. As of August 30, 2004, cumulative funds awarded to the District totaled $24,456,357. OBJECTIVESThe objectives of our audit were to determine whether the District:
SUMMARY OF FINDINGSWe found that the District:
RECOMMENDATIONSWe recommend that the District:
DISTRICT'S COMMENTSThe District concurred with our first three recommendations. We adjusted our fourth recommendation after the District provided documentation to support $66,301 in expenditures in response to our draft report. The District essentially met the intent of our fourth recommendation by agreeing to adjust its FSRs to account for the remaining $238,537 in improperly charged and inadequately documented expenditures. The full text of the District's comments is included as an appendix. INTRODUCTIONBACKGROUNDPublic Health Preparedness and Response for Bioterrorism ProgramStates and major local health departments receive CDC funding to improve their bioterrorism preparedness and response capabilities under the Public Health Preparedness and Response for Bioterrorism Program. The program is authorized under sections 301(a), 317(k)(1)(2), and 319 of the Public Health Service Act (42 U.S.C. §§ 241(a), 247b(k)(1)(2), and 247(d)). CDC initiated cooperative agreements with awardees requiring them to report the program expenditures by focus area as directed by Program Announcement 99051. Specifically, the notice of cooperative agreement states: "To assure proper reporting and segregation of funds for each focus area, Financial Status Reports ... must be submitted for individual focus areas not later than 90 days after the end of the budget period." CDC's program funding is divided into seven focus areas. Eligible applicants could request funds for activities under one or more of these focus areas:
Program funds were meant to augment current funding and focus on public health preparedness activities under the CDC Cooperative Agreement. Program Announcement 99051 states that "...cooperative agreement funds under this program may not be used to replace or supplant any current state or local expenditures." District FundingBioterrorism preparedness program funding for the District has increased from $135,000 in the first year to $11,492,799 for the year that ended August 30, 2004. As of August 30, 2004, cumulative funds awarded to the District totaled $24,456,357. OBJECTIVES, SCOPE, AND METHODOLOGYObjectivesThe objectives of our audit were to determine whether the District:
ScopeThe District expended $8,797,4011 of the $24,456,357 in program funds awarded for the period August 31, 1999, to August 30, 2004. Our review included $7,998,747 in program expenditures for the period August 31, 1999, to March 31, 2004. We did not review District expenditures of $798,654 for the period April 1, 2004, to August 30, 2004. Our review was limited to a nonstatistical sample of District expenditures. The expenditures were generally chosen based on high dollar value or type of expenditure. The following table summarizes the sampled expenditures: Table 1: Summary of Total and Sample Expenditures
We conducted our fieldwork between March and July 2004 at the District office in Washington, District of Columbia. MethodologyTo accomplish the objectives of our audit, we reviewed the District's accounting and financial reporting systems to determine how funds were recorded and reported, and to determine whether funds were expended for necessary, reasonable, allocable, and allowable costs. We also reviewed the prior and current levels of District funding of bioterrorism preparedness activities to assess whether these funds were replaced or supplanted by Federal funds provided. Specifically, we:
Our work was performed in accordance with generally accepted government auditing standards. FINDINGS AND RECOMMENDATIONSWe found that the District:
RECORDING, SUMMARIZING, AND REPORTING PROGRAM FUNDSThe District Did Not Track Program Funds by Focus Area.Program Announcement 99051 An essential aspect of the program is the need for the grantee to accurately and fully account for bioterrorism funds. In that regard, recipients of program funds are required to track expenditures by focus area. Note 3: Technical Reporting Requirements of Program Announcement 99501 in the original Cooperative Agreement states:
The District Was Not Tracking Program Funds By Focus Area The District did not separately track funds for each focus area in its accounting system during the period. Before CDC significantly increased its program award in Period 3, the District used a manual system to track program expenditures by focus area. The District Did Not Adjust Accounting Records to Track Focus AreasThe District did not track program funds by focus area because its grant staff had not requested that the accounting staff make the necessary modifications in its accounting system. According to District staff, the District's accounting system will be capable of tracking program funds by focus area once the necessary modifications are made. The District is planning to modify its accounting system in time to track Fiscal Year (FY) 2005 funds in accordance with the cooperative agreement guidance. CDC was Unable to Measure the Program ResultsWithout accurate and complete accounting