Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

U D
SE OF THE  EPARTMENTAL 

A L HRSA 

LERT  IST BY 
Daniel R. Levinson 

Inspector General 

May 2006

OEI-02-03-00011
 Office of Inspector General 

http://oig.hhs.gov 
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 Services 
The 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.  These assessments help reduce waste, 
abuse, and mismanagement and to promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on 
significant issues.  Specifically, these evaluations focus on preventing fraud, waste, or 
abuse and promoting economy, efficiency, and effectiveness in departmental programs.  
To promote impact, the reports also present practical recommendations for improving 
program operations. 
Office of Investigations 
The Office of Investigations (OI) 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 OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The 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.    E X E C U T I V E   S U M M A R Y  

OBJECTIVE 
To determine the extent to which the Health Resources and Services 
Administration (HRSA) adheres to policies governing the departmental 
Alert List. 
BACKGROUND 
The Alert List is posted on the Department of Health and Human 
Services (HHS) Intranet site for all agencies that award grants.  
According to the Awarding Agency Grants Administration Manual 
(AAGAM), if an awarding agency has concerns about a grantee due to 
the grantees inexperience in handling Federal funds, financial 
instability, inadequate management systems, history of poor 
programmatic performance, or for other reasons, the agency may place 
the grantee on the Alert List.  The purpose of the Alert List is to 
safeguard HHS funds by alerting other agencies to these potential risks.  
Being on the Alert List does not automatically disqualify a grantee from 
receiving an award. 
HRSA is expected to follow the policies governing the Alert List that are 
found in HHSs Awarding Agency Grants Administration Manual 
(AAGAM).  Accordingly, HRSA is expected to place on the Alert List 
grantees that are designated as high risk, including those that have 
special award conditions attached to the grant.  Special award 
conditions address a specific grantee vulnerability and may include, for 
example, drawdown restrictions or more frequent grantee reporting. 
HRSA is also responsible for checking the Alert List prior to making an 
award and for consulting with the other agency(s) that initially placed 
the grantee on the Alert List.  HRSA is further expected to monitor 
grantees on the Alert List and take required actions when it attaches a 
special award condition to a grant.  Additionally, HRSA is responsible 
for removing grantees from the Alert List or justifying retaining a 
grantee whose name appears on the Alert List for more than 2 years.  
In fiscal year 2002, HRSA awarded a total of $34 million to grantees 
that it had placed on the Alert List and another $60.5 million to 
grantees that were placed on the Alert List by other agencies. 
To determine the extent to which HRSA adheres to policies governing 
the Alert List, we reviewed the files of HRSA grantees on the  
March 24, 2003, Alert List. We requested the files of 62 HRSA grantees 
placed on the Alert List by HRSA, the National External Audit Review 
  OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  i  E X E C U T I V E   S U M M A R Y  
Center, or another agency.  HRSA provided 56 files for our review. In 
these grantee files, we looked for evidence that grants officers followed 
each of the policies governing the Alert List.  We also conducted 
structured interviews with four grants officers and two grants officials 
in HRSA. 
FINDINGS 
HRSA does not consistently follow Alert List policies. We found that 
HRSA does not consistently follow Alert List policies including placing, 
checking, consulting, monitoring, and justifying retaining grantees on 
the Alert List. 
HRSA does not consistently place grantees on the Alert List.  Grants officers are 
expected to place a grantee on the Alert List when they designate a grantee 
as high risk or when they attach a special award condition to a grant, even 
if the grantee has already been placed on the Alert List by another agency.  
Grants officers designated a total of 6 of the 56 grantees as high risk.  They 
did not place two of these six grantees on the Alert List.  Grants officers also 
attached at least 1 of the special award conditions as listed in the AAGAM 
to the grants of 25 of the 56 grantees, but placed only 4 of them on the Alert 
List. 
HRSA does not consistently check the Alert List nor accurately document 
checking it. Grants officers are expected to check the Alert List prior to an 
award.  Twenty-four of the fifty-six files reviewed had no evidence that the 
grants officer checked the Alert List.  Twenty-six of the remaining        
thirty-two files contained a copy of a standardized electronic checklist that 
indicated whether or not the grantee was on the Alert List.  Of these 
26 checklists, 14 indicated the grantee was not on the Alert List when the 
opposite was true. 
HRSA does not regularly consult with other agencies to obtain information about 
grantees. Grants officers are responsible for consulting with the agency that 
placed the grantee on the Alert List to obtain information about the grantee.  
In the files of the 45 grantees placed on the Alert List by another agency, we 
found only 2 instances of consultation documented.  In our discussions with 
grants officers, none reported coordinating with agencies that place grantees 
on the Alert List. 
HRSA does not consistently document certain monitoring activities for Alert List 
grantees.  Grants officers are expected to complete certain monitoring 
activities when they attach a special award condition to a grant.  Grants 
officers attached special award conditions to 25 of the 56 grantees.  We 
found that none of the files for these 25 grantees included transmittal 
  OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  ii  E X E C U T I V E   S U M M A R Y  
