Department of Health and Human Services


OFFICE OF 

INSPECTOR GENERAL 

USE OF THE DEPARTMENTAL 


ALERT LIST BY HRSA 


Daniel R. Levinson 


Inspector General 


May 2006


OEI-02-03-00011

Office of Inspector General 
 http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors 

in carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations. These assessments help reduce waste, 

abuse, and mismanagement and to promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on 

significant issues. Specifically, these evaluations focus on preventing fraud, waste, or 

abuse and promoting economy, efficiency, and effectiveness in departmental programs. 

To promote impact, the reports also present practical recommendations for improving 

program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 

and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 

convictions, administrative sanctions, or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. OCIG imposes program exclusions and civil 

monetary penalties on health care providers and litigates those actions within HHS. 

OCIG also represents OIG in the global settlement of cases arising under the Civil False 

Claims Act, develops and monitors corporate integrity agreements, develops compliance 

program guidances, renders advisory opinions on OIG sanctions to the health care 

community, and issues fraud alerts and other industry guidance. 
Δ EXECUTIVE SUMMAR Y 

OBJECTIVE 

To determine the extent to which the Health Resources and Services 

Administration (HRSA) adheres to policies governing the departmental 

Alert List. 

BACKGROUND 

The Alert List is posted on the Department of Health and Human 

Services (HHS) Intranet site for all agencies that award grants. 

According to the Awarding Agency Grants Administration Manual 

(AAGAM), if an awarding agency has concerns about a grantee due to 

the grantees’ inexperience in handling Federal funds, financial 

instability, inadequate management systems, history of poor 

programmatic performance, or for other reasons, the agency may place 

the grantee on the Alert List. The purpose of the Alert List is to 

safeguard HHS funds by alerting other agencies to these potential risks. 

Being on the Alert List does not automatically disqualify a grantee from 

receiving an award. 

HRSA is expected to follow the policies governing the Alert List that are 

found in HHS’s “Awarding Agency Grants Administration Manual” 

(AAGAM). Accordingly, HRSA is expected to place on the Alert List 

grantees that are designated as high risk, including those that have 

special award conditions attached to the grant. Special award 

conditions address a specific grantee vulnerability and may include, for 

example, drawdown restrictions or more frequent grantee reporting. 

HRSA is also responsible for checking the Alert List prior to making an 

award and for consulting with the other agency(s) that initially placed 

the grantee on the Alert List. HRSA is further expected to monitor 

grantees on the Alert List and take required actions when it attaches a 

special award condition to a grant. Additionally, HRSA is responsible 

for removing grantees from the Alert List or justifying retaining a 

grantee whose name appears on the Alert List for more than 2 years. 

In fiscal year 2002, HRSA awarded a total of $34 million to grantees 

that it had placed on the Alert List and another $60.5 million to 

grantees that were placed on the Alert List by other agencies. 

To determine the extent to which HRSA adheres to policies governing 

the Alert List, we reviewed the files of HRSA grantees on the 

March 24, 2003, Alert List. We requested the files of 62 HRSA grantees 

placed on the Alert List by HRSA, the National External Audit Review 

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EXE CUTIVE S U MMAR Y 

Center, or another agency. HRSA provided 56 files for our review. In 

these grantee files, we looked for evidence that grants officers followed 

each of the policies governing the Alert List. We also conducted 

structured interviews with four grants officers and two grants officials 

in HRSA. 

FINDINGS 

HRSA does not consistently follow Alert List policies. We found that 

HRSA does not consistently follow Alert List policies including placing, 

checking, consulting, monitoring, and justifying retaining grantees on 

the Alert List. 

HRSA does not consistently place grantees on the Alert List. Grants officers are 

expected to place a grantee on the Alert List when they designate a grantee 

as high risk or when they attach a special award condition to a grant, even 

if the grantee has already been placed on the Alert List by another agency. 

Grants officers designated a total of 6 of the 56 grantees as high risk. They 

did not place two of these six grantees on the Alert List. Grants officers also 

attached at least 1 of the special award conditions as listed in the AAGAM 

to the grants of 25 of the 56 grantees, but placed only 4 of them on the Alert 

List. 

HRSA does not consistently check the Alert List nor accurately document 

checking it. Grants officers are expected to check the Alert List prior to an 

award. Twenty-four of the fifty-six files reviewed had no evidence that the 

grants officer checked the Alert List. Twenty-six of the remaining 

thirty-two files contained a copy of a standardized electronic checklist that 

indicated whether or not the grantee was on the Alert List. Of these 

26 checklists, 14 indicated the grantee was not on the Alert List when the 

opposite was true. 

HRSA does not regularly consult with other agencies to obtain information about 

grantees. Grants officers are responsible for consulting with the agency that 

placed the grantee on the Alert List to obtain information about the grantee. 

