Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

U D
SE OF THE  EPARTMENTAL 

A L CDC 

LERT  IST BY 
Daniel R. Levinson 

Inspector General 

September 2005

OEI-02-03-00010
 Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs. This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The OIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout the department. 
Office of Evaluation and Inspections 
The OIG's Office of Evaluation and Inspections (OEI) conducts 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 the inspections reports generate rapid, accurate, and up-to-date information on the 
efficiency, vulnerability, and effectiveness of departmental programs. The OEI also 
oversees State Medicaid fraud control units, which investigate and prosecute fraud and 
patient abuse in the Medicaid program. 
Office of Investigations 
The OIG's Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations. The OCIG imposes program exclusions and 
civil monetary penalties on health care providers and litigates those actions within the 
department. The OCIG also represents OIG in the global settlement of cases arising 
under the Civil False Claims Act, develops and monitors corporate integrity agreements, 
develops compliance program guidances, renders advisory opinions on OIG sanctions to 
the health care community, and issues fraud alerts and other industry guidance.    E X E C U T I V E   S U M M A R Y  

OBJECTIVE 
To determine the extent to which the Centers for Disease Control and 
Prevention (CDC) adheres to policies governing the departmental Alert 
List. 
BACKGROUND 
The Alert List is posted on the Department of Health and Human 
Services (HHS) Intranet site for all agencies that award grants.  If an 
awarding agency has concerns about a grantee due to inexperience in 
handling Federal funds, financial instability, inadequate management 
systems, a history of poor programmatic performance, or other reasons, 
the agency may place the grantee on the Alert List.  The purpose of the 
Alert List is to safeguard HHS funds by alerting other agencies to these 
potential risks. 
CDC grants officers are expected to follow policies governing the Alert 
List. These policies are found in the CDC Assistance Management 
Manual and Guidance Memorandum No. 102-PGO entitled Special 
Award Conditions and Alert List, which CDC issued in April 2000.   
Accordingly, CDC grants officers are expected to place on the Alert List 
grantees that are at risk of financial failure or that have special award 
conditions attached to the grant.  Special award conditions address a 
specific grantee vulnerability and may include, for example, requiring 
more frequent grantee reporting. Grants officers are also responsible 
for checking the Alert List prior to making an award and for consulting 
with other agencies that initially placed the grantee on the Alert List. 
Grants officers are also expected to monitor grantees on the Alert List 
and take required actions when it attaches a special award condition.  
Additionally, they are responsible for removing grantees from the Alert 
List or justifying retaining a grantee whose name appears on the Alert 
List more than 2 years.  
In fiscal year 2002, CDC awarded a total of $6.9 million to grantees that 
it had placed on the Alert List and another $10 million to grantees that 
were placed on the Alert List by other agencies. 
To determine the extent to which CDC adheres to policies governing the 
Alert List, we reviewed the files of CDC grantees on the 
January 13, 2003, Alert List. We requested the files of 37 CDC grantees 
placed on the Alert List by CDC, the National External Audit Review 
Center, or another agency.  CDC provided 25 files for our review. 
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  i  E X E C U T I V E   S U M M A R Y  
In the grantee file, we looked for evidence that grants officers followed 
the policies governing the Alert List.  We also conducted structured 
interviews with key staff in CDC. 
FINDINGS 
CDC does not consistently follow Alert List policies. We found that 
CDC does not consistently follow Alert List policies including placing, 
checking, consulting, monitoring, and justifying retaining grantees on 
the Alert List. 
CDC does not consistently place grantees on the Alert List.  Grants officers 
are expected to place a grantee on the Alert List when they designate a 
grantee as high risk or when they attach a special award condition to a 
grant, even if the grantee has already been placed on the Alert List by 
another agency.  Grants officers attached a special award condition to 
the grants of 9 of 25 grantees.  However, they did not designate any of 
these nine grantees as high risk and placed only five of them on the 
Alert List. 
CDC does not consistently provide evidence that the Alert List is checked.       
Grants officers are expected to check the Alert List prior to an award 
and to document when a grantee is found on the Alert List. Only 5 of 
the 25 files reviewed contained any evidence that the grants officer had 
checked the Alert List. 
CDC does not regularly consult with other agencies to obtain information about 
the grantee.  Grants officers are responsible for consulting with the agency 
that placed the grantee on the Alert List to obtain information about the 
grantee. We found two instances of consultation documented in the files of 
the six grantees that other agencies placed on the Alert List.  Similarly, 
there was evidence of consultation in only 1 of the files of the 11 grantees 
that the National External Audit Review Center placed on the Alert List. 
CDC does not consistently document certain monitoring activities for Alert List 
grantees. Grants officers are expected to complete certain monitoring 
activities when they attach a special award condition to a grant.  Grants 
officers attached special award conditions to 9 of the 25 grantees.  We 
found that none of the files for the nine grantees included transmittal 
letters to the grantees indicating the corrective actions required, the 
time period for correction, and a description of the consequences of not 
completing actions required.  Additionally, 4 of the 9 files of grantees 
that had payment-related special conditions did not include notification 
to the Payment Management System. 
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  ii  E X E C U T I V E   S U M M A R Y  
CDC does not provide justification for retaining grantees whose name appears on 
the Alert List more than 2 years. Grants officers are expected to provide 
justification to the Office of Grants when retaining a grantee on the Alert 
List for more than 2 years.  At the time of the file review in March 2003,  
6 of the 11 grantees that CDC placed on the Alert List had been there 
longer than 2 years.  None of these files had justification to support these 
grantees remaining on the Alert List.  
Competing priorities, misunderstandings, and concerns about 
several aspects of the Alert List may explain why grants officers are 
not following Alert List policies. CDC grants officials and grants 
officers explained that the Alert List had not been a priority in the past. 
They noted that they have instead focused on issuing grants, managing 
heavy workloads, and training new staff.  Further, we found that grants 
officials and grants officers do not have a clear understanding of the 
purpose of the Alert List and the policies governing its use. They also 
do not think all aspects of the Alert List are useful.  Specifically, they 
reported that the Alert List is not updated regularly and does not 
always have complete information.  
RECOMMENDATIONS 
We determined that CDC staff do not consistently follow policies 
governing the use of the Alert List.  This lack of adherence to existing 
policies makes it impossible to ensure that a grantees risk of financial 
failure or systemic deficiencies is communicated to all agencies that 
award grants and that HHS funds are safeguarded.   
In 2002, CDC centralized its grants and procurement functions and 
restructured its grants management and contracts management 
branches.  Also, in May 2004, CDC announced a new organizational 
design that coordinates its existing operational units, and grants 
officials are currently in the process of writing procedures.  As part of 
these efforts, we recommend that CDC do the following:  
Ensure that grants officers follow Alert List policies 
CDC needs to ensure that grants officers follow policies for placing 
grantees on the Alert List, checking the Alert List, consulting with 
agencies that place grantees on the Alert List, monitoring grantees with 
special award conditions, and removing grantees from the Alert List 
when appropriate.  CDC should additionally ensure that grants officers 
justify retaining a grantee whose name appears on the Alert List more 
than 2 years. 
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  iii  E X E C U T I V E   S U M M A R Y  
Develop methods to ensure accountability to Alert List policies 
CDC should develop methods to ensure that grants officers are held 
accountable to Alert List policies.   
o 	 Currently, grants officers have a checklist that includes checking 
the Alert List to determine whether a grantee is on the Alert List.  
CDC may consider revising this checklist to include the additional 
Alert List policies and requiring grants officers to complete it for 
each grantee. 
o 	 CDC may consider implementing an internal file review to ensure 
that grants officers are following Alert List policies and using the 
Alert List appropriately.   
o 	 CDC may consider implementing a system to notify grants officers 
when the 2-year time period expires. 
o 	 CDC may consider providing additional training to grants officers 
and their staffs about the importance of using the Alert List and 
the need to follow the policies. 
Improve file maintenance to meet third party review policies  
In the course of this inspection, we found that the files we reviewed do 
not always contain documentation to meet the third party review 
policies of an auditable paper trail. We recommend that CDC ensure 
that grant files are comprehensive so that they meet HHS policies.  The 
files need to specifically include documentation of all Alert List 
activities and actions expected when special award conditions are 
attached to a grant.   
AGENCY COMMENTS 
We received comments on our draft report from CDC.  The full text of 
these comments can be found in Appendix B.  CDC takes no exception to 
the findings in the report and is taking steps to address our 
recommendations.   
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  iv    T A B L E   O F   C O N T E N T S  