letters to the grantees indicating the corrective actions required, the time 
period for correction, and a description of the consequences of not 
completing actions required.  Additionally, 9 of the 15 files of grantees that 
had payment-related special award conditions did not include notification 
to the Payment Management System. 
HRSA does not provide justification for retaining grantees whose names appear 
on the Alert List for more than 2 years. Grants officers are expected to provide 
justification to the Office of Grants when retaining a grantee on the Alert 
List for more than 2 years.  At the time of the file review in August 2003, 
seven grantees that HRSA placed on the Alert List had been on the list for 
longer than 2 years.  None of these files had justifications to support these 
grantees remaining on the Alert List.   
Grants officers do not use the information on the Alert List to make 
grant decisions and some report concerns about the information on 
the Alert List.  Grants officers and grants officials reported that decisions 
about specific grants are based on their own judgments and not from 
information on the Alert List.  One grants officer noted that they put 
special award conditions on a grant based on their own concerns, and one 
grants official further noted that the decision to deny a grant is based on 
their own reasons, not on whether the grantee is on the Alert List.   
In our discussions, three of the four grants officers reported that the 
Alert List is not at all useful.  Generally, these grants officers 
explained that the Alert List does not provide current information and 
that the information on the Alert List is not useful for making decisions 
about grantees. Grants officials also reported that the Alert List is not 
always useful, in part because they do not always know when the Alert 
List is posted.  Our review of the Alert List also found that it did not 
always have complete information.  
RECOMMENDATIONS 
We determined that HRSA staff do not consistently adhere to policies 
governing the use of the Alert List.  This lack of consistency makes it 
difficult to ensure that a grantees risk of programmatic and/or financial 
failure is communicated to all agencies that award grants and that HHS 
funds are appropriately safeguarded. Although grants officers note that 
the Alert List has a number of limitations, it is critical for each agency 
that awards grants to adhere to HHS policies to make the Alert List an 
effective means of conveying grantee risk.   
This review was conducted at a time when HRSA was consolidating and 
centralizing its grants management functions and implementing an 
  OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  iii  E X E C U T I V E   S U M M A R Y  
automated grants management system.  These changes may bring 
greater consistency to its grants management functions and better 
position HRSA to incorporate the following recommendations.  
Specifically, we recommend that HRSA: 
Ensure that grants officers follow Alert List policies.  HRSA needs to make 
the Alert List a higher profile issue and stress that grants staff need to 
follow Alert List policies.  HRSA needs to ensure that grants officers and 
grants officials follow policies for placing grantees on the Alert List, 
checking the Alert List, consulting with the agency that placed the grantee 
on the Alert List, monitoring grantees with special award conditions, and 
removing or retaining Alert List grantees when appropriate.  HRSA also 
needs to ensure consistency in placing grantees on the Alert List by 
providing guidance on high risk designations and special award 
conditions. 
Develop methods to ensure that grants officers follow Alert List policies. 
HRSA should develop methods to ensure that grants officers adhere 
to Alert List policies.   
o 	 Currently, grants officers have a checklist that includes checking 
the Alert List to determine whether the grantee is on the Alert 
List. HRSA may consider revising this checklist to include all 
Alert List policies and requiring grants officers to complete it for 
each grantee. 
o 	 HRSA may consider implementing an internal file review to 
ensure that grants officers are documenting that they are 
following Alert List policies and using the Alert List 
appropriately.  
o 	 HRSA may implement a system to notify grants officers when 
2-year time periods expire.   
o 	 HRSA may consider providing additional guidance to grants 
officers and their staffs about the importance of using the Alert 
List and the need to adhere to policies. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
HRSAs comments on our draft report address only the first finding of 
our report and do not respond to our specific recommendations. 
Specifically, HRSA notes that both HRSA and the Department 
recognize circumstances where it is appropriate to apply conditions to 
ensure short-term compliance or to address minor issues without 
  OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  iv  placing grantees on the departmental Alert List.  HRSA states that OIG 
may not have been aware of the various types of conditions which have 
been previously employed and which are now recognized in Department 
policy. In our response to HRSAs comments, we clarify several aspects 
of our analysis. We note that our analysis took into account more recent 
Department policies on special conditions that were not in effect during 
most of our fieldwork, and that the design of our study eliminated 
situations that do not require a high risk designation and included only 
those special award conditions that reflect more serious situations 
requiring placement on the Alert List.  We also note that our review 
showed that the instances in which HRSA attached a special award 
condition and did not place the grantee on the Alert List were not to 
ensure short-term compliance or address an innocuous situation. 
  OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  v    T A B L E   O F   C O N T E N T S  