In the files of the 45 grantees placed on the Alert List by another agency, we 

found only 2 instances of consultation documented. In our discussions with 

grants officers, none reported coordinating with agencies that place grantees 

on the Alert List. 

HRSA does not consistently document certain monitoring activities for Alert List 

grantees. Grants officers are expected to complete certain monitoring 

activities when they attach a special award condition to a grant. Grants 

officers attached special award conditions to 25 of the 56 grantees. We 

found that none of the files for these 25 grantees included transmittal 

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EXE CUTIVE S U MMAR Y 

letters to the grantees indicating the corrective actions required, the time 

period for correction, and a description of the consequences of not 

completing actions required. Additionally, 9 of the 15 files of grantees that 

had payment-related special award conditions did not include notification 

to the Payment Management System. 

HRSA does not provide justification for retaining grantees whose names appear 

on the Alert List for more than 2 years. Grants officers are expected to provide 

justification to the Office of Grants when retaining a grantee on the Alert 

List for more than 2 years. At the time of the file review in August 2003, 

seven grantees that HRSA placed on the Alert List had been on the list for 

longer than 2 years. None of these files had justifications to support these 

grantees remaining on the Alert List. 

Grants officers do not use the information on the Alert List to make 

grant decisions and some report concerns about the information on 

the Alert List. Grants officers and grants officials reported that decisions 

about specific grants are based on their own judgments and not from 

information on the Alert List. One grants officer noted that they put 

special award conditions on a grant based on their own concerns, and one 

grants official further noted that the decision to deny a grant is based on 

their own reasons, not on whether the grantee is on the Alert List. 

In our discussions, three of the four grants officers reported that the 

Alert List is “not at all useful.” Generally, these grants officers 

explained that the Alert List does not provide current information and 

that the information on the Alert List is not useful for making decisions 

about grantees. Grants officials also reported that the Alert List is not 

always useful, in part because they do not always know when the Alert 

List is posted. Our review of the Alert List also found that it did not 

always have complete information. 

RECOMMENDATIONS 

We determined that HRSA staff do not consistently adhere to policies 

governing the use of the Alert List. This lack of consistency makes it 

difficult to ensure that a grantee’s risk of programmatic and/or financial 

failure is communicated to all agencies that award grants and that HHS 

funds are appropriately safeguarded. Although grants officers note that 

the Alert List has a number of limitations, it is critical for each agency 

that awards grants to adhere to HHS policies to make the Alert List an 

effective means of conveying grantee risk. 

This review was conducted at a time when HRSA was consolidating and 

centralizing its grants management functions and implementing an 

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EXE CUTIVE S U MMAR Y 

automated grants management system. These changes may bring 

greater consistency to its grants management functions and better 

position HRSA to incorporate the following recommendations. 

Specifically, we recommend that HRSA: 

Ensure that grants officers follow Alert List policies. HRSA needs to make 

the Alert List a higher profile issue and stress that grants staff need to 

follow Alert List policies. HRSA needs to ensure that grants officers and 

grants officials follow policies for placing grantees on the Alert List, 

checking the Alert List, consulting with the agency that placed the grantee 

on the Alert List, monitoring grantees with special award conditions, and 

removing or retaining Alert List grantees when appropriate. HRSA also 

needs to ensure consistency in placing grantees on the Alert List by 

providing guidance on high risk designations and special award 

conditions. 

Develop methods to ensure that grants officers follow Alert List policies. 

HRSA should develop methods to ensure that grants officers adhere 

to Alert List policies. 

o Currently, grants officers have a checklist that includes checking 

the Alert List to determine whether the grantee is on the Alert 

List. HRSA may consider revising this checklist to include all 

Alert List policies and requiring grants officers to complete it for 

each grantee. 

o HRSA may consider implementing an internal file review to 

ensure that grants officers are documenting that they are 

following Alert List policies and using the Alert List 

appropriately. 

o HRSA may implement a system to notify grants officers when 

2-year time periods expire. 

o HRSA may consider providing additional guidance to grants 

officers and their staffs about the importance of using the Alert 

List and the need to adhere to policies. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

HRSA’s comments on our draft report address only the first finding of 

our report and do not respond to our specific recommendations. 

Specifically, HRSA notes that both HRSA and the Department 

recognize circumstances where it is appropriate to apply conditions to 

ensure short-term compliance or to address minor issues without 

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placing grantees on the departmental Alert List. HRSA states that OIG 

may not have been aware of the various types of conditions which have 

been previously employed and which are now recognized in Department 

policy. In our response to HRSA’s comments, we clarify several aspects 

of our analysis. We note that our analysis took into account more recent 

Department policies on special conditions that were not in effect during 

most of our fieldwork, and that the design of our study eliminated 

situations that do not require a high risk designation and included only 

those special award conditions that reflect more serious situations 

requiring placement on the Alert List. We also note that our review 

showed that the instances in which HRSA attached a special award 

condition and did not place the grantee on the Alert List were not to 

ensure short-term compliance or address an innocuous situation. 