of program funds, CDC cannot measure how the program is implemented acid whether its objectives have been met. The District Provided an Inaccurate Financial Status ReportThe FSR that the District provided to CDC for the period October 1, 2001, to September 30, 2003, was not accurate. The FSR was not supported by the District's accounting records. Supporting Schedule IncorrectDistrict personnel relied on a summary spreadsheet maintained outside the accounting system to prepare the required FSR. Individual amounts on the summary spreadsheet reconciled with accounting records; however, the totals on the spreadsheet were incorrect. These incorrect totals were subsequently reported on the September 30, 2003, FSR. Unliquidated Obligations Overstated on the Inaccurate FSRSince accurate figures were not carried over to the supporting spreadsheet, unliquidated obligations were overstated on the FSR by $206,014. UNOBLIGATED FUND BALANCESAs of August 30, 2004, the District had $11.8 million or 48.3 percent of Program funds unobligated.Cooperative AgreementUnobligated funds are monies CDC awarded but have not been obligated or expended. Program Announcement 99051 states that activities funded through the program are considered of core importance to the security of the country and that funded applications should be pursued vigorously with as little time lost in start-up as possible. Program funds should be used during the specified timeframe and only for program purposes. For example, Period 2 funds should have been obligated or expended for specific purposes by August 30, 2001. In its Period 4 Continuation Guidance, CDC recognized the significance of continuing unobligated fund balances by stating: "estimated FY 2002 supplemental unobligated funds that are not adequately justified or for which a written carry-over request is not received by July 1, 2003 will be brought forward in lieu of new funds." $11.8 Million in Program Funds Unobligated as of August 30, 2004As of August 30, 2004, unobligated funds totaled $11,821,490 and represented 48.3 percent of the $24,456,357 awarded. CDC has approved the carry forward of period 1 and 2 unobligated funds to period 3. CDC also approved the carry forward $5,944,580 of Period 3 funds to Period 4-Details are provided in the following table. Table 2: District Balances as of August 30, 20042
Funds Were Not Obligated for Various ReasonsDistrict program personnel provided several reasons for the unobligated balances. These included:
Our review has found a significant shifting of funds from one period to another that has also contributed to delays in obligating funds. As noted in our summary report on CDC bioterrorism programs in 17 states (OIG Report Number A-05-04-00027), many awardees across the nation found it difficult to obligate large sums of money in short periods. The District has experienced these same problems. Program Funds Not Fully UtilizedRecurring unobligated balances and carry forwards resulted in unused award amounts, suggesting that funds were not fully utilized to meet important program goals and stronger program oversight may be needed. ALLOWABILITY OF PROGRAM COSTSThe District Improperly Charged or Did Not Adequately Document Program ExpendituresCosts Must be Necessary, Reasonable, Allocable, and Adequately DocumentedOffice of Management and Budget Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments provides basic guidelines for factors affecting the allowability of costs under Federal awards. To be allowable under Federal awards, costs must "...be allocable to..." (C.1.a) and "...be necessary and reasonable for proper and efficient performance and administration of..." the award (C.1.b). Specifically, the cost principles states: "A cost is reasonable if it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost." (C.2) "A cost is allocable to a particular cost objective if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received." (C.3.a) In addition, the guidelines state costs must be adequately documented. (C.1 j) The District Improperly Charges' or Did Not Adequately Document $76,432Nine sample expenditures totaling $76,432 at the District were either improperly charged to the District's CDC program funds or not adequately documented, and are therefore unallowable. We judgmentally selected 39 payroll expenditures totaling $691,535 (24 percent of payroll universe) and 51 non-payroll expenditures totaling $2,445,231 (48 percent of non-payroll universe). The District reversed one of the non-payroll sample items, a lease accrual for $1,331,485, during our review; therefore, we did not review that expenditure. Improper ChargesWe reviewed supporting documentation and found that five sample items totaling $53,188 ($38,438 payroll and $14,750 non-payroll) were improperly charged to the District's program funds. The breakdown of the improper charges follows:
