Report to Congressional Committees

United States Government Accountability Office

GAO

April 2005 HEALTH CARE 

FRAUD AND ABUSE 

CONTROL PROGRAM

Results of Review of 

Annual Reports for 

Fiscal Years 2002 and 

2003 

GAO-05-134 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-134.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Linda Calbom 

at (202) 512-8341 or calboml@gao.gov. 

Highlights of GAO-05-134, a report to 

congressional committees 

April 2005

HEALTH CARE FRAUD AND ABUSE 

CONTROL PROGRAM 

Results of Review of Annual Reports for 

Fiscal Years 2002 and 2003 

Our review of the HCFAC program for fiscal years 2002 and 2003 determined 

the following: 

• Amounts reported as trust fund deposits --$766 million (fiscal year 2002) 

and $243 million (fiscal year 2003)--were appropriate. The sources of 

these deposits were primarily penalties and multiple damages and 

criminal fines collected from health care fraud cases. 

• Amounts reported as appropriations from the trust fund for HCFAC 

activities—$209 million (fiscal year 2002) and $240 million (fiscal year 

2003) --were consistent with HIPAA. The HHS/OIG received funds within 

the minimum and maximum amounts allowed by HIPAA to carry out 

Medicare and Medicaid antifraud activities. The expenditures charged 

against HCFAC funds by HHS and DOJ for fiscal years 2002 and 2003 

were reasonable but the HHS/OIG did not record time charges in its 

workload systems for all staff that worked on HCFAC activities. Also, 

DOJ did not record all fiscal year 2003 expenditures in its accounting 

system so they could be readily identified as HCFAC related. Failure to 

properly record staff hours and expenditure data could hinder DOJ and 

HHS in monitoring the uses of HCFAC funds. 

• Some reported cost savings--$19.9 billion (fiscal year 2002) and 

$20.8 billion (fiscal year 2003) can be considered savings to the trust 

fund, resulting from trust fund expenditures for the HCFAC program, but 

most can not. For example, $1.5 billion of the cost savings for fiscal year 

2002 and $3.9 billion for fiscal year 2003 are the result of HHS/OIG 

recommendations and other initiatives since the HCFAC program was 

created. However, the remaining cost savings continued to be largely 

the result of actions that predate the HCFAC program and cannot be 

associated with expenditures from the trust fund for HCFAC. 

• HIPAA requires that HHS and DOJ issue to Congress a joint HCFAC 

report on January 1 of each year. However, DOJ and HHS have issued 

the last three reports late and the length of the delay has increased each 

year. HHS and DOJ cited onerous internal review processes as the 

reason for late issuance. 

Joint HCFAC Report Issue Dates for Fiscal Years 2001, 2002, and 2003 

Report fiscal year Mandated date of report Actual date of report 

Number of 

months late

 2001 January 1, 2002 April 2002 4

 2002 January 1, 2003 September 2003 9

 2003 January 1, 2004 January 2005 12

Source: GAO based on the joint HCFAC reports for fiscal years 2001, 2002, and 2003. 

Because of the susceptibility of 

health care programs to fraud and 

abuse, Congress enacted the Health 

Care Fraud and Abuse Control 

(HCFAC) program as part of the 

Health Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

Pub. L. No. 104-191. HIPAA 

requires that the Departments of 

Health and Human Services (HHS) 

and Justice (DOJ) issue a joint 

annual report to Congress on 

amounts deposited to the Federal 

Hospital Insurance Trust Fund and 

amounts appropriated from the 

trust fund for the HCFAC program. 

It also requires GAO to submit 

reports biennially. This, our final 

report required by law, provides 

the results of our review of 

amounts reported as (1) deposits to 

the trust fund, (2) appropriations 

from the trust fund and 

justification for expenditure of 

such amounts by HHS and DOJ, 

and (3) savings resulting from 

expenditures from the trust fund. 

We also report on the repeated late 

issuance of the annual HCFAC 

report as well as the status of our 

prior recommendations. 

What GAO Recommends

We made three recommendations 

to improve HHS’s and DOJ’s 

procedures for recording HCFAC 

expenditures and issuing the 

annual HCFAC report. In response, 

HHS and DOJ stated that they are 

taking action to improve these 

activities but did not agree on 

notifying Congress of delays in 

issuing the HCFAC report by the 

mandated deadline. 
Page i GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

Letter 1

Results in Brief 3 

Background 5 

Amounts Reported As Deposits to the Trust Fund Were 

Appropriate 8 

Amounts Appropriated from the Trust Fund Were Consistent with 

HIPAA and Reported Expenditures Were Reasonable 10 

Some Reported Cost Savings Are Related to Trust Fund 

Expenditures for HCFAC, but Most Are Not 17 

Repeated Delays in Issuing the HHS and DOJ Joint HCFAC Reports 

Impact Relevance of Data 18 

Conclusions 19 

Recommendations for Executive Action 19 

Agency Comments and Our Evaluation 20 

Appendix I Scope and Methodology 23 

Appendix II Status of Prior-Year Recommendations 28 

Appendix III Comments from the Department of Health and 

Human Services 30 

Appendix IV Comments from the Department of Justice 32 

Appendix V GAO Contact and Acknowledgments 34 

Related GAO Products 35 

Tables 

Table 1: Amounts Appropriated For HCFAC, Fiscal Years 1997 

through 2003 7 

Contents 
Page ii GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

Table 2: HHS/OIG Funding Sources–Unaudited 13 

Table 3: Joint HCFAC Report Issue Dates for Fiscal Years 2001, 

2002, and 2003 18 

Figures 

Figure 1: Reported Fiscal Years 2002 and 2003 Deposits to the 

Trust Fund Pursuant to HIPAA (Dollars in millions) 9 

Figure 2: Reported Fiscal Years 2002 and 2003 Allocations (Dollars 

in millions) 11 

Abbreviations 

HCFAC Health Care Fraud and Abuse Control program 

HIPAA Health Insurance Portability and Accountability Act 

HHS Department of Health and Human Services 

DOJ Department of Justice 

OIG Office of the Inspector General 

CMS Centers for Medicare and Medicaid Services 

OAS Office of Audit Services 

OEI Office of Evaluations and Inspections 

OI Office of Investigations 

OMP Office of Management and Policy 

USAO United States Attorneys Office 

FTE full-time equivalents 

CBO Congressional Budget Office 

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Page 1 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

April 29, 2005 

Congressional Committees 

Congress enacted the Health Care Fraud and Abuse Control (HCFAC) 

program as part of the Health Insurance Portability and Accountability Act 

of 1996 (HIPAA), Public Law 104-191, to help combat fraud and abuse in 

health care programs, including the Medicare and Medicaid programs. 

Since 1990, we have designated Medicare a high-risk program, vulnerable 

to exploitation in part because of its sheer size—estimated fiscal year 2004 

outlays were $297 billion with net improper payments of $20 billion, 

covering more than 41 million elderly and disabled enrollees. In addition, 

in 2003 we designated Medicaid a high-risk program, in part because of 

concerns about the quality of fiscal oversight needed to prevent 

inappropriate program spending—fiscal year 2003 costs were about 

$274 billion. 

HCFAC, which is administered by the Department of Health and Human 

Services (HHS) and the Department of Justice (DOJ), established a 

national framework to coordinate federal, state, and local law 

enforcement efforts to detect, prevent, and prosecute health care fraud 

and abuse in the public and private sectors. 

HIPAA requires that HHS and DOJ issue a joint annual report to Congress 

no later than January 1 of each year on (1) amounts deposited to the 

Federal Hospital Insurance Trust Fund1

 pursuant to HIPAA for the 

previous fiscal year and the source of such amounts and (2) amounts 

appropriated from the trust fund for each year and the justification for the 

expenditure of such amounts. HHS and DOJ have issued seven joint 

reports, which covered HCFAC-related activities for fiscal years 1997 

through 2003. 

HIPAA, as amended by the Balanced Budget Act of 1997,2

 also mandates 

that we issue a report, no later than January 1, 2004, that identifies the 

 1

 The Hospital Insurance Trust Fund funds the Medicare Part A program, which helps pay 

for hospital, home health, skilled nursing facility, and hospice care for the aged and 

disabled. 