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Δ T ABLE OF CONTENTS 

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

INTR O D U C T I ON ........................................... 1

FINDI NGS ................................................. 8

HRSA does not consistently follow Alert List policies ........... 8

Several factors may account for HRSA not consistently following 

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

RECOM M E NDATI O NS ..................................... 12

 Agency Comments...................................... 13

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

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

A: Code of Federal Regulations ........................... 15

B: Agency Comments ................................... 17

ACKN O W LEDGMENTS .................................... 21
Δ INTRODU C TION 

OBJECTIVE 

To determine the extent to which the Health Resources and Services 

Administration (HRSA) adheres to policies governing the departmental 

Alert List. 

BACKGROUND 

The Alert List is posted on the Department of Health and Human 

Services’ (HHS) Intranet site for all agencies that award grants. 

According to the Awarding Agency Grants Administration Manual 

(AAGAM), if an awarding agency has concerns about a grantee due to 

the grantees’ inexperience in handling Federal funds, financial 

instability, inadequate management systems, history of poor 

programmatic performance, or other reasons, the agency may place the 

grantee on the Alert List. The purpose of the Alert List is to safeguard 

HHS funds by alerting other agencies to these potential risks. Being on 

the Alert List does not automatically disqualify a grantee from receiving 

an award. 

HRSA Grants Management Process 

HRSA works to improve and extend life for people living with Human 

Immunodeficiency Virus and/or Acquired Immune Deficiency Syndrome, 

provide primary health care to medically underserved people, serve 

women and children through State programs, and train a health 

workforce that is both diverse and motivated to work in underserved 

communities.1 

Within HRSA, grants are administered by the Division of Grants 

Management Operations housed within the Office of Management and 

Program Support. At the time of this inspection, HRSA was in the 

process of consolidating its grants management functions under a single 

office and starting to implement an automated grants management 

system. Within the consolidated grants office, there were four grants 

management officers (hereinafter “grants officers”) supervised by the 

Director of the Division of Grants Management Operations. Grants 

officers are primarily responsible for the business and other 

nonprogrammatic areas of grant award and administration. A grants 

1 Health Resources and Services Administration, http://www.hrsa.gov/default.htm, accessed 

07/08/05. 

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INTROD UCT ION 

officer must be appointed for each grant award, but an individual may 

serve in that capacity for multiple awards. 

HRSA grants are awarded and renewed annually in an ongoing process 

throughout the year. In fiscal year 2002, HRSA awarded $33.8 million 

to 15 grantees that it had placed on the Alert List and another 

$61.4 million to 47 grantees that other agencies placed on the Alert List. 

Successful grant proposals receive a Notice of Grant Award, which acts 

as the official agreement between the grantee and HRSA. The Notice of 

Grant Award includes specific requirements for each grantee such as 

spending caps, timelines, documentation requirements, and submission 

deadlines. The following primer defines a number of key terms about 

the grants management process as it relates to the Alert List. 

Primer on Grants Management 

Awarding Agency. The awarding agency is the agency that awards the grant. To do this, 

the awarding agency reviews the merits of each proposal and funds the grantee to carry 

out program objectives. 

Placing Agency. The placing agency is the agency that initiates placement of the grantee 

on the Alert List. The National External Audit Review Center can also indicate that a 

grantee should be considered for placement on the Alert List. 

Grantees on the Alert List. The Alert List identifies grantees that may have one or 

several issues of concern to HHS. Examples of issues may include: 

o a history of poor performance on previous or existing awards, 

o inexperience in handling of Federal funds, 

o financial instability, 

o inadequate management systems, 

o material noncompliance with the terms and conditions of previous awards, and/or 

o other special circumstances. 

High Risk/Special Award Conditions. Special award conditions are attached to a grant 

award to address a specific grantee vulnerability. A high risk designation by the 

awarding agency is a prerequisite for the use of special award conditions. Examples of 

special award conditions may include requiring more frequent grantee reporting or 

limiting the monthly amount a grantee can draw from its total grant award. 

National External Audit Review Center. The National External Audit Review Center, 

within the Office of Inspector General (OIG), is the HHS focal point for receipt of grantee 

audits. As part of its review of these audits, the National External Audit Review Center 

may issue an Alert. This Alert, which is sent to agency Audit Liaison contacts and the 

Office of Grants, indicates the nature of the problem and states that the entity should be 

considered for placement on the Alert List. 

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INTROD UCT ION

Grants officers may also attach special award conditions to a grant to 

address a specific grantee vulnerability. Grants officers are responsible 

for monitoring the progress of the grant project and the grantee’s 

adherence to these requirements and to any special award conditions. 

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 that initiated placement of the 

grantee on the Alert List (the “placing agency”), a contact person at the 

placing agency, and often a brief description of the reason the grantee 

was placed on the Alert List.2 HHS’s policies governing the use of the 

Alert List are found in Chapter 2.01.101 of the AAGAM and part 2, 

section 01 of the Grants Policy Directive (GPD) 2.01. 