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

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

FINDINGS ....................................................... 9 

CDC does not consistently follow Alert List policies . . . . . . . . . . . .  9

Several factors may account for CDC not consistently following   

Alert List policies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12

RECOMMENDATIONS ......................................... 14 

APPENDIXES .................................................. 16 

A: Code of Federal Regulations . . .. . . . . . . . . . . . . . . . . . . . . . . . . 16 

B: AgencyComment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 

ACKNOWLEDGMENTS ......................................... 20 

  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC    I N T R O D U C T I O N  

OBJECTIVE 
To determine the extent to which the Centers for Disease Control and 
Prevention (CDC) adheres to policies governing the departmental Alert 
List. 
BACKGROUND 
The Alert List is posted on the Department of Health and Human 
Services (HHS) Intranet site for all agencies that award grants.  If an 
awarding agency has concerns about a grantee due to inexperience in 
handling Federal funds, financial instability, inadequate management 
systems, a history of poor programmatic performance, or other reasons, 
the agency may place the grantee on the Alert List.  The purpose of the 
Alert List is to safeguard HHS funds by alerting other agencies to these 
potential risks. 
CDC Grants Management Process 
CDC is responsible for administering the national program of 
prevention and control of communicable and vector-borne diseases and 
noninfectious conditions, as well as for improving laboratory conditions 
and assuring safe and healthful working conditions for all working 
people. 
Within CDC, grants are administered by the Procurement and Grants 
Office. In August 2002, CDC centralized its contract and procurement 
functions within this office, and restructured its grants management 
and contracts management branches.  At the time of the inspection, 
there were four Chief Grants Management Officers who supervised a 
staff of Grants Management Officers.  Grants Management Officers are 
primarily responsible for the business and other nonprogrammatic 
areas of grant award and administration. A Grants Management 
Officer may serve in that capacity for multiple awards. 
CDC grants are awarded and renewed annually in an ongoing process 
throughout the year.  In fiscal year 2002, CDC awarded $6.9 million to 
22 grantees that it had placed on the Alert List and another $10 million 
to 15 grantees that other agencies placed on the Alert List. Successful 
grant proposals receive a Notice of Grant Award, which acts as the 
official agreement between the grantee and CDC.  The Notice of Grant 
Award includes specific requirements for each grantee such as spending 
caps, timelines, documentation requirements, and submission deadlines.   
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  1  I N T R O D U C T I O N  
Grants Management Officers may also attach special award conditions 
to a grant to address a specific grantee vulnerability.  Grants 
Management Officers are responsible for monitoring the progress of the 
grant project and the grantees adherence to these requirements and to 
any special award conditions.  The following primer defines a number of 
key terms about the grants management process as it relates to the 
Alert List. 
Primer on Grants Management   
Awarding Agency. The awarding agency is the agency that awards the grant.  To do 
this, the awarding agency reviews the merits of each proposal and funds the grantee 
to carry out program objectives.   
Placing Agency. The placing agency is the agency that initiates placement of the 
grantee on the Alert List.  The National External Audit Review Center can also 
initiate a placement of a grantee on the Alert List based on adverse audit findings.   
High Risk/Special Award Conditions. Special award conditions are attached to a 
grant award to address a specific grantee vulnerability.  A high risk designation by 
the awarding agency is a prerequisite for the use of special award conditions.  
Examples of special award conditions may include requiring more frequent grantee 
reporting or limiting the monthly amount a grantee can draw from its total grant 
award. 
National External Audit Review Center. The National External Audit Review Center, 
within the Office of Inspector General, is the HHS focal point for receipt of grantee 
audits. As part of its review of these audits, National External Audit Review Center 
may issue an Alert.  This Alert, which is sent to agency Audit Liaison contacts and 
the Office of Grants, indicates the nature of the problem and includes a statement 
that the entity should be considered for placement on the Alert List. 
Alert List and High Risk/Special Award Conditions 
The Alert List is maintained by HHSs Office of Grants.  The Alert List 
includes the name and address of the grantee, the date the grantee was 
placed on the Alert List, the agency(s) that initiated placement of the 
grantee on the Alert List (the placing agency), a contact person at the 
placing agency, and often a brief description of the reason the grantee 
was placed on the Alert List.1  At the time of our inspection, CDCs 
1 The Office of Grants is responsible for placing the grantee on the Alert List upon 
recommendation from the awarding agency.  For the purposes of this report, we refer to 
the placing agency as the agency that recommends the grantee placement to the Office of 
Grants 
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  2  I N T R O D U C T I O N  
