Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
SURVEYING STAFF TO IDENTIFY 
UNNECESSARY MANAGEMENT REGULATIONS 
AND INTERNAL CONTROLS 
Tracking and Analysis 
JUNE GIBBS BROWN 
Inspector General 
APRIL 1996 
OEI-09-94-00211  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 three OIG operating components:  the Office of Audit Services, the Office 
of Investigations, and the Office of Evaluation and Inspections.  The OIG also informs the 
Secretary of HHS of program and management problems and recommends courses to correct them. 
OFFICE OF AUDIT SERVICES 
The OIGs 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 the Department. 
OFFICE OF INVESTIGATIONS 
The OIGs 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 money penalties.  The OI also oversees State Medicaid fraud control units which investigate 
and prosecute fraud and patient abuse in the Medicaid program. 
OFFICE OF EVALUATION AND INSPECTIONS 
The OIGs Office of Evaluation and Inspections (OEI) conducts short-term management and 
program evaluations (called inspections) that focus on issues of concern to the Department, the 
Congress, and the public.  The findings and recommendations contained in these inspection reports 
generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, and 
effectiveness of departmental programs.  The report was prepared in the San Francisco regional 
office under the direction of Kaye D. Kidwell, Regional Inspector General, and Paul A. Gottlober, 
Deputy Regional Inspector General.  Project staff included: 
REGION IX  HEADQUARTERS 
Elizabeth Celniker  Tina Fuchs

Donald Loeb

Brad Rollin

REGION II 
Nancy Harrison 
For additional copies of this report, please contact the San Francisco office at (415) 437-7900.  E X E C U T I V E   S U M M A R Y 

PURPOSE 
The purpose of this inspection was to develop and test a prototype that agencies could use 
to track, analyze, and eliminate management regulations and internal controls that may be 
unduly burdensome or unnecessary. 
BACKGROUND 
Executive Order to Reduce Management Regulations 
On September 11, 1993, President Clinton signed Executive Order 12861 which required 
that all executive departments and agencies reduce their internal management regulations 
by 1996.  The President signed the Executive Order immediately following release of the 
National Performance Review which described and detailed the time and resources 
consumed by unnecessary management regulations and internal controls. 
Continuous Improvement Program 
In response, Department of Health and Human Services Secretary Donna Shalala instructed 
her Continuous Improvement Program (CIP) Steering Committee to oversee the reduction 
of management regulations and internal controls within the Department.  The CIPs work 
group on internal controls requested the Office of Inspector Generals assistance in 
developing a methodology that could be used to identify duplicative or unnecessary 
controls and requirements. 
OIG Study 
This is the second of two reports that we have issued on this subject.  The first report, 
"Surveying Staff to Identify Unnecessary Internal Controls" (OEI-09-94-00210), describes 
how to identify potentially unnecessary management regulations and internal controls 
through focus groups and interviews with staff.  For purposes of this study, the term 
management regulations and internal controls includes all of the elements in the 
Executive Order, CIP, and National Performance Review definitions.1  This report 
describes how to analyze and track selected management regulations and internal controls 
to determine if they should be retained, modified, or eliminated.  The goal of the 
methodology is to eliminate controls that are inefficient or ineffective and retain those that 
protect programs from fraud, abuse, and waste. 
1 This includes the terms "management controls," "accounting controls," and "budget controls." 
i  For both reports, we tested our methodology by interviewing Public Health Service (PHS) 
staff, including the Food and Drug Administration (FDA) and the Indian Health Service 
(IHS), and tracking and analyzing the management regulations and internal controls that 
affect them.  We selected PHS because of its diversity and complexity.  After we issued 
the first report, we provided PHS with a list of the 260 management regulations and 
internal controls that staff identified during focus groups and interviews as potentially 
unnecessary.  Some of these management regulations and internal controls have already 
been addressed, and others are in the process of being reviewed. 
After we completed tracking and analysis, in December 1995, the Secretary 
initiated a Departmental reorganization.  The Assistant Secretary for Health 
became the head of a new agency, the Office of Public Health and Science, within 
the Office of the Secretary.  The PHS agencies became HHS operating divisions, 
reporting directly to the Secretary.  These operating divisions now constitute the 
U.S. Public Health Service, with the Secretary as its head. 
STEPS IN THE TRACKING PROCESS 
Tracking and analyzing the list of management regulations and internal controls--and 
eliminating those that are unnecessary--requires eight interrelated steps.  These steps 
include:  (1) refining the list by consolidating, clarifying, and reviewing the problems, 
concerns, and issues identified by staff; (2) identifying quick hits--issues that the agency 
can address with a minimum of review; (3) ranking the remainder of the list; 
(4) conducting a series of interviews with officials who are responsible for program 
operations and those who mandate or oversee the controls and management regulations, (5) 
obtaining relevant documentation, such as appropriate statutes, regulations, policy 
statements, manuals, directives, memoranda, and guidance; (6) analyzing the purpose and 
need for the controls; (7) taking action (if appropriate); and (8) informing staff about the 
results of tracking and any changes that have been implemented. 
PITFALLS AND TIPS TO AVOID THEM 
We experienced some pitfalls that inhibited our ability to track and analyze management 
regulations and internal controls successfully.  These included interviewees who were 
(1) reluctant to participate in tracking, (2) unaware of the reasons that certain controls and 
management regulations were initiated, and (3) unable to think of creative alternatives to 
burdensome controls and management regulations.  We were able to overcome these 
pitfalls through a combination of strategies, but we believe that most of the pitfalls would 
be avoided if agencies cooperate in all aspects of the review, educate staff, and encourage 
staff to participate in the effort. 
ii  GENERAL LESSONS LEARNED THROUGH CASE STUDIES 
To test the tracking and analysis methodology, we selected six management regulations 
and internal controls in collaboration with PHS:  (1) the imprest fund requirements for an 
FDA district office, (2) the requirements for review of FDA seizure recommendations, 
(3) the preparation and submission of several FDA district office administrative reports, (4) 
the regional offices role in PHS Community Health Center program administration, (5) 
the process to purchase a computer in an IHS area office, and (6) the IHS conference 
management system. 
Management regulations and internal controls are necessary to insulate programs from 
fraud, waste, and abuse and to conserve limited resources.  Nevertheless, based on the case 
studies, we learned several lessons about the reasons why some management regulations 
and internal controls may be unnecessary or unduly burdensome: 
All levels of government, including Congress and the Office of Management and 
Budget, have mandated burdensome controls and routine reporting requirements that 
limit agencies reduction efforts. 
Agencies sometimes overreact to the findings of oversight agencies. 
Agencies are reluctant to delegate authority. 
Agencies sometimes exceed reasonable assurance and/or legal requirements when 
developing management regulations and internal controls. 
Multiple agencies and individuals become involved in approving actions and 
processing reports. 
Agencies rarely eliminate obsolete management regulations and internal controls. 
The case studies illustrate these points.  In each case, we describe options that agencies 
could consider, based on the results of our tracking and analysis. 
AGENCY COMMENTS 
We received comments on the draft report from the Assistant Secretary for Planning and 
Evaluation (ASPE).  We did not receive formal comments from the Director of IHS, the 
Administrator of HRSA, or the Commissioner of FDA, although we did receive comments 
from their staff.  The ASPE believes that the tracking and analysis methodology will assist 
the Department in its efforts to reduce unnecessary management regulations and internal 
controls.  The IHS staff concurred with ASPE. 
The HRSA staff did not comment on the tracking and analysis methodology.  They did, 
however, mention that the concerns expressed in the community health center program 
case study will be addressed in HRSAs 1996 reorganization plan. 
iii  The FDA staff also did not comment on the tracking and analysis methodology.  Staff 
provided technical comments on the case studies that differed from those we received 
during the course of our inspection.  Clearly, FDA management will have to determine 
how it can best balance the need to meet the requirements set forth in Executive Order 
12861 with their staffs perceived need for continuation of certain management reports and 
processes. 
The full text of the comments appears in Appendix B. 
iv  T A B L E   O F   C O N T E N T S 

PAGE

EXECUTIVE SUMMARY

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

STEPS IN THE TRACKING PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4

  Refine the list  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4

  Identify quick hits  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4

  Rank  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5

  Interview  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5

  Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6

  Analyze  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7

  Act  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7

  Inform  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8

PITFALLS AND TIPS TO AVOID THEM  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

GENERAL LESSONS LEARNED  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   12

CASE STUDIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   15

  Imprest fund requirements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   15

  FDA seizure recommendation review requirements  . . . . . . . . . . . . . . . . . . . . . .   17

  FDA district office administrative reports  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   20

  Community health center program administration  . . . . . . . . . . . . . . . . . . . . . . .   24

  Purchasing a computer in an IHS area office . . . . . . . . . . . . . . . . . . . . . . . . . . .   28

  IHS conference management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   31