Items Not Adequately DocumentedFour sample items totaling $23,244 were not adequately documented. These items appeared to be expenditures made for temporary services, computer purchases and credit card purchases. Various Reasons for Improperly Charged or Inadequately Documented FundsThere were various reasons for the improper charges and inadequate documentation. The improper charges were due to miscommunication between the District and the Chief Financial Officer (CFO) department, who performs accounting services for the District. Although grant personnel identified the proper grant number to be charged on the supporting expenditure certification for some sample items, the actual grant number charged was incorrect. The inadequately documented charges were the result of missing documentation that was not provided by either the District or the CFO. CDC Funds May Not Be Expended in Accordance with GuidanceImproperly charged and inadequately documented expenditures resulted in program funds expended which are not in accordance with the Cooperative Agreement, and are not necessary and reasonable for proper and efficient performance and administration of the program. The District Erroneously Charged Unrelated Employee Overtime Pay to the ProgramThe District Self-Reported Erroneous Charging of Overtime Pay to the ProgramDuring our review, the District brought to our attention that it had erroneously charged some unrelated overtime pay to the program. Although the employees were assigned to work on the program, they performed unrelated overtime work for a lead contamination issue in the District. The District plans to reallocate the overtime pay to funding obtained through the District's Water and Sewer Authority. However, the District had not yet reallocated the overtime to the proper funding source. $162,105 Erroneously Charged to the ProgramThe District estimated that $162,105 in unrelated overtime payroll cost was erroneously charged to the program. SUPPLANTINGNo Evidence of SupplantingSupplanting Not AllowedBioterrorism program funds were to be used to augment current funding and focus on public health preparedness activities under the CDC Cooperative Agreement. The funds were not to be used to supplant existing Federal, State, or local funds for bioterrorism, infectious disease outbreaks, other public health threats and emergencies, and public health infrastructure within the jurisdiction. Program Announcement 99051 states "...cooperative agreement funds under this program may not be used to replace or supplant any current state or local expenditures." No Evidence of SupplantingWe found no evidence of supplanting at the District. We reviewed cost transfers, the timing of budget reductions versus bioterrorism funding, and costs reported for State fiscal years prior and subsequent to receiving program funding. We did not find significant decreases in District and other funded disbursements in correspondence with increases in federally funded disbursements. We also reviewed the employment history for a sample of program employees. Of the sample reviewed, all program employees' previous duties were either absorbed by or reassigned to other staff not funded by the CDC program. RECOMMENDATIONSWe recommend that the District:
DISTRICT COMMENTS AND OFFICE OF INSPECTOR GENERAL RESPONSEThe District concurred with our first three recommendations. We adjusted our fourth recommendation after the District provided documentation to support $66,301 in expenditures in response to our draft report. The District essentially met the intent of our fourth recommendation by agreeing to adjust its FSRs to account for the remaining $238,537 in improperly charged and inadequately documented expenditures. We are pleased that the District recognizes that $238,537 should not have been charged to Program funds. We are concerned that the revision of the FSRs only increases the significant unobligated funds already reported. The full text of the District's comments is included as an appendix. APPENDIXGOVERNMENT OF THE DISTRICT OF COLUMBIA Office of the Director Stephen Virbitsky
Dear Mr. Virbitsky, Thank you for allowing the DC Department of Health (DOH) to respond to the findings contained in the "Audit of Costs and Reporting of Funds Under the Public Health Preparedness and Response for Bioterrorism Program, March 2005 (Report No. A-03-04-00353)'. This audit reviews expenditures on the Centers for Disease Control (CDC) grant for bioterrorism preparedness (hereinafter "grant") from 1999 to August 2004. The audit findings and DOH responses are as follows:
We have further reviewed the recommendations and offer the following comments:
Sincerely, JON CARVER ACKNOWLEDGMENTSThis report was prepared under the direction of Stephen Virbitsky, Regional Inspector General for Audit Services. Other principal Office of Audit Services staff who contributed include: Robert Baiocco, Audit Manager For information or copies of this report, please contact the Office of Inspector General's Public Affairs office at (202) 619-1343. 1. There is a difference of $206,014 between actual expenditures and reported expenditures due to an inaccurate FSR for October 1, 2001 to, September 30, 2003 submitted by the District to CDC. 2. Although there were four budget periods at the time of our review, the Program was actually a 5-year project period, August 31, 1999, through August 30, 2004. Budget periods were annual, except for Period 3, which covered the 2-year period August 31, 2001, through August 30, 2003. |
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