Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

SURVEYING STAFF TO IDENTIFY 

UNNECESSARY MANAGEMENT REGULATIONS 

AND INTERNAL CONTROLS 

Tracking and Analysis 

JUNE GIBBS BROWN 

Inspector General 

APRIL 1996 

OEI-09-94-00211 
OFFICE OF INSPECTOR GENERAL 

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

amended, is to protect the integrity of the Department of Health and Human Services’ (HHS) 

programs as well as the health and welfare of beneficiaries served by those programs. This 

statutory mission is carried out through a nationwide network of audits, investigations, and 

inspections conducted by three OIG operating components: the Office of Audit Services, the Office 

of Investigations, and the Office of Evaluation and Inspections. The OIG also informs the 

Secretary of HHS of program and management problems and recommends courses to correct them. 

OFFICE OF AUDIT SERVICES 

The 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 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 money penalties. The OI also oversees State Medicaid fraud control units which investigate 

and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECTIONS 

The OIG’s Office of Evaluation and Inspections (OEI) conducts short-term management and 

program evaluations (called inspections) that focus on issues of concern to the Department, the 

Congress, and the public. The findings and recommendations contained in these inspection reports 

generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, and 

effectiveness of departmental programs. The report was prepared in the San Francisco regional 

office under the direction of Kaye D. Kidwell, Regional Inspector General, and Paul A. Gottlober, 

Deputy Regional Inspector General. Project staff included: 

REGION IX HEADQUARTERS 

Elizabeth Celniker Tina Fuchs


Donald Loeb


Brad Rollin


REGION II 

Nancy Harrison 

For additional copies of this report, please contact the San Francisco office at (415) 437-7900. 
EXECUTIVE SUMMARY


PURPOSE 

The purpose of this inspection was to develop and test a prototype that agencies could use 

to track, analyze, and eliminate management regulations and internal controls that may be 

unduly burdensome or unnecessary. 

BACKGROUND 

Executive Order to Reduce Management Regulations 

On September 11, 1993, President Clinton signed Executive Order 12861 which required 

that all executive departments and agencies reduce their internal management regulations 

by 1996. The President signed the Executive Order immediately following release of the 

National Performance Review which described and detailed the time and resources 

consumed by unnecessary management regulations and internal controls. 

Continuous Improvement Program 

In response, Department of Health and Human Services Secretary Donna Shalala instructed 

her Continuous Improvement Program (CIP) Steering Committee to oversee the reduction 

of management regulations and internal controls within the Department. The CIP’s work 

group on internal controls requested the Office of Inspector General’s assistance in 

developing a methodology that could be used to identify duplicative or unnecessary 

controls and requirements. 

OIG Study 

This is the second of two reports that we have issued on this subject. The first report, 

"Surveying Staff to Identify Unnecessary Internal Controls" (OEI-09-94-00210), describes 

how to identify potentially unnecessary management regulations and internal controls 

through focus groups and interviews with staff. For purposes of this study, the term 

management regulations and internal controls includes all of the elements in the 

Executive Order, CIP, and National Performance Review definitions.1 This report 

describes how to analyze and track selected management regulations and internal controls 

to determine if they should be retained, modified, or eliminated. The goal of the 

methodology is to eliminate controls that are inefficient or ineffective and retain those that 

protect programs from fraud, abuse, and waste. 

1 This includes the terms "management controls," "accounting controls," and "budget controls." 

i 
For both reports, we tested our methodology by interviewing Public Health Service (PHS) 

staff, including the Food and Drug Administration (FDA) and the Indian Health Service 

(IHS), and tracking and analyzing the management regulations and internal controls that 

affect them. We selected PHS because of its diversity and complexity. After we issued 

the first report, we provided PHS with a list of the 260 management regulations and 

internal controls that staff identified during focus groups and interviews as potentially 

unnecessary. Some of these management regulations and internal controls have already 

been addressed, and others are in the process of being reviewed. 

After we completed tracking and analysis, in December 1995, the Secretary 

initiated a Departmental reorganization. The Assistant Secretary for Health 

became the head of a new agency, the Office of Public Health and Science, within 

the Office of the Secretary. The PHS agencies became HHS operating divisions, 

reporting directly to the Secretary. These operating divisions now constitute the 

U.S. Public Health Service, with the Secretary as its head. 

STEPS IN THE TRACKING PROCESS 

Tracking and analyzing the list of management regulations and internal controls--and 

eliminating those that are unnecessary--requires eight interrelated steps. These steps 

include: (1) refining the list by consolidating, clarifying, and reviewing the problems, 

concerns, and issues identified by staff; (2) identifying quick hits--issues that the agency 

can address with a minimum of review; (3) ranking the remainder of the list; 

(4) conducting a series of interviews with officials who are responsible for program 

operations and those who mandate or oversee the controls and management regulations, (5) 

obtaining relevant documentation, such as appropriate statutes, regulations, policy 

statements, manuals, directives, memoranda, and guidance; (6) analyzing the purpose and 

need for the controls; (7) taking action (if appropriate); and (8) informing staff about the 

results of tracking and any changes that have been implemented. 

PITFALLS AND TIPS TO AVOID THEM 

We experienced some pitfalls that inhibited our ability to track and analyze management 

regulations and internal controls successfully. These included interviewees who were 

(1) reluctant to participate in tracking, (2) unaware of the reasons that certain controls and 

management regulations were initiated, and (3) unable to think of creative alternatives to 

burdensome controls and management regulations. We were able to overcome these 

pitfalls through a combination of strategies, but we believe that most of the pitfalls would 

be avoided if agencies cooperate in all aspects of the review, educate staff, and encourage 

staff to participate in the effort. 

ii 
GENERAL LESSONS LEARNED THROUGH CASE STUDIES 

To test the tracking and analysis methodology, we selected six management regulations 

and internal controls in collaboration with PHS: (1) the imprest fund requirements for an 

FDA district office, (2) the requirements for review of FDA seizure recommendations, 

(3) the preparation and submission of several FDA district office administrative reports, (4) 

the regional office’s role in PHS’ Community Health Center program administration, (5) 

the process to purchase a computer in an IHS area office, and (6) the IHS conference 

management system. 

Management regulations and internal controls are necessary to insulate programs from 

fraud, waste, and abuse and to conserve limited resources. Nevertheless, based on the case 

studies, we learned several lessons about the reasons why some management regulations 

and internal controls may be unnecessary or unduly burdensome: 

All levels of government, including Congress and the Office of Management and 

Budget, have mandated burdensome controls and routine reporting requirements that 

limit agencies’ reduction efforts. 

Agencies sometimes overreact to the findings of oversight agencies. 

Agencies are reluctant to delegate authority. 

Agencies sometimes exceed reasonable assurance and/or legal requirements when 

developing management regulations and internal controls. 

Multiple agencies and individuals become involved in approving actions and 

processing reports. 

Agencies rarely eliminate obsolete management regulations and internal controls. 

The case studies illustrate these points. In each case, we describe options that agencies 

could consider, based on the results of our tracking and analysis. 

AGENCY COMMENTS 

We received comments on the draft report from the Assistant Secretary for Planning and 

Evaluation (ASPE). We did not receive formal comments from the Director of IHS, the 

Administrator of HRSA, or the Commissioner of FDA, although we did receive comments 

from their staff. The ASPE believes that the tracking and analysis methodology will assist 

the Department in its efforts to reduce unnecessary management regulations and internal 

controls. The IHS staff concurred with ASPE. 

The HRSA staff did not comment on the tracking and analysis methodology. They did, 

however, mention that the concerns expressed in the community health center program 

case study will be addressed in HRSA’s 1996 reorganization plan. 

iii 
The FDA staff also did not comment on the tracking and analysis methodology. Staff 

provided technical comments on the case studies that differed from those we received 

during the course of our inspection. Clearly, FDA management will have to determine 

how it can best balance the need to meet the requirements set forth in Executive Order 

12861 with their staff’s perceived need for continuation of certain management reports and 

processes. 