According to the AAGAM, each awarding agency has an affirmative 

responsibility both to place grantees designated high risk on the Alert 

List and to remove them in a timely manner. The awarding agency 

may designate a grantee high risk/special award conditions if it has 

concerns about the applicant’s/recipients ability to meet performance 

expectations and accountability requirements. According to the 

AAGAM, this concern may be due to the grantees’ inexperience in 

handling of Federal funds, history of poor programmatic performance on 

previous or existing awards, financial instability, inadequate 

management systems, or for other reasons. 

An awarding agency may place special award conditions on a grantee to 

address its concerns.3 According to the AAGAM, special award 

conditions are used as a means of protecting the Federal Government’s 

interests and trying to effect positive change in a recipient’s 

performance or compliance. The AAGAM specifies that special award 

conditions, defined as conditions that are “more restrictive than those 

specified by regulations (e.g., by 45 CFR parts 74 or 92),” may include 

one or more of the following; however, this list is not all-inclusive: 

o Use of a reimbursement payment method rather than advance 

funding. 

2 The Office of Grants maintains the Alert List and is responsible for placing the grantee on 

the Alert List upon recommendation from the awarding agency. For the purposes of this 

report, we refer to the placing agency as the agency that recommends the placement to the 

Office of Grants. 3 HHS’s regulatory basis for imposing special conditions is found in 45 CFR part 74.14 and 

45 CFR part 92.12. (See Appendix A.) 

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INTROD UCT ION 

o Use of the deductive method of accounting for program income 

(where the additive alternative would ordinarily apply or the

matching alternative might be appropriate). 

o Financial or progress reporting more frequently than quarterly. 

o The need for awarding agency prior approval of a cost/activity that 

ordinarily does not require such approval. 

The AAGAM further specifies that special award conditions cannot be 

applied in the absence of a high risk designation. Additionally, the GPD 

states that if special award conditions are included in an award, the 

awarding agency is required to designate the grantee as “high risk/ 

special award conditions” and notify the Office of Grants for inclusion on 

the Alert List. 

Awarding Agency Responsibilities 

Awarding agencies have the responsibility to do the following regarding 

the Alert List: (1) place grantees on the Alert List; (2) check the Alert 

List; (3) consult with the agency that placed the grantee on the Alert 

List, (4) monitor grantees when special award conditions are attached to 

the grant, and; (5) remove grantees from the Alert List in a timely 

manner. Specific Alert List responsibilities are as follows: 

Place. Awarding agencies are responsible for placing on the Alert List 

grantees that they have designated high risk/special award conditions. 

To place a grantee on the Alert List, the awarding agency notifies the 

Office of Grants. The National External Audit Review Center may also 

indicate that a grantee be considered for placement on the Alert List 

based on adverse findings in a grantee’s audit. There may be several 

agencies that place the same grantee on the Alert List. 

Check. Awarding agencies are responsible for checking the Alert List 

prior to awarding a grant. Upon review of the Alert List and 

consideration of the basis for the high risk/special award condition 

designation or issuance of an OIG Alert, an awarding agency must 

determine whether it will independently designate the grantee as high 

risk/special award conditions. 

Consult. If the awarding agency determines that a grantee has been 

placed on the Alert List by another agency, the agency must consider 

whether it also should designate the grantee as high risk and include 

special award conditions in the award. This decision should be made 

following consultation with the agency(s) that made the designation as 

it appears on the Alert List to ensure that it is still current and the 

present situation warrants the designation. 

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INTROD UCT ION

Monitor. If special award conditions are attached to the grant, the 

awarding agency is responsible for taking several actions. Specifically, 

the agency must notify the grantee by transmittal letter of the special 

award condition (but not the placement of the grantee on the Alert List). 

The transmittal letter explains the effect of the high risk designation, 

indicates the corrective actions required, and the time period for 

correction, among other things. If a special award condition relates to 

payment, the awarding agency is responsible for notifying the Division 

of Payment Management when it is imposed and when it is removed.4 

Remove. If an awarding agency places a grantee on the Alert List, it is 

also responsible for notifying the Office of Grants when it is appropriate 

to remove the grantee from the Alert List. Generally, grantees should 

not remain on the Alert List for more than 2 years. If the grantee is on 

the Alert List for more than 2 years, the agency that placed the grantee 

is required to provide justification to the Office of Grants. 

Additionally, according to GPD 3.06, awarding agencies are expected to 

create and maintain files that allow for a third party to follow a paper 

trail of all decisions made and actions taken throughout the grant 

cycle.5 Grants officers are also expected to maintain the official grant 

file and to ensure that the contents of all files are current and can be 

easily identified and accessed. 