AGENCY COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   34

APPENDIX A:  Discussion Guide

APPENDIX B:  Agency Comments

APPENDIX C:  Internal Accounting Controls
 I N T R O D U C T I O N 

PURPOSE 
The purpose of this inspection was to develop and test a prototype that agencies could use 
to track, analyze, and eliminate management regulations and internal controls that may be 
unduly burdensome or unnecessary. 
BACKGROUND 
On September 11, 1993, President Clinton signed Executive Order 12861 which required 
that all executive departments and agencies eliminate 50 percent of their internal 
management regulations by 1996.  The President signed the Executive Order immediately 
following release of the National Performance Review which described and detailed the 
time and resources consumed by unneeded management regulations and internal controls. 
In October 1993, the Office of Management and Budget (OMB) issued instructions to all 
executive departments for implementing the Executive Order.  The OMB instruction stated 
that "the goal of this reduction effort is to weed out needless internal regulations so that: 
(1) the outcomes to be achieved in a regulation are clearly articulated; (2) responsibilities 
for decision making and action are clearly assigned; and (3) oversight can shift from 
process to outcome."  The OMB encouraged agencies to re-examine internal business 
practices and determine how these practices can be re-engineered to accomplish necessary 
reductions. 
In response to the Executive Order and OMB instructions, Department of Health and 
Human Services (HHS) Secretary Donna Shalala instructed her Continuous Improvement 
Program (CIP) Steering Committee to oversee the reduction of management regulations 
and internal controls within the Department.  The CIPs Advisory Group on Organization 
and Management Structure and Processes established a work group to focus on 
management regulations and internal controls.  The CIP work group requested the Office 
of Inspector Generals (OIG) assistance in developing a methodology that could be used to 
identify duplicative or unnecessary management regulations and internal controls. 
This is the second of two reports that we have issued on this subject.  The first report, 
"Surveying Staff to Identify Unnecessary Internal Controls" (OEI-09-94-00210), describes 
how to identify potentially unnecessary management regulations and internal controls 
through focus groups and interviews with staff.  This report describes how to analyze and 
track selected controls and management regulations to determine if they should be retained, 
modified, or eliminated.  The goal of the methodology is to eliminate controls that are 
inefficient or ineffective and retain those that protect programs from fraud, abuse, and 
waste. 
1
 Defining management regulations and internal controls 
As stated in the National Performance Review, the traditional view of internal controls is 
rooted in financial management and accounting.  Since the late 1980s, however, 
government has increasingly integrated this view into the broader context of "management 
controls."  According to the National Performance Review, internal management control 
techniques include "polices, procedures, and organizational plans, and physical 
arrangements." 
The Executive Order defines an internal management regulation as an agency directive or 
regulation that pertains to its organization, management, or personnel matters.  The 
OMB synthesized the definitions of management regulations and internal controls by 
stating that, for the purposes of the reduction effort, an internal control is defined as: 
...any agency directive, regardless of what you call it, that prescribes agency 
policies or procedures--including internal agency acquisition regulations and 
grant management requirements--that pertain to an agencys internal 
organization, management, or personnel. 
The OMB stated that certain regulatory provisions should not be included in this reduction 
effort.  Excluded are provisions that (1) are non-discretionary (i.e. those required by 
statute, court order, Executive Order, or other external agency directive), (2) promote 
public information access, and (3) are determined to be necessary for the delivery of 
"essential services." 
The CIP clarified the definition of internal controls for purposes of HHS reduction effort 
to include any "inappropriate or wasteful internal controls regardless of the organizational 
origin of those controls."  A CIP memo defined internal controls as: 
...any imposition by an organizational unit upon another of a requirement for 
approval of decisions or activities, guidance or procedures on how to 
accomplish an assignment or mission, or reporting of information...internal 
controls include any such imposition, regardless of the origin of the 
requirement. 
For purposes of this study, the term management regulations and internal controls 
includes all of the elements in the Executive Order, CIP, and National Performance Review 
definitions.2  For clarity and brevity, we have consolidated these definitions into the 
following three primary categories: 
2 This includes the terms "management controls," "accounting controls," and "budget controls." 
2  approvals:  layers of review and approvals; 
procedures:  written manuals and guidance as well as unwritten controls such as 
policies and instructions that have become standard; and 
reports:  written or automated reports describing grantee or staff performance, 
requirements to use specific reporting systems, and paperwork requirements. 
Results of focus groups and interviews 
To test our methodology, we conducted interviews--either individually, in small groups, or 
in focus groups--with 154 staff working for Public Health Service (PHS) agencies in 
California.  We selected PHS for the case study because of its diversity and complexity. 
The sample included the PHS regional office in San Francisco, the Food and Drug 
Administration (FDA) regional office in San Francisco, the FDA district office in Alameda, 
the FDA resident post in San Jose, and the Indian Health Service (IHS) Area Office in 
Sacramento.  We also interviewed staff from the IHS district office in Sacramento. 
During the focus groups and interviews, staff identified 260 management regulations and 
internal controls that they believe should be modified or eliminated.  Most of these 
(56 percent) fell into the category of approvals.  One-third pertained to reports, and 
11 percent pertained to guidance.  We provided PHS with the list of the 260 management 
regulations and internal controls.  Some of these items have already been addressed, and 
others are in the process of being reviewed.  For a more complete description of the focus 
group and interview methodology, see "Surveying Staff to Identify Unnecessary Internal 
Controls" (OEI-09-94-00210). 
This report is divided into four parts:  The first part describes the steps required to rank, 
track, and analyze the management regulations and internal controls that were identified by 
staff during the focus groups and interviews.  The second part describes the pitfalls we 
encountered when applying the methodology and some tips to avoid such pitfalls.  The 
third part describes the lessons we learned during the tracking and analysis.  The fourth 
part contains full descriptions of the six management regulations and internal controls that 
we tracked. 
After we completed tracking and analysis, in December 1995, the Secretary 
initiated a Departmental reorganization.  The Assistant Secretary for Health 
became the head of a new agency, the Office of Public Health and Science, within 
the Office of the Secretary.  The PHS agencies became HHS operating divisions, 
reporting directly to the Secretary.  These operating divisions now constitute the 
U.S. Public Health Service, with the Secretary as its head. 
3
 S T E P S   I N   T H E 

T R A C K I N G   P R O C E S S 

Tracking and analyzing the list of management regulations and internal controls--and 
eliminating those that are unnecessary--requires eight discrete but interrelated steps: 
STEP 1:  REFINE THE LIST 
The purpose of this step is to expedite the tracking process by consolidating management 
regulations and internal controls that are similar, clarifying the potential problems with 
each control and management regulation, and reviewing the list to ensure that each issue is 
valid and has not been addressed already. 
Consolidate:  When tracking and analyzing management regulations and internal controls, 
its helpful to group controls and management regulations that pertain to similar processes 
or originate in the same office.  This allows reviewers to save time by conducting fewer 
interviews.  If they consolidate management regulations and internal controls into more 
general process reviews, they can also reduce the disruption to agency officials by 
interviewing them about several controls at one time. 
Clarify:  Reviewers must ensure that they have an accurate understanding of staffs 
problems and concerns by conducting follow-up interviews with focus group and interview 
participants. 
Review:  We found many instances where focus group and interview participants described 
concerns that they believed were management regulations and internal controls but, instead, 
were simply complaints about specific managers or coworkers.  Reviewers should examine 
the list of staff-generated management regulations and internal controls and eliminate those 
that are clearly tied to personality conflicts rather than policy or procedural issues.  After 
eliminating these, reviewers should assess whether the problems with each control and 
management regulation identified by staff still exist, are under study by the agency, or 
have been addressed already.  Management regulations and internal controls that are the 
subject of agency review could be eliminated from the list or given lower priority than 
other controls that had not been identified previously.  Although review should occur 
throughout the tracking process, it is particularly important to conduct a thorough review at 
this initial step. 
STEP 2:  IDENTIFY QUICK HITS 
Reviewers should scan the aggregate list of management regulations and internal controls 
and identify those that are obvious targets for quick action.  Some management regulations 
and internal controls do not require the same in-depth analysis as others because they have 
been evaluated already or the problems and solutions are obvious.  These should be 
removed from the list and referred to the agency for immediate remedy. 
4
 STEP 3:  RANK 
To ensure that the most important issues receive prompt attention, reviewers should rank 
the management regulations and internal controls that remain on the list after steps 
1 and 2.  Reviewers may wish to consider one or more of the following factors when 
ranking the management regulations and internal controls for further analysis: 
the relative number of staff who mentioned the control or management regulation 
during focus groups and interviews; 
the extent to which staff ranked the control or management regulation in their top 
three controls that are most burdensome or unnecessary; 
the number of staff who are affected by the control or management regulation; 
the organizational level at which the control or management regulation could be 
addressed and modified; 
the ease with which the control or management regulation could be addressed and 
modified; and/or 
the apparent negative impact of the control or management regulation (e.g., 
negative effects on public or employee health and safety or significant impairment 
of the agencys ability to accomplish its mission). 
STEP 4:  INTERVIEW 
The interview process consists of a "chain" of interviews, each leading upward through or 
laterally across an agency to reach "the top" level or outside agency where the 
management regulation or internal control was initiated--or could be changed.  In some 
cases, it might be necessary to track a management regulation or internal control only to a 
supervisor (such as for a staff activity report).  In other cases, a management regulation or 
internal control might be tracked to a statute, another federal department, or an 
independent agency.  The interview process consists of two parts, each of which must be 
repeated until the source of the management regulation or internal control has been 
determined: 
1.  Obtain the name and phone number of the person who directly oversees the 
management regulation or internal control. 
This individual may have been identified during the initial focus groups and interviews 
with staff or during the clarification interviews discussed in Step 1.  This may not be the 
individual who originated the requirement.  Each interview should include a discussion of 
the next level, until the originator of the management regulation or internal control is 
identified. 
5
 2.  Conduct interviews with all offices and agencies that impose the control or 
management regulation on a lower office or agency. 
We used a structured discussion guide (see appendix A) to determine: 
how the control or management regulation originated; 
how it benefits clients; 
whether the control or management regulation is appropriate or outdated; 
whether a supervisor, another agency, law, Congressional guidance, or regulation 
requires the individual to enforce the control or management regulation; 
how much time is devoted to overseeing or complying with the control or 
management regulation; 
whether the respondents believe that the control or management regulation should 
be modified or eliminated; and 
whether elimination would jeopardize the agencys stewardship responsibilities. 
In general, the questions should be tailored to the individual or group of individuals being 
interviewed.  The purpose of each interview is to clarify the purpose of the control or 
management regulation and how it is used.  At each step, the interviewers should 
determine whether changes in technology or procedures indicate a lesser need for the 
management regulation or internal control. 
For agencies that have convened management regulation and internal control reduction 
teams, reviewers will find it helpful to interview these team members to ascertain what 
their views are, even if they are not in the chain of interviews. 
STEP 5:  DOCUMENT 
Relevant documentation includes appropriate statutes, Congressional committee reports,

