GAO

United States General Accounting Office

Report to Congressional Requesters

May 2000 NIH RESEARCH

Improvements Needed

in Monitoring

Extramural Grants

GAO/HEHS/AIMD-00-139

Page 1 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring

Contents

Letter 3

Appendixes Appendix I: Scope and Methodology 30

Appendix II: Unaudited Fiscal Year 1999 and 2000 NIH

Appropriations 33

Appendix III: Comments From the Department of Health and Human

Services 34

Appendix IV: GAO Contacts and Staff Acknowledgments 41

Related GAO Products 42

Tables Table 1: Unaudited Fiscal Year 1998-99 NIH Appropriations 22

Table 2: Unaudited Fiscal Year 1998-99 Changes in Funding for NIH

Extramural Research Grants 24

Abbreviations

CAS central accounting system

HHS Department of Health and Human Services

IMPAC II information for management, planning, and coordination

IPA independent public accountant

NIH National Institutes of Health

OER Office of Extramural Research

OFM Office of Financial Management

OIG Office of Inspector General

OMB Office of Management and Budget

PHS Public Health Service

PMS payment management system
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United States General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-282900 Letr

May 31, 2000

The Honorable Tom Bliley

Chairman, Committee on Commerce

House of Representatives

The Honorable Fred Upton

Chairman, Subcommittee on Oversight

and Investigations

Committee on Commerce

House of Representatives

In each of the past 2 years, the Congress has increased the appropriations

for the National Institutes of Health (NIH) by 15 percent. This has put the

Congress on track for doubling NIH’s appropriations from fiscal year 1998

levels by fiscal year 2003 as urged by some congressional leaders. NIH, an

operating division of the Department of Health and Human Services (HHS),

is made up of 25 institutes and centers with a combined fiscal year 2000

appropriation of $17.8 billion—the largest of all federal agencies engaged in

nondefense research.1 Its appropriations account for nearly 40 percent of

all federal nondefense research and development dollars.

More than 80 percent of the appropriations, about $13 billion in fiscal year

1999, go toward extramural research that supports scientists in more than

2,000 institutions—universities, medical schools, hospitals, small

businesses, and research institutions—throughout the country and abroad.

Principal investigators, who are scientists at these institutions, compete for

extramural NIH grants. While project periods under these grants average 4

years in duration, the institutes and centers provide funding for only a

single year at a time. The continuation of funding each year after the first is

primarily contingent upon the awarding entity’s determination that the

scientific progress of the research is satisfactory.

1

HHS has 13 component organizations called operating divisions.
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Given the level of funding disbursed and the importance of the research it

supports, the oversight and monitoring of NIH grantees are critical. In

accordance with Office of Management and Budget (OMB) guidance, NIH

places the primary responsibility for ensuring compliance with federal

requirements on the grantees.2 Recipients of NIH extramural grant funds

are asked to certify to NIH that they comply with federal requirements

related to the funding. These certifications cover a wide range of topics,

including having procedures for investigating allegations of scientific

misconduct, ensuring that recipients of a grant are not delinquent in their

payment of federal debt, and ensuring that research meets federal

requirements for protecting the rights and welfare of human and animal

subjects.

Because of your concern about oversight and monitoring, you asked us to

report on three areas related to NIH’s use of extramural grant funds: (1)

how NIH monitors the scientific progress of extramural research, (2)

whether NIH has controls to ensure the effective financial management of

extramural research grants, and (3) how NIH used the increased funds

from its fiscal year 1999 appropriations to support extramural research.

To assess how NIH monitors scientific progress, we reviewed its policy on

administering research grants, interviewed NIH officials, and randomly

selected and reviewed 116 research project grants and program project

grants that were active in fiscal year 1997 at six institutes.3 By selecting

grants active in fiscal year 1997, we were able to ensure that our sample

included grants with at least one assessment of scientific progress and

grants where the project period was completed. To assess NIH’s financial

management of extramural grants, we selected a statistical sample of 78

grants that were active in fiscal year 1999. The 1999 sample, awarded by 15

institutes, allowed us to examine the financial controls currently in place.

To determine NIH’s use of its increased appropriations, we compared the

NIH fiscal year 1998 appropriations that NIH allocated to extramural

research grants with its fiscal year 1999 allocations. We conducted our

2

See OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements

with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations

(Washington, D.C.: Aug. 29, 1997).

3

Institutes and centers award the majority of extramural research funds through research

project grants and program project grants. In general, the research project grant funds a

single project with an individual principal investigator while the program project grant

funds a group of multidisciplinary projects conducted by several investigators working on

different aspects of a specific research objective or theme.
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work between May 1999 and April 2000 in accordance with generally

accepted government auditing standards. (See appendix I for details on our

scope and methodology.)

Results in Brief Assessing scientific progress and ensuring effective financial management

are critical elements in managing NIH’s extramural grant programs. NIH

has developed policies and procedures to carry out these important

functions, but we found that its system of internal controls could be

strengthened. Institutes and grantees have flexibility in implementing NIH’s

policies and procedures for administering grants. Although the processes

for assessing scientific progress varied at the six institutes we reviewed,

each contained similar key aspects. These included annual reviews of the

scientific progress and budgetary aspects of the research as well as

assessments of compliance with administrative requirements. However, we

found that some grant files lacked documentation of these reviews. In

addition, some institutes lacked written procedures for documenting the

reviews. Furthermore, some files in five of the six institutes lacked required

reports for appropriately closing completed grants. As a result, NIH lacked

important information on scientific progress and inventions developed in a

grant’s last year as well as on unobligated funds that could be recovered for

rebudgeting within the federal government.

Regarding controls over financial management, we identified areas in the

oversight and monitoring of grantees that could be strengthened. For

example, NIH did not always receive and use single audit reports as OMB

required.4 A single audit is an organizationwide audit of a grantee that

focuses on internal controls and compliance with laws and regulations over

federal grant funds. The reports resulting from these audits are a key tool

for financial management oversight. However, NIH awarded grant funds to

several grantees that had not submitted single audit reports. While NIH

generally maintained adequate documentation for the financial monitoring

4

OMB’s Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations

(Washington, D.C.: June 24, 1997), stipulates specific reporting requirements for nonfederal

agencies. It currently requires that audits be completed and necessary documentation be

submitted to the federal clearinghouse that OMB has designated, within 30 days after the

receipt of the auditor’s report by the auditee or 9 months after the end of the audit period,

whichever is earlier. For fiscal years beginning on or before June 30, 1998, the circular

requires that audits be completed and supporting documentation be submitted 30 days after

receipt of the auditor’s report or 13 months after the end of the audit period, whichever is

earlier.
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of its grantees, we identified other areas in internal controls that could be

strengthened. For example, we found discrepancies between grant award

amounts reported in key NIH systems, which increases the risk of

inaccuracies and improper authorization of grant funds. In its fiscal year

1999 audit report on internal controls, the independent public accountant

(IPA) responsible for the financial audit of NIH identified a material

weakness in the analysis and development of financial statements that

included a weakness related to the financial management of grants.

Resolving these issues would provide NIH and HHS assurance that grant

funds are being awarded to eligible recipients only, that these funds are

properly used, and that funds available for future use are accurately

accounted for and reported.

Regarding NIH’s use of fiscal year 1999 appropriations, NIH allocated about

the same percentage of funds to extramural research as it did in fiscal year

1998. Appropriations allocated for extramural research grants accounted

for about $1.4 billion of the nearly $2 billion increase in NIH’s

appropriations, or 70 percent. About 41 percent of the increase for

extramural grants was used to expand by 978 the number of competitive

grants and to increase the average amount awarded for each competitive

grant by 15 percent over fiscal year 1998 levels. The remaining funds were

used to provide outyear commitments to more than 20,000 ongoing grants,

support for extramural research centers, and other extramural research

activities.