The full text of the comments appears in Appendix B. 

iv 
TABLE OF CONTENTS


PAGE


EXECUTIVE SUMMARY


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


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


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


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


• Rank ....................................................... 5


• Interview .................................................... 5


• Document .................................................... 6


• Analyze ..................................................... 7


• Act ....................................................... 7


• Inform ...................................................... 8


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


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


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


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


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


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


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


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


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


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


APPENDIX A: Discussion Guide


APPENDIX B: Agency Comments


APPENDIX C: Internal Accounting Controls

INTRODUCTION


PURPOSE 

The purpose of this inspection was to develop and test a prototype that agencies could use 

to track, analyze, and eliminate management regulations and internal controls that may be 

unduly burdensome or unnecessary. 

BACKGROUND 

On September 11, 1993, President Clinton signed Executive Order 12861 which required 

that all executive departments and agencies eliminate 50 percent of their internal 

management regulations by 1996. The President signed the Executive Order immediately 

following release of the National Performance Review which described and detailed the 

time and resources consumed by unneeded management regulations and internal controls. 

In October 1993, the Office of Management and Budget (OMB) issued instructions to all 

executive departments for implementing the Executive Order. The OMB instruction stated 

that "the goal of this reduction effort is to weed out needless internal regulations so that: 

(1) the outcomes to be achieved in a regulation are clearly articulated; (2) responsibilities 

for decision making and action are clearly assigned; and (3) oversight can shift from 

process to outcome." The OMB encouraged agencies to re-examine internal business 

practices and determine how these practices can be re-engineered to accomplish necessary 

reductions. 

In response to the Executive Order and OMB instructions, Department of Health and 

Human Services (HHS) Secretary Donna Shalala instructed her Continuous Improvement 

Program (CIP) Steering Committee to oversee the reduction of management regulations 

and internal controls within the Department. The CIP’s Advisory Group on Organization 

and Management Structure and Processes established a work group to focus on 

management regulations and internal controls. The CIP work group requested the Office 

of Inspector General’s (OIG) assistance in developing a methodology that could be used to 

identify duplicative or unnecessary management regulations and internal controls. 

This is the second of two reports that we have issued on this subject. The first report, 

"Surveying Staff to Identify Unnecessary Internal Controls" (OEI-09-94-00210), describes 

how to identify potentially unnecessary management regulations and internal controls 

through focus groups and interviews with staff. This report describes how to analyze and 

track selected controls and management regulations to determine if they should be retained, 

modified, or eliminated. The goal of the methodology is to eliminate controls that are 

inefficient or ineffective and retain those that protect programs from fraud, abuse, and 

waste. 

1

Defining management regulations and internal controls 

As stated in the National Performance Review, the traditional view of internal controls is 

rooted in financial management and accounting. Since the late 1980s, however, 

government has increasingly integrated this view into the broader context of "management 

controls." According to the National Performance Review, internal management control 

techniques include "polices, procedures, and organizational plans, and physical 

arrangements." 

The Executive Order defines an internal management regulation as an agency directive or 

regulation that pertains to its organization, management, or personnel matters. The 

OMB synthesized the definitions of management regulations and internal controls by 

stating that, for the purposes of the reduction effort, an internal control is defined as: 

...any agency directive, regardless of what you call it, that prescribes agency 

policies or procedures--including internal agency acquisition regulations and 

grant management requirements--that pertain to an agency’s internal 

organization, management, or personnel. 

The OMB stated that certain regulatory provisions should not be included in this reduction 

effort. Excluded are provisions that (1) are non-discretionary (i.e. those required by 

statute, court order, Executive Order, or other external agency directive), (2) promote 

public information access, and (3) are determined to be necessary for the delivery of 

"essential services." 

The CIP clarified the definition of internal controls for purposes of HHS’ reduction effort 

to include any "inappropriate or wasteful internal controls regardless of the organizational 

origin of those controls." A CIP memo defined internal controls as: 

...any imposition by an organizational unit upon another of a requirement for 

approval of decisions or activities, guidance or procedures on how to 

accomplish an assignment or mission, or reporting of information...internal 

controls include any such imposition, regardless of the origin of the 

requirement. 

For purposes of this study, the term management regulations and internal controls 

includes all of the elements in the Executive Order, CIP, and National Performance Review 

definitions.2 For clarity and brevity, we have consolidated these definitions into the 

following three primary categories: 

2 This includes the terms "management controls," "accounting controls," and "budget controls." 

2 
approvals: layers of review and approvals; 

procedures: written manuals and guidance as well as unwritten controls such as 

policies and instructions that have become standard; and 

reports: written or automated reports describing grantee or staff performance, 

requirements to use specific reporting systems, and paperwork requirements. 

Results of focus groups and interviews 

To test our methodology, we conducted interviews--either individually, in small groups, or 

in focus groups--with 154 staff working for Public Health Service (PHS) agencies in 

California. We selected PHS for the case study because of its diversity and complexity. 

The sample included the PHS regional office in San Francisco, the Food and Drug 

Administration (FDA) regional office in San Francisco, the FDA district office in Alameda, 

the FDA resident post in San Jose, and the Indian Health Service (IHS) Area Office in 

Sacramento. We also interviewed staff from the IHS district office in Sacramento. 

During the focus groups and interviews, staff identified 260 management regulations and 

internal controls that they believe should be modified or eliminated. Most of these 

(56 percent) fell into the category of approvals. One-third pertained to reports, and 

11 percent pertained to guidance. We provided PHS with the list of the 260 management 

regulations and internal controls. Some of these items have already been addressed, and 

others are in the process of being reviewed. For a more complete description of the focus 

group and interview methodology, see "Surveying Staff to Identify Unnecessary Internal 

Controls" (OEI-09-94-00210). 

This report is divided into four parts: The first part describes the steps required to rank, 

track, and analyze the management regulations and internal controls that were identified by 

staff during the focus groups and interviews. The second part describes the pitfalls we 

encountered when applying the methodology and some tips to avoid such pitfalls. The 

third part describes the lessons we learned during the tracking and analysis. The fourth 

part contains full descriptions of the six management regulations and internal controls that 

we tracked. 

After we completed tracking and analysis, in December 1995, the Secretary 

initiated a Departmental reorganization. The Assistant Secretary for Health 

became the head of a new agency, the Office of Public Health and Science, within 

the Office of the Secretary. The PHS agencies became HHS operating divisions, 

reporting directly to the Secretary. These operating divisions now constitute the 

U.S. Public Health Service, with the Secretary as its head. 

3

STEPS IN THE


TRACKING PROCESS


Tracking and analyzing the list of management regulations and internal controls--and 

eliminating those that are unnecessary--requires eight discrete but interrelated steps: 

STEP 1: REFINE THE LIST 

The purpose of this step is to expedite the tracking process by consolidating management 

regulations and internal controls that are similar, clarifying the potential problems with 

each control and management regulation, and reviewing the list to ensure that each issue is 

valid and has not been addressed already. 

Consolidate: When tracking and analyzing management regulations and internal controls, 

it’s helpful to group controls and management regulations that pertain to similar processes 

or originate in the same office. This allows reviewers to save time by conducting fewer 

interviews. If they consolidate management regulations and internal controls into more 

general process reviews, they can also reduce the disruption to agency officials by 

interviewing them about several controls at one time. 

Clarify: Reviewers must ensure that they have an accurate understanding of staff’s 

problems and concerns by conducting follow-up interviews with focus group and interview 

participants. 

Review: We found many instances where focus group and interview participants described 

concerns that they believed were management regulations and internal controls but, instead, 

were simply complaints about specific managers or coworkers. Reviewers should examine 

the list of staff-generated management regulations and internal controls and eliminate those 

that are clearly tied to personality conflicts rather than policy or procedural issues. After 

eliminating these, reviewers should assess whether the problems with each control and 

management regulation identified by staff still exist, are under study by the agency, or 

have been addressed already. Management regulations and internal controls that are the 

subject of agency review could be eliminated from the list or given lower priority than 

other controls that had not been identified previously. Although review should occur 

throughout the tracking process, it is particularly important to conduct a thorough review at 

this initial step. 

