On October 3, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) published a strategic plan for improving oversight of public grants and contracts “to strengthen compliance with HHS award requirements; promote award practices that achieve program outcomes; and mitigate fraud, waste, abuse, and mismanagement.” This comes as grant fraud related to awards by HHS and other agencies routinely makes the news. For example, in July Janet Mello was sentenced to 15 years in prison for stealing over $100 million from a U.S. Department of Agriculture (USDA)/Department of Defense (DoD) grant program aimed at helping military families. Similarly, fraud stemming from the Paycheck Protection Act has been dubbed the “biggest fraud in a generation.”

In Fiscal Year (FY) 2023, excluding the Centers for Medicare and Medicaid Services (CMS), HHS awarded about 142,000 grants totaling more than $77 billion and over 50,000 contracts amounting to more than $21 billion. Therefore, it is crucial that HHS implements effective controls to guard against fraud. The new strategic plan will attempt to enhance OIG oversight of HHS grants and contracts by achieving three strategic goals: 1) strengthening compliance with grant and contract requirements; 2) promoting award practices that achieve program outcomes; and 3) bolstering public trust in HHS awards by minimizing fraud, waste, and mismanagement. As the OIG begins to implement the strategic plan, contractors should pay increasingly close attention to ensure strict compliance with all terms and conditions included in grants and contracts.

Strengthen Compliance Requirements

The Strategic Plan explained that ensuring compliance with requirements for awarding federal funding has been a challenge for HHS and explained that implementing effective controls to enhance oversight, throughout the lifecycle of the grant or contract, is crucial for guarding against fraud and mismanagement. OIG underscored the importance of ensuring awarding agencies comply with relevant requirements including Uniform Guidance and the Federal Acquisition Regulation (FAR), statutory requirements, and agency-specific rules. In addition, OIG highlighted the importance of supervising the activities of subrecipients and advocated for increased scrutiny. There are heightened risks associated with managing subrecipients which, without proper oversight by HHS and primary recipient, can endanger the quality of the provided services.

Promote Award Activities that Promote Program Outcomes

HHS-OIG also noted the importance of ensuring awardees have the necessary processes in place to optimize the allocation of resources and promote positive program outcomes. Through targeted oversight reviews, OIG will continue to help HHS identify opportunities to drive efficiencies and the overall effectiveness of its programs. OIG stated, “[s]trong award management practices during the life cycle enable grants and contract to achieve their purposes.” OIG will also use data analytics to identify risk areas as they arise during performance and help HHS adopt clear performance measures to detect and remediate performance issues or prevent them from happening altogether.

Bolster Public Trust

Lastly, HHS-OIG believes that holding fraudsters accountable and preventing fraud and misuse can enhance public trust and safeguard public funds. First, OIG will increasingly focus on detecting fraud, waste, and abuse related to HHS grants and contracts which “will allow OIG to direct resources to the highest risk areas.” To hold fraudsters accountable, OIG can bring criminal, civil, and administrative actions as well as suspension and debarment referrals. Second, OIG seeks to protect HHS awards through its training and outreach efforts to HHS and agency awardees. Through the use of data analytics, audits, and investigations, OIG identifies risk areas and tailors training to those areas.

Interestingly, HHS has historically not used its discretionary contract and grant debarment authority to the same extent as other agencies, particularly in light of the value of contracts and non-CMS grants it awards. For example, in FY 2020, HHS debarred 15 contractors but awarded approximately $40.7 billion in contracts and $246 billion in non-CMS grants. In contrast, the Department of Homeland Security debarred 215 with approximately $20 billion in contracts and $30 billion in grants in the same time period. Recently, HHS discretionary debarment activity has ticked up a bit, with 30 contractors debarred in FY 2022, however, that number still pales in comparison to other agencies. With oversight poised to increase and an existing trend toward increasingly using the authority, we expect to see more HHS discretionary suspensions and debarments in the future.

Contractor Considerations

Understand the Requirements

HHS grants and contracts come with numerous requirements and HHS-OIG has signaled an increased willingness to pursue those that violate these requirements. Requirements may include agency-specific terms and conditions, FAR provisions, performance metrics, or reporting requirements. While these requirements can sometimes be confusing and vary across agencies, contractors must thoroughly read, understand, and comply with the contractual stipulations or risk significant repercussions. As the focus on compliance intensifies, it is crucial contractors implement the necessary procedures to comply with all relevant requirements.

Focus on Program Outcomes

OIG underscored the importance of prioritizing the achievement of program outcomes with their award practices. Contractors and grant recipients should do the same by setting clear, achievable performance metrics and establishing processes that allow the company to identify and remediate risk areas before they become performance issues that affect the quality or timeliness of the final deliverable.

Improving Oversight Mechanisms

With increased oversight, contractors and grant recipients should implement, or update existing, mechanisms to ensure adequate performance. It can be difficult for some grant awardees to guarantee successful performance on grant awards as small organizations may lack adequate resources making managing grant obligations difficult, awardees may struggle to set and meet clear performance metrics making it hard to demonstrate success, or external factors like economic changes can impact program delivery. Strong internal controls aimed at ensuring successful performance, clear delineation of responsibility between team members, and capacity-building initiatives like training could help contractors deliver strong products. In addition, OIG specifically mentioned increased oversite of subrecipients. Working with multiple partners can complicate oversight efforts. With that in mind, contractors and grant recipients should specifically implement mechanisms to ensure subawardees are compliant and delivering.

Going Forward

HHS-OIG has signaled an increased focus on ensuring HHS grants and contracts are properly managed and funds are not misspent. As a result of the strategic plan, we expect enforcement actions to increase. Contractors that do business with HHS should immediately assess their performance on HHS instruments and correct mistakes where appropriate. Going forward, contractors should work to thoroughly understand the grant or contract requirements prior to accepting award; focus on program outcomes by setting performance metrics and identifying risk areas; and improve oversight mechanisms, especially as it pertains to subrecipients.

Please contact the author if you have any questions about how the new HHS-OIG strategic plan may impact your business.