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

F I N D IN G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8

HRSA doesnot consistently followAlert List policies. . . . . . . . . . .  8

Several factors may account for HRSA not consistently following  

Alert List policies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

R E C O MMEN D A T ION S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12

  AgencyComments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

Office of Inspector General Response. . . . . . . . . . . . . . . . . . . . . . .  13

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

A:  CodeofFederal Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . .  15

B:  AgencyComments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
   I N T R O D U C T I O N  

OBJECTIVE 
To determine the extent to which the Health Resources and Services 
Administration (HRSA) adheres to policies governing the departmental 
Alert List. 
BACKGROUND 
The Alert List is posted on the Department of Health and Human 
Services (HHS) Intranet site for all agencies that award grants.  
According to the Awarding Agency Grants Administration Manual 
(AAGAM), if an awarding agency has concerns about a grantee due to 
the grantees inexperience in handling Federal funds, financial 
instability, inadequate management systems, history of poor 
programmatic performance, or other reasons, the agency may place the 
grantee on the Alert List.  The purpose of the Alert List is to safeguard 
HHS funds by alerting other agencies to these potential risks.  Being on 
the Alert List does not automatically disqualify a grantee from receiving 
an award. 
HRSA Grants Management Process  
HRSA works to improve and extend life for people living with Human 
Immunodeficiency Virus and/or Acquired Immune Deficiency Syndrome, 
provide primary health care to medically underserved people, serve 
women and children through State programs, and train a health 
workforce that is both diverse and motivated to work in underserved 
communities.1 
Within HRSA, grants are administered by the Division of Grants 
Management Operations housed within the Office of Management and 
Program Support.  At the time of this inspection, HRSA was in the 
process of consolidating its grants management functions under a single 
office and starting to implement an automated grants management 
system. Within the consolidated grants office, there were four grants 
management officers (hereinafter grants officers) supervised by the 
Director of the Division of Grants Management Operations. Grants 
officers are primarily responsible for the business and other 
nonprogrammatic areas of grant award and administration.  A grants 
1 Health Resources and Services Administration, http://www.hrsa.gov/default.htm, accessed 
07/08/05. 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  1  I N T R O D U C T I O N  
officer must be appointed for each grant award, but an individual may 
serve in that capacity for multiple awards.   
HRSA grants are awarded and renewed annually in an ongoing process 
throughout the year.  In fiscal year 2002, HRSA awarded $33.8 million 
to 15 grantees that it had placed on the Alert List and another 
$61.4 million to 47 grantees that other agencies placed on the Alert List.  
Successful grant proposals receive a Notice of Grant Award, which acts 
as the official agreement between the grantee and HRSA.  The Notice of 
Grant Award includes specific requirements for each grantee such as 
spending caps, timelines, documentation requirements, and submission 
deadlines. The following primer defines a number of key terms about 
the grants management process as it relates to the Alert List. 
Primer on Grants Management   
Awarding Agency. The awarding agency is the agency that awards the grant.  To do this, 
the awarding agency reviews the merits of each proposal and funds the grantee to carry 
out program objectives.   
Placing Agency. The placing agency is the agency that initiates placement of the grantee 
on the Alert List.  The National External Audit Review Center can also indicate that a 
grantee should be considered for placement on the Alert List. 
Grantees on the Alert List. The Alert List identifies grantees that may have one or 
several issues of concern to HHS.  Examples of issues may include: 
o a history of poor performance on previous or existing awards, 
o inexperience in handling of Federal funds, 
o financial instability, 
o inadequate management systems, 
o material noncompliance with the terms and conditions of previous awards, and/or 
o other special circumstances. 
High Risk/Special Award Conditions. Special award conditions are attached to a grant 
award to address a specific grantee vulnerability.  A high risk designation by the 
awarding agency is a prerequisite for the use of special award conditions.  Examples of 
special award conditions may include requiring more frequent grantee reporting or 
limiting the monthly amount a grantee can draw from its total grant award.  
National External Audit Review Center. The National External Audit Review Center, 
within the Office of Inspector General (OIG), is the HHS focal point for receipt of grantee 
audits. As part of its review of these audits, the National External Audit Review Center 
may issue an Alert.  This Alert, which is sent to agency Audit Liaison contacts and the 
Office of Grants, indicates the nature of the problem and states that the entity should be 
considered for placement on the Alert List. 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  2  I N T R O D U C T I O N

Grants officers may also attach special award conditions to a grant to 
address a specific grantee vulnerability.  Grants officers are responsible 
for monitoring the progress of the grant project and the grantees 
adherence to these requirements and to any special award conditions. 
Alert List and High Risk/Special Award Conditions 
The Alert List is maintained by HHSs Office of Grants.  The Alert List 
includes the name and address of the grantee, the date the grantee was 
placed on the Alert List, the agency that initiated placement of the 
grantee on the Alert List (the placing agency), a contact person at the 
placing agency, and often a brief description of the reason the grantee 
was placed on the Alert List.2  HHSs policies governing the use of the 
Alert List are found in Chapter 2.01.101 of the AAGAM and part 2, 
section 01 of the Grants Policy Directive (GPD) 2.01.   
According to the AAGAM, each awarding agency has an affirmative 
responsibility both to place grantees designated high risk on the Alert 
List and to remove them in a timely manner.  The awarding agency 
may designate a grantee high risk/special award conditions if it has 
concerns about the applicants/recipients ability to meet performance 
expectations and accountability requirements.  According to the 
AAGAM, this concern may be due to the grantees inexperience in 
handling of Federal funds, history of poor programmatic performance on 
previous or existing awards, financial instability, inadequate 
management systems, or for other reasons. 
An awarding agency may place special award conditions on a grantee to 
address its concerns.3  According to the AAGAM, special award 
conditions are used as a means of protecting the Federal Governments 
interests and trying to effect positive change in a recipients 
performance or compliance.  The AAGAM specifies that special award 
conditions, defined as conditions that are more restrictive than those 
specified by regulations (e.g., by 45 CFR parts 74 or 92), may include 
one or more of the following; however, this list is not all-inclusive: 
o 	 Use of a reimbursement payment method rather than advance 
funding. 
2 The Office of Grants maintains the Alert List and is responsible for placing the grantee on 
the Alert List upon recommendation from the awarding agency.  For the purposes of this 
report, we refer to the placing agency as the agency that recommends the placement to the 
Office of Grants. 
3 HHSs regulatory basis for imposing special conditions is found in 45 CFR part 74.14 and 
45 CFR part 92.12.  (See Appendix A.) 
OEI-02-03-00011 USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  3  I N T R O D
 U C T I O N  
o 	 Use of the deductive method of accounting for program income 