METHODOLOGY 

To determine the extent to which HRSA adheres to Alert List policies, 

we reviewed HHS policies governing the Alert List. We then reviewed 

files of grantees on the Alert List and conducted interviews with key 

agency staff. 

Grantee Selection 

Based on the departmental Alert List published on the Intranet 

March 24, 2003, we identified 15 grantees to whom HRSA awarded 

grants and also placed on the Alert List. This included 13 grantees that 

4 The Payment Management System is the centralized grants payment and cash 

management system operated by the Division of Payment Management within the 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. 

5 GPD 3.06 C(1) and GPD 3.06 C(2)(b)(2)(c). 

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INTROD UCT ION 

received HRSA grants in 2002.6 Even though a grantee may no longer 

be funded, as long as it remains on the Alert List and HRSA is noted as 

the placing agency, an awarding agency may contact HRSA to obtain 

information on the circumstances that led to HRSA placing that grantee 

on the Alert List and any current information on the grantee. 

To find the HRSA grantees that another agency placed on the Alert 

List, we compared the grantees on the March 24, 2003, Alert List with a 

list of all HRSA grantees in fiscal year 2002.7 In doing so, we identified 

an additional 47 grantees that had been placed by another agency, for a 

total of 62 HRSA grantees on the Alert List. Note that this inspection 

looks only at grantees that are on the March 24, 2003, Alert List. It 

does not determine the total number of grantees that HRSA should 

have placed on the Alert List. 

File Review 

We requested the complete grant file for each of the 62 HRSA grantees 

on the Alert List. HRSA provided files for a total of 56 grantees. We 

requested the other six files several times over an 8-month period; 

however, HRSA never made these six files available for review. 

We conducted an onsite file review in August 2003 of the 56 files that 

were provided by HRSA. We reviewed these files for evidence that each 

Alert List policy was followed. We considered all documentation as 

evidence, including file checklists, e-mails, telephone logs, notes to the 

file, and other informal notation, as well as standard documentation 

such as Notices of Grant Award, grantee applications, technical reviews, 

and audits. We limited our review to 5 years of documentation. 

Table 1 shows the number of files of HRSA grantees that we requested 

and reviewed, by the agency that had initiated their placement. In 

total, we reviewed 56 files. In some cases, our analysis is based on the 

11 grantees that HRSA placed on the Alert List and the 45 grantees 

that were placed on the Alert List by another agency and not HRSA.

8 

6 Two additional grantees on the Alert List did not receive HRSA grants in 2002. 

7 This list was obtained from HHS’s Tracking Accountability in Government Grants 

(TAGGS) database. The TAGGS database tracks all grants awarded by the Department. 

8 Note that six files were not made available for review. Four of these files were from 

HRSA grantees placed on the Alert List by HRSA and two of these files were HRSA 

grantees placed on the Alert List either by another agency or indicated for placement by 

NEARC. 

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INTROD UCT ION

Table 1: HRSA Alert List Grantees on the Alert List, By Placing Agency 

Placing Agency 

Grant Files 

Requested 

Grant Files 

Provided for 

Review 

HRSA Only 

HRSA and National External Audit 

Review Center 

National External Audit Review Center 

and Another Agency 

National External Audit Review Center 

Only 

Other Agency Only 

10 

5 

2 

38 

7 

7 

4 

0 

38 

7 

Total 62 56 

Source: March 24, 2003, TAGGS Database. 

Note: The National External Audit Review Center does not place grantees on the Alert List; it 

issues an alert to agency liaisons and the Office of Grants that states that the entity should be 

considered for placement on the Alert List. 

Structured Interviews 

We conducted structured interviews with four grants officers. We also 

interviewed one senior member of HRSA’s Division of Grants 

Management Operations, who is responsible for supervising grants 

officers, and one senior member of the Office of Financial Policy and 

Oversight, who is responsible for notifying the HHS Office of Grants 

when HRSA places a grantee on the Alert List and removes a grantee 

from the Alert List. These additional respondents will hereinafter be 

referred to as “grants officials.” 

Standards 

Our review was conducted in accordance with the “Quality Standards 

for Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

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Δ FINDINGS

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

policies consistently follow Alert List 

policies, including placing, checking, 

consulting, monitoring, and justifying retaining grantees on the Alert List. 

HRSA does not consistently place grantees on the Alert List 

We reviewed the files of 56 grantees that were placed on the Alert List 

either by HRSA or another awarding agency. According to the AAGAM, 

grants officers are responsible for placing on the Alert List grantees that 

are designated as high risk. Grants officers designated a total of 6 of 

the 56 grantees as high risk. They did not place two of these six 

grantees on the Alert List. 

The AAGAM also states that a high risk designation is a prerequisite 

for special award conditions. Grants officers attached at least 1 of the 

special award conditions as listed in the AAGAM to the grants of 25 of 

the 56 grantees. Grants officers designated only 6 of these 25 grantees 

as high risk and placed only 4 of them on the Alert List. 