policies governing the use of the Alert List were found in Part II.C.6 of 
the CDC Administration Management Manual (CAMM), Part 2, 
Section 01 of Grants Policy Directive (GPD) 2.01, and Guidance 
Memorandum No. 102-PGO Special Award Conditions and Alert List.2 
According to the CAMM, CDC has an affirmative responsibility both to 
place high risk grantees on the Alert List and to remove them in a 
timely manner.  CDC may designate a grantee as high risk if it has 
concerns about the recipients ability to satisfy performance 
expectations or accountability requirements because the organization 
meets one or more of the following conditions: 
o 	 Has a history of poor programmatic performance or current poor 
performance. 
o 	 Has inadequate management systems. 
o 	 Has sustained large cost disallowances on Federal awards.  
o 	 Has not materially complied with the terms and conditions of 
previous CDC awards. 
o 	 Is financially unstable (insolvent or may become insolvent). 
o 	 Is financially dependent on Federal support (e.g., 80 percent or 
more of the organizations revenues are expected to be derived 
from a Federal grant(s)). 
o 	 Is inexperienced in handling Federal funds, for example, a newly 
formed organization or one that has not previously received 
Federal cost-reimbursement awards (whether contracts or 
grants). 
o 	 Is determined to have other special circumstances. 
An awarding agency may place special award conditions on a grantee to 
protect its interests and to promote positive change in a grantees 
performance or compliance.3  The CAMM also states that use of special 
award conditions and placement on the departmental Alert List are part 
of the high risk designation process required by GPD 2.01 and that a 
2 As of May 2004, CDC no longer uses the CAMM.  It now uses HHSs Awarding Agency 
Grants Administration Manual (AAGAM).  Alert List policies described in the AAGAM 
are similar to those in the CAMM, with the exception that policies on the use of restriction 
conditions are not included in the AAGAM. 
3 HHSs regulatory basis for designating a grantee as high risk is found in 45 CFR 74.14 
and 45 CFR 92.12.  See Appendix A. 
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  3  I N T R O D U C T I O N  
high risk designation has no meaning apart from CDCs ability to 
include special award conditions in awards.  According to the CAMM, a 
restriction is a form of special award condition that need not be 
accompanied by a high risk designation. 4  The CAMM further describes 
that, with the exception of a restriction, CDC may use special award 
conditions only in conjunction with designating a grantee as high risk. 
Special award conditions as listed in the CAMM may include one or 
more of the following: 
o 	 Use of a reimbursement payment method rather than advance 
payment. 
o 	 Use of the deductive method of accounting for program income 
(where the additive alternative ordinarily would apply or the 
matching alternative might be appropriate). 
o 	 More frequent financial or progress reporting than the program 
ordinarily requires or regulation permits. 
o 	 The need for CDC prior approval of a cost or activity that 
ordinarily does not require such approval. 
Awarding Agency Responsibilities 
Awarding agencies have the responsibility to do the following regarding 
the Alert List:  (1) place grantees on the Alert List; (2) check the Alert 
List; (3) consult with the agency that placed the grantee on the Alert 
List; (4) monitor grantees when special award conditions are attached to 
the grant; and (5) remove grantees in a timely manner. Specific Alert 
List responsibilities are as follows: 
o 	 Place. Awarding agencies are responsible for placing on the Alert 
List grantees that they have designated high risk/special award 
conditions. To place a grantee on the Alert List, the awarding 
agency notifies the Office of Grants. The National External Audit 
Review Center may also recommend that a grantee be placed on 
the Alert List based on adverse findings in a grantees audit.  
There may be several agencies that place the same grantee on the 
Alert List. 
4 A restriction needs to meet all three factors:  (1) deals with a limited situation requiring 
submission of a document(s) to complete the award process for an otherwise legal award; 
(2) can be satisfied within 30 days of award; and (3) is approved by the Director, 
Procurement and Grants Office.  This inspection focuses only on those special award 
conditions warranting placement on the Alert List; it does not include a restriction as a 
type of special award condition governed by Alert List policies. 
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  4  I N T R O D U C T I O N  
o 	 Check.  Awarding agencies are also responsible for checking the 
Alert List prior to awarding a grant. Upon review of the Alert 
List and consideration of the basis for the high risk/special award 
condition designation or issuance of an Office of Inspector General 
Alert, an awarding agency must determine whether it will 
independently designate the grantee as high risk/special award 
conditions. 
o 	 Consult.  If the awarding agency determines that a grantee has 
been placed on the Alert List by another agency, he or she must 
consider whether the awarding agency also should designate the 
grantee as high risk and include special award conditions in the 
award. This decision should be made following consultation with 
the agency(s) that made the designation as it appears on the Alert 
List to ensure that it is still current and the present situation 
warrants the designation. 
o 	 Monitor.  If special award conditions are attached to the grant, the 