(where the additive alternative would ordinarily apply or the

matching alternative might be appropriate). 

o 	 Financial or progress reporting more frequently than quarterly. 
o 	 The need for awarding agency prior approval of a cost/activity that 
ordinarily does not require such approval. 
The AAGAM further specifies that special award conditions cannot be 
applied in the absence of a high risk designation.  Additionally, the GPD 
states that if special award conditions are included in an award, the 
awarding agency is required to designate the grantee as high risk/ 
special award conditions and notify the Office of Grants for inclusion on 
the Alert List.  
Awarding Agency Responsibilities 
Awarding agencies have the responsibility to do the following regarding 
the Alert List:  (1) place grantees on the Alert List; (2) check the Alert 
List; (3) consult with the agency that placed the grantee on the Alert 
List, (4) monitor grantees when special award conditions are attached to 
the grant, and; (5) remove grantees from the Alert List in a timely 
manner. Specific Alert List responsibilities are as follows: 
Place. Awarding agencies are responsible for placing on the Alert List 
grantees that they have designated high risk/special award conditions.  
To place a grantee on the Alert List, the awarding agency notifies the 
Office of Grants.  The National External Audit Review Center may also 
indicate that a grantee be considered for placement on the Alert List 
based on adverse findings in a grantees audit.  There may be several 
agencies that place the same grantee on the Alert List.  
Check.  Awarding agencies are responsible for checking the Alert List 
prior to awarding a grant.  Upon review of the Alert List and 
consideration of the basis for the high risk/special award condition 
designation or issuance of an OIG Alert, an awarding agency must 
determine whether it will independently designate the grantee as high 
risk/special award conditions.  
Consult.  If the awarding agency determines that a grantee has been 
placed on the Alert List by another agency, the agency must consider 
whether it also should designate the grantee as high risk and include 
special award conditions in the award.  This decision should be made 
following consultation with the agency(s) that made the designation as 
it appears on the Alert List to ensure that it is still current and the 
present situation warrants the designation.   
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  4  I N T R O D U C T I O N

Monitor.  If special award conditions are attached to the grant, the 
awarding agency is responsible for taking several actions.  Specifically, 
the agency must notify the grantee by transmittal letter of the special 
award condition (but not the placement of the grantee on the Alert List). 
The transmittal letter explains the effect of the high risk designation, 
indicates the corrective actions required, and the time period for 
correction, among other things.  If a special award condition relates to 
payment, the awarding agency is responsible for notifying the Division 
of Payment Management when it is imposed and when it is removed.4 
Remove. If an awarding agency places a grantee on the Alert List, it is 
also responsible for notifying the Office of Grants when it is appropriate 
to remove the grantee from the Alert List. Generally, grantees should 
not remain on the Alert List for more than 2 years.  If the grantee is on 
the Alert List for more than 2 years, the agency that placed the grantee 
is required to provide justification to the Office of Grants.  
Additionally, according to GPD 3.06, awarding agencies are expected to 
create and maintain files that allow for a third party to follow a paper 
trail of all decisions made and actions taken throughout the grant 
cycle.5  Grants officers are also expected to maintain the official grant 
file and to ensure that the contents of all files are current and can be 
easily identified and accessed. 
METHODOLOGY 
To determine the extent to which HRSA adheres to Alert List policies, 
we reviewed HHS policies governing the Alert List.  We then reviewed 
files of grantees on the Alert List and conducted interviews with key 
agency staff. 
Grantee Selection 
Based on the departmental Alert List published on the Intranet  
March 24, 2003, we identified 15 grantees to whom HRSA awarded 
grants and also placed on the Alert List.  This included 13 grantees that 
4 The Payment Management System is the centralized grants payment and cash 
management system operated by the Division of Payment Management within the HHSs 
Program Support Center.  The Payment Management System accomplishes all payment-
related activities for HRSA and other agencies from the time of award through closeout of 
a grant. 
5 GPD 3.06 C(1) and GPD 3.06 C(2)(b)(2)(c). 
OEI-02-03-00011 USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  5  I N T R O D U C T I O N  
received HRSA grants in 2002.6  Even though a grantee may no longer 
be funded, as long as it remains on the Alert List and HRSA is noted as 
the placing agency, an awarding agency may contact HRSA to obtain 
information on the circumstances that led to HRSA placing that grantee 
on the Alert List and any current information on the grantee. 
To find the HRSA grantees that another agency placed on the Alert 
List, we compared the grantees on the March 24, 2003, Alert List with a 
list of all HRSA grantees in fiscal year 2002.7  In doing so, we identified 
an additional 47 grantees that had been placed by another agency, for a 
total of 62 HRSA grantees on the Alert List.  Note that this inspection 
looks only at grantees that are on the March 24, 2003, Alert List.  It 
does not determine the total number of grantees that HRSA should 
have placed on the Alert List. 
File Review 
We requested the complete grant file for each of the 62 HRSA grantees 
on the Alert List.  HRSA provided files for a total of 56 grantees. We 
requested the other six files several times over an 8-month period; 
however, HRSA never made these six files available for review.  
We conducted an onsite file review in August 2003 of the 56 files that 
were provided by HRSA.  We reviewed these files for evidence that each 
Alert List policy was followed.  We considered all documentation as 
evidence, including file checklists, e-mails, telephone logs, notes to the 
file, and other informal notation, as well as standard documentation 
such as Notices of Grant Award, grantee applications, technical reviews, 
and audits. We limited our review to 5 years of documentation.   
Table 1 shows the number of files of HRSA grantees that we requested 
and reviewed, by the agency that had initiated their placement. In 
total, we reviewed 56 files.  In some cases, our analysis is based on the 
11 grantees that HRSA placed on the Alert List and the 45 grantees 
that were placed on the Alert List by another agency and not HRSA.8 
6 Two additional grantees on the Alert List did not receive HRSA grants in 2002. 
7 This list was obtained from HHSs Tracking Accountability in Government Grants 
(TAGGS) database.  The TAGGS database tracks all grants awarded by the Department. 
8 Note that six files were not made available for review.  Four of these files were from 
HRSA grantees placed on the Alert List by HRSA and two of these files were HRSA 
grantees placed on the Alert List either by another agency or indicated for placement by 
NEARC. 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  6  I N T R O D U C T I O N