2

 Pub. L. No. 105-33, 111 Stat. 251 (August 5, 1997). 

United States Government Accountability Office

Washington, DC 20548 
Page 2 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

information reported by HHS and DOJ in their fiscal years 2002 and 2003 

joint HCFAC report. The law also requires that our report include any 

savings resulting from expenditures from the trust fund and any other 

aspects of the operation of the trust fund that we consider appropriate. 

HHS and DOJ were required to issue the joint HCFAC report for fiscal year 

2002 in January 2003 but did not issue the report until September 2003. 

Further, the deadline for issuing the fiscal year 2003 joint HCFAC report 

was January 2004 but the report was not issued until a year later in 

January 2005. Because complete information needed to perform our 

review was not available, we could not meet our reporting deadline of 

January 1, 2004.3

To fulfill our reporting requirements, we assessed the reliability of 

information reported by HHS and DOJ for fiscal years 2002 and 2003 as 

(1) deposits to the trust fund4

 and the sources of such amounts, 

(2) appropriations from the trust fund for HCFAC and justification for the 

expenditure of such amounts, and (3) savings resulting from expenditures 

from the trust fund. We also provide information on issues related to the 

repeated late issuance of the HHS and DOJ joint HCFAC report as well as 

a summary of the status of recommendations made in our prior reports 

(See app. II). 

To assess the reliability of information reported by HHS and DOJ in the 

joint HCFAC reports for fiscal years 2002 and 2003, we (1) obtained 

documentation supporting the various types of deposits and tested 

selected deposit transactions on a statistical basis to determine whether 

the proper amounts were deposited to the trust fund; (2) reviewed and 

analyzed documentation supporting the certification of appropriations 

from the trust fund to HHS and DOJ; (3) reviewed the justification for 

expenditures included in the HHS and DOJ reports; (4) analyzed DOJ and 

 3

 As we have previously stated in our reports on HCFAC program activities for fiscal years 

1998, 1999, 2000, and 2001, even if the HHS and DOJ joint report for fiscal year 2003 was 

issued on time (January 2004), this would not have provided sufficient time for us to 

perform our review and to meet our legislated reporting date of January 2004. 

4

 As reported in the past, the HHS and DOJ joint reports include other amounts collected in 

connection with health care fraud activities, including recovered OIG audit disallowances 

and restitution and compensatory damages. Such amounts for fiscal year 2002 totaled 

$701 million and $480 million for fiscal year 2003. Because HIPAA does not require these 

amounts to be deposited to the trust fund, we did not verify the reported amounts. 

According to HHS and DOJ, they are returned to the trust fund to the extent that they 

represent repayments to Medicare. 
Page 3 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

HHS methodologies for charging expenditures against HCFAC 

appropriations; (5) tested selected expenditure transactions to determine 

whether the expenditures were in support of the HCFAC program; 

(6) reviewed the supporting documentation related to selected cost 

savings amounts; and (7) interviewed HHS, HHS Office of Inspector 

General (OIG), and DOJ personnel. 

We conducted our work from August 2003 through January 2005 in 

accordance with U.S. generally accepted government auditing standards. A 

detailed discussion of our scope and methodology is contained in 

appendix I. We requested comments on a draft of this report from the 

Secretary of HHS and the Attorney General or their designees. We received 

written comments from the Acting Inspector General of HHS and the 

Assistant Attorney General for Administration at DOJ. We have reprinted 

their responses in appendixes III and IV, respectively. 

The HHS and DOJ joint HCFAC reports for fiscal years 2002 and 2003 

stated that about $766 million in fiscal year 2002 and $243 million in fiscal 

year 2003 were deposited into the trust fund pursuant to HIPAA. The 

sources of the deposits were primarily penalties and multiple damages and 

criminal fines resulting from health care fraud audits, evaluations, 

investigations, and litigation. The considerable difference in the deposits 

reported for fiscal year 2002 and 2003 was primarily due to large amounts 

collected from two cases settled in prior years. Our work determined that 

the reported amounts of HCFAC deposits for fiscal years 2002 and 2003 

were appropriate. However, we did identify a relatively minor 

mathematical error in an adjustment made by DOJ to the amount of 

criminal fine deposits reported for fiscal year 2002 in the HCFAC joint 

report. This error was not corrected until fiscal year 2004 and therefore 

not reflected in the 2003 HCFAC joint report. 

We determined that amounts appropriated from the trust fund for HCFAC 

activities—$209.2 million in fiscal year 2002 and $240.6 million in fiscal 

year 2003—were consistent with HIPAA and that the amount of HCFAC 

funds specified in the joint reports was made available to HHS and DOJ. 

We also determined that the expenditure of such amounts was reasonable, 

although some expenditure data were not properly captured in agency 

information systems. For example, staff hours for all staff working on 

HCFAC activities were not tracked in HHS/OIG workload tracking 

systems. Incomplete data on staff hours could hinder the OIG’s ability to 

monitor and ensure that staff perform HCFAC-related work as planned. 

Also, in recording some fiscal year 2003 HCFAC expenditures in its 

Results in Brief 
Page 4 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

accounting system, DOJ did not adhere to its accounting policy, which 

requires DOJ components to record all HCFAC expenditures under 

accounting codes designated for HCFAC. This lack of specificity in 

recording HCFAC expenditures could hinder DOJ’s ability to monitor uses 

of the funds. 

For the first time, there were some reported savings to the trust fund, 

resulting from trust fund expenditures for the HCFAC program. The joint 

HCFAC reports cited cost savings5

 of nearly $19.9 billion for fiscal year 

2002 and $20.8 billion for fiscal year 2003, as a result of HHS/OIG 

recommendations and other initiatives. Of these amounts, about 

$1.5 billion in cost savings for fiscal year 2002 and $3.9 billion for fiscal 

year 2003 resulted from actions taken since the HCFAC program was 

created. However, the remaining cost savings relate to actions that predate 

the HCFAC program and cannot be associated with expenditures from the 

trust fund for HCFAC activities. Further, since audit, evaluation, 

investigation, and litigation activities typically span several years, savings 

from such activities in fiscal years 2002 and 2003 may not be realized until 

future years. 

Finally, we experienced significant delays in completing our review of 

fiscal years 2002 and 2003 HCFAC activities due to the late issuance of the 

HHS and DOJ joint reports that HIPAA requires the agencies to issue by 

January 1st of each year. For example, the joint report for fiscal year 2002 

was due January 1, 2003, but was not issued until 9 months later in 

September 2003. Likewise, the report for fiscal year 2003, due January 1, 

2004, was issued 12 months late in January 2005. DOJ and HHS officials 

reported that onerous internal review processes have impacted the 

timeliness of report issuance. Taking steps to streamline these processes 

is needed to ensure that Congress has timely information to use as it 

makes decisions on the HCFAC program funding. 

To address the issues that we identified in HHS’s procedures for recording 

staff hours and DOJ’s processes for recording HCFAC expenditures, we 

are making recommendations to HHS and DOJ to develop additional 

procedures for these activities. We are also making a recommendation to 

help ensure that the HCFAC reports are issued in a more timely manner. In 

 5

 Cost savings are estimated savings resulting from health care funds not being expended in 

future years due to legislative or regulatory changes. Cost savings differ from collections 

that are deposited to the trust fund. 
Page 5 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

commenting on a draft of this report, HHS and DOJ generally agreed with 

our recommendations and stated that they are already taking action to 

improve procedures for recording staff hours and HCFAC expenditures as 

well as procedures for approving the HCFAC report. However, HHS and 

DOJ did not agree with our recommendation that they report to Congress 

delays in issuing the HCFAC report by the mandated deadline. In their 

comments, HHS and DOJ noted that additional reporting, which requires 

clearance through both departments would be counterproductive to 

clearing the annual HCFAC report and of little value to Congress. We 

disagree. Congress should be informed if reports that it may use in making 

future program funding and oversight decisions are not expected to be 

issued by the mandated report deadline. In addition, the mechanism for 

reporting such delays could be as simple as an electronic mail message to 

all the committees of jurisdiction and therefore would not cause any 

undue burden. HHS and DOJ also provided us with technical comments, 

which we have incorporated as appropriate. 