awarding agency is responsible for taking several actions.  
Specifically, the agency must notify the grantee by transmittal 
letter of the special award condition (but not the placement of the 
grantee on the Alert List).  The transmittal letter explains the 
effect of the high risk designation, indicates the corrective actions 
required and the time period for correction, among other things.  
If a special award condition relates to payment, the awarding 
agency is responsible for notifying the Division of Payment 
Management when the requirement is imposed and when it is 
removed.5 
o 	 Remove. If an awarding agency places a grantee on the Alert List, 
it is also responsible for notifying the Office of Grants when it is 
appropriate to remove the grantee from the Alert List.  Generally, 
grantees should not remain on the Alert List for more than 
2 years.  If the grantee is on the Alert List for more than 2 years, 
the agency that placed the grantee is required to provide 
justification to the Office of Grants. 
5 The Payment Management System is the centralized grants payment and cash 
management system operated by the Division of Payment Management within HHSs 
Program Support Center.  The Payment Management System accomplishes all payment-
related activities for HRSA and other agencies from the time of award through closeout of 
a grant. 
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  5  I N T R O D U C T I O N  
Additionally, according to the CAMM, CDC is expected to create and 
maintain files that allow for a third party (e.g., auditor or other 
reviewer) to follow the paper trail beginning with program initiation 
through closeout of individual awards, and decisions made and 
actions taken in between. Grants officers are also expected to 
maintain the official grant file and to ensure that contents of all files 
are current and can be easily identified and accessed.  
METHODOLOGY 
To determine the extent to which CDC adheres to Alert List policies, we 
reviewed CDC and HHS policies governing the Alert List. We then 
reviewed files of grantees on the Alert List and conducted interviews 
with key agency staff. 
Grantee Selection 
Based on the departmental Alert List published on the Intranet as of 
January 13, 2003, we identified 22 grantees to whom CDC awarded 
grants and also placed on the Alert List.  This included 4 grantees that 
received CDC grants in 2002 and 18 grantees that received CDC grants 
as far back as 1997.  Even if a grantee is not currently funded, as long 
as it remains on the Alert List and CDC is noted as the placing agency, 
an awarding agency is supposed to contact CDC to obtain information 
on that grantees potential risk. 
To find CDC grantees that another agency placed on the Alert List, we 
compared the grantees on the January 13, 2003, Alert List with a list of 
all CDC grantees in fiscal year 2002.6  In doing so, we identified an 
additional 15 grantees that had been placed by another agency, for a 
total of 37 CDC grantees on the Alert List. 
File Review 
We requested that the complete grant file for each of the 37 CDC 
grantees on the Alert List be made available for onsite review.  The 
CDC provided files for a total of 25 grantees. We requested the other 
12 files several times over a 2-month period but CDC never made them 
available for review.  CDC officials explained that 11 of these CDC 
placements were no longer funded and that these files were stored and 
maintained offsite by contractors.  CDC did not provide a file for an 
6 This list was obtained from HHSs Tracking Accountability in Government Grants 
(TAGGS) database.  The TAGGS database tracks all grants awarded by HHS. 
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  6  I N T R O D U C T I O N  
additional grantee that received funds in fiscal year 1999 through fiscal 
year 2002. 
We conducted an onsite file review of the 25 files that were provided 
by CDC during March 2003. 7  We reviewed these files for evidence 
that each Alert List policy was followed.  Specifically, we looked for 
evidence of: (1) placing a grantee on the Alert List when special 
award conditions were attached to the grant or when otherwise 
appropriate, (2) checking the Alert List prior to making a grant 
award, (3) consulting with other agencies that placed the grantee on 
the Alert List, (4) monitoring potential vulnerabilities and taking 
action when a special award condition was attached to the grant, and 
(5) justifying retaining a grantee whose name appears on the Alert 
List for more than 2 years. 
Most of the grantees had been on the Alert List for several years. 
Because CDC is responsible for maintaining a grantee file for 5 years, 
we limited our review to 5 years of documentation.  We considered all 
documentation as evidence, including file checklists, e-mails, telephone 
logs, notes to the file, and other informal notation, as well as standard 
documentation such as Notices of Grant Award, grantee applications, 
technical reviews, and audits. 
Table 1 (on the following page) shows the number of files of CDC 
grantees that we requested and reviewed, by the agency that initiated 
their placement.  In total, we reviewed 25 files.  In some cases, our 
analysis is based on the 11 grantees that CDC placed on the Alert List 
and the 14 grantees that were placed on the Alert List by another 
agency and not CDC.  In other cases, we make a distinction between the 
11 grantees that National External Audit Review Center placed on the 
Alert List and the 6 grantees that other agencies placed on the Alert 
List. 
7 Two of these files were provided after the onsite review. 
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  7  I N T R O D U C T I O N