STEP 2: IDENTIFY QUICK HITS 

Reviewers should scan the aggregate list of management regulations and internal controls 

and identify those that are obvious targets for quick action. Some management regulations 

and internal controls do not require the same in-depth analysis as others because they have 

been evaluated already or the problems and solutions are obvious. These should be 

removed from the list and referred to the agency for immediate remedy. 

4

STEP 3: RANK 

To ensure that the most important issues receive prompt attention, reviewers should rank 

the management regulations and internal controls that remain on the list after steps 

1 and 2. Reviewers may wish to consider one or more of the following factors when 

ranking the management regulations and internal controls for further analysis: 

the relative number of staff who mentioned the control or management regulation 

during focus groups and interviews; 

the extent to which staff ranked the control or management regulation in their top 

three controls that are most burdensome or unnecessary; 

the number of staff who are affected by the control or management regulation; 

the organizational level at which the control or management regulation could be 

addressed and modified; 

the ease with which the control or management regulation could be addressed and 

modified; and/or 

the apparent negative impact of the control or management regulation (e.g., 

negative effects on public or employee health and safety or significant impairment 

of the agency’s ability to accomplish its mission). 

STEP 4: INTERVIEW 

The interview process consists of a "chain" of interviews, each leading upward through or 

laterally across an agency to reach "the top" level or outside agency where the 

management regulation or internal control was initiated--or could be changed. In some 

cases, it might be necessary to track a management regulation or internal control only to a 

supervisor (such as for a staff activity report). In other cases, a management regulation or 

internal control might be tracked to a statute, another federal department, or an 

independent agency. The interview process consists of two parts, each of which must be 

repeated until the source of the management regulation or internal control has been 

determined: 

1. Obtain the name and phone number of the person who directly oversees the 

management regulation or internal control. 

This individual may have been identified during the initial focus groups and interviews 

with staff or during the clarification interviews discussed in Step 1. This may not be the 

individual who originated the requirement. Each interview should include a discussion of 

the next level, until the originator of the management regulation or internal control is 

identified. 

5

2. Conduct interviews with all offices and agencies that impose the control or 

management regulation on a lower office or agency. 

We used a structured discussion guide (see appendix A) to determine: 

how the control or management regulation originated; 

how it benefits clients; 

whether the control or management regulation is appropriate or outdated; 

whether a supervisor, another agency, law, Congressional guidance, or regulation 

requires the individual to enforce the control or management regulation; 

how much time is devoted to overseeing or complying with the control or 

management regulation; 

whether the respondents believe that the control or management regulation should 

be modified or eliminated; and 

whether elimination would jeopardize the agency’s stewardship responsibilities. 

In general, the questions should be tailored to the individual or group of individuals being 

interviewed. The purpose of each interview is to clarify the purpose of the control or 

management regulation and how it is used. At each step, the interviewers should 

determine whether changes in technology or procedures indicate a lesser need for the 

management regulation or internal control. 

For agencies that have convened management regulation and internal control reduction 

teams, reviewers will find it helpful to interview these team members to ascertain what 

their views are, even if they are not in the chain of interviews. 

STEP 5: DOCUMENT 

Relevant documentation includes appropriate statutes, Congressional committee reports,


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


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


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


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


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


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


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


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


controls.


6

STEP 6: ANALYZE 

Analyzing all interviews and documentation is necessary to allow reviewers to develop a 

list of options for decision makers. Overall, reviewers should (1) differentiate between 

administrative controls and internal accounting controls and (2) look for indications that a 

control or management regulation might be excessive. Indicators include affirmative 

responses to the following questions: 

Was the control initiated in response to an isolated occurrence or abuse. If so, are 

the resulting management regulations and internal controls appropriate? 

Can the control or regulation be eliminated without increasing the agency’s risk to 

fraud, waste, or abuse? 

Have technological advances, such as systems automation, been implemented since 

the control was established? 

Does agency guidance significantly vary from applicable law and regulation without 

any clear reasoning behind it? 

Do interviewees, including Congressional or Executive Branch agencies (if 

appropriate), agree that the control could be modified or eliminated? 

In the case of an internal accounting control, additional analysis is necessary. This would 

include the following steps: 

analyzing the control environment, 

identifying and analyzing inherent risks, 

testing the control’s effectiveness, and 

determining whether the analysis supports eliminating control. 

We have provided additional details explaining these four steps in appendix C. 

STEP 7: ACT 

While reviewers might complete their tasks with Step 6, taking action on the options that 

they present is the most important step in the process. Ultimately, the success of the 

reduction effort hinges on the agency’s ability to implement solutions to unduly 

burdensome or unnecessary management regulations and internal controls. 

7

STEP 8: INFORM 

Reporting the results of (1) the review and any corrective action or (2) the basis for 

retaining a regulation or control can have a positive effect on employee morale. Failure to 

do so, on the other hand, can be detrimental to staff who contributed time and ideas to the 

process. 

8

PITFALLS AND TIPS TO AVOID T HEM


During the course of tracking management regulations and internal controls identified by 

field staff, we experienced some pitfalls that inhibited our ability to track controls 

successfully. We offer some tips below to avoid them in the future. 

PITFALL:	 INTERVIEWEES WERE RELUCTANT TO PARTICIPATE IN 

TRACKING 

We encountered some staff who were unsure whether to participate fully in interviews. 

They appeared to be reluctant to share their thoughts about the control or management 

regulation because they did not want to undermine their agency, component, or manager. 

Other staff were defensive, believed it was a waste of time, and/or expressed hostility that 

anybody would question certain processes. 

Tips 

This is one indication that an internal agency group might be more successful in 

conducting the tracking. 

We held introductory conference calls with staff from various agency components. 

It was important to involve senior-level staff in these meetings so that it was clear 

that the agency was a cooperative partner in the effort to reduce unnecessary 

management regulations and internal controls. 

PITFALL:	 STAFF SOMETIMES DO NOT KNOW WHY A CONTROL OR 

MANAGEMENT REGULATION EXISTS, EVEN THOUGH THEY 

PLAY A MAJOR ROLE IN ITS ADMINISTRATION 

This may make it difficult for reviewers to determine the basis for the control or 

management regulation and to discuss options. Most frequently, when staff did not know 

the basis or reason, they tended to assume that it was legally required. This may occur 

because some internal control systems require segregation of duties. In other cases, it may 

occur simply because the control or management regulation has been in place for a long 

time, and nobody ever questioned its existence. 

Tips 

Agencies should educate staff about the reasons for specific management 

regulations and internal controls, especially when the they have been implemented 

in response to a requirement from another department or agency. 

Sometimes not knowing the reason a control or management regulation exists can 

be a benefit, because the interviewee can focus on what makes sense rather than 

9

what he or she believes is required. Focusing on logical solutions can help 

reviewers overcome this barrier. 

Obtain statutory citations and documentation from other sources, perhaps using 

computerized on-line searches. 

PITFALL:	 INTERVIEWEES FREQUENTLY WERE UNABLE TO THINK OF 

CREATIVE OR LESS BURDENSOME OPTIONS TO 

MANAGEMENT REGULATIONS AND INTERNAL CONTROLS 

Throughout the identification and tracking phases, it was clear that staff have learned to 

accept and live with management regulations and internal controls. In many instances, we 

found it difficult to solicit ideas for modifying existing controls and management 

regulations because staff simply had never considered that they could be changed or 

eliminated. This was particularly true when the control or management regulation was 

mandated by an outside agency. 

Tips 

In general, agencies need to foster an environment of change and creativity, where 

suggestions to streamline processes are valued and rewarded. 

Reviewers should research alternatives to the control or management regulation and 

make follow-up calls to interviewees to obtain their opinions about them. This 

requires obtaining all background information on the control or management 

regulation, including its purpose, results, and cost effectiveness. We sought to have 

interviewees make distinctions between what the law required and what was 

promulgated in the agency’s regulations or policies. 

PITFALL:	 BOTH INTERNAL AND EXTERNAL REVIEWERS HAVE 

ADVANTAGES AND DRAWBACKS 

While any individual or group of individuals can apply this methodology to an agency’s 

management regulations and internal controls, determining whether the review should be 

conducted by an internal or external team is a major decision. An internal team has the 

advantage of knowing the laws, regulations, controls, and personnel within the agency. 