In addition, grants officers are expected to notify the Office of Grants in 

writing to place a grantee on the Alert List. They placed a total of 11 of 

the 56 grantees on the Alert List. However, there was evidence of 

notification in only 1 of these 11 files. 

Our discussions with HRSA grants officers confirm that they have 

different understandings of when to place a grantee on the Alert List 

and how to designate a grantee as high risk. One grants officer, for 

example, would place grantees with financial liability or worsening 

quality of services provided. Another grants officer would place 

grantees without protocols or accounting systems, those with safety 

issues, or those for whom more frequent submission of required 

documents is needed. When we asked about the process to designate a 

grantee as high risk, one grants officer noted that instead of a formal 

designation, HRSA “would rather refer to these as risky behaviors.” 

The other grants officers reported different procedures they follow when 

designating a grantee as high risk (as the first step in the process that 

should lead to placement on the Alert List), which included conducting 

site visits, obtaining supporting documentation, or notifying the 

grantee. 

Additionally, although the AAGAM lists four specific special award 

conditions, grants officers have different understandings of what they 

consider special award conditions that could be used to respond to a 

grantee that was designated high risk. All grants officers agreed that 

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F I NDING S 

drawdown restriction is a type of special award condition. However, 

other than drawdown restriction, their responses varied, and included 

such actions as requiring a corrective action plan, more frequent 

reporting, or technical assistance in response to a high risk designation. 

HRSA does not consistently check the Alert List nor accurately document 

checking it 

The AAGAM states that grants officers are responsible for checking the 

Alert List prior to granting an award. Twenty-four of the fifty-six files 

reviewed had no evidence that the grants officer checked the Alert List. 

Twenty-six of the remaining thirty-two files contained a copy of a 

standardized electronic checklist that included a yes/no checkbox 

indicating that the grantee was on the Alert List. Another six files had 

evidence that the Alert List was checked in other types of checklists 

that are used to record specific program-related activities and grant 

award processes. 

In addition, when we reviewed the 26 files that had copies of electronic 

checklists, we found that the checklist information was not always 

accurate. Fourteen of the twenty-six checklists indicated the grantee 

was “not appearing on the Alert List” when the grantee was in fact on 

the Alert List.9 

HRSA does not regularly consult with other agencies to obtain information 

about the grantee 

As stated in the AAGAM, the grants officers must consider whether 

they also should designate the grantee as high risk and include special 

award conditions in the award. This decision should be made following 

consultation with the agency(s) that made the designation as it appears 

on the Alert List to ensure that it is still current and the present 

situation warrants the designation. 

We found little evidence that HRSA consults with other agencies that 

place grantees on the Alert List. Other agencies placed 7 HRSA 

grantees on the Alert List and the National External Audit Review 

Center indicated 38 HRSA grantees for placement on the Alert List. We 

found no documentation of any consultation in the files of the seven 

grantees that other agencies placed on the Alert List. Similarly, we 

found evidence of consultation in 2 of the files of the 38 grantees that 

9 This analysis is based on a comparison of the dates the grantee was placed on the Alert 

 List with dates on the electronic checklist. We were unable to conduct a similar analysis 

 for the files that had other types of checklists because they only indicated whether the 

 Alert List was checked, not whether the grantee was found on the Alert List. 

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F I NDING S 

the National External Audit Review Center indicated for placement on 

the Alert List. 

In our discussions with grants officers, none reported coordinating with 

the placing agency or the National External Audit Review Center. Only 

one grants official reported that a phone call would be made to find out 

why the grantee was placed on the Alert List. 

HRSA does not consistently document certain monitoring activities for Alert 

List grantees 

The awarding agency is expected to complete certain monitoring 

activities when it attaches a special award condition to a grant. 

According to the AAGAM, these activities include notifying the grantee 

of the special award conditions in a letter that indicates the corrective 

actions required, the time period for correction, and a description of the 

consequences of not completing the actions required. The awarding 

agency is also responsible for notifying the Director of the Payment 

Management System if a special award condition relating to payment 

was attached to the grant. 

Grants officers attached special award conditions as listed in the 

AAGAM to 25 of the 56 grantees. We found that none of the files for the 

25 grantees included transmittal letters to the grantees indicating the 

corrective actions required, the time period for correction, and a 

description of the consequences of not completing actions required. (We 

did find occasional references in which the grantees were made aware of 

specific actions required to resolve issues.) Additionally, 8 of the 15 files 

of grantees that had payment-related special award conditions did not 

include notification to the Payment Management System. 

HRSA does not provide justification for retaining grantees whose names 

appear on the Alert List more than 2 years 

The AAGAM states that the placing agency is to provide justification to 

the Office of Grants when keeping a grantee on the Alert List for more 

than 2 years. At the time of the file review in August 2003, 7 of the 

11 grantees that HRSA placed on the Alert List had been there longer 

than 2 years. None of these seven files had justification to support 

these grantees remaining on the Alert List. 