HHS generally agreed with our recommendations for improving internal

controls over extramural grants. It did not concur with our

recommendation to perform an analysis of the status of fiscal year 1998

single audit reports, maintaining that to further collapse the time for

identifying delinquent single audit reports would not be worthwhile.

However, HHS has misinterpreted the intent of our recommendation. We

believe it would be worthwhile to begin analyzing the reports without

waiting until all have been submitted.

Background NIH, the nation’s leader in conducting and sponsoring biomedical research,

is made up of 25 institutes and centers. Most of them have separate

appropriations and are charged with specific missions. Their missions

generally focus on a given disease, like cancer or arthritis; a particular

organ, like the heart or eye; or a stage of development, like childhood or old

age. Fiscal year 2000 appropriations range from the $43 million for the

Fogarty International Center for Advanced Study in the Health Sciences to
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the $3.3 billion for the National Cancer Institute. (See appendix II for fiscal

year 2000 appropriations.)

NIH institutes and centers accomplish their missions chiefly through

intramural and extramural research. Intramural research, accounting for

$1.6 billion in fiscal year 1999, entails government scientists conducting

research in the institutes’ and centers’ own laboratories and clinics.

Extramural research entails scientists conducting research in research

institutions, and it amounted to about $13 billion in fiscal year 1999.

Principal investigators compete for extramural grants. After the first year

of funding, they must submit noncompetitive continuation grant

applications for continued funding. These applications include annual

progress reports, budget information, and invention statements. While

grantees are responsible for managing the day-to-day grant activities in

accordance with NIH requirements, an institute or center awarding a grant

has overall responsibility for the grant and for deciding whether to

continue funding it. At the end of a grant’s multiyear project period,

principal investigators may apply for renewal of funding through the

competitive process. Upon completion of research and termination of

funding, grantees are required to submit a final financial status report, a

statement identifying inventions developed under the grant, and a final

report on scientific progress.

NIH’s management is responsible for ensuring that adequate systems of

internal controls are developed and implemented for the proper oversight

and monitoring of research institutions. An adequate system of internal

controls, as defined by the Comptroller General’s Standards for Internal

Control in the Federal Government, which is issued pursuant to the Federal

Managers’ Financial Integrity Act of 1982, should provide reasonable

assurance that an agency is effectively and efficiently using resources,

producing reliable reports, and complying with applicable laws and

regulations. The standards also state that internal control monitoring

should assess the quality of performance over time and ensure that the

findings of audits and other reviews are promptly resolved. Accordingly,

cost-effective internal controls should be designed to provide reasonable

assurance regarding the prevention or prompt detection of unauthorized

acquisition, use, or disposition of federal funds.

Generally, activities such as site visits and reviews of progress and financial

reports that grantees file are controls that federal officials use to oversee

and monitor grant programs. An additional key control for the oversight

and monitoring of NIH grants available to NIH management is the single
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audit. A single audit is an organizationwide audit of a grantee that focuses

on internal controls and the recipients’ compliance with laws and

regulations governing the funds received from federal grants. OMB’s June

1997 Circular A-133 established policies to guide the implementation of the

Single Audit Act Amendments of 1996 and provided an administrative

foundation for uniform audit requirements for nonfederal entities that

administer federal awards. These audit requirements apply to nonfederal

entities that spend $300,000 or more in federal awards.

The Institutes’ Process

for Reviewing

Scientific Progress

Under the general direction of NIH, institutes monitor the scientific

progress of the extramural grants they award. In the six institutes we

reviewed, program staff, who are scientists with expertise in the fields of

research sponsored by their institutes, assessed the scientific progress of

research annually primarily by reviewing documents such as progress

reports the grantees submitted. They also said they monitor scientific

progress throughout the year through such means as reviewing

publications. In addition, grants management staff contributed to

monitoring scientific progress by reviewing budget information submitted

by grantees to determine whether the pace of expenditures is consistent

with the expected progress of the research.

NIH Provides Overall

Guidance

Through its Office of Extramural Research (OER), NIH gives institutes

general guidance for monitoring the scientific progress of extramural

grants. Building upon the Public Health Service’s (PHS) Grants Policy

Statement, first issued in 1965, OER developed the NIH Grants Policy

Statement for monitoring extramural grants in 1998. The policy

incorporates statutory requirements and OMB and HHS requirements. It

also provides guidance for the institutes’ monitoring of scientific progress

and other aspects of grantee performance. Institutes and grantees have

flexibility in implementing the guidance.

OER requires an institute to determine that the principal investigator has

made satisfactory scientific progress before providing subsequent funding

on an ongoing grant. OER also requires that institutes review grantee

reports of scientific progress annually. These reports are to contain specific

research aims, results of studies the principal investigator conducted, a

statement of the potential significance of findings to the scientific field and

their potential effect on health, and a list of related publications by the

principal investigator, including manuscripts submitted or accepted for

publication.
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Beginning in 1995, OER required new program staff to attend 7 days of

basic training in order to give the staff a uniform base of information and

knowledge for monitoring research grants. The training includes

information on NIH, the extramural program and grant process,

responsibilities of program staff, relationships between grants and

contracts management staff, and relevant regulations, policies, and

procedures. Experienced program staff are required to attend two training

activities annually to maintain current knowledge of extramural policies

and procedures. Program and grants management staff we spoke with also

emphasized the importance of working closely with and being mentored by

more experienced staff. Mentoring assignments could last up to 2 years for

the more complex grants.

Program Staff at the Six

Institutes Primarily Used

Progress Reports to Monitor

Scientific Progress

The six institutes we visited generally followed NIH policy in monitoring

the scientific progress of the extramural grants that the institutes awarded.5

Program staff in these institutes determined whether progress was

satisfactory by comparing the accomplishments in the principal

investigator’s annual progress report with the stated aims and objectives of

the research proposal. They also reviewed the annual progress report to

see whether there were any changes in the scope and objectives of the

research and whether the principal investigator encountered any problems

while doing the research. Program staff also considered the number and

quality of investigator-authored publications as another indication of

scientific progress.

In addition to reviewing grantee annual progress reports as required by

policy, program staff told us they monitored scientific progress throughout

the year. For example, program staff reviewed published papers and

unpublished manuscripts that the principal investigator submitted to them

and that were related to research performed under the grant. They also

frequently communicated with principal investigators. This interaction was

facilitated by attendance at scientific conferences and professional

meetings. One program officer said that because of frequent contact with

principal investigators, she was generally alerted to problems in their

research before receiving annual progress reports.

5

The six institutes were the National Cancer Institute; National Heart, Lung, and Blood

Institute; National Institute on Alcohol Abuse and Alcoholism; National Institute of Child

Health and Human Development; National Institute of Dental and Craniofacial Research;

and National Institute of Neurological Disorders and Stroke.
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Program staff explained that they were able to anticipate some problems

affecting scientific progress because during the initial competitive award

process, external reviewers documented issues that could interfere with

accomplishing the principal investigator’s research aims. For example, if

these reviewers considered a particular research strategy to be risky and

thought the principal investigator might encounter difficulties in

accomplishing the specific aims and objectives, this concern would be

expressed in the reviewers’ summary statement. Summary statements are

included in the grant files and are thus available to the program staff for

monitoring purposes.

The number of progress reports each staff member reviewed varied among

institutes and even within a single institute. Among the institutes we

visited, the average number of progress reports reviewed annually by each

program staff varied from a high of 125 at one institute to a low of 40 at

another. Although the number of grants reviewed varied among staff

members, the workload, based on the type or complexity of grants, was

about the same, according to NIH officials. Staff whose portfolios included

more complex grants, such as program project grants and clinical trials,

reviewed a smaller number of progress reports than staff whose portfolios

included less complex research project grants.