HIPAA established the HCFAC program to consolidate and strengthen 

ongoing efforts to combat fraud and abuse in health care programs and 

expand resources for fighting health care fraud. The Attorney General and 

the Secretary of HHS through the HHS Office of Inspector General 

(HHS/OIG) administer HCFAC. The HCFAC program goals are to 

• coordinate federal, state, and local law enforcement efforts to control 

fraud and abuse associated with health plans; 

• conduct investigations, audits, and other studies of delivery and payment 

for health care for the United States; 

• facilitate the enforcement of the civil, criminal, and administrative statutes 

applicable to health care; 

• provide guidance to the health care industry, including the issuance of 

advisory opinions, safe harbor notices, and special fraud alerts; and 

• establish a national database of adverse actions against health care 

providers. 

HIPAA requires the following types of collections to be deposited in the 

trust fund: 

• criminal fines recovered in cases involving a federal health care offense; 

Background 
Page 6 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

• civil monetary penalties and assessments imposed in health care fraud 

cases; 

• amounts resulting from the forfeiture of property by reason of a federal 

health care offense; 

• penalties and damages obtained and otherwise creditable to miscellaneous 

receipts of the general fund of the Treasury obtained under sections 3729 

through 3733 of Title 31, United States Code (commonly known as the 

False Claims Act), in cases involving claims related to the provision of 

health care items and services (other than funds awarded to a relator,6

 for 

restitution, or otherwise authorized by law); and 

• unconditional gifts and bequests. 

Funds for the HCFAC program are appropriated from the trust fund to an 

expenditure account, referred to as the Health Care Fraud and Abuse 

Control Account (control account) maintained within the trust fund. The 

Attorney General and the Secretary of HHS jointly certify that the funds 

transferred to the control account are necessary to finance health care 

fraud and abuse control activities. Only a portion of the funds collected 

and deposited to the trust fund are appropriated to the control account 

annually for the HCFAC program. 

The maximum amounts that may be appropriated for HCFAC each year 

are specified by HIPAA. The maximum amount for fiscal year 1997, the 

first year of HCFAC, was $104 million and HIPAA limited the amounts for 

each of the fiscal years 1998 through 2003 to an amount equal to the limit 

for the preceding fiscal year increased by 15 percent. For each fiscal year 

after 2003, the amount made available was capped at the 2003 limit (See 

table 1). 

 6

 A relator is a private citizen who files a qui tam suit on behalf of the federal government 

under the provisions of the False Claims Act. 
Page 7 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

Table 1: Amounts Appropriated For HCFAC, Fiscal Years 1997 through 2003 

Dollars in millions 

Year Amount 

1997 $104.0

1998 $119.6

1999 $137.5

2000 $158.2

2001 $181.9

2002 $209.2

2003 $240.6

Sources: The annual joint HHS and DOJ HCFAC reports for fiscal years 1997 through 2003. 

In addition to the annual limits on the total amount made available for 

HCFAC, HIPAA includes annual minimum and maximum amounts that are 

earmarked specifically for HHS/OIG activities for the Medicare and 

Medicaid programs. For example, of the $240.6 million available in fiscal 

year 2003, a minimum of $150 million and a maximum of $160 million were 

earmarked for the HHS/OIG to ensure continued efforts by the HHS/OIG to 

detect and prevent fraud and abuse in the Medicare and Medicaid 

programs. 

HHS’s Centers for Medicare and Medicaid Services (CMS) performs the 

accounting for the HCFAC control account. Prior to fiscal year 2003, CMS 

set up allotments in its accounting system for each of the HHS and DOJ 

entities receiving HCFAC funds. The HHS and DOJ entities accounted for 

their HCFAC obligations and expenditures in their respective accounting 

systems and reported them to CMS. CMS then recorded the obligations 

and expenditures against the appropriate allotments in its accounting 

system. However, for fiscal year 2003, HHS changed the method of 

providing funds to DOJ from a direct allotment to a reimbursable 

agreement. This change requires DOJ components to prepare and submit 

billing packages to CMS to obtain reimbursement from DOJ’s allotment of 

the HCFAC funds. 
Page 8 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

HHS and DOJ reported total deposits to the trust fund of about 

$766 million in fiscal year 2002 and $243 million in fiscal year 2003. On the 

basis of our review of a statistical sample of deposit transactions for fiscal 

years 2002 and 2003, we determined that the amounts HHS and DOJ 

reported as deposits to the trust fund were appropriate.7

 As shown in 

figure 1, these deposits primarily consisted of penalties and multiple 

damages and criminal fines collected as a result of health care fraud 

cases.8

 The considerable difference in the amount of criminal fines 

reported for fiscal year 2002 and 2003 is primarily due to large criminal 

fine collections from two major cases settled in prior years. In addition, 

the difference in the amount of penalties and multiple damages reported 

for fiscal years 2002 and 2003 was primarily due to collections of amounts 

from a major case settled in a prior year. 

 7

 See appendix I for statistical sample details. 

8

 HIPAA also requires that gifts and bequests and amounts resulting from the forfeiture of 

property in federal health care cases be deposited to the trust fund. Gifts and bequests 

totaled $6,820 for fiscal year 2002 but no amounts were reported for fiscal year 2003. Also, 

no amounts were reported for forfeitures for either year. 

Amounts Reported As 

Deposits to the Trust 

Fund Were 

Appropriate 
Page 9 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

Figure 1: Reported Fiscal Years 2002 and 2003 Deposits to the Trust Fund Pursuant 

to HIPAA (Dollars in millions) 

Related to our review of criminal fine deposits, DOJ provided us with 

supporting documents related to a $13.0 million adjustment that was 

calculated and reported to the Department of the Treasury in September 

2002 to correct the amount of criminal fine deposits previously reported in 

error. When we reviewed the supporting documents for the adjustment, 

we identified a mathematical error of approximately $130,000 in DOJ’s 

determination of the adjustment. While the amount of error has a minimal 

impact on the trust fund balance, we found that DOJ lacked supervisory 

review procedures for deposits, which may have contributed to the error 

going unnoticed. Lack of supervisory review could result in undetected 

material errors to the trust fund in the future. 

0

100

200

300

400

500

Civil monetary 

Criminal 

penalties

fines

Penalties and 

multiple damages

Dollars

Source: GAO, based on amounts reported in the Department of Health and Human Services and The Department of Justice Health 

Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2002 (Washington, D.C.: September 2003) and Department 

of Health and Human Services and The Department of Justice Health Care Fraud and Abuse Control Program Annual Report for 

Fiscal Year 2003 (Washington, D.C.: January 2005).

FY 2002 = 765.8

FY 2003 = 242.5

328.6

232.9

2.5

430.5

6.7 7.1
Page 10 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

The Comptroller General’s Standards for Internal Control in the Federal 

Government9

 state that management review is an important control 

activity in helping to ensure that all transactions are completely and 

accurately recorded. DOJ officials acknowledged the importance of this 

control activity and in response they developed new procedures to ensure 

proper review of all adjustments and deposit amounts before reports are 

sent to Treasury. In addition, in September 2004, DOJ made the necessary 

correction to the amount of criminal fine deposits reported to the trust 

fund. However, because the correction of the error was not made until 

after the end of fiscal year 2003, the HCFAC joint report for fiscal year 

2003 did not include the correction. 

In fiscal years 2002 and 2003, $209 million and $240 million, respectively, 

were appropriated from the trust fund for performing HCFAC program 

activities. On the basis of our review of supporting documents, we 

determined that these amounts were consistent with HIPAA and that the 

amount of HCFAC funds specified in the joint reports was made available 

to HHS and DOJ. We also determined that HHS’s and DOJ’s expenditure of 

amounts appropriated from the trust fund was reasonable. However, we 

did note that some data on expenditures were not included in HHS and 

DOJ information systems. For example, some staff hours needed to 

monitor payroll expenses were not tracked in HHS/OIG workload tracking 

systems. Also, DOJ did not record some expenditure data in its accounting 

system as HCFAC expenses and therefore could not provide an electronic 

file of all nonpayroll expenses from which we could select a statistical 

sample of these fiscal year 2003 expenses. We tested nonpayroll expenses, 

selected on a nonstatistical basis, from hard copy documents and 

determined that they were adequately supported and related to HCFAC. 