However, an internal team may already have formed opinions about certain management 

regulations and internal controls, and staff might be less comfortable speaking honestly and 

freely with them. External reviewers--a team of reviewers from one or more outside 

agencies or a consultant--are more likely to be unbiased, but they probably require more 

time to become acquainted with the agency’s structure, policies, and inner-workings. 

10

Tips 

Agencies might want to consider using outside personnel to conduct the initial 

focus groups and interviews and then turning the effort over to an internal group 

that has detailed knowledge of the issues raised. 

Regardless of whether the agency selects internal or external reviewers--or a 

combination--it should seek objective reviewers, i.e., those who do not have a stake 

in either the continuance or the elimination of management regulations and internal 

controls. 

11

GENERAL LESSONS LEARNED


ABOUT INTERNAL CONTROLS


To test the methodology, we selected, in collaboration with PHS, six management 

regulations and internal controls to track and analyze: 

the imprest fund requirements for an FDA district office; 

the requirements for review of FDA seizure recommendations; 

the preparation and submission of several FDA district office administrative reports, 

including the accounts receivable, emergency salary advances, gains and losses, and 

travel advance reports; 

the PHS regional office’s role in the Community Health Center program 

administration; 

the process to purchase a computer in an IHS area office; and 

the IHS conference management system. 

In addition to using the methodology’s criteria to select these controls and management 

regulations, we selected issues that represented a cross-section of the different control and 

management regulation categories (approvals, guidance, reports) as well as the agencies 

included in the study. The case studies are described in detail in the next section. 

Management regulations and internal controls are necessary to insulate programs from 

fraud, waste, and abuse and to conserve limited resources. Nevertheless, based on the case 

studies, we learned several lessons about the reasons why some management regulations 

and internal controls appear to be unnecessary or unduly burdensome. 

ALL LEVELS OF GOVERNMENT, INCLUDING CONGRESS AND THE OFFICE 

OF MANAGEMENT AND BUDGET, HAVE MANDATED BURDENSOME 

CONTROLS AND ROUTINE REPORTING REQUIREMENTS THAT LIMIT 

AGENCIES’ REDUCTION EFFORTS 

Mandates from Congress and OMB sometimes result in requirements that spawn a plethora


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


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


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


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


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


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


12

really apply to them. For example, all agencies must report accounts receivable to 

Congress and OMB even though many agencies, such as FDA, have minimal accounts 

receivable. 

We also found instances where Congress would not allow certain authorities to be 

delegated below a certain level. By enacting this type of legislation--such as barring 

central office from delegating certain grantmaking authority to regional offices--Congress 

inhibits the agency’s ability to administer its programs efficiently and reduce burdensome 

management regulations and internal controls. 

AGENCIES SOMETIMES OVERREACT TO THE FINDINGS OF OVERSIGHT 

AGENCIES 

Agencies come under extreme pressure to react strongly and swiftly when Congress, the 

General Accounting Office, OIG, or other oversight agencies identify material weaknesses 

or other problems in their programs. As a result, agencies sometimes implement strict 

management regulations and internal controls that exceed oversight agency 

recommendations and penalize agency components that have never exhibited the same 

level of vulnerability as the components where the weakness was identified. One example 

is the FDA imprest fund requirements. Isolated instances of abuse in other agencies that 

had large imprest funds resulted in a series of strict and, at times, excessive management 

regulations and internal controls. 

AGENCIES ARE RELUCTANT TO DELEGATE AUTHORITY 

Agencies are hesitant to delegate authority to subordinate offices or individuals, even when 

allowed by law or regulation to do so. Agency officials frequently cite the need for 

consistency among field offices as a rationale for not delegating. The IHS’ conference 

management system, for example, would allow the Director of IHS to delegate authority to 

approve area offices’ conference plans. To date, however, the director has not delegated 

this authority, even though other high-level IHS officials are involved in the review and 

approval of the conference plans. 

AGENCIES SOMETIMES EXCEED REASONABLE ASSURANCE AND/OR 

LEGAL REQUIREMENTS WHEN DEVELOPING MANAGEMENT 

REGULATIONS AND INTERNAL CONTROLS 

We found several instances where agencies required field offices to provide reports more 

frequently than the agency itself was required to. While the need for agencies to track 

certain data might be necessary for critical issues, in some cases these reports contain little 

information and are basically paperwork exercises. This is the case with two of the four 

FDA administrative reports that we tracked. Although Congress requires quarterly or 

annual reports, FDA headquarters requires district offices to submit monthly reports, even 

though the reports contain little or no new or useful information. 

13

MULTIPLE AGENCIES AND INDIVIDUALS BECOME INVOLVED IN 

APPROVING ACTIONS AND PROCESSING REPORTS 

In some instances, agencies and individuals become involved in a chain of approvals or 

report processing, even though their roles and the purpose for including them are unclear. 

Several of the case studies illustrate how many agencies and officials are unnecessarily 

involved and how these layers could be streamlined or eliminated: 

To procure a computer in an IHS area office, six separate reviews must be 

completed. Although the area office streamlined the operation by allowing some 

individuals to review more than one facet of the requisition, there are still too many 

reviewers and each review is too narrow in scope. For example, one official must 

certify that excess inventory to fill the need does not exist. Another official, who is 

part of a committee that reviews requisitions, must certify that the computer is 

actually needed. And yet another official has the authority to decide whether the 

computer should be purchased and, if so, what type of equipment would meet the 

requestor’s needs. 

While FDA has streamlined its process for reviewing seizure recommendations, the 

process still requires that a number of different agencies review all 

recommendations, even if a specific case is identical to a previous case. The 

FDA currently is identifying certain regulated products that could be subject to 

fewer layers of headquarters review. So far, however, headquarters staff have been 

reluctant to consider eliminating more than one layer of review. 

The PHS’ Debt Management Branch consolidated agencies’ accounts receivable 

data but did not submit the data to the Treasury Department to meet the statutory 

requirement, nor did it assist in debt collection activities. Instead, FDA submitted 

the data directly to the Treasury Department. The Debt Management Branch 

simply provided comparative data to PHS agencies, although most of them, 

including FDA, had few accounts receivable. 

AGENCIES DO NOT ALWAYS ELIMINATE OBSOLETE MANAGEMENT 

REGULATIONS AND INTERNAL CONTROLS 

Even when agencies implement automated systems to replace cumbersome manual systems 

that require numerous management regulations and internal controls, they do not always 

eliminate the previous controls and management regulations, especially reporting 

requirements. Automated budget and personnel systems throughout PHS and the Office of 

Personnel Management did not result in significant reductions in the number of duplicative 

manual reports. 

14

CASE STUDIES


THE IMPREST FUND REQUIREMENTS FOR THE FDA DISTRICT OFFICE 

Numerous management regulations and internal controls govern the use of imprest (petty 

cash) funds, which are used in the district office to procure small-cost goods and services. 

These controls and management regulations were developed as a result of fraud, and 

because oversight agencies were concerned that the availability of cash invites abuse. The 

FDA is eliminating imprest funds in all district offices in favor of less burdensome and 

risky systems. 

BACKGROUND 

The district office’s imprest fund totals approximately $1,000 for each fiscal year. Among 

the controls that govern the management of these funds, 

only the principal cashier--who must be designated by the Treasury Department--or 

a designated alternate may have access to the fund; 

cashiers may not be certifying officers; 

advances from the principal cashier to the alternate must be done with a signed 

interim receipt. If this cannot be done in advance, a committee of three will 

process the transfer to the alternate and sign the interim receipt; 

at least five accountability reports are required, including a daily reconciliation and 

an annual audit; 

in order to obtain a cash advance from the fund, requestors must submit a 

393 form and obtain the approval of a branch manager or district director; and 

annually, all authorized cashiers and administrative officers must read a 31-page 

manual and sign on each of 17 separate pages. Each signature indicates that they 

have read and understood that page. They must submit the signed pages to 

headquarters. 