Table 1: CDC Alert List Grantees on the Alert List, by Placing Agency 
Grant Files  
Grant Files   Provided for 
Placing Agency  Requested  Review 
CDC Only  19  8 
CDC and National External Audit  2  2 
Review Center 
CDC and Another Agency  1  1 
National External Audit Review Center  10  9 
Only 
Other Agency Only  5  5 
Total  37  25 
Source: January 13, 2003, departmental Alert List and Tracking Accountability in Government 
Grants (TAGGS) Database. 
Structured Interviews 
We conducted interviews with two senior grants officials and another 
staff member in CDCs Procurement and Grants Office (hereinafter 
grants officers).  We also conducted interviews with the three Chief 
Grants Officers responsible for checking the Alert List prior to award 
and for supervising Grants Management Officers.  At the request of 
each Chief Grants Officer, an additional Grants Management Officer 
participated in each interview.  These Chief Grants Officers and their 
staffs will hereinafter be referred to as grants officers.   
Standards 
We conducted this inspection in accordance with the Quality Standards 
for Inspections issued by the Presidents Council on Integrity and 
Efficiency. 
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  8    F I N D I N G S  
CDC does not consistently follow Alert List  We found that CDC does not 
consistently follow Alert List 
policies 
policies including placing, 
checking, consulting, monitoring, 
and justifying retaining grantees on the Alert List. 
CDC does not consistently place grantees on the Alert List 
According to the CAMM, CDC has an affirmative responsibility to place 
high risk grantees on the Alert List.  It also states that CDCs use of 
special award conditions and placement on the departmental Alert List 
are part of the high risk designation process required by GPD 2.01.  We 
reviewed the files of 25 grantees that were placed on the Alert List by 
either CDC or another awarding agency.  Grants officers attached a 
special award condition as listed in the CAMM to the grants of 9 of 
25 grantees.  However, they did not designate any of these 
nine grantees as high risk and placed only five of them on the Alert List. 
In addition, grants officers are expected to notify the Office of Grants to 
place a grantee on the Alert List.  CDC placed a total of 11 of the  
25 grantees on the Alert List.  However, there was no evidence of 
notification in any of these 11 files. 
In our discussions with all three grants officers, we found that each of 
them had a different understanding about when to place a grantee on 
the Alert List.  All three reported that they do not automatically place a 
grantee with special award conditions on the Alert List.  One reported 
placing a grantee on the Alert List only if it has a special award 
condition that is payment related. 
CDC does not consistently provide evidence that the Alert List is checked 
The CAMM states that grants officers are expected to check the Alert 
List prior to an award.  Only 5 of the 25 files reviewed contained any 
evidence that the grants officer checked the Alert List.  Two of these 
instances were noted on a budget certification document that is 
periodically included in the grant file.  Evidence in the other  
three instances was documented in notes to the grant file. 
In some of the grantee files we found a standardized checklist that 
tracked certain grant monitoring activities.  This checklist includes 
checking the Alert List to determine whether the grantee had been 
placed on it. However, this checklist was not always included in the 
grantee file or was not always complete with respect to the Alert List.  
  OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  9  F I N D I N G S  
At the same time, in our discussions with the grants officers, all     
three reported they always check the Alert List prior to awarding a 
grant. In addition to checking the Alert List, they noted that they 
review some combination of the grantee application, financial 
documents, organizational policies, and previous history as part of their 
grant award decisions. 
CDC does not regularly consult with other agencies to obtain information 
about the grantee 
The CAMM states that, when a grantee is found on the Alert List, the 
grants officer should consult with the agency(s) that initiated the 
grantee placement.  Grants officers are expected to review that agencys 
existing restrictions on the grantee to ensure that they are current and 
warranted, and then to consider this information when making the 
award decision. 
We found little evidence that CDC consults with other agencies that 
place grantees on the Alert List, including the National External Audit 
Review Center.  Specifically, there were only two instances of 
consultation documented in the files of the six grantees that other 
agencies placed on the Alert List.8  Similarly, there was evidence of 
consultation with the National External Audit Review Center in only  
1 of the files of the 11 grantees that National External Audit Review 
Center placed on the Alert List.  Additionally, grants officers are 
expected to check the single audit database for National External Audit 
Review Center Alerts for all grantees.9  We found documentation of this 
activity in only 4 of the 25 grant files. 
In our discussions with grants officers, all three reported having little 
experience consulting with other agencies that placed grantees on the 
Alert List. One grants officer noted only one instance of making a call 
to a placing agency to learn why the grantee was placed on the Alert 
List. Similarly, only one grants officer could recall ever contacting 
National External Audit Review Center.  We also learned that the CDC 
Procurement and Grants Office receives information from National 
External Audit Review Center about audit findings for grantees that the 
8 These six grantees include five grantees that another agency placed on the Alert List and