Table 1: HRSA Alert List Grantees on the Alert List, By Placing Agency 
Grant Files  
Grant Files   Provided for 
Placing Agency  Requested  Review 
HRSA Only  10  7 
HRSA and National External Audit  5  4 
Review Center 
National External Audit Review Center  2  0 
and Another Agency 
National External Audit Review Center  38  38 
Only 
Other Agency Only  7  7 
Total  62  56 
Source: March 24, 2003, TAGGS Database. 
Note: The National External Audit Review Center does not place grantees on the Alert List; it 
issues an alert to agency liaisons and the Office of Grants that states that the entity should be 
considered for placement on the Alert List. 
Structured Interviews 
We conducted structured interviews with four grants officers.  We also 
interviewed one senior member of HRSAs Division of Grants 
Management Operations, who is responsible for supervising grants 
officers, and one senior member of the Office of Financial Policy and 
Oversight, who is responsible for notifying the HHS Office of Grants 
when HRSA places a grantee on the Alert List and removes a grantee 
from the Alert List.  These additional respondents will hereinafter be 
referred to as grants officials.   
Standards 
Our review was conducted in accordance with the Quality Standards 
for Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  7    F I N D I N G S

HRSA does not consistently follow Alert List 
We found that HRSA does not 
policies  consistently follow Alert List 
policies, including placing, checking, 
consulting, monitoring, and justifying retaining grantees on the Alert List. 
HRSA does not consistently place grantees on the Alert List 
We reviewed the files of 56 grantees that were placed on the Alert List 
either by HRSA or another awarding agency.  According to the AAGAM, 
grants officers are responsible for placing on the Alert List grantees that 
are designated as high risk.  Grants officers designated a total of 6 of 
the 56 grantees as high risk.  They did not place two of these six 
grantees on the Alert List.  
The AAGAM also states that a high risk designation is a prerequisite 
for special award conditions.  Grants officers attached at least 1 of the 
special award conditions as listed in the AAGAM to the grants of 25 of 
the 56 grantees.  Grants officers designated only 6 of these 25 grantees 
as high risk and placed only 4 of them on the Alert List.   
In addition, grants officers are expected to notify the Office of Grants in 
writing to place a grantee on the Alert List. They placed a total of 11 of 
the 56 grantees on the Alert List.  However, there was evidence of 
notification in only 1 of these 11 files. 
Our discussions with HRSA grants officers confirm that they have 
different understandings of when to place a grantee on the Alert List 
and how to designate a grantee as high risk.  One grants officer, for 
example, would place grantees with financial liability or worsening 
quality of services provided.  Another grants officer would place 
grantees without protocols or accounting systems, those with safety 
issues, or those for whom more frequent submission of required 
documents is needed.  When we asked about the process to designate a 
grantee as high risk, one grants officer noted that instead of a formal 
designation, HRSA would rather refer to these as risky behaviors. 
The other grants officers reported different procedures they follow when 
designating a grantee as high risk (as the first step in the process that 
should lead to placement on the Alert List), which included conducting 
site visits, obtaining supporting documentation, or notifying the 
grantee. 
Additionally, although the AAGAM lists four specific special award 
conditions, grants officers have different understandings of what they 
consider special award conditions that could be used to respond to a 
grantee that was designated high risk.  All grants officers agreed that 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  8  F I N D I N G S  
drawdown restriction is a type of special award condition.  However, 
other than drawdown restriction, their responses varied, and included 
such actions as requiring a corrective action plan, more frequent 
reporting, or technical assistance in response to a high risk designation.   
HRSA does not consistently check the Alert List nor accurately document 
checking it 
The AAGAM states that grants officers are responsible for checking the 
Alert List prior to granting an award.  Twenty-four of the fifty-six files 
reviewed had no evidence that the grants officer checked the Alert List. 
Twenty-six of the remaining thirty-two files contained a copy of a 
standardized electronic checklist that included a yes/no checkbox 
indicating that the grantee was on the Alert List.  Another six files had 
evidence that the Alert List was checked in other types of checklists 
that are used to record specific program-related activities and grant 
award processes. 
In addition, when we reviewed the 26 files that had copies of electronic 
checklists, we found that the checklist information was not always 
accurate. Fourteen of the twenty-six checklists indicated the grantee 
was not appearing on the Alert List when the grantee was in fact on 
the Alert List.9 
HRSA does not regularly consult with other agencies to obtain information 
about the grantee 
As stated in the AAGAM, the grants officers must consider whether 
they also should designate the grantee as high risk and include special 
award conditions in the award.  This decision should be made following 
consultation with the agency(s) that made the designation as it appears 
on the Alert List to ensure that it is still current and the present 
situation warrants the designation. 
We found little evidence that HRSA consults with other agencies that 
place grantees on the Alert List.  Other agencies placed 7 HRSA 
grantees on the Alert List and the National External Audit Review 