In our discussions, grants officers described different processes for 

retaining a grantee on the Alert List for more than 2 years. Two of the 

four grants officers mentioned that they contact the grants official 

responsible for contacting the Office of Grants to request that a grantee 

remain on the Alert List for more than 2 years. The grants official 

misunderstood the policy, however, and reported that HHS is supposed 

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F I NDING S 

to contact HRSA to keep a grantee on the Alert List for more than 2 

years, when the opposite is true. 

Grants officers do not use the information 

on the Alert List to make grant decisions and 

some report concerns about the information 

on the Alert List 

Grants officers and officials report 

that grant decisions are based on 

their own judgments and not on 

Alert List information. 

Specifically, one grants officer 

noted that they put special award 

conditions on a grant based on their own concerns. One grants official 

further noted that the decision to deny a grant is based on their own 

reasons, not on whether the grantee is on the Alert List. 

Several grants officers’ responses further suggest that they are 

confident that their own decisionmaking adequately protects their 

grants. As one grants officer reported, “. . . we’re pretty confident that 

we are looking at things that are relevant to us; we’re not necessarily 

looking for someone else’s guidance.” And, as one grants official 

reported, “. . . just because someone else puts [the grantee] on the Alert 

List doesn’t mean I agree with them.” Rather, as one grants officer 

acknowledged, they take into account a number of factors such as the 

type of organization and the need to get services out when making grant 

decisions. 

Grants officers and officials report concerns about the information on the 

Alert List 

In our discussions, three of the four grants officers reported that the 

Alert List is “not at all useful.” Generally, these grants officers 

explained that the Alert List does not provide current information and 

that the information on the Alert List is not useful for making decisions 

about grantees. One grants officer and one grants official also reported 

that the Alert List is not always useful, in part because they do not 

always know when the Alert List is updated and posted on the Intranet. 

Our review of the Alert List also found that it did not always have 

useful or complete information. The March 24, 2003, version of the 

Alert List did not have reasons the grantees were placed on the Alert 

List for 55 of the 314 grantees. In addition, the reasons that the 

grantees were placed on the Alert List were not always helpful. For 

example, reasons given included general statements such as “going 

concern.” Further, for a few grantees the grantee name on the Alert 

List was markedly different from the name on the grant award. 

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Δ RECOMME NDA TIONS 

RECOMMENDATIONS 

We determined that HRSA staff do not consistently adhere to policies 

governing the use of the Alert List. This lack of consistency makes it 

difficult to ensure that a grantee’s risk of programmatic and/or financial 

failure is communicated to all agencies that award grants and that HHS 

funds are appropriately safeguarded. Although grants officers note that 

the Alert List has a number of limitations, it is critical for each agency 

that awards grants to adhere to HHS policies to make the Alert List an 

effective means of conveying grantee risk. 

This review was conducted at a time when HRSA was consolidating and 

centralizing its grants management functions and implementing an 

automated grants management system. These changes may bring 

greater consistency to its grants management functions and better 

position HRSA to incorporate the following recommendations. 

Specifically, we recommend that HRSA: 

Ensure that grants officers follow Alert List policies 

HRSA needs to make the Alert List a higher profile issue and stress 

that grants staff need to follow Alert List policies. HRSA needs to 

ensure that grants officers and grants officials follow policies for placing 

grantees on the Alert List, checking the Alert List, consulting with the 

agency that placed the grantee on the Alert List, monitoring grantees 

with special award conditions, and removing or retaining Alert List 

grantees when appropriate. HRSA also needs to ensure consistency in 

placing grantees on the Alert List by providing guidance on high risk 

designations and special award conditions. 

Develop methods to ensure that grants officers follow Alert List policies 

HRSA should develop methods to ensure that grants officers adhere 

to Alert List policies. 

o Currently, grants officers have a checklist that includes checking 

the Alert List to determine whether the grantee is on the Alert 

List. HRSA may consider revising this checklist to include all 

Alert List policies and requiring grants officers to complete it for 

each grantee. 

o HRSA may consider implementing an internal file review to 

ensure that grants officers are documenting that they are 

following Alert List policies and using the Alert List 

appropriately. 

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R E C O MMENDA T I O N S 

o HRSA may implement a system to notify grants officers when 

2-year time periods expire. 

o HRSA may consider providing additional guidance to grants 

officers and their staffs about the importance of using the Alert 

List and the need to adhere to policies. 

AGENCY COMMENTS 

In its comments to the draft report, HRSA notes that it met with 

Department staff to discuss its concerns with some of the report 

findings and that the Department concurs with HRSA’s use of applying 

specific conditions for short term compliance in the absence of a “high 

risk declaration” with grantee placement on the Departmental Alert 

List. 