regulations, policy statements, manuals, directives, memoranda, and guidance.  When

analyzing documentation, it is important to compare it to its source.  For instance,

reviewers should examine statutory or regulatory citations in a policy manual and conduct

their own review or analysis of those laws and regulations to identify discrepancies or

questionable interpretations.  Reviewers then can ask questions that will help discover why

a manual apparently goes beyond what a law or regulation specifically requires.

Reviewers should also analyze audits, inspections, and other oversight reports that may

have led to the implementation of more stringent management regulations and internal

controls.

6
 STEP 6:  ANALYZE 
Analyzing all interviews and documentation is necessary to allow reviewers to develop a 
list of options for decision makers.  Overall, reviewers should (1) differentiate between 
administrative controls and internal accounting controls and (2) look for indications that a 
control or management regulation might be excessive.  Indicators include affirmative 
responses to the following questions: 
Was the control initiated in response to an isolated occurrence or abuse.  If so, are 
the resulting management regulations and internal controls appropriate? 
Can the control or regulation be eliminated without increasing the agencys risk to 
fraud, waste, or abuse? 
Have technological advances, such as systems automation, been implemented since 
the control was established? 
Does agency guidance significantly vary from applicable law and regulation without 
any clear reasoning behind it? 
Do interviewees, including Congressional or Executive Branch agencies (if 
appropriate), agree that the control could be modified or eliminated? 
In the case of an internal accounting control, additional analysis is necessary.  This would 
include the following steps: 
analyzing the control environment, 
identifying and analyzing inherent risks, 
testing the controls effectiveness, and 
determining whether the analysis supports eliminating control. 
We have provided additional details explaining these four steps in appendix C. 
STEP 7:  ACT 
While reviewers might complete their tasks with Step 6, taking action on the options that 
they present is the most important step in the process.  Ultimately, the success of the 
reduction effort hinges on the agencys ability to implement solutions to unduly 
burdensome or unnecessary management regulations and internal controls. 
7
 STEP 8:  INFORM 
Reporting the results of (1) the review and any corrective action or (2) the basis for 
retaining a regulation or control can have a positive effect on employee morale.  Failure to 
do so, on the other hand, can be detrimental to staff who contributed time and ideas to the 
process. 
8
 P I T F A L L S   A N D   T I P S   T O   A V O I D   T H E M 

During the course of tracking management regulations and internal controls identified by 
field staff, we experienced some pitfalls that inhibited our ability to track controls 
successfully.  We offer some tips below to avoid them in the future. 
PITFALL:	 INTERVIEWEES WERE RELUCTANT TO PARTICIPATE IN 
TRACKING 
We encountered some staff who were unsure whether to participate fully in interviews. 
They appeared to be reluctant to share their thoughts about the control or management 
regulation because they did not want to undermine their agency, component, or manager. 
Other staff were defensive, believed it was a waste of time, and/or expressed hostility that 
anybody would question certain processes. 
Tips 
This is one indication that an internal agency group might be more successful in 
conducting the tracking. 
We held introductory conference calls with staff from various agency components. 
It was important to involve senior-level staff in these meetings so that it was clear 
that the agency was a cooperative partner in the effort to reduce unnecessary 
management regulations and internal controls. 
PITFALL:	 STAFF SOMETIMES DO NOT KNOW WHY A CONTROL OR 
MANAGEMENT REGULATION EXISTS, EVEN THOUGH THEY 
PLAY A MAJOR ROLE IN ITS ADMINISTRATION 
This may make it difficult for reviewers to determine the basis for the control or 
management regulation and to discuss options.  Most frequently, when staff did not know 
the basis or reason, they tended to assume that it was legally required.  This may occur 
because some internal control systems require segregation of duties.  In other cases, it may 
occur simply because the control or management regulation has been in place for a long 
time, and nobody ever questioned its existence. 
Tips 
Agencies should educate staff about the reasons for specific management 
regulations and internal controls, especially when the they have been implemented 
in response to a requirement from another department or agency. 
Sometimes not knowing the reason a control or management regulation exists can 
be a benefit, because the interviewee can focus on what makes sense rather than 
9
 what he or she believes is required.  Focusing on logical solutions can help 
reviewers overcome this barrier. 
Obtain statutory citations and documentation from other sources, perhaps using 
computerized on-line searches. 
PITFALL:	 INTERVIEWEES FREQUENTLY WERE UNABLE TO THINK OF 
CREATIVE OR LESS BURDENSOME OPTIONS TO 
MANAGEMENT REGULATIONS AND INTERNAL CONTROLS 
Throughout the identification and tracking phases, it was clear that staff have learned to 
accept and live with management regulations and internal controls.  In many instances, we 
found it difficult to solicit ideas for modifying existing controls and management 
regulations because staff simply had never considered that they could be changed or 
eliminated.  This was particularly true when the control or management regulation was 
mandated by an outside agency. 
Tips 
In general, agencies need to foster an environment of change and creativity, where 
suggestions to streamline processes are valued and rewarded. 
Reviewers should research alternatives to the control or management regulation and 
make follow-up calls to interviewees to obtain their opinions about them.  This 
requires obtaining all background information on the control or management 
regulation, including its purpose, results, and cost effectiveness.  We sought to have 
interviewees make distinctions between what the law required and what was 
promulgated in the agencys regulations or policies. 
PITFALL:	 BOTH INTERNAL AND EXTERNAL REVIEWERS HAVE 
ADVANTAGES AND DRAWBACKS 
While any individual or group of individuals can apply this methodology to an agencys 
management regulations and internal controls, determining whether the review should be 
conducted by an internal or external team is a major decision.  An internal team has the 
advantage of knowing the laws, regulations, controls, and personnel within the agency. 
However, an internal team may already have formed opinions about certain management 
regulations and internal controls, and staff might be less comfortable speaking honestly and 
freely with them.  External reviewers--a team of reviewers from one or more outside 
agencies or a consultant--are more likely to be unbiased, but they probably require more 
time to become acquainted with the agencys structure, policies, and inner-workings. 
10
 Tips 
Agencies might want to consider using outside personnel to conduct the initial 
focus groups and interviews and then turning the effort over to an internal group 
that has detailed knowledge of the issues raised. 
Regardless of whether the agency selects internal or external reviewers--or a 
combination--it should seek objective reviewers, i.e., those who do not have a stake 
in either the continuance or the elimination of management regulations and internal 
controls. 
11
 G E N E R A L   L E S S O N S   L E A R N E D 