Center indicated 38 HRSA grantees for placement on the Alert List.  We 
found no documentation of any consultation in the files of the seven 
grantees that other agencies placed on the Alert List.  Similarly, we 
found evidence of consultation in 2 of the files of the 38 grantees that 
9 This analysis is based on a comparison of the dates the grantee was placed on the Alert 
   List with dates on the electronic checklist.  We were unable to conduct a similar analysis     
   for the files that had other types of checklists because they only indicated whether the  
   Alert List was checked, not whether the grantee was found on the Alert List.   
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  9  F I N D I N G
 S  
the National External Audit Review Center indicated for placement on 
the Alert List.   
In our discussions with grants officers, none reported coordinating with 
the placing agency or the National External Audit Review Center. Only 
one grants official reported that a phone call would be made to find out 
why the grantee was placed on the Alert List. 
HRSA does not consistently document certain monitoring activities for Alert 
List grantees 
The awarding agency is expected to complete certain monitoring 
activities when it attaches a special award condition to a grant.  
According to the AAGAM, these activities include notifying the grantee 
of the special award conditions in a letter that indicates the corrective 
actions required, the time period for correction, and a description of the 
consequences of not completing the actions required.  The awarding 
agency is also responsible for notifying the Director of the Payment 
Management System if a special award condition relating to payment 
was attached to the grant. 
Grants officers attached special award conditions as listed in the 
AAGAM to 25 of the 56 grantees. We found that none of the files for the 
25 grantees included transmittal letters to the grantees indicating the 
corrective actions required, the time period for correction, and a 
description of the consequences of not completing actions required.  (We 
did find occasional references in which the grantees were made aware of 
specific actions required to resolve issues.)  Additionally, 8 of the 15 files 
of grantees that had payment-related special award conditions did not 
include notification to the Payment Management System. 
HRSA does not provide justification for retaining grantees whose names 
appear on the Alert List more than 2 years 
The AAGAM states that the placing agency is to provide justification to 
the Office of Grants when keeping a grantee on the Alert List for more 
than 2 years. At the time of the file review in August 2003, 7 of the   
11 grantees that HRSA placed on the Alert List had been there longer 
than 2 years. None of these seven files had justification to support 
these grantees remaining on the Alert List. 
In our discussions, grants officers described different processes for 
retaining a grantee on the Alert List for more than 2 years. Two of the 
four grants officers mentioned that they contact the grants official 
responsible for contacting the Office of Grants to request that a grantee 
remain on the Alert List for more than 2 years.  The grants official 
misunderstood the policy, however, and reported that HHS is supposed 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  10  F I N D I N G S  
to contact HRSA to keep a grantee on the Alert List for more than 2 
years, when the opposite is true. 
Grants officers do not use the information 
Grants officers and officials report 
on the Alert List to make grant decisions and 
that grant decisions are based on 
some report concerns about the information  their own judgments and not on 
on the Alert List  Alert List information. 
Specifically, one grants officer 
noted that they put special award 
conditions on a grant based on their own concerns.  One grants official 
further noted that the decision to deny a grant is based on their own 
reasons, not on whether the grantee is on the Alert List. 
Several grants officers responses further suggest that they are 
confident that their own decisionmaking adequately protects their 
grants. As one grants officer reported, . . . were pretty confident that 
we are looking at things that are relevant to us; were not necessarily 
looking for someone elses guidance.  And, as one grants official 
reported, . . . just because someone else puts [the grantee] on the Alert 
List doesnt mean I agree with them.  Rather, as one grants officer 
acknowledged, they take into account a number of factors such as the 
type of organization and the need to get services out when making grant 
decisions. 
Grants officers and officials report concerns about the information on the 
Alert List 
In our discussions, three of the four grants officers reported that the 
Alert List is not at all useful.  Generally, these grants officers 
explained that the Alert List does not provide current information and 
that the information on the Alert List is not useful for making decisions 
about grantees. One grants officer and one grants official also reported 
that the Alert List is not always useful, in part because they do not 
always know when the Alert List is updated and posted on the Intranet. 
Our review of the Alert List also found that it did not always have 
useful or complete information.  The March 24, 2003, version of the 
Alert List did not have reasons the grantees were placed on the Alert 
List for 55 of the 314 grantees.  In addition, the reasons that the 
grantees were placed on the Alert List were not always helpful.  For 
example, reasons given included general statements such as going 
concern.  Further, for a few grantees the grantee name on the Alert 
List was markedly different from the name on the grant award. 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  11    R E C O M M E N D A T I O N S  