HRSA further notes that some of the findings in the report may have 

resulted from a misunderstanding in terminology being used by HRSA 

staff and OIG reviewers. HRSA also believes that clarifications in 

Department policies concerning award conditions, issued subsequent to 

the OIG review, draw into question the validity of some of the report 

findings. HRSA notes that the new policies recognize circumstances 

where it is appropriate to apply conditions without placing grantees on 

the Departmental Alert List. 

More specifically, HRSA notes that the Department issued several 

AAGAM chapters, including section 2.04.104D (“Grant Awards”), which 

states that a grants officer may place award “restrictions” or “specific 

conditions” on an award to ensure short-term grantee compliance and 

that such restrictions may not rise to a level requiring the grantee to be 

designated as high risk and placed on the Alert List. HRSA states that 

the OIG may not have been aware of the various types of conditions 

which have been previously employed and which are now recognized in 

Department policy. The full text of HRSA’s comments is provided in 

Appendix B. 

OFFICE OF INSPECTOR GENERAL RESPONSE 

HRSA’s comments on our draft report do not respond to our specific 

recommendations. We hope that HRSA’s comments on the final report 

delineate specific actions HRSA plans to take in response to our findings 

and recommendations. 

In response to HRSA’s comments, we wish to clarify several aspects of 

our analysis. At the outset we should note that, contrary to HRSA’s 

understanding, we took into account AAGAM 2.04.104D (“Grant 

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Awards”) in our analysis even though it was not in effect during most of 

our fieldwork. 

Moreover, we are aware that HRSA has the ability under current policy 

to impose conditions of a type or level that do not require a high-risk 

designation. However, the design of our study accounted for this 

concern and eliminated those types of situations. Specifically, when we 

reviewed all the terms and conditions of the grants in our sample that 

were documented in the files, we identified the conditions that met the 

criteria of AAGAM 2.04.104D(c) which are defined in AAGAM 2.01.101 

and which warrant a designation of high risk and placement on the 

Alert List. We included the special award conditions that reflected 

more serious situations requiring placement on the Alert List. 

Specifically, we included the following categories of conditions imposed 

by HRSA: reimbursement payment method, financial or progress 

reporting more frequently than quarterly, and the need for the 

awarding office prior approval of a cost or activity. These conditions are 

also identified as special award conditions in 45 CFR section 92.12. 

In addition, as stated in the report, our review focused on grantees that 

were already on the Alert List that had been placed by another agency 

and/or had been recommended for placement on the Alert List by the 

National External Audit Review Center because of a systematic audit 

deficiency. Therefore, by design, the grantees in our review were those 

that did not have a proven track record but had some history of poor 

performance identified by another agency and/or by the National 

External Audit Review Center. 

Further, our review showed that the instances in which HRSA attached 

a special award condition and did not place the grantee on the Alert List 

were not to ensure short-term compliance or address an innocuous 

situation. The following examples illustrate the types of situations that 

we found in our review. In one file, documentation indicated that HRSA 

had determined that “the grantee has an operating deficit and is not 

eligible to apply for any other [HRSA] funding until a balanced budget 

is achieved.” In another file, HRSA noted that the grantee “continues to 

be plagued with financial concerns” which included $2.6 million in 

liabilities. In another file, HRSA noted on the Notice of Grant Award 

that it had serious concerns about the grantee’s lack of compliance with 

special conditions related to the submission of its annual audits, 

financial reports, and its final budget. We also found two instances in 

which HRSA had designated the grantee as high risk but had not placed 

the grantee on the Alert List in accordance with Department policy. 

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We further note that HRSA’s comments only address the first finding of 

our report. They do not address HRSA’s violations of other Alert List 

policies including checking the Alert List, consulting with other 

agencies to obtain information about grantees on the Alert List, 

documenting certain monitoring activities for grantees on the Alert List, 

and providing justification for retaining grantees on the Alert List. 

Finally, the Alert List is fundamental to safeguarding Department 

grant funds and is an important tool for agencies to use to share 

concerns about particular grantees. However, the value of the Alert 

List is diminished for all Department grantmaking agencies when 

agencies fail to provide required information to the Alert List in 

accordance with Department policies. As a member of the Federal 

grantmaking community and a steward of Federal funds, HRSA has a 

responsibility to protect both its own grants as well as those of other 

awarding agencies in the Department. 

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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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APP E N D I X ~ B 

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APP E N D I X ~ B 

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APP Δ E N D I X ~B ACKNOWLEDGMENTS 

This report was prepared under the direction of Jodi Nudelman, 

Regional Inspector General for Evaluation and Inspections in the New 

York regional office. Other principal Office of Evaluation and 

Inspections staff who contributed include: 

Vincent Greiber, Team Leader 

Natasha Besch, Program Analyst 

Sonjeya Fitzgerald, Program Analyst 

Nicole Gillette, Program Analyst 

Alan Levine, Program Specialist 

Elise Stein, Director, Public Health and Human Services Branch 

Barbara Tedesco, Mathematical Statistician 

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