A B O U T   I N T E R N A L   C O N T R O L S 

To test the methodology, we selected, in collaboration with PHS, six management 
regulations and internal controls to track and analyze: 
the imprest fund requirements for an FDA district office; 
the requirements for review of FDA seizure recommendations; 
the preparation and submission of several FDA district office administrative reports, 
including the accounts receivable, emergency salary advances, gains and losses, and 
travel advance reports; 
the PHS regional offices role in the Community Health Center program 
administration; 
the process to purchase a computer in an IHS area office; and 
the IHS conference management system. 
In addition to using the methodologys criteria to select these controls and management 
regulations, we selected issues that represented a cross-section of the different control and 
management regulation categories (approvals, guidance, reports) as well as the agencies 
included in the study.  The case studies are described in detail in the next section. 
Management regulations and internal controls are necessary to insulate programs from 
fraud, waste, and abuse and to conserve limited resources.  Nevertheless, based on the case 
studies, we learned several lessons about the reasons why some management regulations 
and internal controls appear to be unnecessary or unduly burdensome. 
ALL LEVELS OF GOVERNMENT, INCLUDING CONGRESS AND THE OFFICE 
OF MANAGEMENT AND BUDGET, HAVE MANDATED BURDENSOME 
CONTROLS AND ROUTINE REPORTING REQUIREMENTS THAT LIMIT 
AGENCIES REDUCTION EFFORTS 
Mandates from Congress and OMB sometimes result in requirements that spawn a plethora

of management regulations and internal controls.  For example, when Congress requires

a routine report, multiple agencies and layers within each agency must develop the

capability to provide such information.  This is particularly apparent in certain

instances at FDA where several layers within FDA, as well as the Office of the Secretary,

process data prior to submitting reports to Congress or OMB.  Furthermore, Congress may

impose the same reporting requirements on all agencies, even if the report does not

12
 really apply to them.  For example, all agencies must report accounts receivable to 
Congress and OMB even though many agencies, such as FDA, have minimal accounts 
receivable. 
We also found instances where Congress would not allow certain authorities to be 
delegated below a certain level.  By enacting this type of legislation--such as barring 
central office from delegating certain grantmaking authority to regional offices--Congress 
inhibits the agencys ability to administer its programs efficiently and reduce burdensome 
management regulations and internal controls. 
AGENCIES SOMETIMES OVERREACT TO THE FINDINGS OF OVERSIGHT 
AGENCIES 
Agencies come under extreme pressure to react strongly and swiftly when Congress, the 
General Accounting Office, OIG, or other oversight agencies identify material weaknesses 
or other problems in their programs.  As a result, agencies sometimes implement strict 
management regulations and internal controls that exceed oversight agency 
recommendations and penalize agency components that have never exhibited the same 
level of vulnerability as the components where the weakness was identified.  One example 
is the FDA imprest fund requirements.  Isolated instances of abuse in other agencies that 
had large imprest funds resulted in a series of strict and, at times, excessive management 
regulations and internal controls. 
AGENCIES ARE RELUCTANT TO DELEGATE AUTHORITY 
Agencies are hesitant to delegate authority to subordinate offices or individuals, even when 
allowed by law or regulation to do so.  Agency officials frequently cite the need for 
consistency among field offices as a rationale for not delegating.  The IHS conference 
management system, for example, would allow the Director of IHS to delegate authority to 
approve area offices conference plans.  To date, however, the director has not delegated 
this authority, even though other high-level IHS officials are involved in the review and 
approval of the conference plans. 
AGENCIES SOMETIMES EXCEED REASONABLE ASSURANCE AND/OR 
LEGAL REQUIREMENTS WHEN DEVELOPING MANAGEMENT 
REGULATIONS AND INTERNAL CONTROLS 
We found several instances where agencies required field offices to provide reports more 
frequently than the agency itself was required to.  While the need for agencies to track 
certain data might be necessary for critical issues, in some cases these reports contain little 
information and are basically paperwork exercises.  This is the case with two of the four 
FDA administrative reports that we tracked.  Although Congress requires quarterly or 
annual reports, FDA headquarters requires district offices to submit monthly reports, even 
though the reports contain little or no new or useful information. 
13
 MULTIPLE AGENCIES AND INDIVIDUALS BECOME INVOLVED IN 
APPROVING ACTIONS AND PROCESSING REPORTS 
In some instances, agencies and individuals become involved in a chain of approvals or 
report processing, even though their roles and the purpose for including them are unclear. 
Several of the case studies illustrate how many agencies and officials are unnecessarily 
involved and how these layers could be streamlined or eliminated: 
To procure a computer in an IHS area office, six separate reviews must be 
completed.  Although the area office streamlined the operation by allowing some 
individuals to review more than one facet of the requisition, there are still too many 
reviewers and each review is too narrow in scope.  For example, one official must 
certify that excess inventory to fill the need does not exist.  Another official, who is 
part of a committee that reviews requisitions, must certify that the computer is 
actually needed.  And yet another official has the authority to decide whether the 
computer should be purchased and, if so, what type of equipment would meet the 
requestors needs. 
While FDA has streamlined its process for reviewing seizure recommendations, the 
process still requires that a number of different agencies review all 
recommendations, even if a specific case is identical to a previous case.  The 
FDA currently is identifying certain regulated products that could be subject to 
fewer layers of headquarters review.  So far, however, headquarters staff have been 
reluctant to consider eliminating more than one layer of review. 
The PHS Debt Management Branch consolidated agencies accounts receivable 
data but did not submit the data to the Treasury Department to meet the statutory 
requirement, nor did it assist in debt collection activities.  Instead, FDA submitted 
the data directly to the Treasury Department.  The Debt Management Branch 
simply provided comparative data to PHS agencies, although most of them, 
including FDA, had few accounts receivable. 
AGENCIES DO NOT ALWAYS ELIMINATE OBSOLETE MANAGEMENT 
REGULATIONS AND INTERNAL CONTROLS 
Even when agencies implement automated systems to replace cumbersome manual systems 
that require numerous management regulations and internal controls, they do not always 
eliminate the previous controls and management regulations, especially reporting 
requirements.  Automated budget and personnel systems throughout PHS and the Office of 
Personnel Management did not result in significant reductions in the number of duplicative 
manual reports. 
14
 C A S E   S T U D I E S 

THE IMPREST FUND REQUIREMENTS FOR THE FDA DISTRICT OFFICE 
Numerous management regulations and internal controls govern the use of imprest (petty 
cash) funds, which are used in the district office to procure small-cost goods and services. 
These controls and management regulations were developed as a result of fraud, and 
because oversight agencies were concerned that the availability of cash invites abuse.  The 
FDA is eliminating imprest funds in all district offices in favor of less burdensome and 
risky systems. 
BACKGROUND 
The district offices imprest fund totals approximately $1,000 for each fiscal year.  Among 
the controls that govern the management of these funds, 
only the principal cashier--who must be designated by the Treasury Department--or 
a designated alternate may have access to the fund; 
cashiers may not be certifying officers; 
advances from the principal cashier to the alternate must be done with a signed 
interim receipt.  If this cannot be done in advance, a committee of three will 
process the transfer to the alternate and sign the interim receipt; 
at least five accountability reports are required, including a daily reconciliation and 
an annual audit; 
in order to obtain a cash advance from the fund, requestors must submit a 
393 form and obtain the approval of a branch manager or district director; and 
annually, all authorized cashiers and administrative officers must read a 31-page 
manual and sign on each of 17 separate pages.  Each signature indicates that they 
have read and understood that page.  They must submit the signed pages to 
headquarters. 
STAFF CONCERNS 
Managers and staff at the field level do not understand why so many controls and 
management regulations exist for such a small amount of money.  "We can buy 
$60,000 lab equipment, but if $1 is missing from the imprest funds, its a major problem," 
said one staff member. 
15
 TRACKING AND ANALYSIS 
In June 1992, PHS declared a material weakness regarding FDAs imprest fund operations. 
This came after an FDA staff member obtained unauthorized cash payments from the FDA 
Headquarters imprest fund totaling more than $25,000.  A subsequent review by the OIG 
determined that these losses could have been avoided if FDA had followed the 
management regulations and internal controls in place at the time when the illegal 
activities were perpetrated. 
Although the OIG recommended corrective actions pertaining to imprest fund operations, it 
also recommended that FDA consider eliminating the imprest fund and using alternative 
methods, such as third-party drafts and credit cards, to eliminate all cash disbursements. 
The FDA is in the process of implementing third-party draft systems in all district offices. 
We tracked imprest controls and management regulations through FDA headquarters. 
While imprest controls and management regulations could be tracked through FDA to 
PHS, the Office of the Secretary, the Treasury Department, and OMB, we stopped tracking 
upon learning that FDA had plans to eliminate all imprest funds within a year. 
CONCLUSIONS/OPTIONS 
Although FDA is eliminating imprest funds, valuable lessons can be learned from how 
these excessive management regulations and internal controls evolved.  As is sometimes 
the case, burdensome requirements resulted from isolated instances of abuse.  Some of the 
controls applicable to larger funds were unnecessary and burdensome when applied to 
smaller funds. 
Many of the management regulation and internal control failures noted in the OIG audit 
report were unique to FDA headquarters.  The size of the staff at FDA headquarters 
combined with the volume of transactions processed by the cashier in Rockville resulted in 
a situation where the cashier was not acquainted with funds requestors or approving 
officials.  In district offices, the cashier is more likely to know most of the staff by name 
or face. 
The FDA in Rockville processed hundreds of thousands of dollars in imprest transactions 
while the FDA district office rarely had a balance of more than $1,000.  In this case, the 
burden of the controls and management regulations far outweighed the potential for fraud 
and waste. 
STAFF COMMENTS ON THE DRAFT REPORT 
In their written comments, FDA staff questioned their authority to eliminate imprest fund 
controls, asserting that only the Treasury Department can do this.  We stopped tracking 
these controls when we learned that FDA was eliminating imprest funds.  Nevertheless, the 
case study illustrates how cumbersome and inflexible management regulations and internal 
controls can be. 
16  REQUIREMENTS FOR REVIEW OF FDA SEIZURE RECOMMENDATIONS 
Field level staff believe the requirements for headquarters review of seizure 
recommendations cause unnecessary delays.  The FDA follows an internally developed 
procedure for seizures that ensures an exceptionally high success rate.  The 
FDA acknowledges concerns about delays and is convening a workgroup to develop 
alternative procedures. 
BACKGROUND 
A seizure is a regulatory action by the federal government against products that are found

to be in violation of the federal Food, Drug, and Cosmetic Act.  In a seizure action,

FDA recommends that the U.S. Attorney file a Complaint for Forfeiture and a warrant for

arrest, directing the U.S. Marshal to seize the violative products.  Parties interested in the

products, such as owners or agents, may claim them and litigate on the products behalf.