Because there is no separate job series for staff responsible for monitoring

scientific progress, precise staffing figures for this function are not readily

available. However, at the end of fiscal year 1999, NIH had 1,088 full-timeequivalent employees in the job series that includes program staff and their

supervisors. The six institutes we visited employed 370 of these staff,

ranging from 21 full-time-equivalent employees in one institute to 160 in

another. For the six institutes, this staffing level was about a 16 percent

increase from fiscal year 1997 levels.

Grants Management Staff at

the Six Institutes

Contributed to Monitoring

Scientific Progress

Grants management staff, who are responsible for the financial

management of grants and for ensuring grantee compliance with statutes,

regulations, and guidelines, also contributed to the monitoring of scientific

progress at the six institutes we reviewed. They did this by examining

required budgetary information submitted by grantees. For example, grants

management staff assessed this information for large unobligated balances

to determine whether the pace of expenditures corresponded with the

anticipated progress of the research. Large unobligated balances could

result from the failure to purchase necessary equipment or hire key

personnel as planned. In clinical research, the slow recruitment of human
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subjects can also lead to large unobligated balances. In reviewing three

such files, we found two in which the institutes reduced funds and required

interim progress reports.6 At four of the institutes we reviewed, grants

management staff also verified that program staff had assessed the

principal investigator’s scientific progress.

The specific budget information available to grants management staff

varied, depending on whether the grant was a research project grant or a

program project grant. For research project grants, the grants management

staff assessed information annually on changes in financial support for key

personnel, significant rebudgeting of funds, changes in the level of effort of

key personnel, and estimates of expected and large unobligated balances.7

For program project grants, the staff had access to all this information as

well as detailed budget information, a budget justification, and an annual

report on expenditures.

The Documentation of

Scientific Progress Was

Not Always Available

Each of the six institutes we visited required program staff to document

their assessment of scientific progress by completing a checklist. The

institutes’ checklists varied in detail, but all had a section devoted to the

same purpose: assessing scientific progress. For example, one institute

used a checklist that, in addition to a box to check indicating adequate

scientific progress, included items on the involvement of human subjects

or vertebrate animals in the research, the need for biohazard protections,

changes in research scope and objectives, scientific overlap with other

research, substantial changes in foreign involvement, additional questions

if the grant is a cooperative agreement, and space for nearly a full page of

narrative comments. Other institutes required much less detail in

documenting their assessment.

Of the 116 grants we reviewed, 98 files contained evidence that the

program staff had assessed scientific progress for each year that the

research was funded. For the remaining 18 files, in one or more years that

6

The three files come from a sample of problem cases that the institutes we visited

identified.

7

In 1995, NIH implemented the Streamlined Noncompeting Award Process for research

project grants and certain other types of grants to expedite the processing of

noncompetitive continuation awards. For awards under this process, grantees are no longer

required to submit annual budget information with a budget justification and the

expenditure report is required only at the end of the grant period.
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the research was funded, there was no documentation to indicate whether

scientific progress had been assessed. About 6 percent of the time there

was no evidence whether scientific progress was assessed.8

We noted wide variation in the level of documentation of scientific progress

on checklists among and within the institutes. Some program staff checked

the appropriate box on the progress report review checklist to indicate

satisfactory progress. Others also wrote one or two paragraphs, and still

others wrote up to two pages. We were told that the additional written

documentation was used to highlight the results of the research. Although

individual institutes may require more written documentation, an OER

official said that he expected narrative comments on the checklists only

when problems with scientific progress had surfaced. However, in its

comments for management consideration, the IPA responsible for the

financial audit of NIH noted that many of the institutes and centers did not

have written procedures on how they prepare checklists, progress review

forms, and grants management worksheets. When standard forms were

used in the process, the information captured was consistent.

While most files indicated that scientific progress was assessed in

conjunction with annual decisions on continuation funding, we found

much less documentation to support ongoing monitoring. Although

program staff told us they monitored grants throughout the year, they

generally did not document their efforts in the grant files.

Some Grant Files

Lacked Documentation

of Closeouts for

Completed Grants

Grants management staff are responsible for ensuring that a grantee submit

a complete closeout package within 90 days after the end of the grant’s

multiyear project period. Closeout documents are to include a final

financial status report, a final scientific progress report, and a final

statement on inventions developed under the grant. A final financial status

report is needed to ensure proper accounting for the use of grant funds. A

final scientific progress report provides a summary of progress toward the

achievement of the specified aims, a list of significant results, and a list of

publications for the grant. A final invention statement provides information

on all inventions that were conceived or first used under the grant, even if

previously reported.

8

The 116 grants in our sample should have been assessed a total of 369 times when

applications were submitted annually for noncompetitive continuation of funding.
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In our review of the six institutes, we found that grantees did not always

comply with closeout requirements. For example, at one institute we

visited, grantees of 628 of the 736 grants were delinquent in providing

complete closeout packages in fiscal year 1998. NIH staff in several

institutes told us that ensuring grantee compliance with closeout

requirements was not a high priority, especially in relation to monitoring

active grants. Among grants we reviewed, about 20 percent were no longer

funded in late 1999. We found that a little less than half of those—11 grants

from five institutes—did not submit all the required reports. Three of the 11

were more than 2 years overdue.

Five of the grants did not include final financial status reports. Four of

these were research project grants and one was a program project grant. As

a result, NIH lacked information on how much of the grant funds had not

been spent and therefore should have been recovered for rebudgeting

within the federal government. The absence of final financial status reports

for the research project grants meant that NIH lacked financial information

from these projects for the entire duration of the grants. For program

project grants, however, financial status reports are submitted annually.

Consequently, the absence of the final financial status report for the

program project grant meant that financial information was missing only

for the final grant year.

In addition, of the 11 grants, 10 did not include the final progress report and

9 did not include the final invention statement in their files. Progress

reports from previous award years of a grant would have been submitted as

part of the annual noncompetitive application, so that the absence of this

information means that NIH did not know what progress was made in the

final year of the grant. Similarly, the absence of a final invention statement

means that NIH did not know of inventions developed in the final year of

the grant.

By law, a grantee that wants to retain title and profit from inventions it

created under federally funded research projects must disclose inventions,

acknowledge the government’s royalty-free right to the inventions, and

record the government’s interest on any patent filed on the invention.

Grantees are required under the Bayh-Dole Act and Executive Order 12591

to report inventions created under federally sponsored projects within 60
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days of the date the inventor reports them to the grantee.9 However, in

1994, the HHS Office of Inspector General (OIG) reported that NIH had no

system for determining whether documents were submitted in a timely

fashion. OIG concluded that NIH did not have procedures to detect grantee

noncompliance with requirements related to inventions developed using

federal funds, including requirements of the Bayh-Dole Act, and

recommended that NIH use a database to track grantees for timely

compliance.10

As a result, NIH developed I-Edison, an interactive database for tracking

inventions developed with federal funds. Grantees can submit invention

reports to I-Edison electronically, but they are not required to do so.

Instead, they may submit paper documentation to NIH. Regardless, NIH’s

policy is to have this information in the grant file. According to officials in

OER, the absence of the final invention statement in the grant file does not

necessarily mean that NIH did not know of any inventions that occurred on

the projects. NIH officials said that ensuring that final invention statements

and other closeout documents appeared in grant files has not been a high

priority for institutes, despite NIH’s policy. Instead, institutes have placed a

higher priority on monitoring compliance from grantees with active

research grants.

On February 16, 2000, OER issued final guidance to institutes on

procedures for obtaining closeout documents and imposing sanctions on

grantees if such documents are not received. Sanctions can include

withholding funds for a specific grant or for an entire grantee institution.