However, having all data on HCFAC expenses in its accounting system 

could help managers in monitoring how HCFAC funds are spent. 

 9

GAO, Standards for Internal Control in the Federal Government 

GAO/AIMD-00-21.3.1(Washington, D.C.: November 1999). 

Amounts 

Appropriated from 

the Trust Fund Were 

Consistent with 

HIPAA and Reported 

Expenditures Were 

Reasonable 
Page 11 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

HIPAA specifies the maximum amounts that may be appropriated from the 

trust fund each year for HCFAC, as well as a minimum and maximum 

amount of the appropriations that must go to the HHS/OIG for Medicare 

and Medicaid antifraud activities. For fiscal years 2002 and 2003, HHS and 

DOJ each received the maximum amount from the trust fund allowed 

under HIPAA. In addition, HHS and DOJ entered into memorandums of 

agreement to agree on how much of the HCFAC appropriation each HHS 

and DOJ unit would receive. The amount allocated to each unit was 

included in the HHS and DOJ joint reports and is depicted in figure 2. 

Figure 2: Reported Fiscal Years 2002 and 2003 Allocations (Dollars in millions) 

Reported Amounts 

Appropriated from the 

Trust Fund for HCFAC and 

General Uses of the Funds 

Were Consistent with 

HIPAA 

0

50

100

150

200

DOJ other 

DOJ Civil 

 Division

divisions

DOJ United 

States attorneys

HHS other 

components

HHS Center for Medicare 

and Medicaid Services

HHS Office of 

Inspector General

Dollars

145.0

160.0

23.4

2.7 6.3 7.8

25.2 30.4 26.0

14.5

4.0 4.5

Source: GAO, based on amounts included in the fiscal years 2002 and 2003 memorandum of agreement between HHS and 

DOJ, and the Office of Management and Budget form SF-132s, Apportionment and Reapportionment Schedule, for the Health 

Care Fraud and Abuse Control Account for fiscal year 2002 and fiscal year 2003.

FY 2002 = 290.2 total

FY 2003 = 240.6 total

Components
Page 12 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

In accordance with HIPAA, HHS/OIG was allocated amounts within the 

minimum and maximum funding allowed by statute—$145 million and 

$160 million, for fiscal years 2002 and 2003 respectively. In the HHS and 

DOJ joint report, the HHS/OIG, other HHS units, and DOJ provided 

information related to how the HCFAC funds were used. The HHS/OIG 

reported that its fiscal years 2002 and 2003 HCFAC funds were used in 

carrying out efforts to both detect health care fraud and abuse and prevent 

it. These efforts included several fraud prevention activities that reduced 

program losses as well as participation in prosecutions and settlements of 

cases involving Medicare and Medicaid fraud, and investigations, audits, 

and evaluations that helped reveal vulnerabilities or incentives for 

fraudulent practices. 

Other HHS components also reported on how they had expended their 

HCFAC funds including CMS. CMS received $2.7 million in fiscal year 2002 

and $23.4 million in fiscal year 2003. The increase in funding for fiscal year 

2003 was in support of several projects including the Medicaid Payment 

Accuracy Measurement Project, Medicare/Medicaid Data Analysis Project, 

and Medicaid Financial Management initiatives, including Medicaid Audits. 

DOJ reported that its funding was used to support its role in civil and 

criminal prosecution of health care professionals, providers, and others as 

well as its role in recovering funds that federal health care programs have 

paid as a result of fraud, waste, and abuse. 

We determined that expenditures charged by HHS and DOJ for HCFAC 

activities were reasonable. In evaluating HHS HCFAC expenditures, we 

focused on expenditures of the HHS/OIG. The HHS/OIG’s payroll and 

nonpayroll expenses represented about 96 percent of all HHS 

expenditures charged against HCFAC funds for fiscal years 2002 and 2003. 

We reviewed the methodology that the HHS/OIG used to charge 

expenditures against its HCFAC funding and determined that it was 

reasonable. The OIG charges a percentage of its total payroll and 

nonpayroll expenses to the HCFAC program. The percentage that is 

charged each year is based on the relative proportion of its annual HCFAC 

funding to its total funding. These amounts are then monitored throughout 

the year. As table 2 shows, HCFAC funding for fiscal years 2002 and 2003 

was 80 and 81 percent, respectively, of the OIG’s total funding. 

HCFAC Expenditures Were 

Reasonable but Some 

Expenditure Data Were 

Not Captured in HHS and 

DOJ Information Systems 
Page 13 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

Table 2: HHS/OIG Funding Sources–Unaudited 

Appropriation Amount Percentage

Fiscal year 2002 general $ 35,308,000 20

Fiscal year 2002 HCFAC $145,000,000 80

Fiscal year 2002 total $180,308,000 100

 

Fiscal year 2003 general $ 36,807,550 19

Fiscal year 2003 HCFAC $160,000,000 81

Fiscal year 2003 total $196,807,550 100

Source: HHS, Office of Inspector General, Justification of Estimates for Appropriations Committees for Fiscal Year 2004 and HHS, 

Office of Inspector General, Justification of Estimates for Appropriations Committees for Fiscal Year 2005.

HHS/OIG management takes several steps to help assure that HCFAC 

funds are expended on HCFAC-related activities. For one, management 

meets with its component offices at the beginning of the year to determine 

how much of each component’s resources will be devoted to HCFACrelated activities. Some component offices make plans to devote resources 

to HCFAC in excess of the 80-81 percent funding level, while other 

components plan to devote less. OIG management evaluates each 

component’s plans in relation to each component’s full-time equivalents 

(FTE)10 to ensure that OIG resources overall are spent on HCFAC activities 

in accordance with the funding level. In addition, throughout the year, 

three of the components, Office of Audit Services (OAS), Office of 

Evaluations and Inspections (OEI), and Office of Investigations (OI) track 

the staff time spent on various projects in their workload tracking system. 

The information in each component’s system is summarized and 

monitored quarterly to ensure that staff time is being spent on HCFAC in 

accordance with the funding. 

The OIG’s Office of Management and Policy (OMP) requests summary 

reports from the component offices that include the staff time spent on 

HCFAC activities and uses the information in determining if the OIG 

overall is performing HCFAC work as planned. The lead OMP staff person 

said that when material variances are identified in the amount of staff time 

 10 FTE employment is the measure of the total number of regular (nonovertime) hours 

worked by an employee divided by the number of compensable hours applicable to each 

fiscal year. A typical FTE work year is equal to 2,080 hours. Office of Management and 

Budget, The Budget for Fiscal Year 2003, Historical Table (Washington, D.C.: U.S. 

Government Printing Office, 2002) 
Page 14 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

devoted to HCFAC, the components are instructed to adjust the type of 

work performed. We reviewed the monitoring reports that the OMP staff 

prepares and these reports showed that the amount of time devoted to 

HCFAC activities for the OIG as a whole was in line with the planned 

amount. 

We also performed several tests on the information maintained in 

components’ workload systems as they are relied on in monitoring HCFAC 

payroll expenditures. For example, we analyzed the data in the 

components’ workload tracking systems to determine if the projects 

identified as HCFAC were appropriately classified as HCFAC-related in 

each component. We analyzed titles and supporting documents for all of 

the projects in the workload tracking systems of OAS and OEI—two 

components that account for about 55 percent of the OIG staff. We 

determined that the projects were appropriately classified as HCFAC or 

non-HCFAC. 

We also compared hours in the OAS, OEI, and OI workload tracking 

systems to hours in the payroll system to determine if the components’ 

systems included hours for all staff. We found that the hours recorded in 

OAS’s system agreed with hours in the payroll system. However, hours in 

OI’s and OEI’s systems did not agree with the payroll system. The OI 

system included approximately 52 percent fewer hours for fiscal year 2002 

and 44 percent fewer hours for 2003 than were in the payroll system. OI 

managers were aware of the variance and explained that until they 

recently implemented a new system, their workload system did not 

include staff hours for administrative and supervisory staff. In determining 

the amount of staff hours spent on HCFAC-related assignments, OI 

concluded that administrative and supervisory time was spent in the same 

relative percentages as the staff who recorded their time in the workload 

system. 