If there is no proper claimant, the federal government may destroy the products.

A seizure recommendation must pass multiple reviews.  From the time a field investigator

finds violative products until the U.S. Attorney files the case, numerous offices decide

whether the seizure case will proceed, including (1) the FDA district office, (2) the

appropriate FDA center, (3) FDAs Division of Compliance Management Operations

(DCMO), (4) the Office of General Counsel (OGC) within FDA, and (5) the

U.S. Attorneys Office.  The FDA also notifies the Department of Justices Office of

Consumer Litigation when it formally recommends that the U.S. Attorney file a case.

STAFF CONCERNS 
In the FDA regional office, district office, and resident post, staff said the multiple levels 
of review required for seizure recommendations cause untimely delays.  While the 
recommendation is being reviewed, the violative products could be sold to consumers or 
otherwise moved from the site. 
Staff identified several steps that they believe unnecessarily prolong the process: 
the requirements that both the centers and DCMO review seizure recommendations; 
the OGCs involvement in endorsing the seizure action before the case can be 
forwarded to the U.S. Attorneys Office; 
field staffs lack of authority to recommend a seizure action directly to the 
U.S. Attorneys Office; and 
the requirement that field investigators make availability checks and revalidate 
conditions several times to assure the products are present and still violative. 
17
 TRACKING AND ANALYSIS 
The FDA Regulatory Procedures Manual Chapter 8-20 spells out the procedure for

recommending a seizure.  The FDA has developed this internal procedure over the years

and periodically convenes workgroups to revise or update it.  Headquarters staff believe

that the procedure is highly effective.  They acknowledge, however, that the multiple

reviews sometimes result in delays.  Currently, an FDA workgroup is reviewing ways to

streamline the review of seizure cases.

Reviews by both the appropriate center and DCMO are specified in the Regulatory

Procedures Manual.  While the center checks for compliance with product-specific policy,

DCMO checks for consistency with FDA policy nationally and among centers.  The

FDA decided this two-step review is more efficient than a previous system, in which

compliance staff located in a single office did not have enough access to the technical

expertise in the centers.

Each center has its own internal process for review, some much more complex than others.

Depending on the center, the seizure recommendation may be subject to review and

approval or disapproval by the consumer safety officer, branch chief, division director,

and/or compliance office director.  The FDAs timetable for center review of a seizure

recommendation is 5 days.  Center staff say their ability to meet this goal depends on the

complexity of the violation.

Under a pilot program, not all seizure recommendations must be reviewed by the centers.

The FDA Compliance Policy Guides direct the district office to forward certain cases

directly to DCMO.  This procedure, called "direct reference," is used in selected instances

where policy is firmly established and evidence is strong, such as a massive infestation of

insects spreading filth throughout a warehouse.

The FDAs internal policy extends OGCs authority, under federal regulation

21 CFR 5.10(b), to review seizure recommendations.  According to headquarters staff,

OGC review improves the process because the U.S. Attorney is more likely to file the case

if it can use the food and drug expertise of OGC attorneys.  Both FDA and

OGC staff believe that OGC review satisfies the Department of Justices Office of

Consumer Litigation, which currently does not exercise its authority to review seizure

recommendations [28 CFR 0.45(j)].

In only one circumstance--margarine substitution for butter--is the FDA district office

allowed to forward the seizure recommendation directly to the U.S. Attorney.  Although an

FDA workgroup discussed increasing direct recommendation to the U.S. Attorney, FDA

has not pursued this option.  Some staff believe it should be tried on a limited basis, while

others believe that the lack of headquarters and OGC review would raise red-flags with the

Department of Justice and the U.S. Attorneys.

The Regulatory Procedures Manual states that violative conditions must be revalidated if

the evidence is older than 30 days to ensure that the products are present and still violative

18  when the U.S. Marshal seizes them.  Last year, FDA changed the procedures to avoid 
multiple revalidations.  Now, OGC approves seizure recommendations, pending 
revalidation.  Since the change in procedures, FDA staff reported there have not been any 
cases requiring multiple revalidations. 
CONCLUSIONS/OPTIONS 
The FDA should continue the workgroups efforts to improve the seizure process. 
Members of the workgroup and other FDA staff have suggested ways to speed the process 
while maintaining appropriate review of seizure recommendations.  These suggestions 
include: 
encouraging firms to hold or recondition violative products voluntarily; 
increasing the frequency of communication between the field, centers, DCMO, and 
OGC; 
improving the clarity and organization of the case documents; 
developing the charge most supportable by the evidence; 
transmitting case files by electronic mail or over-night mail on a diskette; 
improving the coordination of reviews between divisions within some centers; 
continuing and perhaps expanding a pilot program of "direct reference;" 
implementing concurrent review by the centers and DCMO in urgent cases; 
developing and implementing an on-line library of jurisdictional models for 
pleadings; and 
implementing a pilot program of direct recommendation of cases from the district 
office to the U.S. Attorney in carefully selected, clear-cut cases. 
In addition to the options being considered by the workgroup, it may be helpful for 
FDA to examine whether reviews are unnecessarily repeated.  For example, staff in the 
centers, DCMO, and OGC all mentioned cases that had elementary problems, such as 
omitted Interstate Commerce documentation, reaching their level of review.  The 
FDA may want to explore ways to notify subsequent reviewers of the issues that have 
already been checked, the results of these checks, and any actions that should be 
completed. 
19
 FDA DISTRICT OFFICE ADMINISTRATIVE REPORTS 
Staff from FDAs district office believe that only 3 of approximately 30 routine 
administrative reports serve any useful function.  Others were useful at one time but are 
now obsolete, primarily because administrative processes have changed or become 
automated.  Tracking of a sample of four reports revealed that these reporting 
requirements appear to be excessive when compared to the legal requirements.  In general, 
however, FDA has been proactive in reviewing the need for these reports. 
BACKGROUND 
Food and Drug Administration district offices must submit approximately 30 routine 
administrative reports to headquarters on a monthly, quarterly, semi-annual, or annual 
basis.  On a monthly basis, headquarters requires reports on travel advances, accounts 
receivable, and emergency salary advances.  On a quarterly basis, headquarters requires 
more than a dozen reports, including summaries of procurement, usage of government 
vehicles, accidents and injuries, the aging of travel advances, and gains and losses.  On a 
semi-annual basis, headquarters requires reports on use of commercial printing services, 
physical security, and computer security.  On an annual basis, headquarters requires reports 
on copy equipment, safety, and imprest (petty cash) fund disbursements. 
STAFF CONCERNS 
During interviews, FDA staff stated that most of these reports no longer serve any useful 
purpose.  When asked to evaluate the list of 30 reports to determine which reports they 
believed were truly necessary, FDA staff highlighted only 3 of the reports.  The other 
reports are not necessary because (1) an administrative process has changed making a 
report obsolete, yet the report is still required, (2) the information is available to 
headquarters via computer system or data that they already have, and (3) headquarters does 
not appear to use the data. 
In some cases, staff claimed that certain reports are no longer necessary because the 
processes had been automated or otherwise changed.  One example is the monthly 
accounts receivable report.  "You generally submit a report with all 0s."  said one staff 
member.  A similar situation exists with the emergency salary advance report.  Although 
the expanded use of direct deposit has virtually eliminated emergency salary advance 
requests, FDA district office staff must still submit monthly reports to headquarters. 
In other cases, automated administrative systems have replaced manual systems, meaning 
that the information is already available to headquarters via on-line systems.  Despite this, 
headquarters continues to require manual reports.  Examples cited by FDA district office 
staff include the monthly travel advance report.  Headquarters gives printouts including 
this information to the district offices but requires reports anyway.  Another example is the 
quarterly gains and losses report, which includes information about staffing changes.  It 
duplicates a staffing report that the district office must send to the regional office every 2 
weeks.  Administrative staff wonder why so many staffing reports are required when 
20  personnel data are available to the regional office and headquarters through the automated 
Administrative Resources Information Exchange System (ARIES) system. 
In some instances, staff simply do not believe that headquarters uses the information they 
submit.  For example, staff do not know of any instances where headquarters has acted on 
seriously delinquent accounts on the accounts receivable reconciliation report. 
TRACKING AND ANALYSIS 
We tracked the purpose and use of the four administrative reports highlighted above.  We 
provided the entire list of reports that staff believe are unnecessary to PHS and FDA. 
The PHS and FDA accounts receivable reporting requirements exceed both

OMB and Treasury requirements without any apparent enhancement.  Congress

requires agencies to report outstanding accounts receivable to OMB and the

Secretary of the Treasury "at least once each year" [31 U.S.C. 3719].  Along with

the annual report, the Treasury Department requires a quarterly report from all

agencies with more than $100,000 in accounts receivable.