9

See Technology Transfer: Reporting Requirements for Federally Sponsored Inventions

Need Revision (GAO/RCED-99-242, Aug. 12, 1999), in which we noted that organizations did

not always disclose or document the government’s rights as required.

10See HHS, OIG, NIH Oversight of Extramural Research Inventions, Report OEI-03-91-00930

(Washington, D.C.: May 1994).
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Internal Controls Over

the Financial

Management of Grants

Need to Be

Strengthened

We identified areas in internal controls related to the oversight and

monitoring of grant recipients that need to be strengthened. For example,

NIH did not always receive single audit reports from recipients in

accordance with OMB’s reporting requirements and did not effectively use

the results of single audit reports for deciding on grantees’ eligibility for

grant funds and determining financial management systems’ capabilities. In

its fiscal year 1999 financial audit report on internal controls, the IPA

identified a material weakness in the analysis and development of financial

statements that included a weakness related to the financial management

of grants. We also identified discrepancies between the data in the

information for management, planning, and coordination (IMPAC II)

system, the central accounting system (CAS), and the payment

management system (PMS) that affect the accuracy of grant award

amounts.11 In some instances, the “paylist,” which identifies grant

applications that were selected for funding, was not always properly

authorized. These deficiencies could result in NIH’s erroneously awarding

grants to ineligible grant recipients and in funds being used for improper

purposes.

The Use of Single Audit

Results Could Enhance the

Oversight of Grantees

NIH did not always receive single audit reports from grant recipients in

accordance with OMB’s reporting requirements, and it did not effectively

use the results of single audit reports to oversee and monitor program

recipients. One of the objectives of the Single Audit Act is to ensure that

federal departments and agencies rely on and use audit work performed

pursuant to the act. Federal agencies are required to ensure that audits are

performed on a timely basis and to monitor the reports to ensure that

findings are identified and resolved. The Comptroller General’s Standards

for Internal Control in the Federal Government states that monitoring

internal controls should include policies and procedures for ensuring that

the findings of audits and other reviews are promptly resolved. To comply

with the standards, NIH should (1) promptly evaluate findings from audits

and other reviews, including those showing deficiencies and

11IMPAC II, the NIH grants system, is an online computer-based information system that

contains application and award information on extramural grants. CAS is the central system

that accumulates all NIH’s accounting records and is designed to meet NIH’s specific

financial needs. PMS serves as a fiscal intermediary between agencies that award grants and

recipients of grants and contracts. Among other functions, it expedites the flow of cash

between the federal government and recipients, transmits recipient disbursement data back

to the awarding agencies, and maintains cash advances sent to the grant recipients.
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recommendations reported by auditors and others who evaluate agencies’

operations; (2) determine proper actions in response to findings and

recommendations from audits and reviews; and (3) complete, within

established time periods, all actions that correct or otherwise resolve the

matters brought to its attention. As discussed in our June 1994 report, the

Single Audit Act of 1984 encouraged recipients of federal funds to review

and revise their financial management practices.12 This resulted in state

and local governments’ institutionalizing fundamental reforms, such as (1)

strengthening internal controls, (2) installing new accounting systems or

enhancing old ones, (3) improving systems for tracking federal funds, and

(4) resolving audit findings. Single audit reports contain meaningful

information on entities’ financial status and management of federal funds

and can indicate where the entities have additional problems that need

further audit or investigation. Entities’ financial statements can contain

information indicating problems of concern to the federal government,

such as possible overcharges or a failure to reimburse the federal

government.

In audit reports covering fiscal years 1996 and 1997, the IPA responsible for

the financial audit of NIH reported that NIH did not have an adequate

system to ensure that all single audit reports were received. In reports

covering fiscal years 1998 and 1999, this issue was reported as a comment

for management’s consideration. The IPA recommended that HHS and its

operating divisions, including NIH, develop a system to track the

submission of single audit reports by grantees and identify those that are

delinquent or noncompliant with the Single Audit Act. The IPA also

recommended that procedures be developed for early identification,

reporting, and followup of grantees that are delinquent in the submission of

the reports.

HHS, which establishes guidance for its operating divisions, has

acknowledged that improved oversight in filing single audit reports is

needed. In response to the IPA’s recommendation, HHS established a

process to identify and follow up with grantees that had not submitted an

audit report when required. Under this process, HHS and NIH identified

reports that had not been submitted for fiscal years 1995, 1996, and 1997.

As of December 1999, 2 of the grantees had not submitted single audit

12See Single Audit: Refinements Can Improve Usefulness (GAO/AIMD-94-133, June 21, 1994).

The 1984 act was superseded by the Single Audit Act Amendments of 1996 (31 U.S.C. 7501)

to improve coverage, effectiveness, and reporting.
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reports for fiscal year 1995 and 29 had not submitted the reports for fiscal

year 1996. For fiscal year 1997, 351 of 915 NIH grantees that should have

submitted a single audit report had not done so as of February 2000. HHS

had not completed the followup and resolution of these delinquent reports.

In addition, as of January 2000, about 6 months after the fiscal year 1998

single audit reports should have been received, HHS had not begun analysis

of these reports. Based on information from HHS’ single audit reports

database, about 40 percent of these reports would have been due by July

1999. However, HHS and its operating divisions had not identified the

recipients that were delinquent in submitting the reports.

Although NIH’s top 100 recipients, which account for more than 75 percent

of its grant funds, have submitted single audit reports for fiscal year 1997,

proper oversight of the remaining 25 percent is still needed. NIH has

continued to award current funds to some of the grantees that had not

submitted single audit reports. For example, in fiscal year 1999, NIH

awarded funds to 15 of the 31 grantees that had not submitted fiscal year

1995 and 1996 single audit reports. Together, the grants related to the 15

grantees amounted to about $73 million as of December 1999.13 Lack of

timely receipt and effective use of the results of single audit reports hinders

NIH’s ability to determine whether grantees were eligible to receive grant

funds or properly accounted for these funds.

In a single audit, auditors review internal controls of an entity’s financial

management systems. Thus, timely receipt and analysis of single audit

reports can assist NIH in assessing the financial management capabilities

of its grantees’ systems. However, NIH did not routinely review single audit

reports to assess the grantees’ financial management systems’ capabilities.

According to NIH grant policy, grants management staff may review the

financial and business management systems of its grantees to determine

the adequacy of the systems to support the expenditure of and

accountability for NIH funds. At 11 of the 15 institutes we visited, financial

management systems were not reviewed for all grantees but, rather, were

reviewed case by case, depending on whether the grantee had received a

grant in previous years from NIH or was considered a high-risk grantee,

such as a small business. If NIH does not use the results of single audit

13In commenting on the draft of this report, HHS provided updated information. As of May

2000, eight grantees have not submitted fiscal year 1995 or 1996 single audit reports. HHS

said that NIH made grant awards in fiscal year 1999 to three of these grantees totaling about

$15.4 million.
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reports to assess the adequacy of the grantees’ systems to expend and

account for NIH funds, it could be awarding grants to recipients with

inadequate financial management systems that could result in the

mismanagement of grant funds.

As mentioned earlier, HHS has acknowledged that improved oversight in

filing single audit reports is needed. In accordance with OMB’s guidance,

HHS required its operating divisions, including NIH, to apply sanctions to

grantees considered delinquent for submission of a single audit report. The

HHS operating division providing the majority of financial assistance

should apply the sanctions to recipients found to be delinquent in

submission of their single audit report. These sanctions include (1)

withholding further grant payments on current funds, (2) withholding

additional support for the grant, (3) withholding a percentage of federal

awards until the audit is satisfactorily completed, and (4) suspending

federal awards until the audit is conducted or terminating the federal

award. Because these sanctions had not been fully implemented at the time

of our review, we were not able to assess them.

