Testimony of Daniel R. Levinson 
Inspector General 
U.S. Department of Health and Human Services 
 
 
Top Management Challenges at the Department of Labor, Health 
and Human Services and Education: Perspective from the 
Inspectors General 
 
 
 
Before the 
United States House of Representatives 
Committee on Appropriations 
Subcommittee on Labor, Health and Human Services, Education, 
and Related Agencies 
 
 
 
March 19, 2013 
Rayburn House Office Building 
Room 2358-C 
 
 
 
 
 
  With a discretionary budget of approximately $50 million in fiscal year 2012, the Office of 
Inspector General (OIG) is charged with overseeing more than 300 Department of Health and 
Human Services (HHS) programs, accounting for more than $100 billion (excluding Medicare, 
Medicaid, and the State Childrens Health Insurance Program).1  These 300-plus public health and 
human services programs touch the lives of virtually every American.  Today, I focus on HHS 
management challenges related to grant and contract administration, data security, improper 
payments, emergency preparedness, and management of public health programs. 
EFFECTIVELY ADMINISTER GRANTS AND CONTRACTS 
 
HHS is the largest Federal grantmaker and the third largest Federal contracting agency.  
Effective management of these outlays must be a priority.  OIG has identified vulnerabilities at 
HHS grantees that could be mitigated by improved HHS oversight.  These include deficiencies in 
grantees internal controls, financial stability, organizational structures, procurement and property 
management policies, and personnel policies and procedures.  And HHS has improperly funded 
certain contracts, resulting in appropriations violations. 
Ineffective grants administration can put vital Federal funds at risk.  For example, OIGs 
postaward reviews of Recovery Act grantees identified instances when grantees claimed 
unallowable costs, indicating that better oversight was needed.  OIG also conducted numerous pre-
award reviews of Recovery Act grant applicants.  OIG recommended and HHS implemented 
front-end controls to mitigate grantees risks and better protect these funds.  In another example, 
OIG found inconsistencies in the Centers for Disease Control and Preventions (CDC) oversight of 
grants authorized under the Presidents Emergency Plan for AIDS Relief (PEPFAR), and most of 
the awards files lacked evidence to demonstrate that CDC performed required monitoring.  OIG 
followup work looks at selected CDC local offices abroad and PEPFAR recipient organizations in 
                                                 
1 Through separate funding under the Health Care Fraud and Abuse Control (HCFAC) Program, OIG oversees 
Medicare and Medicaid.  HCFAC funding constitutes about 80 percent of OIGs total budget. 
  2  Namibia, South Africa, Vietnam, Ethiopia, and Zambia.  Initial findings have identified 
opportunities to improve compliance but not widespread problems overseas.  Across HHS, OIG 
has investigated specific cases of grant fraud and other criminal and civil violations. 
Ineffective oversight can also put people at risk.  For example, during site visits to high-
risk Head Start facilities, OIG found alarming violations of health and safety requirements, such as 
toxic chemicals, dangerous tools, and even a machete within reach of children.  The 
Administration for Children and Families (ACF) has taken actions to remedy problems or 
terminate problematic grantees and needs to ensure that all Head Start grantees provide safe 
environments for the children they serve. 
Ongoing OIG reviews include work underway for this Committee to examine HHS 
oversight of grantees compliance with lobbying prohibitions, including reviewing HHS guidance 
and monitoring of grantees.  We are also conducting a systemic Department-wide review to assess 
agencies ability to mitigate the risks of grant fraud and mismanagement.  OIG experts have 
trained grants officers across HHS about effective oversight and grant fraud risks to help HHS 
prevent vital funds from being stolen or misused.    
With respect to contracts, OIG has found instances of improper funding, leading to 
potential violations of the Antideficiency Act, in 11 of 18 completed audits of National Institutes 
of Health contracts.  OIG is assessing the effectiveness of remedial actions taken by HHS to 
properly fund its contracts and prevent future violations of the Antideficiency Act.   
PROTECT SECURITY AND INTEGRITY OF DATA, SYSTEMS, AND TECHOLOGY 
 
As reliance on information technology and data grows, so do the challenge and importance 
of ensuring the security and integrity of systems and data.  Each year, OIG assesses information 
security controls in various HHS networks and systems.  While HHS has addressed many 
deficiencies identified by prior audits, we continue to identify findings that put HHS systems, data, 
  3  and operations at risk.  These include deficiencies in computer inventory management; logical 
access controls (e.g., weak passwords); outdated software; and patch management that could allow 
unauthorized access to HHS systems and sensitive data.  Also, some HHS laptops lacked whole 
disk encryption, which put data at risk if laptops are lost or stolen.  OIG recommended fixes for 
specific problems as well as a greater management focus on strengthening information security 
across HHS.  Looking ahead, OIG is assessing security controls for the Data Services Hub being 
developed by HHS for the Health Insurance Exchanges. 
Further, the security and integrity of health care providers systems and data are essential 
to protect patient privacy, prevent and detect fraud, and improve quality of care.  OIG raised 
concerns about HHSs oversight of hospitals network security and has also noted the lack of 
general information technology (IT) security controls that would protect sensitive health data.  
Health IT holds promise of benefits for patients and providers; however, continued oversight is 
needed to guard against misuses that could result in improper payments or poor quality of care.   
REDUCE AND REPORT IMPROPER PAYMENTS 
 