Despite the quarterly and annual requirements, FDA district offices must submit

monthly accounts receivable reports to headquarters.  The FDA headquarters

consolidates district office reports, annually transmits accounts receivable data to

the Treasury Department, and quarterly submits a report to PHS Debt Management

Branch.  The Debt Management Branch consolidates accounts receivable data and

provides a quarterly comparative report to the PHS Office of Management and each

reporting agency.

In general, most PHS agencies have few accounts receivable.  While the Health

Resources and Services Administration (HRSA) has accounts receivable totaling

more than $1 billion, FDA generally has less than $500,000.  Despite this

difference, FDAs reporting requirements are as strict (or more strict when looking

at the monthly district office reporting requirement) as HRSAs.  Officials from

PHS believe that they will need to track FDAs accounts receivable in the future,

however, because it recently started collecting user fees.  Currently, these are not

included in the reports, although these receivables may total up to $52 million.

One headquarters staff person stated that accounts receivable were more of a

problem 10 years ago.

Officials from PHS believe that an active oversight role is necessary because the

agencies have not done a good job collecting overdue accounts receivable.  While

its stated role is to be the "focal point" for PHS debt collection activities, the Debt

Management Branch is not involved in any debt collection activities.  Agencies

work directly with the Department of Justice to collect overdue accounts.

21
 The HHS Office of the Secretary also receives an annual accounts receivable 
report from the Office of the Assistant Secretary for Management and Budget.  The 
data for this report are received directly from the Treasury Department. 
The emergency salary advance report is required by FDAs Office of Financial 
Management and does not go outside of this office.  Managers concede that this 
report could be eliminated and are in the process of doing so for three major 
reasons.  First, the need for emergency salary advances has decreased since 
agencies implemented direct paycheck deposit on a broad scale.  Second, 
emergency salary advance balances are listed in each offices general ledger, 
negating the need for a regular report.  Third, the availability of direct deposit as an 
option has allowed the agency to be stricter on giving emergency salary advances. 
According to agency policy, staff who refuse to use direct deposit may now receive 
only one emergency salary advance per year. 
We tracked the travel advance report from FDAs district office to the Accounting 
Reports and Analysis Branch within FDAs Office of Financial Management.  This 
branch consolidates all district office travel advance reports and sends the data to 
PHS Office of Management, Division of Budget, Resources Analysis Branch.  On 
a quarterly basis, this office analyzes data from each PHS agency to identify trends 
in the numbers and average amounts of outstanding travel vouchers.  This review is 
an internal PHS requirement that has the goal of implementing OMB Bulletin 88-
17, which directs agencies to limit travel advances to out-of-pocket expenses. 
An FDA headquarters staff person indicated that agencies are mandated to make 
sure that travel advances are not outstanding for more than 30 days.  In a 
1993 audit of FDAs imprest fund requirements, OIG auditors found a "high level 
of outstanding travel advances."  At that time, an FDA official noted that the 
agency rarely used its legal right to offset an employees paycheck for delinquent 
travel vouchers. 
The gains and losses report, which had been required by the Office of Regulatory 
Affairs in FDA headquarters, was eliminated in late 1994 because personnel 
information is available through the Office of Personnel Managements automated 
personnel system or through FDAs ARIES personnel system.  Initially, the report 
was used by headquarters to manage downsizing of the agency.  Improvements in 
the ARIES system allowed FDA headquarters to eliminate the report. 
CONCLUSIONS/OPTIONS 
The FDA has been relatively active in addressing unnecessary reports.  Regional and 
district office staff have been involved in management regulations and internal controls 
reduction efforts.  A major barrier to faster change, according to staff, has been the slow 
pace of automation due to limited resources.  However, the ability to automate allowed 
FDA to eliminate the gains and losses report, and the emergency salary advance report 
appears to be on the brink of elimination. 
22  In the case of the two other reports reviewed--the accounts receivable and travel advance 
reports--district offices must submit reports more frequently than the agency.  In both 
instances, the offices that receive the reports do not take any collection action based on the 
data in the reports. 
The FDAs accounts receivable are relatively small, especially when split among 21 district 
offices.  The FDA and the Office of the Secretary could develop less burdensome methods 
to track accounts receivable.  The information that is required in the reports is available 
from each district offices general ledger, and districts understand that they can call FDAs 
Office of Financial Management if theyre having problems collecting overdue accounts. 
At the very least, this report could be required quarterly or annually rather than monthly 
and still meet the Treasury Departments reporting requirement. 
The FDA could also seek an exemption from the reporting requirement due to its small 
amount of receivables.  The Office of the Secretary might have to assist in this area, 
perhaps by requesting that OMB or the Treasury Department waive the reporting 
requirement in instances where an agencys receivables are less than $500,000. 
Of the four reports we reviewed here, the travel advance report--also required by OMB-
appears to be the one that is most necessary, according to staff.  Since nobody outside of 
the district office routinely gets involved in delinquent travel advance instances, we 
question the necessity of so many offices being involved. 
STAFF COMMENTS ON THE DRAFT REPORT 
In their written comments, FDA headquarters staff disagreed with our options and 
conclusions regarding three of the four administrative reports.  These comments contradict 
information provided during tracking interviews by Office of Financial Management staff, 
who acknowledged that these reports could be required less frequently, and layers of 
review could be eliminated without adverse consequences. 
The purpose of our methodology is to identify and track internal controls and management 
regulations that may be unduly burdensome or unnecessary.  This case study describes one 
category of management regulations and internal controls, administrative reports, that staff 
identified as problematic.  Clearly, it is FDA managements responsibility to determine if 
the burden of these reports on district office and headquarters staff outweighs their value. 
23
 THE ROLE OF THE REGIONAL OFFICE IN THE ADMINISTRATION 
OF THE COMMUNITY HEALTH CENTER (CHC) PROGRAM 
Regional office staff, who used to have significant input into decisions to award and renew 
grants and oversee CHC grantees, question their role since central office staff and 
contracted consultants have assumed more responsibility.  Staff believe this is 
inappropriate, because they have more day-to-day contact with individual grantees than 
either of these other entities.  Through management regulation and internal control 
tracking, we found that most changes in the CHC program were mandated by Congress. 
BACKGROUND 
Section 330 of the Public Health Service Act authorizes the federal government to provide 
grants for community-based organizations to provide primary and preventive health care to 
populations who would otherwise lack access to such care.  The Bureau of Primary Health 
Care (BPHC) within the Health Resources and Services Administration is responsible for 
administering the CHC program. 
Organizations submit applications for CHC funding to BPHC which determines who will 
receive funding and the amount of each award.  Grantees typically receive multiple year 
grant awards but must submit annual renewal applications during the grant period. 
Grantees that wish to continue receiving CHC grants at the end of their grant periods must 
submit a project period renewal application.  In most cases, renewal is automatic, except 
when another organization wishes to compete for CHC funding or when the existing 
grantee has serious service delivery or administrative problems.  In these cases, staff must 
conduct site visits and document grantees problems prior to defunding them. 
Regional office staff conduct a variety of activities related to grantee funding and 
operation.  While many of these activities support central offices decision-making 
authority when awarding new grants and renewing the grants of existing grantees, the 
regional office is also the primary point of contact for CHC grantees.  Regional office staff 
duties include: 
reviewing applications for new and continued funding;

providing on-site technical assistance, as needed, if resources are available;

conducting desk reviews of grantees who are not up for grant renewal;

conducting Primary Care Effectiveness Reviews of grantees that are applying for

grant renewals; and

participating on On-Site Review teams for grantees that exhibit significant service

delivery and/or administrative problems.