Adequate Documentation

Was Maintained but Other

Controls Need

Strengthening

From our review of 78 grant files, we found that NIH generally maintained

adequate documentation for the financial monitoring of its grants. This

documentation included a signed grant application, approved Notice of

Grant Award, financial status reports, where applicable, and progress

reports.14 For example, for 76 of the 78 grants we reviewed, we found that

the dollar amount of the award and the document number—the common

identifier of grants—could be tracked and verified through three key

financial management systems. However, in one instance, we found that

the amount reported in IMPAC II did not agree with the amount in PMS.

Grant award data in IMPAC II, CAS, and PMS should agree.15 We also found

that a grant award amount was incorrectly posted to the wrong grantee in

PMS. While NIH officials could not document what caused this error, they

told us that the principal investigator moved from the university to a

14The Notice of Grant Award is a legally binding document that notifies the grantee and

others that an award has been made. It contains or references all terms and conditions of

the award and its dollar amount.

15Each institute transmits grant award data from IMPAC II to the Office of Financial

Management (OFM). These data include the dollar amount of the grant award, document

number, and the common account number. OFM transmits this information to NIH’s CAS,

which in turn transmits valid transactions to PMS.
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federal agency in the fourth year of the grant. The related grant award data

in IMPAC II and CAS reflected the federal agency as the new recipient of

the funds. However, PMS continued to reflect the university as the grantee.

As a result, funds appropriated for year four of the grant were incorrectly

made available in PMS for the university’s use. At the time of our review,

the university had not drawn down these funds. However, this error could

have resulted in an improper payment of grant funds. In another instance,

the award amount on the Notice of Grant Award did not agree with the

amount in IMPAC II, CAS, or PMS. The amount on the Notice of Grant

Award was $195,000, compared with the $69,000 reported in the three key

systems. As a result, the correct award amount was not available to the

grantee. NIH officials could not explain how this error occurred and were

not aware of either of these errors until we brought them to their attention.

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

Government states that ongoing monitoring activities should include

comparisons and reconciliations to identify inaccuracies or exceptions that

alert management to any internal problems. The IPA’s internal control

report covering fiscal year 1999 reported a material weakness in controls

over the analysis and development of financial statements. The IPA

reported that in the review of NIH’s synchronization report, deficiencies in

the reconciliation of data between CAS and PMS were not resolved in a

timely manner.16 A significant number of the discrepancies between the two

systems were more than a year old and included such items as incorrect

posting of expenditures in CAS, duplicate posting of grant obligations in

CAS, or duplicate transmittals of payment authority to PMS. In one

instance, the IPA noted that a document that had a $200,000 authorization

in PMS could not be supported by data contained in CAS or IMPAC II.

Timely resolution of these items reduces the risk of overpayment to

grantees and could help ensure the accuracy of funds available for

grantees’ future use.

In addition, we found areas in which internal controls over award

authorization needed strengthening. For example, the “paylist,” which is a

list of competing grant applications selected for funding, was not always

properly approved by authorized officials. The Comptroller General’s

Standards for Internal Control in the Federal Government states that

transactions and other significant events should be authorized and

executed only by persons acting within the scope of their authority.

16The synchronization report identifies inconsistencies in grant data between CAS and PMS.
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According to the standards, this is the principal means of ensuring that only

valid transactions to exchange, transfer, use, or commit resources and

other events are initiated or entered into. Authorizations should be clearly

communicated to managers and employees. When an application is

submitted, it is initially reviewed for scientific merit and budget

reasonableness. Following the initial review, a second-level review is

performed by Advisory Council members who should have knowledge of

the institute’s programmatic areas, familiarity with the institute’s priorities

and procedures, and knowledge of the institute’s mission. Immediately

following the second-level review, the institute’s director is provided a

“ranking list” or “paylist” of competing applications to review for payment.

The approved grant applications are ranked in percentile or priority score

order from most meritorious to least, and an amount is recommended.

After review and discussion with the institute’s division director, the

institute’s program director indicates on the ranking list the applications

that have been selected for funding. According to NIH officials, the

institute’s Associate Director of the Division of Extramural Activities and

the Chief Grants Management Officer should sign the paylist as the

authorization to issue the Notice of Grant Award to prevent incorrect and

unauthorized grant awards.

However, we found that the paylist at one of the institutes was signed by

only one NIH official and another paylist at a different institute was

unsigned and maintained on the Intranet, an internal network. While we

found only one instance in which the paylist was not signed, 38 grants on

this list amounted to about $10 million.17 Lack of proper authorization of

grant award documents increases the risk of inaccuracies and improper

authorizations of grant funds awarded to grantees.

On another matter, in reviewing NIH’s instructions for completing grant

applications, we noted an inconsistency between NIH’s Grants Policy

Statement and PHS’ instructions. Grant applicants must make a

certification on their grant application that covers various topics, including

nondelinquency of federal debt as defined by the agency. According to

OMB Memorandum M-87-32, “Certification of Nondelinquency by

Applicants for Federal Assistance,” the certification is seen as an important

step toward ensuring that recipients of federal grant funds are not

delinquent on federal debt.

17Of the 38 grants on the paylist, 1 was included in our sample of 78 grants.
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NIH’s policy statement and PHS’ instructions each refer to the Federal Debt

Collection Procedures Act, which provides that a debtor is ineligible to

receive a federal grant that is financed directly or indirectly by the United

States if there is a judgment lien against the debtor’s property for a debt to

the United States (28 U.S.C. 3201 (e)). NIH’s and PHS’ position is that a

debtor with such a lien may not receive grant funds either directly as a

grant award or indirectly as payment for participating in an NIH grant

awarded to someone else. Consistent with that position, NIH’s policy

statement and PHS’ instructions clearly provide that costs charged to

awards that provide funds to individuals who are in violation of the act will

be disallowed.

NIH’s policy statement and PHS’ instructions, however, are not similarly

consistent on the scope of the certification regarding nondelinquency of

federal debt. The PHS instructions make clear that the certification applies

only to the applicant organization. The PHS instructions state that in

accordance with OMB Memorandum M-87-32, the applicant organization

must certify that it is not delinquent on the repayment of any federal debt

before a grant award can be made. The PHS instructions also state that the

certification “applies to the applicant organization, not to the person

signing the application as the authorized representative nor to the principal

investigator.” In contrast, the NIH policy statement provides that before a

grant can be awarded, the applicant organization must certify that the

applicant organization is not delinquent in repaying any federal debt and

“any person to be paid from grant funds” is also not delinquent in repaying

such debt. During our review, we discussed the apparent inconsistency

with NIH officials. As we were completing our review, NIH received a legal

opinion from its Office of General Counsel that concluded that an

inconsistency exists and that in interpreting the certification on the grant

application, the PHS instructions take precedence over the NIH policy

statement. The legal opinion provided options to NIH on changing its

Grants Policy Statement in light of the inconsistency.

Fiscal Year 1999

Funding Increases

Expanded Extramural

Research

In fiscal year 1999, the Congress increased NIH appropriations nearly $2

billion over fiscal year 1998 levels. The proportion of funds that the

Congress appropriated to each NIH component remained about the same.

(See table 1.)
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Table 1: Unaudited Fiscal Year 1998-99 NIH Appropriations

Note: Totals may not add because of rounding. NIH consists of 25 institutes and centers. In fiscal year

2000, NIH received 24 appropriations—for 22 institutes and centers, the Office of the Director, and

buildings and facilities. The three centers not listed in this table—the Warren Grant Magnuson Clinical

Center, the Center for Scientific Review, and the Center for Information Technology—received no

separate appropriation.

a

Dollars in millions.