In June 2003, OI upgraded its workload tracking system to record hours 

for all staff. In addition, OI implemented new procedures to help ensure 

that all hours were recorded in its workload system. The procedures 

include weekly automatic, system-generated electronic mail messages that 

are sent to supervisors informing them of employees that did not record 

their time and a reconciliation of hours in the HHS payroll system to hours 

in the workload system that is performed during periodic inspections at 

regional offices. 

The OEI workload tracking system included about 12 percent fewer hours 

than the payroll system for fiscal years 2002 and 2003. OEI officials said 
Page 15 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

that they did not have procedures in place to identify missing hours. 

However, they believed that most of the people not entering data into the 

workload system were probably managers and administrative personnel 

whose hours would probably reflect the same allocation of hours between 

HCFAC and non-HCFAC work as those staff recording hours. In addition, 

the OMP staff person who monitored staff hours applied the HCFAC and 

non-HCFAC hours recorded in the workload system against the total FTEs 

for OEI to determine that the OIG as a whole performed HCFAC work as 

planned. Therefore, while this issue did not appear to impact the propriety 

of HCFAC payroll expenditures during our review period, incomplete staff 

hours in the component workload tracking systems could hinder OIG 

managers in monitoring the amount of HCFAC work performed in the 

future. Therefore, it is critical that all OIG components have procedures in 

place to ensure that workload data are complete. 

In assessing the reliability of DOJ fiscal year 2002 expenditures, we tested 

a statistical sample of the largest category of fiscal year 2002 nonpayroll 

expenses, which accounted for 69 percent of nonpayroll and 34 percent of 

DOJ’s total fiscal year 2002 HCFAC expenditures. We determined that 

nonpayroll expenses were adequately supported and related to HCFAC on 

the basis of our review of supporting documentation. 11 In addition, we 

reviewed the payroll expenses charged by DOJ’s United States Attorneys 

Office (USAO) against HCFAC funds that represented 76 percent of DOJ’s 

fiscal year 2002 HCFAC payroll expenditures and 38 percent of DOJ’s total 

fiscal year 2002 HCFAC expenditures. 

We determined that the USAO methodology for charging salaries to 

HCFAC was reasonable. USAO charged the full annual salaries of 160 

individuals against HCFAC program funds in fiscal year 2002 as a 

surrogate for the 160 FTEs that were funded by the program. USAO 

managers said that this was administratively easier than trying to charge a 

portion of the salary of all the staff that perform health care fraud and 

abuse work. To assess the reasonableness of this approach, we reviewed 

the hours recorded in the USAO workload system for fiscal year 2002. 

According to data in the system, USAO staff devoted about 587,168 staff 

hours (282.3 FTEs) to health care fraud-related activities during fiscal year 

2002, which was about 76 percent more than the 160 FTEs (332,800 hours) 

funded by the program. In addition, to ensure that the salaries charged to 

HCFAC were reasonable, we compared the average annual salaries for the 

 11 See appendix I for statistical sample details. 
Page 16 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

160 staff (i.e., attorneys, paralegals, and administrative staff) charged to 

the HCFAC account to the average annual salary for the same positions 

USAO-wide. We found that the salaries were generally comparable. 

Our review of DOJ’s fiscal year 2003 HCFAC expenditures also included a 

review of USAO salaries charged against HCFAC funds as these amounts 

represented 75 percent of DOJ’s fiscal year 2003 HCFAC payroll 

expenditures and 49 percent of all fiscal year 2003 HCFAC expenses. 

USAO charged the salaries of 162 individuals against HCFAC funding in 

fiscal year 2003. Our review procedures were similar to our work on 2002 

payroll expenditures, and we again found the payroll expenditure amounts 

to be reasonable. 

We also tested a nonstatistical selection of nonpayroll expenses for fiscal 

year 2003 from hard copy documentation included in DOJ billing 

packages.12 We determined that these expenses were adequately supported 

and related to HCFAC. We did not select a statistical sample of fiscal year 

2003 nonpayroll HCFAC expenses because DOJ could not provide an 

electronic file of detailed transactions from its accounting system for all 

nonpayroll HCFAC expenditures. Only one of the four DOJ components 

properly recorded expenditures under the specific HCFAC account class 

in the accounting system. DOJ accounting policy, issued March 2003, 

required that each DOJ component record expenses charged against 

HCFAC funds under a specific HCFAC account class so that they can be 

readily identified as related to HCFAC. 

Managers for the components that did not follow this accounting policy 

told us that they recorded their fiscal year 2003 HCFAC expenses at a 

summary level under an account class for general expenses and not under 

the HCFAC account class as required because they instead prepared the 

hard copy billing packages for reimbursement, which were supposed to 

provide details on HCFAC expenditures. However, we found that the 

billing packages contained varying levels of detail. Without the full detail 

recorded in the accounting system it is difficult to monitor HCFAC 

expenditures. In addition, the lack of such expenditure detail could 

impede DOJ officials’ ability to prepare meaningful budgets to support 

future HCFAC funding requests. 

 12 Billing packages contain documentation to support HCFAC expenditures that DOJ must 

submit to CMS for reimbursement of HCFAC expenditures under the reimbursable 

agreement for fiscal year 2003. 
Page 17 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

For the first time, some of the reported cost savings can be considered 

savings to the trust fund, resulting from trust fund expenditures for the 

HCFAC program. The joint reports cited cost savings13 of nearly 

$19.9 billion for fiscal year 2002 and $20.8 billion for fiscal year 2003, as a 

result of HHS/OIG recommendations and other initiatives. Of these 

amounts, about $1.5 billion in cost savings for fiscal year 2002 and 

$3.9 billion for fiscal year 2003 resulted from actions taken since the 

HCFAC program was created. However, the remaining cost savings 

($18.4 billion for fiscal year 2002 and $16.9 billion for fiscal year 2003) 

continued to be related to actions that predate the HCFAC program and 

cannot be associated with expenditures from the trust fund for HCFAC 

activities. Further, since audit, evaluation, investigation, and litigation 

activities typically span several years, savings from such activities in fiscal 

years 2002 and 2003 may not be realized until future years. 

As has been the case in the past, most of the audits and evaluations related 

to the reported cost savings (i.e., 47 of the 50 audits cited by the OIG) were 

done by the OIG before the HCFAC program was created. However, the 

HHS/OIG cited cost savings related to three reports that were issued in 

fiscal year 2000. 

One of the three reports, which consolidated the results of seven HHS/OIG 

audits on Medicaid enhanced payments, found that payments to some 

providers were not based on the cost of providing services. The report 

included recommendations that resulted in changes in program 

regulations and administrative actions. For example, in January 2001, CMS 

issued a final rule to change Medicaid payment policies, placing limitations 

on enhanced payments under Medicaid upper-payment limit requirements 

for hospital services, nursing facility services, intermediate care facility 

services for the mentally retarded, and clinic services. 

In addition, CMS issued a final rule in January 2002 placing additional 

limitations on enhanced payments for hospitals. CMS projected that the 

regulatory changes would result in cost savings of $79.3 billion over 

10 years beginning with about $1.4 billion in fiscal year 2002 and about 

$3.8 billion in fiscal year 2003. The two other reports issued in fiscal year 

2000 that resulted in costs savings of about $100 million for both fiscal 

 13 Cost savings are estimated savings resulting from health care funds not being expended 

in future years due to legislative or regulatory changes. Cost savings differ from collections 

that are deposited to the trust fund. 

Some Reported Cost 

Savings Are Related 

to Trust Fund 

Expenditures for 

HCFAC, but Most Are 

Not 
Page 18 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

years 2002 and 2003 were related to recovering overpayments to nursing 

homes and Medicaid drug rebates. Because the three reports were issued 

since the HCFAC program was created and the savings occurred in fiscal 

years 2002 and 2003, the savings can be linked to expenditures from the 

trust fund. 

We reviewed the support for the total cost savings amounts reported by 

the HHS/OIG for fiscal years 2002 and 2003. We initially found an 

overstatement of $840 million in the amounts included in the draft report 

for fiscal year 2003. The overstatement occurred because the HHS/OIG did 

not record an adjustment for the revised cost savings amounts issued by 

the Congressional Budget Office (CBO). The annual cost savings amounts 

reported by the HHS/OIG are based on estimates issued by CBO of savings 

that are expected from implementation of health-care-related legislation. 