STAFF CONCERNS 
Regional office staff described a number of management regulations and internal controls 
that they believe are questionable or unnecessary.  Staff believe that central office 
implemented these controls and management regulations to ensure fairness and uniformity 
24  in grants administration.  They expressed serious concerns, however, about the 
effectiveness of these controls.  They stated that: 
For applications for continuing and renewing grants, central office simply concurs 
with regional recommendations and therefore is frequently an unnecessary layer of 
review.  Regional staff could not recall an instance where central office did not 
concur with their recommendation for a grant continuation or renewal and therefore 
questioned central offices involvement in the process. 
Central office should allow regional offices to approve grantees requests to 
reprogram and carry-over budget dollars.  The regional office has the most contact 
with grantees and generally knows firsthand about the situations that would cause 
them to request reprogramming and carry-overs, because it has routine oversight 
responsibility.  Central office does not have that kind of knowledge and must base 
its decisions on regional office input and grantee lobbying. 
While regional offices have limited resources to conduct site visits, central office 
spends thousands of dollars each year for consultants to provide on-site technical 
assistance and conduct reviews.  While some of these consultants provide 
specialized technical assistance, others are simply former regional office staff. 
Current regional office staff question the appropriateness of these expenditures, 
since they believe that they are qualified to conduct these site visits.  In addition, 
they noted that they frequently must consolidate or summarize consultants reports 
into their own grantee reports or rewrite them to conform to central offices 
preferred format. 
Grantees circumvent the regional offices by going "over their heads" when 
reviewers find problems.  Although reviewers might believe that a certain course of 
action is necessary, the regional office is left "out of the loop" when it comes to 
corrective action decisions.  Central office is particularly susceptible to lobbying 
efforts and should allow regional offices to make the final corrective action 
decisions. 
TRACKING AND ANALYSIS 
While several of the above issues appear to be policy choices, federal law does not allow

central office to delegate certain authorities to regional offices.  These include the authority

to enter into, modify, or issue approvals with respect to grants or contracts

[42 U.S.C. 254C(j)].  This provision was passed as part of a series of reforms in 1988 to

"assure that national program goals and requirements are consistently followed by all

10 HHS regions," according to one member of Congress.  As a result, central office is

legally bound to be involved in all grant approvals, even routine budget period renewals

and reprogramming or carry-over requests.  In addition, central office may not delegate

new award authority to the regional office, even if it wished to decentralize this process.

25
 According to central office staff, consultants have become more important in monitoring 
and technical assistance for several reasons.  First, Congress enacted a cap on federal 
agency travel costs, but this cap does not apply to contracted service providers.  Second, 
consultants provide specialized expertise on areas of current concern, such as managed care 
principles.  Third, central office encourages more peer-to-peer interaction and assistance by 
using other CHC administrators and providers to conduct on-site technical assistance and 
review.  The practice of using former staff as consultants is limited.  These staff are 
experts in certain areas and help provide assistance to CHCs while staying under Congress 
travel cap. 
Central office staff acknowledged that grantees sometimes bypass regional offices and seek 
relief from them when reviewers find problems during site visits.  Central office staff 
emphasized that decisions about how they should address these grantees are always made 
in concert with regional office managers, but line staff are not always involved.  According 
to one staff person, regional office reviewers are more likely to endorse defunding grantees 
than central office, which will use this option only as a last resort because the community 
might lose all access to health care. 
CONCLUSIONS/OPTIONS 
Congress mandate conflicts with the National Performance Review which endorses a 
strong regional office role.  Chapter 3 focuses on staff empowerment and decisions being 
made at the level closest to the customer: 
We must give decision making power to those who do the work, pruning 
layer upon layer of managerial overgrowth....  We must offer top-down 
support for bottom-up decisionmaking....  Americas best-run businesses are 
realizing enormous cost savings and improving the quality of their products 
by pushing decisions down as far as possible and eliminating unnecessary 
management layers.  The federal government will adopt this decentralized 
approach as its new standard operating procedure.  This technique can 
unearth hundreds of good ideas, eliminate employee frustration, and raise 
the morale and productivity of an entire organization.  Put simply, all 
federal agencies will delegate, decentralize, and empower employees to 
make decisions.  This will let front-line and front-office workers use their 
creative judgment as they offer service to customers and solve problems.... 
The Office of the Secretary or HRSA would have to petition Congress to revise the law if 
they wish to change the CHC administration system.  Overall, HRSA has little legal 
authority to delegate CHC decisions to regional offices.  Central office has assumed many 
of the roles traditionally held by regional offices.  While central office staff emphasized 
that the regional office remains the focal point for grantee interaction, regional office staff 
do not believe that they have much authority and their morale appears to be low.  Regional 
office staff were not aware of the statutory basis for some of the controls and management 
regulations.  If Congress does not ease the requirements, HRSA should educate regional 
office staff about the mandates.  Central office could also make a special effort to include 
26  regional line staff along with their managers in conference calls to decide on corrective 
actions for problematic grantees, as well as other action items. 
While using consultants is desirable in some cases, the Congressionally-mandated travel 
cost cap results in instances where HRSA must use consultants rather than regional office 
staff.  In these cases, one could argue that using consultants is not necessarily cost-
effective, and the travel cap actually results in higher cost to the taxpayer. 
STAFF COMMENTS ON THE DRAFT REPORT 
In their written comments, HRSA staff stated the future role and responsibilities of 
regional staff will be clearly defined in HRSAs 1996 reorganization plans.  They also 
maintained that they have not used consultants merely to stay under the mandated travel 
cap.  This contradicts assertions made by central and regional office staff during tracking 
interviews. 
27
 PURCHASING A COMPUTER IN AN IHS AREA OFFICE 
Purchasing a computer in an IHS area office involves multiple requirements for approval

from area office and sometimes headquarters staff.  Area office and IHS policies, as well

as federal statutes and regulations, govern computer procurement.  While a recent increase

in area procurement authority promises to facilitate buying a computer,

HHS agencies should continue efforts to reduce internal restrictions where possible.

BACKGROUND 
The process of purchasing a computer in an IHS area office begins when a staff person 
fills out a requisition either on IHS automated procurement system or HHS form 393. 
Besides obtaining approval from a direct supervisor, the person requesting the purchase 
must also obtain the approval of (1) the Automated Data Processing (ADP) Committee, 
(2) the Information Systems Coordinator, (3) the Property Management Officer, (4) the 
Financial Management Officer, (5) an executive administrator, and (6) the Contracting 
Officer. 
If the total cost of the purchase falls within delegated limits, the area office Contracting 
Officer can process a purchase order for the computer.  Requisitions for a computer 
purchase above these limits must be forwarded to the IHS Office of Information 
Resources Management (OIRM) in headquarters.  The OIRM has purchase authority up to 
$2.5 million.  Purchases greater than $2.5 million must have Departmental and/or General 
Services Administration (GSA) approval. 
STAFF CONCERNS 
Area office staff objected to: 
the number of officials who must approve the requisition within the area office; 
the requirement that the area offices ADP Committee review and approve the 
requisition, because its members lack technical expertise and the committee does 
not meet on a regular basis; and 
the requirement that headquarters review certain multiple computer purchases. 
TRACKING AND ANALYSIS 
The IHS computer procurement requirements come from the area office, the Indian Health 
Manual, federal statutes, regulations, and OMB, GAO, HHS, and PHS policies.  Primarily, 
computer procurement must comply with the Federal Acquisition Regulation [48 CFR 1], 
the Health and Human Services Acquisition Regulation [48 CFR 301], and the Federal 
Information Resources Management Regulation (FIRMR) [41 CFR 201].  Federal laws 
relating to IHS computer procurement include the Paperwork Reduction Act of 1980 [44 
U.S.C. 3501] and the Buy Indian Act Authority [25 U.S.C. 47].  Last year, Congress 
28  passed the Federal Acquisition Streamlining Act, which, among other things, raised the 
simplified small purchase threshold to $100,000.  The HHS is in the process of 
incorporating this act into the Health and Human Services Acquisition Regulation. 
Required area office approvals 
While some requirements for area office review originate in federal regulation or statute, 
the decisions to require ADP committee and executive administrator review were made by 
the area office. 
ADP Committee:  The requirement for ADP Committee review of requisitions for 
computer equipment originates with the California Area Director.  Impetus for this 
requirement was concern that too many lap-top computers were being purchased 
without adequate review of whether they were needed.  Staff who had abused the 
purchase authority no longer work in the area office.  At this time, the committee 
head reviews most requisitions without consulting the whole committee. 
The Information Systems Coordinator:  The FIRMR and the delegation of authority 
from IHS headquarters give the area Information Systems Coordinator the authority 
to decide whether computer equipment should be purchased, and if so, what 
equipment best meets the needs, is compatible, and meets Energy Star requirements. 
The Property Management Officer:  The Federal Property Management Regulations 
[41 CFR 101-26.101] require that agencies first check to see if excess property can 
satisfy the need. 
The Financial Management Officer:  The General Accounting Offices Policy and 
Procedures Manual directs agencies to implement fiscal control systems to ensure 
that agency expenditures do not exceed the appropriation, in accordance with the 
Anti-Deficiency Act [31 U.S.C. 1341]. 
An executive administrator:  It is internal area office policy that the Associate 
Director of the Office of Administration and Management approve requisitions. 
The Contracting Officer:  Only Contracting Officers appointed in accordance with 
the Federal Acquisition Regulation may enter into a contractual commitment on 
behalf of the government.  Due to a recently corrected material weakness in 
procurement, IHS exercises caution in delegating procurement authority to the area 
offices. 
Delegation of procurement authority to the area office 
The limit on what computer purchases can be processed in the area office stems from the

delegation of procurement authority specific to Federal Information Processing

resources.  The FIRMR gives GSA the ultimate purchase authority and the ability to

delegate this authority to the agencies.  The chain of delegation is as follows:

29  GSA gave HHS procurement authority for $10 million ($1 million non-
competitive). 
HHS delegated authority for $5 million ($500,000 non-competitive) to individual 
agencies, including IHS. 
Within IHS, OIRM has procurement authority for $2.5 million ($250,000 non-
competitive). 
OIRM delegated procurement authority to each area director, who in turn delegated 
authority to the Information Systems Coordinator.  Each area office has authority 
up to: 
(1) the small purchase limit--currently $25,000; or 
(2) for GSA-schedule, the smaller of $250,000 or the schedule limit. 
While the amount delegated to the area office used to be only $5,000 for computer 
equipment, OIRM increased the delegation in July 1994.  Now, almost all computer 
purchases can be approved in the area office. 
CONCLUSIONS/OPTIONS 
Increased delegation of procurement authority for Federal Information Processing resources 
to the area office has substantially reduced the number of computer purchases that must be 
reviewed and processed in headquarters.  Staff reported the increased delegation was a 
great improvement. 
Although many of the requirements on computer procurement are government-wide, 
HHS and its agencies can make efforts to streamline procurement and other requirements 
further.  The HHS should consider coordinating the implementation of the Federal 
Acquisition Streamlining Act with the recommendations of a departmental workgroup on 
streamlining acquisition requirements. 
Within IHS, the number of approval levels could be streamlined without undermining the 
need to ensure that all acquisitions are not only necessary and economical but also 
compatible with current equipment and consistent with IHS IRM strategic plan.  The area 
office could reduce or eliminate the requirement for ADP Committee approval.  It also 
could evaluate the need for an executive administrators review of computer purchases. 
The Information Systems Coordinator has been delegated this authority from the Area 
Director and has already reviewed the proposed purchase. 
30
 IHS CONFERENCE MANAGEMENT 
Annually, the IHS area office submits a proposed conference plan for headquarters review. 
Area office staff believe this review takes too much time and requires excessively detailed 
documentation.  Conference management controls stem from IHS policy, HHS policy, 
GSAs Federal Travel Regulation, and OMB Bulletin 93-11.  The IHS may want to 
consider delegating authority for conference management and reducing duplication of 
records maintenance. 
BACKGROUND 
Annually, IHS determines which proposed conferences will take place that fiscal year. 
Under IHS conference management procedures, any conference for 30 or more 
IHS-sponsored participants must be part of a conference plan that is subject to reviews by 
area office and headquarters staff.  The conference plan must be approved by: 
the Area Director, in consultation with the area offices Executive Committee; 
the headquarters Office of Administration and Management, Division of 
Administrative Services, which verifies that the required documentation has been 
submitted; 
the Executive Leadership Group of the Council of Area and Associate Directors, 
which recommends approval of proposals to the Director; and 
the Director of IHS. 
Each conference proposal includes a description of the conferences purpose and benefits, a 
tentative agenda, a cost comparison for three proposed sites including travel and 
employees time costs, and a justification if the site is in a resort area that may appear 
extravagant to the public.  Area offices submit detailed reports on the conferences held 
during the year to headquarters by October 15 of the next fiscal year.  Both the area office 
and headquarters maintain these records for 3 years. 
STAFF CONCERNS 
Many IHS area office staff said the procedure for submitting an annual conference plan for 
headquarters approval takes too much time.  Although IHS headquarters is supposed to 
approve plans by October 15, area office staff stated that they must wait until February or 
March of the following year to learn whether the plan has been approved.  Staff avoid 
planning conferences for the first quarter of the fiscal year, because the plan may not be 
approved in time.  Some staff believe the review takes too long because too many officials 
must approve the conference plan. 
Some area office staff questioned why the conference management policy requires them to 
submit such detailed information in each conference proposal.  Other staff believe the 
31  requirement to keep detailed records on conferences for 3 years wastes file space in both 
the area offices and headquarters. 
TRACKING AND ANALYSIS 
Conference management policy appears in the IHS General Administration Manual Chapter

1-40.  The IHS developed this policy to comply with HHS General Administration Manual

Chapter 1-40, GSA Federal Travel Regulation provisions

[41 CFR 301-16], and management control aspects of the Federal Managers Financial

Integrity Act.  The IHS implemented certain controls and management regulations without

regulatory or statutory bases.

Conference management approval procedures were strengthened in recent years in response

to an IHS-reported material weakness.  As its corrective action,

IHS supplemented the existing HHS General Administration Manual Chapter 1-40 with

policies specific to IHS.  As in the HHS policy, IHS policy requires that conference plans

be submitted for "top level management" review on a fiscal year basis.  The HHS is in the

process of rescinding its conference management policy, however.

The IHS updated its policy last year to incorporate Federal Travel Regulation provisions,

which are based on OMB Bulletin 93-11 "Fiscal Responsibility and Reducing Perquisites"

and a Presidential Memorandum.  The Federal Travel Regulation requires that:

"a senior agency official" authorize government sponsorship of a conference

involving travel of 30 or more participants;

agencies use GSA space when possible, avoid sites that might appear extravagant to

the public, and use approved accommodations meeting the guidelines of the Fire

Prevention and Control Guidelines for Places of Public Accommodation

[15 U.S.C. 2225];

agencies document cost comparisons for alternative conference sites, including the

travel and time costs for all conference participants; and

agencies keep these records for 3 years.

The IHS policy on conference management exceeds the requirements of the Federal Travel 
Regulation and the HHS policy because it: 
requires the Area Directors approval before sending the plan to headquarters; 
charges the Executive Leadership Group with reviewing plans and recommending 
them to the Director; 
32
 designates the Director, or his/her designee, as the only IHS official who may 
approve the annual IHS Conference Plan -- in practice the IHS has not delegated 
authority past the Director; and 
requires both area office and headquarters staff to maintain records. 
The IHS staff said the review by the Executive Leadership Group is time-consuming, 
primarily because IHS appropriation is always delayed, the groups workload is 
burdensome, and it meets infrequently.  Other staff pointed out that the groups review is 
beneficial because its diverse members contribute different viewpoints and specialized 
knowledge.  For example, a member of the group who is a clinician can review a 
conference proposal to determine whether the clinical aspects of a conference are 
appropriate and necessary. 
Headquarters staff believe the current procedures have increased fiscal responsibility, saved 
money, and resulted in a greater percentage of funds for direct service delivery.  They also 
believe, however, that the procedures could be streamlined by eliminating excessively 
detailed documentation which would provide for a more timely approval process. 
CONCLUSIONS/OPTIONS 
While IHS has experienced positive results in controlling costs and potential 
mismanagement, it nevertheless has developed requirements that many consider too 
bureaucratic, excessive, and time-consuming.  To improve and simplify the conference 
management procedures, IHS may want to consider: 
delegating approval authority to a level lower than the Director; 
using alternatives to Executive Leadership Group review, such as review and 
recommendation by headquarters Office of Administration and Management; 
allowing certain types of conferences to go through less strenuous review and/or 
implementing prior approval requirements; 
maintaining conference management records in one site to save file space and staff 
resources; 
using a different review cycle, other than annual, to distribute the workload over the 
year; and 
working with HHS officials, including the OIG to see how the recision of the 
HHS conference management policy will affect IHS policy options. 
33
 A G E N C Y   C O M M E N T S 

We received comments on the draft report from the Assistant Secretary for Planning and 
Evaluation (ASPE).  We did not receive formal comments from the Director of IHS, the 
Administrator of HRSA, or the Commissioner of FDA, although we did receive comments 
from their staff.  The ASPE believes that the tracking and analysis methodology will assist 
the Department in its efforts to reduce unnecessary management regulations and internal 
controls.  The IHS staff concurred with ASPE. 
The HRSA staff did not comment on the tracking and analysis methodology.  They did, 
however, mention that the concerns expressed in the community health center program 
case study will be addressed in HRSAs 1996 reorganization plan. 
The FDA staff also did not comment on the tracking and analysis methodology.  Staff 
provided technical comments on the case studies that differed from those we received 
during the course of our inspection.  Clearly, FDA management will have to determine 
how it can best balance the need to meet the requirements set forth in Executive Order 
12861 with their staffs perceived need for continuation of certain management reports and 
processes. 
The full text of the comments appears in Appendix B. 
34
         


 
       
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
	  
 
 
A - 1 	  
 
 
   
   
	  
 
 
	  
 
 
 
	  
 
 
           


 
 
B - 1 

B - 2 

B - 3 B - 4 B - 5 

B - 6 B - 7          


 
 
 
 
 
 
 
 
 
 
   
 
 
 
 

 	  
 

 	  
 

    

    

    

    

    

    
 
 
 
C - 1    
 
 
 
 
 

    

    

    

    
   
 
 
 
 
 
 
 
 
 
 
 

    

 	  
 
 
 

 	  
 
 

 	  
 
C - 2 
 	  
 
 
 
 
 
 
 
 
	  
 
 

 	  
 

    

 	  
 

 	  
 
 
C - 3