the one grantee placed by both another agency and CDC.   

9 The Federal Audit Clearinghouse single audit database contains summary information on 

grantee A-133 audits, including audit results.  The National External Audit Review Center 

posts results of its own grantee audit findings on the single audit database. 

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National External Audit Review Center placed on the Alert List, but 
this information is not routinely shared with the grants officers. 
CDC does not consistently document certain monitoring activities for Alert 
List grantees 
The awarding agency is expected to complete certain monitoring 
activities when it attaches a special award condition to a grant.  
According to the CAMM, these activities include notifying the grantee of 
the special award conditions in a letter that indicates the corrective 
actions required, the time period for correction, and a description of the 
consequences of not completing the actions required.  The awarding 
agency is also responsible for notifying the Director of the Payment 
Management System if a special award condition relating to payment 
was attached to the grant. 
Grants officers attached special award conditions to 9 of the 
25 grantees.  We found that none of the files for these nine grantees 
included transmittal letters to the grantees indicating the corrective 
actions required, the time period for correction, and a description of the 
consequences of not completing actions required.  (We did find 
occasional references in which the grantees were made aware of specific 
actions required to resolve issues). Additionally, four of the nine files of 
grantees that had payment-related special conditions did not include 
notification to the Payment Management System. 
CDC does not provide justification for retaining grantees whose names 
appear on the Alert List more than 2 years 
The CAMM states that the Procurement and Grants Officer is to 
provide justification to the Office of Grants when keeping a grantee on 
the Alert List for more than 2 years.  At the time of the file review in 
March 2003, 6 of the 11 grantees that CDC placed on the Alert List had 
been there longer than 2 years.  None of these files had justification to 
support these grantees remaining on the Alert List.  In our discussions 
with grants officers, each described different policies regarding keeping 
grantees on the Alert List longer than 2 years.  When asked what 
procedure they follow, only one reported that justification would be 
provided to the Procurement and Grants Officer.  
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Competing priorities, misunderstandings, and 
concerns about several aspects of the Alert List  Grants officers 
may explain why grants officers are not  have competing 
priorities. In 2002, 
following Alert List policies   
CDC centralized its 
contract and procurement functions and restructured its grants and 
contracts management branches.  As a result, the Procurement and 
Grants Office assumed new administrative responsibilities and acquired 
43 additional full-time staff.  At the time of the interview, each Chief 
Grants Management Officer was responsible for approximately    
13 Grants Management Officers, who monitored 60 to 100 grants each.   
Further, in our discussions with grants officers, they indicated that 
using the Alert List has not always been a priority.  They explained that 
they have instead focused on getting grants out, managing heavy 
workloads, and training new staff.  One grants officer reported that 
consulting the Alert List was not always done . . . because we had new 
people who hadnt had the training yet, but lots of grants to get out. 
CDC grants officers and officials do not always have a clear understanding 
of the Alert List 
We found that grants officers and CDC officials do not always have a 
clear understanding of the purpose and the policies governing the Alert 
List. Some respondents explained that they do not always place 
grantees on the Alert List because they could not be sure that the 
information would not be used against the grantee.  Some were also 
reluctant to place grantees on the Alert List because they did not want 
to rat on the grantee or jeopardize their relationship with the grantee. 
Grants officers also reported some misunderstanding of the grants 
policies for using the Alert List, such as the responsibility to notify the 
Office of Grants to remove a grantee from the Alert List. 
We found that some grants officers and CDC officials are beginning to 
understand the purpose of the Alert List.  One official noted that grants 
officers have started to realize that the Alert List is a way to inform 
other awarding agencies, to open communication with the placing 
agency, and to help raise awareness of National External Audit Review 
Center concerns.  Another grants officer added that grants officers are 
now aware that the Alert List is just an alert and that finding a 
potential grantee on the Alert List does not necessarily require grants 
officers to take action against the grantee. 
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CDC grants officials and grants officers do not think all aspects of the Alert 
List are useful  
Grants officers and CDC officials provided several reasons they believe 
the Alert List is not always useful or is difficult to use. Some 
respondents reported that the Alert List is not updated regularly.  Also, 