CBO revised its estimate of fiscal year 2003 cost savings that would be 

realized from implementation of the Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act of 1999, but HHS officials did not 

recognize and factor in the effect of the adjustment in the fiscal year 2003 

draft HCFAC report. HHS officials explained that the responsibility for 

preparing the cost savings amounts had recently been reassigned to 

another staff person who had not looked for CBO adjustments. The cost 

savings amounts were corrected and restated in the final report. 

HIPAA requires that HHS and DOJ issue a joint report on the HCFAC 

program for each fiscal year by January 1 of the following calendar year. 

For fiscal years 1997 through 2000, the joint HCFAC report was issued on 

or close to January 1 of the subsequent year. However, beginning with the 

report for fiscal year 2001 the report has been issued late and the length of 

the delay has increased each year. See table 3 for the timing of reports for 

fiscal years 2001, 2002, and 2003. 

Table 3: Joint HCFAC Report Issue Dates for Fiscal Years 2001, 2002, and 2003 

Report fiscal 

year 

Mandated date of 

report 

Actual date of 

report 

Number of 

months late

Fiscal Year 2001 January 1, 2002 April 2002 4

Fiscal Year 2002 January 1, 2003 September 2003 9

Fiscal Year 2003 January 1, 2004 January 2005 12

Source: GAO based on the annual joint HHS and DOJ HCFAC reports for fiscal years 2001, 2002, and 2003. 

Repeated Delays in 

Issuing the HHS and 

DOJ Joint HCFAC 

Reports Impact 

Relevance of Data 
Page 19 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

The fiscal year 2003 report was more than a year late when it was released. 

HHS and DOJ officials told us that the joint reports have been issued late 

because of lengthy review processes within each agency. They have 

attempted to expedite the process but with little apparent success. Delays 

in issuing the HCFAC reports significantly erode the usefulness of these 

reports to Congress and others in making decisions about HCFAC 

program funding and oversight. 

While the information on HCFAC trust fund activity provided in the HHS 

and DOJ fiscal years 2002 and 2003 joint reports was reasonable, better 

tracking of time charges by HHS/OIG and nonpayroll expenditures by DOJ 

would improve their ability to monitor the use of HCFAC funds. In 

addition, the usefulness of the fiscal year 2002 and fiscal year 2003 joint 

annual reports was severely impaired due to their untimely issuance. Until 

HHS and DOJ streamline their internal review processes, the annual joint 

reports will continue to be delinquent and therefore of limited use to 

congressional decision makers and other interested parties. 

To improve HHS’s accountability over HCFAC program expenditures, we 

recommend that the HHS Inspector General require all HHS/OIG 

components to develop procedures for ensuring that all key staff hours 

spent on HCFAC activities are recorded in OIG workload tracking 

systems. 

To improve DOJ’s accountability for HCFAC program expenditures, we 

recommend that the Attorney General develop monitoring procedures to 

ensure that DOJ components record key HCFAC program expenditure 

data under the appropriate HCFAC account class in DOJ’s accounting 

system. 

To help ensure that the joint HHS and DOJ HCFAC reports are issued in a 

more timely manner, we recommend that the Secretary of HHS and the 

Attorney General 

• develop a more expedited review process and 

• notify congressional committees with oversight responsibility for the 

HCFAC program of delays in issuing the joint report within 1 month after 

missing the January 1 deadline and provide updates until the report is 

issued. 

Conclusions 

Recommendations for 

Executive Action 
Page 20 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

A draft of this report was provided to HHS and DOJ for their review and 

comment. Written comments from HHS and DOJ are reprinted in 

appendixes III and IV. HHS and DOJ also provided technical comments 

that we incorporated as appropriate. 

In written comments, HHS concurred with our recommendation that the 

HHS Inspector General require all of its components to develop 

procedures for ensuring that all key staff hours spent on HCFAC activities 

are recorded in its workload tracking systems and noted that it is already 

moving to implement such procedures. Similarly, in its written comments, 

DOJ concurred with our recommendation for ensuring that DOJ 

components record key HCFAC program expenditure data under the 

appropriate HCFAC account class in DOJ’s accounting system and noted 

that its Justice Management Division will meet with the components to 

assist them in using the accounting classes designated for HCFAC funds. 

Regarding our recommendation for ensuring that HCFAC reports are 

issued in a more timely manner, HHS and DOJ agreed to develop a more 

expedited review process for the HCFAC reports. DOJ commented that it 

has already instituted several new procedures that it believes will shorten 

the time needed for future reports and HHS stated that it will work with 

DOJ in developing changes to the review process. HHS and DOJ, however, 

did not agree that they should report to Congress delays in issuing the 

HCFAC report by the mandated deadline. In their comments, HHS and 

DOJ noted that additional reporting, which requires clearance through 

both departments, would be counterproductive to clearing the annual 

HCFAC report. HHS added that such notification would not provide 

Congress with any substantial information and DOJ added that reporting 

on delays would be of little value to congressional oversight committees. 

Instead, DOJ officials stated that they propose to expedite the review and 

approval process, to the extent that source data are available and 

circumstances are within the department’s control. 

We disagree with HHS’s and DOJ’s position that Congress would not gain 

any value in knowing that the HCFAC report is going to be issued after the 

date that Congress mandated in law. Congress should be informed if 

reports that it may use in making future program funding and oversight 

decisions are not expected to be issued by the mandated report deadline. 

In addition, it appears that HHS and DOJ interpreted our recommendation 

for reporting delays in issuing the HCFAC report to mean sending 

Congress a report that would require a formal clearance process through 

both agencies. This was not our intent. HHS and DOJ officials can and 

should develop a mechanism for notifying Congress of delays that would 

Agency Comments 

and Our Evaluation 
Page 21 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

not place an undue burden on their staff or interfere with issuing and 

clearing the HCFAC report itself. Such a mechanism could be as simple as 

sending an electronic mail message to all the committees of jurisdiction. 

DOJ also commented on the status of two remaining open 

recommendations from our prior report. We will continue to work with 

DOJ to obtain documentation to support the actions that DOJ said it is 

implementing. 

We are sending copies of this report to the Secretary of HHS, the Attorney 

General, and other interested parties. Copies will be made available to 

others on request. In addition, the report will be available at no charge on 

the GAO Web site at http://www.gao.gov. If you or your staffs have any 

questions, please contact me at (202) 512-8341 or by e-mail at 

calboml@gao.gov. Additional GAO contacts and acknowledgments are 

provided in appendix IV. 

Linda M. Calbom 

Director, Financial Management and Assurance 
Page 22 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

List of Committees 

The Honorable Charles E. Grassley 

Chairman 

The Honorable Max Baucus 

Ranking Minority Member 

Committee on Finance 

United States Senate 

The Honorable Michael B. Enzi 

Chairman 

The Honorable Edward M. Kennedy 

Ranking Minority Member 

Committee on Health, Education, Labor, and Pensions 

United States Senate 

The Honorable Arlen Specter 

Chairman 

The Honorable Patrick J. Leahy 

Ranking Minority Member 

Committee on the Judiciary 

United States Senate 

The Honorable Joe Barton 

Chairman 

The Honorable John D. Dingell 

Ranking Minority Member 

Committee on Energy and Commerce 

House of Representatives 

The Honorable F. James Sensenbrenner Jr. 

Chairman 

The Honorable John Conyers Jr. 

Ranking Minority Member 

Committee on the Judiciary 

House of Representatives 

The Honorable William M. Thomas 

Chairman 

The Honorable Charles B. Rangel 

Ranking Minority Member 

Committee on Ways and Means 

House of Representatives 
Appendix I: Scope and Methodology 

Page 23 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

To assess the reliability and reasonableness of information reported by 

HHS and DOJ in the joint HCFAC reports for fiscal years 2002 and 2003 as 

deposits to the trust fund and the sources of such amounts, we did the 

following. 

• We reviewed the joint HHS and DOJ HCFAC reports for fiscal years 2002 

and 2003 to identify amounts deposited to the trust fund. 

• We interviewed HHS and DOJ officials to update our understanding of 

procedures related to deposits. 