RECOMMENDATIONS 
We determined that HRSA staff do not consistently adhere to policies 
governing the use of the Alert List.  This lack of consistency makes it 
difficult to ensure that a grantees risk of programmatic and/or financial 
failure is communicated to all agencies that award grants and that HHS 
funds are appropriately safeguarded. Although grants officers note that 
the Alert List has a number of limitations, it is critical for each agency 
that awards grants to adhere to HHS policies to make the Alert List an 
effective means of conveying grantee risk.   
This review was conducted at a time when HRSA was consolidating and 
centralizing its grants management functions and implementing an 
automated grants management system.  These changes may bring 
greater consistency to its grants management functions and better 
position HRSA to incorporate the following recommendations.  
Specifically, we recommend that HRSA: 
Ensure that grants officers follow Alert List policies 
HRSA needs to make the Alert List a higher profile issue and stress 
that grants staff need to follow Alert List policies.  HRSA needs to 
ensure that grants officers and grants officials follow policies for placing 
grantees on the Alert List, checking the Alert List, consulting with the 
agency that placed the grantee on the Alert List, monitoring grantees 
with special award conditions, and removing or retaining Alert List 
grantees when appropriate.  HRSA also needs to ensure consistency in 
placing grantees on the Alert List by providing guidance on high risk 
designations and special award conditions. 
Develop methods to ensure that grants officers follow Alert List policies 
HRSA should develop methods to ensure that grants officers adhere 
to Alert List policies.   
o 	 Currently, grants officers have a checklist that includes checking 
the Alert List to determine whether the grantee is on the Alert 
List. HRSA may consider revising this checklist to include all 
Alert List policies and requiring grants officers to complete it for 
each grantee. 
o 	 HRSA may consider implementing an internal file review to 
ensure that grants officers are documenting that they are 
following Alert List policies and using the Alert List 
appropriately.  
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  12  R	 E C O M M E N D A T I O N S  
o 	 HRSA may implement a system to notify grants officers when 
2-year time periods expire.   
o 	 HRSA may consider providing additional guidance to grants 
officers and their staffs about the importance of using the Alert 
List and the need to adhere to policies.  
AGENCY COMMENTS 
In its comments to the draft report, HRSA notes that it met with 
Department staff to discuss its concerns with some of the report 
findings and that the Department concurs with HRSAs use of applying 
specific conditions for short term compliance in the absence of a high 
risk declaration with grantee placement on the Departmental Alert 
List. 
HRSA further notes that some of the findings in the report may have 
resulted from a misunderstanding in terminology being used by HRSA 
staff and OIG reviewers.  HRSA also believes that clarifications in 
Department policies concerning award conditions, issued subsequent to 
the OIG review, draw into question the validity of some of the report 
findings. HRSA notes that the new policies recognize circumstances 
where it is appropriate to apply conditions without placing grantees on 
the Departmental Alert List.   
More specifically, HRSA notes that the Department issued several 
AAGAM chapters, including section 2.04.104D (Grant Awards), which 
states that a grants officer may place award restrictions or specific 
conditions on an award to ensure short-term grantee compliance and 
that such restrictions may not rise to a level requiring the grantee to be 
designated as high risk and placed on the Alert List.  HRSA states that 
the OIG may not have been aware of the various types of conditions 
which have been previously employed and which are now recognized in 
Department policy.  The full text of HRSAs comments is provided in 
Appendix B. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
HRSAs comments on our draft report do not respond to our specific 
recommendations.  We hope that HRSAs comments on the final report 
delineate specific actions HRSA plans to take in response to our findings 
and recommendations. 
In response to HRSAs comments, we wish to clarify several aspects of 
our analysis.  At the outset we should note that, contrary to HRSAs 
understanding, we took into account AAGAM 2.04.104D (Grant 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  13  Awards) in our analysis even though it was not in effect during most of 
our fieldwork. 
Moreover, we are aware that HRSA has the ability under current policy 
to impose conditions of a type or level that do not require a high-risk 
designation. However, the design of our study accounted for this 
concern and eliminated those types of situations.  Specifically, when we 
reviewed all the terms and conditions of the grants in our sample that 
were documented in the files, we identified the conditions that met the 
criteria of AAGAM 2.04.104D(c) which are defined in AAGAM 2.01.101 
and which warrant a designation of high risk and placement on the 
Alert List. We included the special award conditions that reflected 
more serious situations requiring placement on the Alert List.  
Specifically, we included the following categories of conditions imposed 
by HRSA:  reimbursement payment method, financial or progress 
reporting more frequently than quarterly, and the need for the 
awarding office prior approval of a cost or activity.  These conditions are 
also identified as special award conditions in 45 CFR section 92.12.   
In addition, as stated in the report, our review focused on grantees that 
were already on the Alert List that had been placed by another agency 
and/or had been recommended for placement on the Alert List by the 
National External Audit Review Center because of a systematic audit 
deficiency. Therefore, by design, the grantees in our review were those 
that did not have a proven track record but had some history of poor 
performance identified by another agency and/or by the National 
External Audit Review Center.   
Further, our review showed that the instances in which HRSA attached 
a special award condition and did not place the grantee on the Alert List 
were not to ensure short-term compliance or address an innocuous 
situation. The following examples illustrate the types of situations that 
we found in our review.  In one file, documentation indicated that HRSA 
had determined that the grantee has an operating deficit and is not 
eligible to apply for any other [HRSA] funding until a balanced budget 
is achieved.  In another file, HRSA noted that the grantee continues to 
be plagued with financial concerns which included $2.6 million in 
liabilities. In another file, HRSA noted on the Notice of Grant Award 
that it had serious concerns about the grantees lack of compliance with 
special conditions related to the submission of its annual audits, 
financial reports, and its final budget.  We also found two instances in 
which HRSA had designated the grantee as high risk but had not placed 
the grantee on the Alert List in accordance with Department policy. 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  14  We further note that HRSAs comments only address the first finding of 
our report.  They do not address HRSAs violations of other Alert List 
policies including checking the Alert List, consulting with other 
agencies to obtain information about grantees on the Alert List, 
documenting certain monitoring activities for grantees on the Alert List, 
and providing justification for retaining grantees on the Alert List.   
Finally, the Alert List is fundamental to safeguarding Department 
grant funds and is an important tool for agencies to use to share 
concerns about particular grantees.  However, the value of the Alert 
List is diminished for all Department grantmaking agencies when 
agencies fail to provide required information to the Alert List in 
accordance with Department policies.  As a member of the Federal 
grantmaking community and a steward of Federal funds, HRSA has a 
responsibility to protect both its own grants as well as those of other 
awarding agencies in the Department. 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  15    A P P E N D I X ~ A  

