Department of Health and Human Services


OFFICE OF 

INSPECTOR GENERAL 

USE OF THE DEPARTMENTAL 


ALERT LIST BY CDC 


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. 
Δ EXECUTIVE SUMMAR 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. 

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EXE CUTIVE S U MMAR 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. 

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EXE CUTIVE S U MMAR 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 grantee’s 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. 

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EXE CUTIVE S U MMAR 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. 

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Δ T ABLE OF CONTENTS 

EXECUTI VE SUMMARY ......................................... i

INTRODUCTI ON ................................................ 1 

FINDI NGS ....................................................... 9 

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

Several factors may account for CDC not consistently following 

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

RECOM M E NDATI O NS ......................................... 14 

APPENDI XES .................................................. 16 

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

B: Agency Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 

ACKN O W LEDGMENTS ......................................... 20 

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Δ INTRODU C TION 

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. 

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INTROD UCT ION 

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 grantee’s 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 HHS’s 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, CDC’s 

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 

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INTROD UCT ION 

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 recipient’s 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 organization’s 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 grantee’s 

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 

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2 As of May 2004, CDC no longer uses the CAMM. It now uses HHS’s 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 HHS’s regulatory basis for designating a grantee as high risk is found in 45 CFR 74.14 

and 45 CFR 92.12. See Appendix A. 

USE O F T H E DE PA R T M E N TA L ALER T L I S T BY CDC 3 
INTROD UCT ION 

high risk designation has no meaning apart from CDC’s 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 grantee’s audit. 

There may be several agencies that place the same grantee on the 

Alert List. 

 OE I-02-03-00 010 

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. 

USE O F T H E DE PA R T M E N TA L ALER T L I S T BY CDC 4 
INTROD UCT ION 

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 HHS’s 

Program Support Center. The Payment Management System accomplishes all paymentrelated activities for HRSA and other agencies from the time of award through closeout of 

a grant. 

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INTROD UCT ION 

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 grantee’s 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 HHS’s Tracking Accountability in Government Grants 

(TAGGS) database. The TAGGS database tracks all grants awarded by HHS. 

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INTROD UCT ION 

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. 

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INTROD UCT ION

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 CDC’s 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 President’s Council on Integrity and 

Efficiency. 

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Δ FINDINGS 

CDC does We found that CDC does not not consistently follow Alert List 

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 CDC’s 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. 

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F I NDING 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 agency’s 

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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F I NDING S 

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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F I NDING S 

Competing priorities, misunderstandings, and 

concerns about several aspects of the Alert List 

may explain why grants officers are not 

following Alert List policies 

Grants officers 

have competing 

priorities. In 2002, 

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 hadn’t 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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F I NDING S 

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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Δ RECOMME NDA TIONS 

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 grantee’s 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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R E C O MMENDA T I O N S 

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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/

Δ APPENDIX A 

PART 74--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR AWARDS AND 

SUBAWARDS TO INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, 

OTHER NONPROFIT ORGANIZATIONS, AND COMMERCIAL 

ORGANIZATIONS; AND CERTAIN GRANTS AND AGREEMENTS WITH 

STATES, LOCAL GOVERNMENTS AND INDIAN TRIBAL GOVERNMENTS 

Special award conditions. 

(a) The HHS awarding agency may impose additional requirements as 

needed, without regard to § 74.4, above, if an applicant or recipient: 

(1) has a history of poor performance, 

(2) is not financially stable, 

(3) has a management system that does not meet the standards 

prescribed in this part, 

(4) has not conformed to the terms and conditions of a previous 

award, or 

(5) is not otherwise responsible. 

(b) When it imposes any additional requirements, the HHS awarding 

agency must notify the recipient in writing as to the following: 

(1) the nature of the additional requirements, 

(2) the reason why the additional requirements are being

imposed, 

(3) the nature of the corrective actions needed, 

(4) the time allowed for completing the corrective actions, and 

(5) the method for requesting reconsideration of the additional 

requirements imposed. 

(c) The HHS awarding agency will promptly remove any additional 

requirements once the conditions that prompted them have been 

corrected. 

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APP E N D I X A 

PART 92--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 

COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS 

Sec. 92.12 Special grant or subgrant conditions for “high risk” grantees. 

(a) A grantee or subgrantee may be considered as high risk if an 

awarding agency determines that a grantee or subgrantee: 

(1) has a history of unsatisfactory performance; or 

(2) is not financially stable; or 

(3) has a management system which does not meet the 

management standards set forth in this part; or 

(4) has not conformed to terms and conditions of previous awards; 

or 

(5) is otherwise not responsible; and if the awarding agency 

determines that an award will be made, special conditions 

and/or restrictions shall correspond to the high risk condition 

and shall be included in the award. 

(b) Special conditions or restrictions may include: 

(1) payment on a reimbursement basis; 

(2) withholding authority to proceed to the next phase until 

receipt of evidence of acceptable performance within a given 

funding period; 

(3) requiring additional, more detailed financial reports; 

(4) additional project monitoring;

 (5) requiring the grantee or subgrantee to obtain technical or 

management assistance; or 

(6) establishing additional prior approvals. 

(c) If an awarding agency decides to impose such conditions, the 

awarding official will notify the grantee or subgrantee as early as 

possible, in writing, of: 

(1) the nature of the special conditions/restrictions, 

(2) the reason(s) for imposing them, 

(3) the corrective actions which must be taken before they will be 

removed and the time allowed for completing the corrective 

actions, and 

(4) the method of requesting reconsideration of the conditions/ 

restrictions imposed. 

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Δ APPENDIX B 

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APP E N D I X B 

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Δ ACKNOWLEDMENTS 

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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