1998

Percent of

total 1999

Percent of

total

Percent change

1998-99

National Cancer Institute $2,528a 18.5% $2,892a 18.5% 14.4%

National Heart, Lung, and Blood Institute 1,571 11.5 1,775 11.4 13.0

National Institute of Allergy and Infectious Diseases 1,359 9.9 1,571 10.0 15.6

National Institute of General Medical Sciences 1,062 7.8 1,203 7.7 13.3

National Institute of Diabetes and Digestive and Kidney

Diseases

900 6.6 1,021 6.5 13.4

National Institute of Neurological Disorders and Stroke 775 5.7 897 5.7 15.8

National Institute of Mental Health 743 5.4 854 5.5 14.9

National Institute of Child Health and Human

Development

675 4.9 752 4.8 11.5

National Institute on Drug Abuse 541 4.0 617 3.9 14.0

National Institute on Aging 520 3.8 600 3.8 15.3

National Center for Research Resources 452 3.3 561 3.6 24.0

National Eye Institute 355 2.6 396 2.5 11.3

National Institute of Environmental Health Sciences 341 2.5 388 2.5 13.6

National Institute of Arthritis and Musculoskeletal and

Skin Diseases

273 2.0 306 2.0 12.1

National Institute on Alcohol Abuse and Alcoholism 226 1.7 259 1.7 14.7

National Human Genome Research Institute 223 1.6 284 1.8 27.4

National Institute of Dental and Craniofacial Research 214 1.6 238 1.5 11.2

National Institute on Deafness and Other

Communication Disorders

201 1.5 231 1.5 14.7

National Library of Medicine 161 1.2 182 1.2 13.2

National Institute of Nursing Research 64 0.5 70 0.4 9.9

National Center for Complementary and Alternative

Medicineb

20 0.1 51 0.3 158.5

John E. Fogarty International Center for Advanced Study

in the Health Sciences

28 0.2 35 0.2 24.7

Office of the Directorb 221 1.6 256 1.6 15.7

Buildings and facilities 207 1.5 197 1.3 -4.4

Total $13,659 100.0% $15,633 100.0% 14.5%
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b

National Center for Complementary and Alternative Medicine received its first direct appropriation in

fiscal year 2000. This table presents the amounts allocated to its predecessor, the Office of Alternative

Medicine, from the Office of Director appropriation. The Office of Director amounts have been adjusted

accordingly.

Source: HHS, NIH, Fiscal Year 2000 Justification of Estimates for Appropriations Committees, Vol. 1

(Washington, D.C.: 1999), p. 26, and Fiscal Year 2001 Justification of Estimates for Appropriations

Committees, Vol. 1 (Washington, D.C.: 2000), p. 36.

NIH allocated about 70 percent, or nearly $1.4 billion, of the fiscal year 1999

increase to extramural research grants. The proportion of extramural

funding allocated to project grants, research center grants, and other

research grants for fiscal year 1999 remained about the same as it was in

fiscal year 1998.

About 41 percent of the nearly $1.4 billion increase was used to expand the

number of competitive project grants awarded. (See table 2.) As a result,

978 more grants were funded than in fiscal year 1998, bringing the total

number of competitive grants awarded to 8,565 grants in fiscal year 1999.

At the same time, the average amount awarded for competitive project

grants increased by 15 percent from an average of about $255,900 in fiscal

year 1998 to about $293,600 in fiscal year 1999. This 15 percent increase

resulted in part from NIH’s attempt to award amounts closer to those

recommended by external reviewers. Previously, some institutes we visited

had been making across-the-board reductions to the recommended

amounts, ranging from 5 to 25 percent, in order to fund more grants. NIH

officials told us that they did not augment funding for the approximately

20,000 ongoing grants awarded in previous years except as previously

committed. These increases accounted for about 27 percent of the

extramural research increase. Research centers’ grants and other research

grants received 29 percent, about $390 million of the nearly $1.4 billion

increase in funding for extramural research grants. Research centers’

grants included infrastructure support for clinical research, biotechnology,

and comparative medicine. Other research grants included funds for

research career development, cooperative clinical research, and

biomedical research support. The remaining 3 percent, about $50 million,

went for small business research technology transfer.
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Table 2: Unaudited Fiscal Year 1998-99 Changes in Funding for NIH Extramural Research Grants

Note: Excludes about $2 billion in fiscal year 1999 extramural research funding for Training, Research

and Development Contracts, construction, a portion of the funding for Cancer Prevention and Control,

and the National Library of Medicine. Totals may not add because of rounding.

a

Dollars in millions.

b

SBIR = Small Business Innovation Research. STTR = Small Business Technology Transfer.

Source: HHS, NIH, Fiscal Year 2000 Justification of Estimates for Appropriations Committees, Vol. 1

(Washington, D.C.: 1999), p. 30, and Fiscal Year 2001 Justification of Estimates for Appropriations

Committees, Vol. 1 (Washington, D.C.: 2000), p. 40.

Conclusions Monitoring the scientific progress and financial management of research

grants is important because these activities help ensure that the NIH

extramural research program, the largest component of NIH’s budget, is

soundly managed. Implementing appropriate internal controls is a key

factor in ensuring the accountability of federal funds. Although NIH has

Extramural research grants

Fundinga

Increasea 1998 1999 Percent increase

Project grants

Competitive grants $1,941 $2,515 $574 41.4%

Noncompetitive grants 5,617 5,988 371 26.8

SBIR and STTRb 269 315 46 3.3

Subtotal $7,827 $8,818 $991 71.5%

Research center grants

Specialized and comprehensive centers 844 1,002 158 11.4

Clinical research 170 202 32 2.3

Biotechnology 58 71 13 0.9

Comparative medicine 64 76 12 0.9

Centers in minority institutions 32 34 2 0.1

Subtotal $1,168 $1,385 $217 15.7%

Other research grants

Research careers 226 271 45 3.2

Cancer education 14 17 3 0.2

Cooperative clinical research 197 246 49 3.5

Biomedical research support 26 38 12 0.9

Minority biomedical research support 54 66 12 0.9

Other 115 171 56 4.0

Subtotal $632 $809 $177 12.8%

Total $9,627 $11,012 $1,385 100.0%
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developed processes to ensure the proper oversight of its extramural

research program, its system of internal controls is not always followed or

documented. Internal control problems related to scientific progress

include inconsistencies in documenting assessments of progress before

awarding continued funding and in ensuring the timely closeout of

completed grants. Internal control problems related to financial

management include weaknesses in ensuring that single audits are

conducted, submitted on a timely basis, and used in considering grant

awards. Furthermore, another internal control problem involves the

accuracy of grant data maintained in key financial systems. As a result,

scientific monitoring and financial management functions need to be

improved.

Recommendations To improve internal controls, we recommend that the Secretary of HHS

direct the Assistant Secretary for Management and Budget to refine and

implement the procedures that have been developed to identify, report, and

follow up on grantees that are delinquent in submitting single audit reports

by ensuring the (1) completion of the followup and resolution of delinquent

reports from fiscal years 1995, 1996, and 1997; (2) performance of the

analysis to determine the status of the fiscal year 1998 single audit reports;

and (3) reinforcement of the use of sanctions against delinquent grantees.