STAFF CONCERNS 

Managers and staff at the field level do not understand why so many controls and 

management regulations exist for such a small amount of money. "We can buy 

$60,000 lab equipment, but if $1 is missing from the imprest funds, it’s a major problem," 

said one staff member. 

15

TRACKING AND ANALYSIS 

In June 1992, PHS declared a material weakness regarding FDA’s imprest fund operations. 

This came after an FDA staff member obtained unauthorized cash payments from the FDA 

Headquarters imprest fund totaling more than $25,000. A subsequent review by the OIG 

determined that these losses could have been avoided if FDA had followed the 

management regulations and internal controls in place at the time when the illegal 

activities were perpetrated. 

Although the OIG recommended corrective actions pertaining to imprest fund operations, it 

also recommended that FDA consider eliminating the imprest fund and using alternative 

methods, such as third-party drafts and credit cards, to eliminate all cash disbursements. 

The FDA is in the process of implementing third-party draft systems in all district offices. 

We tracked imprest controls and management regulations through FDA headquarters. 

While imprest controls and management regulations could be tracked through FDA to 

PHS, the Office of the Secretary, the Treasury Department, and OMB, we stopped tracking 

upon learning that FDA had plans to eliminate all imprest funds within a year. 

CONCLUSIONS/OPTIONS 

Although FDA is eliminating imprest funds, valuable lessons can be learned from how 

these excessive management regulations and internal controls evolved. As is sometimes 

the case, burdensome requirements resulted from isolated instances of abuse. Some of the 

controls applicable to larger funds were unnecessary and burdensome when applied to 

smaller funds. 

Many of the management regulation and internal control failures noted in the OIG audit 

report were unique to FDA headquarters. The size of the staff at FDA headquarters 

combined with the volume of transactions processed by the cashier in Rockville resulted in 

a situation where the cashier was not acquainted with funds requestors or approving 

officials. In district offices, the cashier is more likely to know most of the staff by name 

or face. 

The FDA in Rockville processed hundreds of thousands of dollars in imprest transactions 

while the FDA district office rarely had a balance of more than $1,000. In this case, the 

burden of the controls and management regulations far outweighed the potential for fraud 

and waste. 

STAFF COMMENTS ON THE DRAFT REPORT 

In their written comments, FDA staff questioned their authority to eliminate imprest fund 

controls, asserting that only the Treasury Department can do this. We stopped tracking 

these controls when we learned that FDA was eliminating imprest funds. Nevertheless, the 

case study illustrates how cumbersome and inflexible management regulations and internal 

controls can be. 

16 
REQUIREMENTS FOR REVIEW OF FDA SEIZURE RECOMMENDATIONS 

Field level staff believe the requirements for headquarters review of seizure 

recommendations cause unnecessary delays. The FDA follows an internally developed 

procedure for seizures that ensures an exceptionally high success rate. The 

FDA acknowledges concerns about delays and is convening a workgroup to develop 

alternative procedures. 

BACKGROUND 

A seizure is a regulatory action by the federal government against products that are found


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


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


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


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


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


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


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


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


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


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


U.S. Attorney’s Office. The FDA also notifies the Department of Justice’s Office of


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


STAFF CONCERNS 

In the FDA regional office, district office, and resident post, staff said the multiple levels 

of review required for seizure recommendations cause untimely delays. While the 

recommendation is being reviewed, the violative products could be sold to consumers or 

otherwise moved from the site. 

Staff identified several steps that they believe unnecessarily prolong the process: 

the requirements that both the centers and DCMO review seizure recommendations; 

the OGC’s involvement in endorsing the seizure action before the case can be 

forwarded to the U.S. Attorney’s Office; 

field staff’s lack of authority to recommend a seizure action directly to the 

U.S. Attorney’s Office; and 

the requirement that field investigators make availability checks and revalidate 

conditions several times to assure the products are present and still violative. 

17

TRACKING AND ANALYSIS 

The FDA Regulatory Procedures Manual Chapter 8-20 spells out the procedure for


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


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


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


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


streamline the review of seizure cases.


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


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


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


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


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


expertise in the centers.


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


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


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


and/or compliance office director. The FDA’s timetable for center review of a seizure


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


complexity of the violation.


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


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


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


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


insects spreading filth throughout a warehouse.


The FDA’s internal policy extends OGC’s authority, under federal regulation


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


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


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


OGC staff believe that OGC review satisfies the Department of Justice’s Office of


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


recommendations [28 CFR 0.45(j)].


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


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


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


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


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


Department of Justice and the U.S. Attorneys.


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


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


18 
when the U.S. Marshal seizes them. Last year, FDA changed the procedures to avoid 

multiple revalidations. Now, OGC approves seizure recommendations, pending 

revalidation. Since the change in procedures, FDA staff reported there have not been any 

cases requiring multiple revalidations. 

CONCLUSIONS/OPTIONS 

The FDA should continue the workgroup’s efforts to improve the seizure process. 

Members of the workgroup and other FDA staff have suggested ways to speed the process 

while maintaining appropriate review of seizure recommendations. These suggestions 

include: 

encouraging firms to hold or recondition violative products voluntarily; 

increasing the frequency of communication between the field, centers, DCMO, and 

OGC; 

improving the clarity and organization of the case documents; 

developing the charge most supportable by the evidence; 

transmitting case files by electronic mail or over-night mail on a diskette; 

improving the coordination of reviews between divisions within some centers; 

continuing and perhaps expanding a pilot program of "direct reference;" 

implementing concurrent review by the centers and DCMO in urgent cases; 

developing and implementing an on-line library of jurisdictional models for 

pleadings; and 

implementing a pilot program of direct recommendation of cases from the district 

office to the U.S. Attorney in carefully selected, clear-cut cases. 

In addition to the options being considered by the workgroup, it may be helpful for 

FDA to examine whether reviews are unnecessarily repeated. For example, staff in the 

centers, DCMO, and OGC all mentioned cases that had elementary problems, such as 

omitted Interstate Commerce documentation, reaching their level of review. The 

FDA may want to explore ways to notify subsequent reviewers of the issues that have 

already been checked, the results of these checks, and any actions that should be 

completed. 

19

FDA DISTRICT OFFICE ADMINISTRATIVE REPORTS 

Staff from FDA’s district office believe that only 3 of approximately 30 routine 

administrative reports serve any useful function. Others were useful at one time but are 

now obsolete, primarily because administrative processes have changed or become 

automated. Tracking of a sample of four reports revealed that these reporting 

requirements appear to be excessive when compared to the legal requirements. In general, 

however, FDA has been proactive in reviewing the need for these reports. 

BACKGROUND 

Food and Drug Administration district offices must submit approximately 30 routine 

administrative reports to headquarters on a monthly, quarterly, semi-annual, or annual 

basis. On a monthly basis, headquarters requires reports on travel advances, accounts 

receivable, and emergency salary advances. On a quarterly basis, headquarters requires 

more than a dozen reports, including summaries of procurement, usage of government 

vehicles, accidents and injuries, the aging of travel advances, and gains and losses. On a 

semi-annual basis, headquarters requires reports on use of commercial printing services, 

physical security, and computer security. On an annual basis, headquarters requires reports 

on copy equipment, safety, and imprest (petty cash) fund disbursements. 

STAFF CONCERNS 

During interviews, FDA staff stated that most of these reports no longer serve any useful 

purpose. When asked to evaluate the list of 30 reports to determine which reports they 

believed were truly necessary, FDA staff highlighted only 3 of the reports. The other 

reports are not necessary because (1) an administrative process has changed making a 

report obsolete, yet the report is still required, (2) the information is available to 

headquarters via computer system or data that they already have, and (3) headquarters does 

not appear to use the data. 

In some cases, staff claimed that certain reports are no longer necessary because the 

processes had been automated or otherwise changed. One example is the monthly 

accounts receivable report. "You generally submit a report with all 0’s." said one staff 

member. A similar situation exists with the emergency salary advance report. Although 

the expanded use of direct deposit has virtually eliminated emergency salary advance 

requests, FDA district office staff must still submit monthly reports to headquarters. 