grantees are not always immediately placed on the Alert List by the 
Office of Grants; rather, they are included when the updated Alert List 
is published.  Some also explained that the Web site location changes 
and that they sometimes had trouble finding the Alert List. 
Our review of the Alert List also found that it did not always have 
useful or complete information. The January 13, 2003, version of the 
Alert List did not have reasons the grantees were placed on the Alert 
List for 59 of 313 grantees.  In addition, the reasons the grantees were 
placed on the Alert List were not always helpful because of general 
statements such as going concern or noncompliance.  Further, no 
placing agency was identified for some grantees, and the grantee name 
on the Alert List was markedly different from the name on the grant 
award for other grantees. 
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RECOMMENDATIONS 
We determined that CDC staff do not consistently follow policies 
governing the use of the Alert List.  This lack of adherence to existing 
policies makes it impossible to ensure that a grantees risk of financial 
failure or systemic deficiencies is communicated to all agencies that 
award grants and that HHS funds are safeguarded.   
In 2002, CDC centralized its grants and procurement functions and 
restructured its grants management and contracts management 
branches.  Also, in May 2004, CDC announced a new organizational 
design that coordinates its existing operational units, and grants 
officials are currently in the process of writing procedures.  As part of 
these efforts, we recommend that CDC do the following:  
Ensure that grants officers follow Alert List policies 
CDC needs to ensure that grants officers follow policies for placing 
grantees on the Alert List, checking the Alert List, consulting with the 
agencies that place grantees on the Alert List, monitoring grantees on 
the Alert List, and removing grantees from the Alert List when 
appropriate.  CDC should additionally ensure that grants officers justify 
retaining a grantee whose name appears on the Alert List more than  
2 years. 
Develop methods to ensure accountability to Alert List policies 
CDC should develop methods to ensure that grants officers are held 
accountable to Alert List policies.   
o 	 Currently, grants officers have a checklist that includes checking 
the Alert List to determine whether a grantee is on the Alert List.  
CDC may consider revising this checklist to include the additional 
Alert List policies and requiring grants officers to complete it for 
each grantee. 
o 	 CDC may consider implementing an internal file review to ensure 
that grants officers are following Alert List policies and using the 
Alert List appropriately.   
o 	 CDC may consider implementing a system to notify grants officers 
when the 2-year time period expires. 
o 	 CDC may consider providing additional training to grants officers 
and their staffs about the importance of using the Alert List and 
the need to follow the policies. 
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Improve file maintenance to meet third party review policies  
In the course of this inspection, we found that the files we reviewed do 
not always contain documentation to meet the third party review 
policies of an auditable paper trail. We recommend that CDC ensure 
that grant files are comprehensive so that they meet HHS policies.  The 
files need to specifically include documentation of all Alert List 
activities and actions expected when special award conditions are 
attached to a grant.   
AGENCY COMMENTS  
We received comments on our draft report from CDC.  The full text of 
these comments can be found in Appendix B.  CDC takes no exception 
to the findings in the report and is taking steps to address our 
recommendations.  Specifically, CDC plans to: 
o 	 Request that 22 of the 25 CDC grantees on the December 1, 2004, 
Alert List be removed from the Alert List;   
o 	 Stress to grants staff the need to follow policies; 
o 	 Identify and document Alert List additions and deletions, and 
prompt grants staff for action after 2 years; 
o 	 Revise the Alert List portion of the preaward checklist used by 
grants staff; and 
o 	 Conduct an internal file review to identify all grants that contain 
special award conditions and to determine if Alert List policies 
were followed. 
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PART 74--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR AWARDS AND 
SUBAWARDS TO INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, 
OTHER NONPROFIT ORGANIZATIONS, AND COMMERCIAL 
ORGANIZATIONS; AND CERTAIN GRANTS AND AGREEMENTS WITH 
STATES, LOCAL GOVERNMENTS AND INDIAN TRIBAL GOVERNMENTS 
Special award conditions. 
(a) 	The HHS awarding agency may impose additional requirements as 
.needed, without regard to  74.4, above, if an applicant or recipient: 
(1) 	has a history of poor performance, 
(2) 	is not financially stable, 
(3) 	has a management system that does not meet the standards 
prescribed in this part, 
(4) 	has not conformed to the terms and conditions of a previous 
award, or 
(5) 	is not otherwise responsible. 
(b) 	When it imposes any additional requirements, the HHS awarding 
.agency must notify the recipient in writing as to the following: 
(1) 	the nature of the additional requirements, 
(2) 	the reason why the additional requirements are being