• We obtained data from HHS and DOJ reports and electronic databases for 

the various deposits as of September 30, 2002, and September 30, 2003,1

and selected deposit transactions on a statistical basis to determine 

whether the proper amounts were deposited to the trust fund. We assessed 

the reliability of the data by (1) performing electronic testing of required 

data elements, (2) reviewing existing information about the data and the 

system that produced them, and (3) interviewing agency officials 

knowledgeable about the data. We determined that the data were 

sufficiently reliable for the purposes of this report. The transactions that 

we selected on a statistical basis included the following:2

• We selected a dollar unit sample of penalties and multiple damages 

totaling $276.8 million from a population totaling $322.6 million for fiscal 

year 2002, and a dollar unit sample totaling $181.2 million from a 

population totaling $229.8 million for fiscal year 2003. 

• We selected a dollar unit sample of criminal fines totaling $435.5 million 

from a population totaling $443.5 million for fiscal year 2002 and a dollar 

unit sample totaling $1.9 million from a population totaling $2.5 million for 

fiscal year 2003. 

• We selected a dollar unit sample of civil monetary penalties totaling 

$1.7 million from a population totaling $6.9 million for fiscal year 2002 and 

 1

 HHS penalties and multiple damages and civil monetary penalties were obtained from 

electronic databases. DOJ penalties and multiple damages were obtained from the U.S. 

Department of Justice FMIS Debt Management Module Detail Listing to Support Transfer 

of Funds from the U.S. Department of Justice Via IPAC. DOJ criminal fines for fiscal years 

2002 and 2003 were obtained from the Criminal Fines Report. 

2

 Samples for the penalties and multiple damages and civil monetary penalties were 

selected at a 63 percent confidence level and Criminal Fines at a 95 percent confidence 

level. 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 24 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

a dollar unit sample totaling $1.7 million from a population totaling 

$7.1 million for fiscal year 2003. 

• We obtained supporting documentation for each sample transaction from 

various sources depending on the type of deposit. We traced amounts 

reported on the supporting documentation to reports and other records to 

confirm that proper amounts were reported as deposits. 

To assess the reliability of information reported by HHS and DOJ in the 

joint HCFAC reports for fiscal years 2002 and 2003 as appropriations from 

the trust fund for HCFAC, we 

• obtained and reviewed the HIPAA legislation, which includes the 

maximum and minimum amounts that can be appropriated from the trust 

fund for HCFAC; 

• obtained and reviewed the HCFAC funding requests for the HHS and DOJ 

components to determine whether activities included in the requests were 

consistent with the stated purposes of the HIPAA legislation; 

• obtained the funding decision memorandum detailing how the funds 

would be distributed between HHS and DOJ, and obtained related 

documentation for fiscal years 2002 and 2003 to verify the HCFAC funds 

certified by HHS and DOJ officials; and 

• compared amounts reported in the joint HCFAC reports to the approved 

funding decision memorandum and compared amounts from the decision 

memorandum to the OMB documentation (Apportionment Schedule 

SF-132) to verify that the amounts were made available. 

To assess the reliability of information reported by HHS and DOJ in the 

joint HCFAC reports for fiscal years 2002 and 2003 as the justification for 

the expenditure of HCFAC funds, we did the following. 

• We reviewed the justifications provided in the reports and discussed them 

with HHS and DOJ officials. 

• We obtained and analyzed data from the HHS/OIG components’ workload 

tracking systems on the number of hours recorded as worked on HCFAC 

projects. We reviewed these data for obvious errors and completeness and 

compared these data for the four selected components with hardcopy 

documents we obtained from these components, and to the HHS payroll 

system data. When we found discrepancies we brought them to the 

attention of the specific component and worked with them to obtain 
Appendix I: Scope and Methodology 

Page 25 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

explanations for the discrepancies before conducting our analyses. On the 

basis of this, we determined that the data were sufficiently reliable for the 

purposes of this report. 

• We evaluated the methodology used by the HHS/OIG to charge payroll 

expenses against HCFAC funds for fiscal years 2002 and 2003—these 

expenses represented 76 percent and 78.6 percent respectively of total 

HCFAC expenses. For our evaluation, we (1) obtained the total number of 

staff hours recorded in the workload tracking systems for each of the OIG 

components and compared the hours in these systems to hours in the HHS 

payroll system; (2) obtained a list of HHS/OIG projects and related staff 

hours included in the workload tracking systems for two OIG components, 

OAS and OEI (staff in OAS and OEI accounted for 55 percent of all OIG 

employees), and reviewed the project subjects to assess whether projects 

identified as HCFAC were appropriately classified; and (3) for the project 

subjects that were unclear, we obtained and reviewed documentation 

describing the work performed for the jobs to assess whether the job was 

appropriately classified as HCFAC or non-HCFAC. 

• We analyzed HHS/OIG nonpayroll expenditures charged against HCFAC 

funds for fiscal years 2002 and 2003—these represented 20 and 

17.4 percent respectively. We obtained reports from HHS on the amount of 

HCFAC and non-HCFAC expenditures by expenditure category (travel, 

rent, supplies, etc.) for each fiscal year; we then calculated the percentage 

charged to HCFAC and non-HCFAC funds for each category and compared 

them to the percentages used by the OIG to allocate expenses against 

HCFAC funding—80 percent for HCFAC in fiscal year 2002 and 81 percent 

in fiscal year 2003. 

• We obtained DOJ expenditure and allotment reports for all five 

components that charge activity to the HCFAC program and calculated the 

total amount of payroll and nonpayroll expenditures. 

• We evaluated the methodology used by the U.S. Attorney Offices (USAO) 

to charge payroll expenses against the HCFAC fund. These expenses 

accounted for 38 percent and 49 percent respectively of total DOJ 

expenses charged against fiscal years 2002 and 2003 HCFAC funds and 

76 percent and 75 percent respectively of DOJ’s total fiscal years 2002 and 

2003 HCFAC payroll expenses. USAO payroll expenses were equal to the 

annual salaries for 160 FTEs for fiscal year 2002 and 162 FTEs for fiscal 

year 2003. We reviewed the hours recorded in USAO’s workload system to 

ensure that the office devoted staff time to HCFAC-related activities equal 

to or greater than the annual hours of the 160 FTEs for both fiscal years. 

We compared the average annual salary for USAO staff positions 
Appendix I: Scope and Methodology 

Page 26 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

(attorney, paralegal, administrative) charged to the HCFAC account to the 

average annual salary for the same staff positions USAO-wide to ensure 

that the salary amounts charged against HCFAC were reasonable. We 

interviewed an agency official knowledgeable about the data obtained 

from USAO’s workload system to identify any data problems and 

determined that the data were sufficiently reliable for the purposes of this 

report. 

• We tested a statistical sample of the largest category of nonpayroll 

expenses, the Civil component advisory services, which accounted for 

34 percent of total DOJ expenses charged against fiscal year 2002 HCFAC 

funds and 69 percent of the total nonpayroll expenses. We selected a 

dollar unit sample of 19 transactions totaling $13.1 million from a 

population totaling $16.5 million and compared the transaction data to 

supporting documentation such as invoices and advisory services 

contracts to make sure they agreed.3

• We tested nonpayroll expenses charged against fiscal year 2003 HCFAC 

funds selected on a nonstatistical basis. We did not select a statistical 

sample of nonpayroll expenses because DOJ’s accounting system did not 

identify the complete population of expenditure transactions charged 

against HCFAC funds. We modified our methodology and (1) obtained 

copies of all billing packages submitted by DOJ to HHS for reimbursement, 

(2) selected a nonstatistical sample equal to 50 percent ($6.7 million of a 

total $13.4 million) of the total summary amounts listed on each billing 

package, and (3) traced and compared the data to supporting 

documentation, such as invoices and advisory services contracts. 

To assess the reliability of information reported by HHS and DOJ in the 

joint HCFAC reports for fiscal years 2002 and 2003 as cost savings, we 

• obtained the schedule of HHS/OIG Cost Savings 1998-2011 and compared 

the data for fiscal years 2002 and 2003 to the HCFAC joint reports; 

• obtained the fiscal years 2002 and 2003 HHS/OIG semiannual reports and 

traced and compared the amounts identified as cost savings to the 

amounts reported in the fiscal years 2002 and 2003 HCFAC joint reports; 

• selected cost saving transactions on a nonstatistical basis, traced and 

compared the data to supporting documentation; and 

 3

 At a 63 percent confidence level. 
Appendix I: Scope and Methodology 

Page 27 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

• reviewed the dates of reports that the OIG cited as having findings and 

recommendations that resulted in the reported cost savings. 