To improve internal controls at NIH, we recommend that the Secretary of

HHS direct the Acting Director of NIH to

• require that the institutes document their assessments of grantees’

scientific progress before awarding continued funding by ensuring that

progress report review forms are properly filled out and problems with

scientific progress are documented;

• ensure that institutes properly close out completed grant files in a timely

manner;

• follow up and resolve delinquent single audit reports on a timely basis

after HHS has identified delinquent grantees and, in particular, complete

the followup and resolution of delinquent reports for fiscal years 1995,

1996, and 1997;

• establish and implement a process to ensure that single audit reports are

reviewed to identify significant problems related to NIH’s grants and use

this process as a management tool for ensuring that significant

problems are resolved and considered in the oversight and monitoring

of grant recipients; and
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• ensure the accuracy of grant data in the three key financial management

systems, IMPAC II, CAS, and PMS, by (1) resolving discrepancies

resulting from the reconciliation between CAS and PMS on a timely

basis and (2) performing periodic detailed reviews of transactions,

specifically the grant award amount, within IMPAC II, CAS, and PMS.

Agency Comments and

Our Evaluation

In written comments (reprinted in appendix III) on a draft of this report,

HHS generally agreed with our recommendations for improving internal

controls over extramural grants. It did not concur with our

recommendation to perform an analysis of the status of fiscal year 1998

single audit reports. In its comments, HHS reaffirmed its commitment to an

effective grants monitoring process.

HHS concurred with our recommendation that the Assistant Secretary for

Management and Budget complete the followup and resolution of

delinquent reports from fiscal years 1995, 1996, and 1997. It noted that HHS

instituted a system 3 years ago for identifying grantees and the federal

dollars at risk and has consistently pursued the identification and

collection of outstanding audit reports. In addition, HHS noted that the

financial audits by independent public accounting firms for HHS and NIH

no longer cite an internal control weakness in this area. While the single

audit issue was not reported in the IPA’s internal control report in fiscal

year 1999, it was cited as an internal control weakness for management’s

consideration in fiscal years 1998 and 1999.

HHS did not concur with our recommendation that it perform an analysis

to determine the status of the fiscal year 1998 single audit reports, stating

that to further collapse the time for identifying delinquent audits would not

be worthwhile. However, we did not recommend that HHS further collapse

the time for identifying delinquent audits; our recommendation was that

HHS perform the analysis to determine the status of the fiscal year 1998

single audit reports. To the extent that single audit reports are not analyzed

until all reports for a particular fiscal year are due, the risk increases that

grants will be awarded to ineligible grantees or to grantees that have not

submitted prior years’ single audit reports.

HHS concurred with our recommendation to reinforce the use of sanctions

against delinquent grantees. HHS said that it will use sanctions where

appropriate.
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HHS concurred with our recommendation that NIH document assessments

of grantees’ scientific progress. It noted that NIH has reinforced its policy

that requires documentation and plans to develop a standard checklist for

all awarding units to use for these assessments and stated that NIH expects

a written narrative when progress is not acceptable. These actions should

help ensure that scientific progress is documented. Without a completed

checklist, it is not possible to know whether scientific progress was

assessed. A narrative addition to the checklist is an appropriate and needed

way to document problems.

HHS also concurred with our recommendation that NIH ensure adequate

documentation of closeouts of completed grants. It said that existing policy

provides clear guidance to grantees for submitting final reports. HHS

acknowledged that closeout activity has not been a priority for the

institutes. HHS stated that it would need to apply sanctions to grantees to

foster their compliance and that doing so would be difficult and resource

intensive. However, as we note in the report, in February 2000 OER issued

guidance to the institutes recommending steps—including sanctions—for

the institutes to take to ensure grantee compliance. We believe that NIH

should appropriately implement requirements regarding closeout

documentation. Although HHS concurred with this recommendation, it did

not specify any actions to implement it.

HHS concurred in principle with our recommendation that NIH follow up

and resolve delinquent single audit reports in a timely manner after HHS

has identified delinquent grantees and, in particular, complete the followup

and resolution of delinquent reports for fiscal years 1995, 1996, and 1997.

HHS noted that some of the data cited in our draft report as related to

single audits were either out of date or not correct. NIH provided the

information and it was correct as of December 1999. We have included data

HHS provided that were current as of May 2000.

HHS concurred in principle with our recommendation that NIH establish

and implement a process to ensure that single audit reports are reviewed to

identify significant problems related to its grants and use this process as a

management tool for ensuring that significant problems are resolved and

considered in the oversight and monitoring of grant recipients. It noted that

NIH’s Special Reviews Branch of the Division of Financial Advisory

Services of the Office of Contracts Management is responsible for resolving

single audit findings and for maintaining all audit reports that have been

forwarded to NIH for audit resolution for use by NIH staff. In addition, HHS

noted that NIH established a work group in November 1998 to determine
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whether all required single audit reports had been received and to follow

up with recipients that were delinquent in submitting the reports and

impose sanctions where appropriate. We support these efforts. However,

HHS did not specify how it will use the results of single audit reports as a

management tool for overseeing and monitoring grant recipients.

HHS concurred with our recommendation that NIH ensure the accuracy of

grant data in the three key financial management systems, IMPAC II, CAS,

and PMS. It noted that NIH has devoted more staff to improve the

timeliness and accuracy of the reconciliation between CAS and PMS. In

addition, to improve the quality of the reconciliation process, NIH has plans

to implement a new NIH business system.

Finally, HHS stated that in general NIH provides appropriate oversight and

monitoring in accordance with federal requirements. As we note in this

report, NIH has developed policies and procedures to assess scientific

progress and provide financial management for its grants. However, we

found that these policies and procedures were not consistently

implemented by the institutes. Our recommendations are intended to help

ensure that NIH’s internal control processes are effectively carried out,

thereby helping to ensure that its objectives are accomplished.

HHS also provided technical comments, which we incorporated, where

appropriate.

As we agreed with your offices, unless you publicly announce the report’s

contents earlier, we plan no further distribution of it until 30 days from the

date of this letter. We will then send copies to other interested

congressional committees; the Honorable Donna Shalala, Secretary of the

Department of Health and Human Services; Dr. Ruth Kirschstein, Acting

Director of the National Institutes of Health; the Honorable Jacob J. Lew,

Director of the Office of Management and Budget; and others who are

interested. We will also make copies available to others on request. If you

or your staff have any questions or need additional information, please
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call Janet Heinrich at (202) 512-7119 or Gloria L. Jarmon at (202) 512-4476.

GAO contacts and staff acknowledgments are listed in appendix IV.

Janet Heinrich

Associate Director, Health Financing and Public Health Issues

Health, Education, and Human Services Division

Gloria L. Jarmon

Director, Health, Education, and Human Services

Accounting and Financial Management Issues

Accounting and Information Management Division
Page 30 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring

Appendix I

Scope and Methodology ApApenednxidexiIs

We identified the process the National Institutes of Health (NIH) uses to

monitor scientific progress in extramural grants, its financial management

of these grants, and its use of additional funding in fiscal year 1999. We did

not examine its competitive process for making awards, but we did

examine its oversight of research that it has already decided to support. In

this appendix, we give details on the methodology we used in examining

each aspect of your request.

Monitoring Scientific

Progress

To ascertain how NIH monitors scientific progress in extramural grants, we

obtained and reviewed NIH grant administration policy and interviewed

NIH staff at the Office of Extramural Programs and the Office of Policy for

Extramural Research Administration. In addition, we examined a sample of

files from extramural grants that were active in fiscal year 1997.

We first stratified the NIH institutes into large, medium, and small

institutes, based on their estimated number of active grants. Specifically,

we defined large institutes as those that monitored more than 2,000 grants,

medium institutes as those that monitored between 1,000 and 2,000 grants,

and small institutes as those that monitored fewer than 1,000 grants in

1997. We then selected two institutes from each group, ensuring that each

institute supported a diverse mix of research, including basic, applied,

clinical, and population-based research. We visited the National Cancer

Institute and the National Heart, Lung, and Blood Institute, each of which

monitors more than 2,000 such grants annually; the National Institute of

Neurological Disorders and Stroke and the National Institute of Child

Health and Human Development, each of which monitors 1,000 to 2,000

grants; and the National Institute on Alcohol Abuse and Alcoholism and the

National Institute of Dental and Craniofacial Research, each of which

monitors fewer than 1,000 grants.