/imposed, 

(3) 	the nature of the corrective actions needed, 
(4) 	the time allowed for completing the corrective actions, and 
(5) 	the method for requesting reconsideration of the additional  
/requirements imposed. 
(c) 	The HHS awarding agency will promptly remove any additional 
requirements once the conditions that prompted them have been 
corrected. 
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PART 92--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 
COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS 
Sec. 92.12 Special grant or subgrant conditions for high risk grantees. 
(a) 	A grantee or subgrantee may be considered as high risk if an  
awarding agency determines that a grantee or subgrantee: 
(1) 	has a history of unsatisfactory performance; or 
(2) 	is not financially stable; or 
(3) 	has a management system which does not meet the   
.management standards set forth in this part; or 
(4) 	has not conformed to terms and conditions of previous awards; 
.or 
(5) 	is otherwise not responsible; and if the awarding agency  
.determines that an award will be made, special conditions 
.and/or restrictions shall correspond to the high risk condition 
.and shall be included in the award. 
(b) Special conditions or restrictions may include: 
(1) 	payment on a reimbursement basis; 
(2) 	withholding authority to proceed to the next phase until    
/receipt of evidence of acceptable performance within a given 
/funding period; 
(3) 	requiring additional, more detailed financial reports; 
(4) 	additional project monitoring;
 (5) 	requiring the grantee or subgrantee to obtain technical or  
.management assistance; or 
(6) 	establishing additional prior approvals. 
(c) 	If an awarding agency decides to impose such conditions, the 
awarding official will notify the grantee or subgrantee as early as  
possible, in writing, of: 
(1) 	the nature of the special conditions/restrictions, 
(2) 	the reason(s) for imposing them, 
(3) 	the corrective actions which must be taken before they will be  
.removed and the time allowed for completing the corrective 
.actions, and 
(4) 	the method of requesting reconsideration of the conditions/ 
.restrictions imposed. 
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OEI-02-03-00010  USE OF THE DEPARTMENTAL ALERT LIST BY CDC  19    A C K N O W L E D M E N T S  

This report was prepared under the direction of Jodi Nudelman, Acting 
Regional Inspector General for Evaluation and Inspections in the New 
York regional office.  Other principal Office of Evaluation and 
Inspections staff who contributed include: 
Vincent Greiber, Team Leader 
Natasha Besch, Program Analyst 
Nicole Gillette, Program Analyst 
Alan Levine, Program Specialist 
Linda Ragone, Deputy Regional Inspector General, Region III 
Elise Stein, Director, Public Health and Human Services Branch 
Barbara Tedesco, Mathematical Statistician 
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