In other cases, automated administrative systems have replaced manual systems, meaning 

that the information is already available to headquarters via on-line systems. Despite this, 

headquarters continues to require manual reports. Examples cited by FDA district office 

staff include the monthly travel advance report. Headquarters gives printouts including 

this information to the district offices but requires reports anyway. Another example is the 

quarterly gains and losses report, which includes information about staffing changes. It 

duplicates a staffing report that the district office must send to the regional office every 2 

weeks. Administrative staff wonder why so many staffing reports are required when 

20 
personnel data are available to the regional office and headquarters through the automated 

Administrative Resources Information Exchange System (ARIES) system. 

In some instances, staff simply do not believe that headquarters uses the information they 

submit. For example, staff do not know of any instances where headquarters has acted on 

seriously delinquent accounts on the accounts receivable reconciliation report. 

TRACKING AND ANALYSIS 

We tracked the purpose and use of the four administrative reports highlighted above. We 

provided the entire list of reports that staff believe are unnecessary to PHS and FDA. 

The PHS and FDA accounts receivable reporting requirements exceed both


OMB and Treasury requirements without any apparent enhancement. Congress


requires agencies to report outstanding accounts receivable to OMB and the


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


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


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


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


monthly accounts receivable reports to headquarters. The FDA headquarters


consolidates district office reports, annually transmits accounts receivable data to


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


Branch. The Debt Management Branch consolidates accounts receivable data and


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


reporting agency.


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


Resources and Services Administration (HRSA) has accounts receivable totaling


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


difference, FDA’s reporting requirements are as strict (or more strict when looking


at the monthly district office reporting requirement) as HRSA’s. Officials from


PHS believe that they will need to track FDA’s accounts receivable in the future,


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


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


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


problem 10 years ago.


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


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


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


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


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


21

The HHS’ Office of the Secretary also receives an annual accounts receivable 

report from the Office of the Assistant Secretary for Management and Budget. The 

data for this report are received directly from the Treasury Department. 

The emergency salary advance report is required by FDA’s Office of Financial 

Management and does not go outside of this office. Managers concede that this 

report could be eliminated and are in the process of doing so for three major 

reasons. First, the need for emergency salary advances has decreased since 

agencies implemented direct paycheck deposit on a broad scale. Second, 

emergency salary advance balances are listed in each office’s general ledger, 

negating the need for a regular report. Third, the availability of direct deposit as an 

option has allowed the agency to be stricter on giving emergency salary advances. 

According to agency policy, staff who refuse to use direct deposit may now receive 

only one emergency salary advance per year. 

We tracked the travel advance report from FDA’s district office to the Accounting 

Reports and Analysis Branch within FDA’s Office of Financial Management. This 

branch consolidates all district office travel advance reports and sends the data to 

PHS’ Office of Management, Division of Budget, Resources Analysis Branch. On 

a quarterly basis, this office analyzes data from each PHS agency to identify trends 

in the numbers and average amounts of outstanding travel vouchers. This review is 

an internal PHS requirement that has the goal of implementing OMB Bulletin 88-

17, which directs agencies to limit travel advances to out-of-pocket expenses. 

An FDA headquarters staff person indicated that agencies are mandated to make 

sure that travel advances are not outstanding for more than 30 days. In a 

1993 audit of FDA’s imprest fund requirements, OIG auditors found a "high level 

of outstanding travel advances." At that time, an FDA official noted that the 

agency rarely used its legal right to offset an employee’s paycheck for delinquent 

travel vouchers. 

The gains and losses report, which had been required by the Office of Regulatory 

Affairs in FDA headquarters, was eliminated in late 1994 because personnel 

information is available through the Office of Personnel Management’s automated 

personnel system or through FDA’s ARIES personnel system. Initially, the report 

was used by headquarters to manage downsizing of the agency. Improvements in 

the ARIES system allowed FDA headquarters to eliminate the report. 

CONCLUSIONS/OPTIONS 

The FDA has been relatively active in addressing unnecessary reports. Regional and 

district office staff have been involved in management regulations and internal controls 

reduction efforts. A major barrier to faster change, according to staff, has been the slow 

pace of automation due to limited resources. However, the ability to automate allowed 

FDA to eliminate the gains and losses report, and the emergency salary advance report 

appears to be on the brink of elimination. 

22 
In the case of the two other reports reviewed--the accounts receivable and travel advance 

reports--district offices must submit reports more frequently than the agency. In both 

instances, the offices that receive the reports do not take any collection action based on the 

data in the reports. 

The FDA’s accounts receivable are relatively small, especially when split among 21 district 

offices. The FDA and the Office of the Secretary could develop less burdensome methods 

to track accounts receivable. The information that is required in the reports is available 

from each district office’s general ledger, and districts understand that they can call FDA’s 

Office of Financial Management if they’re having problems collecting overdue accounts. 

At the very least, this report could be required quarterly or annually rather than monthly 

and still meet the Treasury Department’s reporting requirement. 

The FDA could also seek an exemption from the reporting requirement due to its small 

amount of receivables. The Office of the Secretary might have to assist in this area, 

perhaps by requesting that OMB or the Treasury Department waive the reporting 

requirement in instances where an agency’s receivables are less than $500,000. 

Of the four reports we reviewed here, the travel advance report--also required by OMB-­

appears to be the one that is most necessary, according to staff. Since nobody outside of 

the district office routinely gets involved in delinquent travel advance instances, we 

question the necessity of so many offices being involved. 

STAFF COMMENTS ON THE DRAFT REPORT 

In their written comments, FDA headquarters staff disagreed with our options and 

conclusions regarding three of the four administrative reports. These comments contradict 

information provided during tracking interviews by Office of Financial Management staff, 

who acknowledged that these reports could be required less frequently, and layers of 

review could be eliminated without adverse consequences. 

The purpose of our methodology is to identify and track internal controls and management 

regulations that may be unduly burdensome or unnecessary. This case study describes one 

category of management regulations and internal controls, administrative reports, that staff 

identified as problematic. Clearly, it is FDA management’s responsibility to determine if 

the burden of these reports on district office and headquarters staff outweighs their value. 

23

THE ROLE OF THE REGIONAL OFFICE IN THE ADMINISTRATION 

OF THE COMMUNITY HEALTH CENTER (CHC) PROGRAM 

Regional office staff, who used to have significant input into decisions to award and renew 

grants and oversee CHC grantees, question their role since central office staff and 

contracted consultants have assumed more responsibility. Staff believe this is 

inappropriate, because they have more day-to-day contact with individual grantees than 

either of these other entities. Through management regulation and internal control 

tracking, we found that most changes in the CHC program were mandated by Congress. 

BACKGROUND 

Section 330 of the Public Health Service Act authorizes the federal government to provide 

grants for community-based organizations to provide primary and preventive health care to 

populations who would otherwise lack access to such care. The Bureau of Primary Health 

Care (BPHC) within the Health Resources and Services Administration is responsible for 

administering the CHC program. 

Organizations submit applications for CHC funding to BPHC which determines who will 

receive funding and the amount of each award. Grantees typically receive multiple year 

grant awards but must submit annual renewal applications during the grant period. 

Grantees that wish to continue receiving CHC grants at the end of their grant periods must 

submit a project period renewal application. In most cases, renewal is automatic, except 

when another organization wishes to compete for CHC funding or when the existing 

grantee has serious service delivery or administrative problems. In these cases, staff must 

conduct site visits and document grantees’ problems prior to defunding them. 

Regional office staff conduct a variety of activities related to grantee funding and 

operation. While many of these activities support central office’s decision-making 

authority when awarding new grants and renewing the grants of existing grantees, the 

regional office is also the primary point of contact for CHC grantees. Regional office staff 

duties include: 

reviewing applications for new and continued funding;


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


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


conducting Primary Care Effectiveness Reviews of grantees that are applying for


grant renewals; and


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


delivery and/or administrative problems.