Using a list of active grants that NIH provided us, we selected a random

sample of 15 research project grants from each of these six institutes. We

also randomly selected 5 program project grants from 5 of the 6 institutes.

In the remaining institute, only a single program project grant was active in

fiscal year 1997, which we reviewed. We focused on research project grants

and program project grants because they constituted about 87 percent of

the extramural research funding for research grants. Other types of

extramural funding included awards for small businesses, research and

development contracts, cooperative agreements, training grants, and

fellowships.
Appendix I

Scope and Methodology

Page 31 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring

We reviewed each sample file to ascertain the extent of institutes’

monitoring of scientific progress. This included (1) obtaining an overall

grant history; (2) reviewing evidence that institutes had reviewed the

adequacy of scientific progress, changes in research scope and objectives,

and significant budgetary information; (3) identifying evidence that

institutes had approved the grants for continued funding; and (4) where

appropriate, determining whether the files included documents required in

closing out the grants.

To ensure that each grant would have at least one annual progress report

reviewed by NIH for noncompetitive continuation funding, we selected

grants that were active in fiscal year 1997. Since funding for some grants

that were active in fiscal year 1997 would likely have ended by the time of

our data collection in 1999, selecting this period also allowed us to review

the institutes’ procedures for closing out grants. Furthermore, we asked

officials at each institute to identify two grants that had problems, and we

reviewed the files to understand the difficulties and ascertain how they

were resolved. In addition, at each of the six institutes we reviewed the

files of grants that were terminated or withdrawn in fiscal year 1997

according to the information for management, planning, and coordination

(IMPAC II) database. We cannot generalize from the results of our sample

review to other institutes or NIH as a whole.

The Financial

Management of Grants

To determine whether NIH has controls to ensure the effective financial

management of its extramural research grants, we obtained an

understanding of the grants control environment by reviewing and

analyzing related grants policies and procedures and interviewing NIH

officials. We held discussions with and coordinated our work with the

independent public accountant (IPA) responsible for performing the fiscal

year 1999 financial audit of NIH and reviewed fiscal year 1998 and 1999

workpapers related to grants monitoring.

We selected a statistical sample of 78 research project grants and program

project grants that were active in fiscal year 1999 from the IMPAC II

system. These 78 grants were awarded by 15 NIH institutes. The 15

institutes were the National Institute on Alcohol Abuse and Alcoholism;

National Institute on Aging; National Institute of Allergy and Infectious

Diseases; National Institute of Arthritis and Musculoskeletal and Skin

Diseases; National Cancer Institute; National Institute on Drug Abuse;

National Institute on Deafness and other Communication Disorders;

National Institute of Diabetes and Digestive and Kidney Diseases; National
Appendix I

Scope and Methodology

Page 32 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring

Institute of Environmental Health Sciences; National Eye Institute;

National Institute of General Medical Sciences; National Institute of Child

Health and Human Development; National Heart, Lung, and Blood Institute;

National Institute of Mental Health; and National Institute of Neurological

Disorders and Stroke. We interviewed grants management staff at these 15

institutes and reviewed the grantee files related to the 78 grants to

determine whether key financial monitoring documentation was

maintained, such as signed grant applications, approved Notice of Grant

Awards, and financial status reports. We traced the 78 grants to the

payment management system and to the NIH accounting system to

determine whether they were properly accounted for and reported. To

understand a research institution’s management of grants, we interviewed

officials at one of NIH’s top ten recipients of extramural grant funds. To

determine whether NIH’s grantees complied with the Single Audit Act

requirements, we analyzed fiscal year 1997 data from the Department of

Health and Human Services’ (HHS) single audit report database. We also

reviewed HHS’ policies and procedures on the Single Audit Act and

interviewed agency officials.

The Use of Fiscal Year

1999 Funding for

Extramural Research

To ascertain how NIH used its increased fiscal year 1999 appropriation for

extramural research, which accounted for the largest percentage of the

nearly $2 billion increase in funding for fiscal year 1999, we compared the

NIH fiscal year 1998 and 1999 appropriations allocated to extramural

research. Additionally, we examined the increase in the average cost per

research grant awarded in fiscal year 1999. For this comparison, we

obtained the data from the HHS budget justification to appropriations

committees for fiscal years 2000 and 2001 and did not independently verify

the information. In the course of this work, we also interviewed officials

from NIH’s Office of Budget.

We performed our work at NIH’s Washington, D.C., area offices and the

HHS headquarters in Washington, D.C., from May 1999 through April 2000.

We conducted our work in accordance with generally accepted government

auditing standards.
Page 33 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring

Appendix II

Unaudited Fiscal Year 1999 and 2000 NIH

Appropriations ApendxiI

Note: Dollars in millions. Totals may not add because of rounding.

a

National Center for Complementary and Alternative Medicine received its first direct appropriation in

fiscal year 2000. Fiscal year 1999 amounts were allocated to its predecessor, the Office of Alternative

Medicine, from the Office of Director appropriation. The Office of Director amounts have been adjusted

accordingly.

Source: HHS, NIH, Fiscal Year 2001 Justification of Estimates for Appropriations Committees, Vol. 1

(Washington, D.C.: 2000), p. 36.

1999 2000

National Cancer Institute $2,892 $3,312

National Heart, Lung, and Blood Institute 1,775 2,026

National Institute of Allergy and Infectious Diseases 1,571 1,797

National Institute of General Medical Sciences 1,203 1,354

National Institute of Diabetes and Digestive and Kidney

Diseases

1,021 1,141

National Institute of Neurological Disorders and Stroke 897 1,030

National Institute of Mental Health 854 975

National Institute of Child Health and Human Development 752 859

National Institute on Drug Abuse 617 687

National Institute on Aging 600 688

National Center for Research Resources 561 675

National Eye Institute 396 450

National Institute of Environmental Health Sciences 388 443

National Institute of Arthritis and Musculoskeletal and Skin

Diseases

306 349

National Human Genome Research Institute 284 336

National Institute on Alcohol Abuse and Alcoholism 259 293

National Institute of Dental and Craniofacial Research 238 269

National Institute on Deafness and Other Communication

Disorders

231 264

National Library of Medicine 182 215

National Institute of Nursing Research 70 90

National Center for Complementary and Alternative

Medicinea

51 69

John E. Fogarty International Center for Advanced Study in

the Health Sciences

35 43

Office of the Directora 256 282

Buildings and facilities 197 165

Total $15,633 $17,813
Page 34 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring

Appendix III

Comments From the Department of Health

and Human Services ApendxiI
Appendix III

Comments From the Department of Health

and Human Services

Page 35 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring
Appendix III

Comments From the Department of Health

and Human Services

Page 36 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring
Appendix III

Comments From the Department of Health

and Human Services

Page 37 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring

Now page 11.

Now pages 16-17.
Appendix III

Comments From the Department of Health

and Human Services

Page 38 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring

Now page 17.
Appendix III

Comments From the Department of Health

and Human Services

Page 39 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring
Appendix III

Comments From the Department of Health

and Human Services

Page 40 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring
Page 41 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring

Appendix IV

GAO Contacts and Staff Acknowledgments ApendxiIV

GAO Contacts Bruce D. Layton, 202-512-6837

Chinero N. Nwaigwe, 202-512-5472

Staff

Acknowledgments

David W. Bieritz, Bertha Dong, Harrison E. Greene, Jr., Rosa R. Harris, and

Paul T. Wagner, Jr., also made key contributions to this report.
Page 42 GAO/HEHS/AIMD-00-139 NIH Grants Monitoring

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