In assessing the status of recommendations made in our prior report, we 

• reviewed the recommendations included in our prior report and the 

comments provided by DOJ on our prior report to identify corrective 

actions that had been implemented or were to be implemented in the 

future; 

• provided a list of the prior-year recommendations and their status per DOJ 

comments to DOJ management and requested supporting documentation 

for the corrective actions taken; and 

• reviewed the supporting documentation to verify that the corrective 

actions were implemented and that the corrective actions completely 

addressed the recommendations. 

We conducted our work from August 2003 through January 2005 in 

accordance with U.S. generally accepted government auditing standards. 

We provided a draft of this report to HHS and DOJ for their comments. 

Written comments from the Acting Inspector General of HHS and the 

Assistant Attorney General for Administration at DOJ are included in 

appendixes III and IV, respectively. We also received technical comments 

from HHS and DOJ that were incorporated as appropriate. 
Appendix II: Status of Prior-Year 

Recommendations 

Page 28 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

Prior-year recommendation Status Explanation 

To improve DOJ’s accountability for the 

HCFAC program collections, we 

recommend that the Attorney General: 

 

• fully implement plans to make all 

necessary correcting adjustments for 

collections transferred to the trust fund in 

error and 

Closed, implemented DOJ determined the amount of the 

overstatement and submitted an 

adjustment to the Bureau of Public Debt 

(BPD) in September 2002. However, in our 

review of the supporting documentation we 

identified a mathematical error in DOJ’s 

calculations. DOJ agreed with the revised 

amount and submitted the adjustment to 

BPD in September 2004. 

• ensure that subsequent collection 

reports submitted to the Department of 

the Treasury are accurate. 

Closed, implemented DOJ developed and implemented new 

procedures for reviewing collections reports 

for accuracy and approving them prior to 

submission to BPD. 

To improve DOJ’s accountability for 

HCFAC program expenditures, we 

recommend that the Attorney General: 

 

• make correcting adjustments for 

expenditures improperly charged to the 

HCFAC appropriation and 

Open According to DOJ officials, the misposted 

non-HCFAC charge, along with the HCFAC 

charge that was posted to another account, 

have been corrected in the Financial 

Management Information System. GAO 

requested, but had not received at the end 

of fieldwork, documentation that supports 

the correction of the charges. 

• reinforce financial management policies 

and procedures to minimize errors in 

recording HCFAC transactions. 

Open According to DOJ officials, the department 

is continuing its ongoing financial 

management training efforts to reinforce 

the importance of accurate financial 

management processing and the 

minimization of data entry and errors. Also, 

the issue is also emphasized in monthly 

Financial Managers Council meetings and 

“clean audit” training. GAO requested, but 

had not received at the end of fieldwork, 

documentation to verify whether DOJ staff 

responsible for HCFAC accounting 

functions have completed the designated 

training. 

Continued

Appendix II: Status of Prior-Year 

Recommendations 
Appendix II: Status of Prior-Year 

Recommendations 

Page 29 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

Prior-year recommendation Status Explanation 

To facilitate providing Congress and 

other decision makers with relevant 

information on program performance 

and results, we recommend that the 

Attorney General and the Secretary of 

HHS assess the feasibility of tracking 

cost savings and expenditures 

attributable to HCFAC activities by the 

various federal programs affected. 

Closed, no longer applicable This recommendation is closed because of 

recent changes to HIPAA legislation. 

HIPAA had required GAO to report on cost 

savings and expenditures attributable to 

HCFAC activities by the various federal 

programs affected but did not require HHS 

and DOJ to track cost savings and 

expenditures in this manner. In December 

2003, Congress passed Public Law 108-

173, which amended the HIPAA legislation. 

The amendment removed the language 

requiring GAO to identify any expenditures 

from the Trust Fund with respect to 

activities not involving the Medicare 

program. 

Source: U.S. General Accounting Office, Medicare: Health Care Fraud and Abuse Control Program for Fiscal Years 2000 and 2001, 

GAO-02-731 (Washington, D.C.: June 30, 2002) and information provided by HHS and DOJ. 
Appendix III: Comments from the Department of Health and Human Services 

Page 30 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

Appendix III: Comments from the 

Department of Health and Human Services 
Appendix III: Comments from the Department of Health and Human Services 

Page 31 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 
Appendix IV: Comments from the Department 

of Justice 

Page 32 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

Appendix IV: Comments from the 

Department of Justice 
Appendix IV: Comments from the Department 

of Justice 

Page 33 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 
Appendix V: GAO Contact and 

Acknowledgments 

Page 34 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

Kimberly Brooks, (202) 512-9038, brooksk@gao.gov 

W. Ed Brown, H. Donald Campbell, Lisa Crye, Kelly Lehr, Kathryn 

Peterson, and Matthew Wood made key contributions to this report. 

Sharon Byrd provided statistical sampling technical assistance. 

Appendix V: GAO Contact and 

Acknowledgments 

GAO Contact 

Acknowledgments 
Related GAO Products 

Page 35 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 1, 

2005. 

Medicare: CMS’s Program Safeguards Did Not Deter Growth in Spending 

for Power Wheelchairs. GAO-05-43. Washington, D.C.: November 17, 2004. 

Medicare Hospice Care: Modifications to Payment Methodology May Be 

Warranted. GAO-05-42. Washington, D.C.: October 15, 2004. 

Medicare Physician Payments: Concerns about Spending Target System 

Prompt Interest in Considering Reforms. GAO-05-85. Washington, D.C.: 

October 8, 2004. 

Comprehensive Outpatient Rehabilitation Facilities: High Medicare 

Payments in Florida Raise Program Integrity Concerns. GAO-04-709. 

Washington, D.C.: August 12, 2004. 

Medicaid Program Integrity: State and Federal Efforts to Prevent and 

Detect Improper Payments. GAO-04-707. Washington, D.C.: July 16, 2004. 

Comptroller General’s Forum on Health Care: Unsustainable Trends 

Necessitate Comprehensive and Fundamental Reforms to Control 

Spending and Improve Value. GAO-04-793SP. Washington, D.C.: May 2004. 

Criminal Debt: Actions Still Needed to Address Deficiencies in Justice’s 

Collection Processes. GAO-04-338. Washington, D.C.: March 5, 2004. 

Medicare Home Health: Payments to Most Freestanding Home Health 

Agencies More Than Covered Their Costs. GAO-04-359. Washington, D.C.: 

February 27, 2004. 

Medicaid: Improved Federal Oversight of State Financing Schemes Is 

Needed. GAO-04-228. Washington, D.C.: February 13, 2004. 

Financial Management: Status of the Governmentwide Efforts to 

Address Improper Payment Problems. GAO-04-99. Washington, D.C.: 

October 17, 2003. 

Medicare Provider Enrollment: Opportunities to Enhance Program 

Integrity Efforts. GAO-03-185. Washington, D.C.: March 17, 2003. 

Medicare: Payment for Blood Clotting Factor Exceeds Providers’ 

Acquisition Cost. GAO-03-184. Washington, D.C.: January 10, 2003. 

Related GAO Products 
Related GAO Products 

Page 36 GAO-05-134 HCFAC Fiscal Years 2002 and 2003 

High-Risk Series: An Update. GAO-03-119. Washington, D.C.: January 1, 

2003. 

Medicaid Financial Management: Better Oversight of State Claims for 

Federal Reimbursement Needed. GAO-02-300. Washington, D.C.: 

February 28, 2002. 

Medicare: Health Care Fraud and Abuse Control Program for Fiscal 

Years 2000 and 2001. GAO-02-731. Washington, D.C.: June 3, 2002. 

Civil Fines and Penalties Debt: Review of CMS’ Management and 

Collection Processes. GAO-02-116. Washington, D.C.: December 31, 2001. 

Medicare: Reporting on the Health Care Fraud and Abuse Control 

Program for Fiscal Years 1998 and 1999. GAO/AIMD-00-51R. Washington, 

D.C.: December 13, 1999. 

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