PART 74--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR AWARDS AND 
SUBAWARDS TO INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, 
OTHER NONPROFIT ORGANIZATIONS, AND COMMERCIAL 
ORGANIZATIONS; AND CERTAIN GRANTS AND AGREEMENTS WITH 
STATES, LOCAL GOVERNMENTS AND INDIAN TRIBAL GOVERNMENTS 
Special award conditions. 
(a) 	The HHS awarding agency may impose additional requirements as 
.needed, without regard to  74.4, above, if an applicant or recipient: 
(1) 	has a history of poor performance, 
(2) 	is not financially stable, 
(3) 	has a management system that does not meet the standards 
prescribed in this part, 
(4) 	has not conformed to the terms and conditions of a previous 
award, or 
(5) 	is not otherwise responsible. 
(b) 	When it imposes any additional requirements, the HHS awarding 
.agency must notify the recipient in writing as to the following: 
(1) 	the nature of the additional requirements, 
(2) 	the reason why the additional requirements are being

/imposed, 

(3) 	the nature of the corrective actions needed, 
(4) 	the time allowed for completing the corrective actions, and 
(5) 	the method for requesting reconsideration of the additional  
/requirements imposed. 
(c) 	The HHS awarding agency will promptly remove any additional 
requirements once the conditions that prompted them have been 
corrected. 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  16  A P P E N D I X ~ A  
PART 92--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 
COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS 
Sec. 92.12 Special grant or subgrant conditions for high risk grantees. 
(a) 	A grantee or subgrantee may be considered as high risk if an  
.awarding agency determines that a grantee or subgrantee: 
(1) 	has a history of unsatisfactory performance; or 
(2) 	is not financially stable; or 
(3) 	has a management system which does not meet the   
.management standards set forth in this part; or 
(4) 	has not conformed to terms and conditions of previous awards; 
.or 
(5) 	is otherwise not responsible; and if the awarding agency  
.determines that an award will be made, special conditions 
.and/or restrictions shall correspond to the high risk condition 
.and shall be included in the award. 
(b) Special conditions or restrictions may include: 
(1) 	payment on a reimbursement basis; 
(2) 	withholding authority to proceed to the next phase until    
/receipt of evidence of acceptable performance within a given 
/funding period; 
(3) 	requiring additional, more detailed financial reports; 
(4) 	additional project monitoring;
 (5) 	requiring the grantee or subgrantee to obtain technical or  
.management assistance; or 
(6) 	establishing additional prior approvals. 
(c) 	If an awarding agency decides to impose such conditions, the 
awarding official will notify the grantee or subgrantee as early as  
possible, in writing, of: 
(1) 	the nature of the special conditions/restrictions, 
(2) 	the reason(s) for imposing them, 
(3) 	the corrective actions which must be taken before they will be  
.removed and the time allowed for completing the corrective 
.actions, and 
(4) 	the method of requesting reconsideration of the conditions/ 
.restrictions imposed. 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  17    A P P E N D I X ~ B  

OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  18
 A P P E N D I X   ~   B  

OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  19
 A P P E N D I X   ~   B  

OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  20
 A P P E N D I X   ~   B  

OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  21
 AP  P AE CN KD IN XO~ WB L  E D G M E N T S  

This report was prepared under the direction of Jodi Nudelman, 
Regional Inspector General for Evaluation and Inspections in the New 
York regional office.  Other principal Office of Evaluation and 
Inspections staff who contributed include: 
Vincent Greiber, Team Leader 
Natasha Besch, Program Analyst 
Sonjeya Fitzgerald, Program Analyst 
Nicole Gillette, Program Analyst 
Alan Levine, Program Specialist 
Elise Stein, Director, Public Health and Human Services Branch 
Barbara Tedesco, Mathematical Statistician 
OEI-02-03-00011  USE OF THE DEPARTMENTAL ALERT LIST BY HRSA  22