HHS should make every reasonable effort to ensure that vital Federal dollars are spent for 
their intended purposes and in accordance with program requirements.  In FY 2012, the 
Department reported $64.8 billion in improper payments across eight programs deemed as high 
risk by the Office of Management and Budget.  Three of these are relevant to todays hearing  
Foster Care, Head Start, and the Child Care Development Fund (CCDF)  and accounted for about 
$0.5 billion of those improper payments.2  The positive news is HHS achieved improper payment 
rates below 10 percent for all three of these programs, and Head Starts improper payment rate 
was less than 1 percent.  HHS met its error rate reduction goals for Head Start and CCDF.   
The challenge remains for HHS to meet error rate reduction goals for Foster Care and to  
                                                 
2 The other five programs were Medicare Fee-for-Service, Medicare Advantage, the Medicare Prescription Drug 
Program, Medicaid, and the Childrens Health Insurance Program (CHIP). 
  4  further lower CCDFs improper payment rate from 7.9 percent.  In addition, HHS did not meet its 
requirement to report an improper payment rate for the ninth high-risk program, Temporary 
Assistance for Needy Families, citing limitations in its authority to require States to provide the 
requisite information.   
PREVENT, PREPARE FOR, AND RESPOND TO PUBLIC HEALTH EMERGENCIES 
 
HHS is integral to preventing, preparing for, and responding to public health emergencies 
resulting from a wide spectrum of natural and man-made disasters.  Adding to this management 
challenge is the need to coordinate effectively with a myriad of Federal, State, local, private, and 
international entities.  In recent years, OIG has recommended management improvements in 
planning, coordination, and communication during pandemic influenza and hurricanes.  Most 
recently, OIG reviewed local public health preparedness for radiological and nuclear incidents and 
recommended that CDC enhance its guidance and coordination with other entities involved in 
preparedness and response.  Looking ahead and building on lessons learned from Hurricane 
Katrina, we will review HHSs internal control plans for overseeing funds for Hurricane Sandy 
relief and will conduct audits and evaluations based on identified risks. 
Ensuring the security of toxins known as select agents and the Strategic National 
Stockpile is paramount to preventing and responding to public health disasters.  OIG investigates 
violations of HHS rules for the handling of select agents and imposes financial penalties as 
appropriate.  OIG has identified deficiencies in laboratory security over select agents and plans to 
review exports and imports of select agents.  We are also assessing CDCs safeguards to ensure 
that the Stockpiles for pharmaceuticals are secure from theft, tampering, or other loss. 
EFFECTIVELY MANAGE PUBLIC HEALTH PROGRAMS 
Effective oversight and management of public health resources is essential to ensure that 
  5  vulnerable populations receive the full benefit of public health programs.  OIG has identified the 
need for increased oversight of certain public health programs to meet their missions effectively.   
For example, CDCs Vaccines for Children program provides free vaccines to millions of eligible 
children at a cost of almost $4 billion.  However, my office found that providers too frequently 
stored vaccines at inappropriate temperatures, potentially reducing their effectiveness to protect 
against diseases.  CDC agreed with and is implementing our recommendations, including working 
with State health officials and medical organizations and changing its vaccine ordering and 
inventory systems. 
The Health Resources and Services Administrations (HRSA) community health centers 
are on the front lines of providing primary care to underserved populations.  Yet, we found that 
HRSA provided limited oversight of the extent to which patients receive required services.  OIG 
will continue our oversight of community health centers, including reviewing their use of the 
Affordable Care Act (ACA) grant funds.  Likewise, the 340B Drug Discount Program is intended 
to increase access to prescription drugs for underserved and vulnerable populations.  Prior OIG 
reviews have uncovered systemic problems with HRSAs oversight of the program, including 
problems with accuracy and reliability of data.  HRSA is implementing improvements, and we 
will continue to monitor HRSAs management practices. 
CONCLUSION 
OIG will continue our vigilant oversight of HHSs management of these challenges, 
including increased responsibilities to oversee new programs created by ACA and the growing 
complexity and importance of existing HHS programs.  I thank this Committee for its commitment 
to our shared goals  ensuring efficiency, effectiveness, and integrity in HHS programs and 
operations  which remain paramount in the current budget environment. 
  6