STAFF CONCERNS 

Regional office staff described a number of management regulations and internal controls 

that they believe are questionable or unnecessary. Staff believe that central office 

implemented these controls and management regulations to ensure fairness and uniformity 

24 
in grants administration. They expressed serious concerns, however, about the 

effectiveness of these controls. They stated that: 

For applications for continuing and renewing grants, central office simply concurs 

with regional recommendations and therefore is frequently an unnecessary layer of 

review. Regional staff could not recall an instance where central office did not 

concur with their recommendation for a grant continuation or renewal and therefore 

questioned central office’s involvement in the process. 

Central office should allow regional offices to approve grantees’ requests to 

reprogram and carry-over budget dollars. The regional office has the most contact 

with grantees and generally knows firsthand about the situations that would cause 

them to request reprogramming and carry-overs, because it has routine oversight 

responsibility. Central office does not have that kind of knowledge and must base 

its decisions on regional office input and grantee lobbying. 

While regional offices have limited resources to conduct site visits, central office 

spends thousands of dollars each year for consultants to provide on-site technical 

assistance and conduct reviews. While some of these consultants provide 

specialized technical assistance, others are simply former regional office staff. 

Current regional office staff question the appropriateness of these expenditures, 

since they believe that they are qualified to conduct these site visits. In addition, 

they noted that they frequently must consolidate or summarize consultants’ reports 

into their own grantee reports or rewrite them to conform to central office’s 

preferred format. 

Grantees circumvent the regional offices by going "over their heads" when 

reviewers find problems. Although reviewers might believe that a certain course of 

action is necessary, the regional office is left "out of the loop" when it comes to 

corrective action decisions. Central office is particularly susceptible to lobbying 

efforts and should allow regional offices to make the final corrective action 

decisions. 

TRACKING AND ANALYSIS 

While several of the above issues appear to be policy choices, federal law does not allow


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


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


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


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


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


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


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


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


25

According to central office staff, consultants have become more important in monitoring 

and technical assistance for several reasons. First, Congress enacted a cap on federal 

agency travel costs, but this cap does not apply to contracted service providers. Second, 

consultants provide specialized expertise on areas of current concern, such as managed care 

principles. Third, central office encourages more peer-to-peer interaction and assistance by 

using other CHC administrators and providers to conduct on-site technical assistance and 

review. The practice of using former staff as consultants is limited. These staff are 

experts in certain areas and help provide assistance to CHCs while staying under Congress’ 

travel cap. 

Central office staff acknowledged that grantees sometimes bypass regional offices and seek 

relief from them when reviewers find problems during site visits. Central office staff 

emphasized that decisions about how they should address these grantees are always made 

in concert with regional office managers, but line staff are not always involved. According 

to one staff person, regional office reviewers are more likely to endorse defunding grantees 

than central office, which will use this option only as a last resort because the community 

might lose all access to health care. 

CONCLUSIONS/OPTIONS 

Congress’ mandate conflicts with the National Performance Review which endorses a 

strong regional office role. Chapter 3 focuses on staff empowerment and decisions being 

made at the level closest to the customer: 

We must give decision making power to those who do the work, pruning 

layer upon layer of managerial overgrowth.... We must offer top-down 

support for bottom-up decisionmaking.... America’s best-run businesses are 

realizing enormous cost savings and improving the quality of their products 

by pushing decisions down as far as possible and eliminating unnecessary 

management layers. The federal government will adopt this decentralized 

approach as its new standard operating procedure. This technique can 

unearth hundreds of good ideas, eliminate employee frustration, and raise 

the morale and productivity of an entire organization. Put simply, all 

federal agencies will delegate, decentralize, and empower employees to 

make decisions. This will let front-line and front-office workers use their 

creative judgment as they offer service to customers and solve problems.... 

The Office of the Secretary or HRSA would have to petition Congress to revise the law if 

they wish to change the CHC administration system. Overall, HRSA has little legal 

authority to delegate CHC decisions to regional offices. Central office has assumed many 

of the roles traditionally held by regional offices. While central office staff emphasized 

that the regional office remains the focal point for grantee interaction, regional office staff 

do not believe that they have much authority and their morale appears to be low. Regional 

office staff were not aware of the statutory basis for some of the controls and management 

regulations. If Congress does not ease the requirements, HRSA should educate regional 

office staff about the mandates. Central office could also make a special effort to include 

26 
regional line staff along with their managers in conference calls to decide on corrective 

actions for problematic grantees, as well as other action items. 

While using consultants is desirable in some cases, the Congressionally-mandated travel 

cost cap results in instances where HRSA must use consultants rather than regional office 

staff. In these cases, one could argue that using consultants is not necessarily costeffective, and the travel cap actually results in higher cost to the taxpayer. 

STAFF COMMENTS ON THE DRAFT REPORT 

In their written comments, HRSA staff stated the future role and responsibilities of 

regional staff will be clearly defined in HRSA’s 1996 reorganization plans. They also 

maintained that they have not used consultants merely to stay under the mandated travel 

cap. This contradicts assertions made by central and regional office staff during tracking 

interviews. 

27

PURCHASING A COMPUTER IN AN IHS AREA OFFICE 

Purchasing a computer in an IHS area office involves multiple requirements for approval


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


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


in area procurement authority promises to facilitate buying a computer,


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


BACKGROUND 

The process of purchasing a computer in an IHS area office begins when a staff person 

fills out a requisition either on IHS’ automated procurement system or HHS form 393. 

Besides obtaining approval from a direct supervisor, the person requesting the purchase 

must also obtain the approval of (1) the Automated Data Processing (ADP) Committee, 

(2) the Information Systems Coordinator, (3) the Property Management Officer, (4) the 

Financial Management Officer, (5) an executive administrator, and (6) the Contracting 

Officer. 

If the total cost of the purchase falls within delegated limits, the area office Contracting 

Officer can process a purchase order for the computer. Requisitions for a computer 

purchase above these limits must be forwarded to the IHS’ Office of Information 

Resources Management (OIRM) in headquarters. The OIRM has purchase authority up to 

$2.5 million. Purchases greater than $2.5 million must have Departmental and/or General 

Services Administration (GSA) approval. 

STAFF CONCERNS 

Area office staff objected to: 

the number of officials who must approve the requisition within the area office; 

the requirement that the area office’s ADP Committee review and approve the 

requisition, because its members lack technical expertise and the committee does 

not meet on a regular basis; and 

the requirement that headquarters review certain multiple computer purchases. 

TRACKING AND ANALYSIS 

The IHS computer procurement requirements come from the area office, the Indian Health 

Manual, federal statutes, regulations, and OMB, GAO, HHS, and PHS policies. Primarily, 

computer procurement must comply with the Federal Acquisition Regulation [48 CFR 1], 

the Health and Human Services Acquisition Regulation [48 CFR 301], and the Federal 

Information Resources Management Regulation (FIRMR) [41 CFR 201]. Federal laws 

relating to IHS computer procurement include the Paperwork Reduction Act of 1980 [44 

U.S.C. 3501] and the Buy Indian Act Authority [25 U.S.C. 47]. Last year, Congress 

28 
passed the Federal Acquisition Streamlining Act, which, among other things, raised the 

simplified small purchase threshold to $100,000. The HHS is in the process of 

incorporating this act into the Health and Human Services Acquisition Regulation. 

Required area office approvals 

While some requirements for area office review originate in federal regulation or statute, 

the decisions to require ADP committee and executive administrator review were made by 

the area office. 

ADP Committee: The requirement for ADP Committee review of requisitions for 

computer equipment originates with the California Area Director. Impetus for this 

requirement was concern that too many lap-top computers were being purchased 

without adequate review of whether they were needed. Staff who had abused the 

purchase authority no longer work in the area office. At this time, the committee 

head reviews most requisitions without consulting the whole committee. 

The Information Systems Coordinator: The FIRMR and the delegation of authority 

from IHS headquarters give the area Information Systems Coordinator the authority 

to decide whether computer equipment should be purchased, and if so, what 

equipment best meets the needs, is compatible, and meets Energy Star requirements. 

The Property Management Officer: The Federal Property Management Regulations 

[41 CFR 101-26.101] require that agencies first check to see if excess property can 

satisfy the need. 

The Financial Management Officer: The General Accounting Office’s Policy and 

Procedures Manual directs agencies to implement fiscal control systems to ensure 

that agency expenditures do not exceed the appropriation, in accordance with the 

Anti-Deficiency Act [31 U.S.C. 1341]. 

An executive administrator: It is internal area office policy that the Associate 

Director of the Office of Administration and Management approve requisitions. 

The Contracting Officer: Only Contracting Officers appointed in accordance with 

the Federal Acquisition Regulation may enter into a contractual commitment on 

behalf of the government. Due to a recently corrected material weakness in 

procurement, IHS exercises caution in delegating procurement authority to the area 

offices. 

Delegation of procurement authority to the area office 

The limit on what computer purchases can be processed in the area office stems from the


delegation of procurement authority specific to Federal Information Processing


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


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


29 
GSA gave HHS procurement authority for $10 million ($1 million noncompetitive). 

HHS delegated authority for $5 million ($500,000 non-competitive) to individual 

agencies, including IHS. 

Within IHS, OIRM has procurement authority for $2.5 million ($250,000 noncompetitive). 

OIRM delegated procurement authority to each area director, who in turn delegated 

authority to the Information Systems Coordinator. Each area office has authority 

up to: 

(1) the small purchase limit--currently $25,000; or 

(2) for GSA-schedule, the smaller of $250,000 or the schedule limit. 

While the amount delegated to the area office used to be only $5,000 for computer 

equipment, OIRM increased the delegation in July 1994. Now, almost all computer 

purchases can be approved in the area office. 

CONCLUSIONS/OPTIONS 

Increased delegation of procurement authority for Federal Information Processing resources 

to the area office has substantially reduced the number of computer purchases that must be 

reviewed and processed in headquarters. Staff reported the increased delegation was a 

great improvement. 

Although many of the requirements on computer procurement are government-wide, 

HHS and its agencies can make efforts to streamline procurement and other requirements 

further. The HHS should consider coordinating the implementation of the Federal 

Acquisition Streamlining Act with the recommendations of a departmental workgroup on 

streamlining acquisition requirements. 

Within IHS, the number of approval levels could be streamlined without undermining the 

need to ensure that all acquisitions are not only necessary and economical but also 

compatible with current equipment and consistent with IHS’ IRM strategic plan. The area 

office could reduce or eliminate the requirement for ADP Committee approval. It also 

could evaluate the need for an executive administrator’s review of computer purchases. 

The Information Systems Coordinator has been delegated this authority from the Area 

Director and has already reviewed the proposed purchase. 

30

IHS CONFERENCE MANAGEMENT 

Annually, the IHS area office submits a proposed conference plan for headquarters review. 

Area office staff believe this review takes too much time and requires excessively detailed 

documentation. Conference management controls stem from IHS policy, HHS policy, 

GSA’s Federal Travel Regulation, and OMB Bulletin 93-11. The IHS may want to 

consider delegating authority for conference management and reducing duplication of 

records maintenance. 

BACKGROUND 

Annually, IHS determines which proposed conferences will take place that fiscal year. 

Under IHS conference management procedures, any conference for 30 or more 

IHS-sponsored participants must be part of a conference plan that is subject to reviews by 

area office and headquarters staff. The conference plan must be approved by: 

the Area Director, in consultation with the area office’s Executive Committee; 

the headquarters Office of Administration and Management, Division of 

Administrative Services, which verifies that the required documentation has been 

submitted; 

the Executive Leadership Group of the Council of Area and Associate Directors, 

which recommends approval of proposals to the Director; and 

the Director of IHS. 

Each conference proposal includes a description of the conference’s purpose and benefits, a 

tentative agenda, a cost comparison for three proposed sites including travel and 

employees’ time costs, and a justification if the site is in a resort area that may appear 

extravagant to the public. Area offices submit detailed reports on the conferences held 

during the year to headquarters by October 15 of the next fiscal year. Both the area office 

and headquarters maintain these records for 3 years. 

STAFF CONCERNS 

Many IHS area office staff said the procedure for submitting an annual conference plan for 

headquarters approval takes too much time. Although IHS headquarters is supposed to 

approve plans by October 15, area office staff stated that they must wait until February or 

March of the following year to learn whether the plan has been approved. Staff avoid 

planning conferences for the first quarter of the fiscal year, because the plan may not be 

approved in time. Some staff believe the review takes too long because too many officials 

must approve the conference plan. 

Some area office staff questioned why the conference management policy requires them to 

submit such detailed information in each conference proposal. Other staff believe the 

31 
requirement to keep detailed records on conferences for 3 years wastes file space in both 

the area offices and headquarters. 

TRACKING AND ANALYSIS 

Conference management policy appears in the IHS General Administration Manual Chapter


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


Chapter 1-40, GSA Federal Travel Regulation provisions


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


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


regulatory or statutory bases.


Conference management approval procedures were strengthened in recent years in response


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


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


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


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


process of rescinding its conference management policy, however.


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


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


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


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


involving travel of 30 or more participants;


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


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


Prevention and Control Guidelines for Places of Public Accommodation


[15 U.S.C. 2225];


agencies document cost comparisons for alternative conference sites, including the


travel and time costs for all conference participants; and


agencies keep these records for 3 years.


The IHS policy on conference management exceeds the requirements of the Federal Travel 

Regulation and the HHS policy because it: 

requires the Area Director’s approval before sending the plan to headquarters; 

charges the Executive Leadership Group with reviewing plans and recommending 

them to the Director; 

32

--

designates the Director, or his/her designee, as the only IHS official who may 

approve the annual IHS Conference Plan in practice the IHS has not delegated 

authority past the Director; and 

requires both area office and headquarters staff to maintain records. 

The IHS staff said the review by the Executive Leadership Group is time-consuming, 

primarily because IHS’ appropriation is always delayed, the group’s workload is 

burdensome, and it meets infrequently. Other staff pointed out that the group’s review is 

beneficial because its diverse members contribute different viewpoints and specialized 

knowledge. For example, a member of the group who is a clinician can review a 

conference proposal to determine whether the clinical aspects of a conference are 

appropriate and necessary. 

Headquarters staff believe the current procedures have increased fiscal responsibility, saved 

money, and resulted in a greater percentage of funds for direct service delivery. They also 

believe, however, that the procedures could be streamlined by eliminating excessively 

detailed documentation which would provide for a more timely approval process. 

CONCLUSIONS/OPTIONS 

While IHS has experienced positive results in controlling costs and potential 

mismanagement, it nevertheless has developed requirements that many consider too 

bureaucratic, excessive, and time-consuming. To improve and simplify the conference 

management procedures, IHS may want to consider: 

delegating approval authority to a level lower than the Director; 

using alternatives to Executive Leadership Group review, such as review and 

recommendation by headquarters Office of Administration and Management; 

allowing certain types of conferences to go through less strenuous review and/or 

implementing prior approval requirements; 

maintaining conference management records in one site to save file space and staff 

resources; 

using a different review cycle, other than annual, to distribute the workload over the 

year; and 

working with HHS officials, including the OIG to see how the recision of the 

HHS conference management policy will affect IHS’ policy options. 

33

AGENCY COMMENTS


We received comments on the draft report from the Assistant Secretary for Planning and 

Evaluation (ASPE). We did not receive formal comments from the Director of IHS, the 

Administrator of HRSA, or the Commissioner of FDA, although we did receive comments 

from their staff. The ASPE believes that the tracking and analysis methodology will assist 

the Department in its efforts to reduce unnecessary management regulations and internal 

controls. The IHS staff concurred with ASPE. 

The HRSA staff did not comment on the tracking and analysis methodology. They did, 

however, mention that the concerns expressed in the community health center program 

case study will be addressed in HRSA’s 1996 reorganization plan. 

The FDA staff also did not comment on the tracking and analysis methodology. Staff 

provided technical comments on the case studies that differed from those we received 

during the course of our inspection. Clearly, FDA management will have to determine 

how it can best balance the need to meet the requirements set forth in Executive Order 

12861 with their staff’s perceived need for continuation of certain management reports and 

processes. 

The full text of the comments appears in Appendix B. 

34

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