Report to Congressional Committees 

United States General Accounting Office

GAO

June 2003 DEPARTMENT OF 

HEALTH AND 

HUMAN SERVICES 

Review of the 

Management of 

Inspector General 

Operations 

GAO-03-685 
The credibility of inspectors general is largely premised on their ability to act 

objectively and impartially—both in substance and in perception. Some of 

the HHS Inspector General’s actions—including her decision to delay a 

politically sensitive audit—created the perception that she lacked 

appropriate independence in certain situations. The Inspector General 

exhibited serious lapses in judgment that further troubled many OIG staff. 

For example, she inappropriately obtained a firearm that she briefly 

possessed at her workplace and OIG credentials that identified her as a law 

enforcement officer. The Inspector General also initiated a variety of 

personnel changes in a manner that resulted in the resignation or retirement 

of a significant portion of senior management, disillusioned a number of 

higher level OIG officials and other employees, and fostered an atmosphere 

of anxiety and distrust. Ultimately, the collective effect of these actions 

compromised her ability to serve as an effective leader of HHS’s Office of 

Inspector General. 

Examining productivity trends is difficult because the work of the OIG often 

involves multiyear efforts and the results recorded for a single year are 

heavily dependent on work initiated in prior years. Similarly, savings 

achieved in any one year can be attributable to the culmination of efforts 

made over several years. Given these constraints, GAO noted that 

productivity at the OIG over the last 3 years increased in some areas and 

declined in others. Overall savings attributable to the OIG’s efforts—as 

reported in its semiannual reports to the Congress—increased from $15.6 

billion in fiscal year 2000 to $21.8 billion in fiscal year 2002. The number of 

individuals convicted for violating HHS program statutes and regulations—

another key indicator of the OIG’s performance—also increased. On the 

other hand, declines were noted in the number of settlements with providers 

who submitted false claims to the government and the OIG’s education and 

outreach activities. 

GAO’s survey results showed that employees’ overall views of the 

organization, management, and their personal job satisfaction generally 

remained positive and relatively unchanged between 2002 and 2003. 

However, field office staff and those in lower level positions were 

considerably more positive in their views of the organization than their 

counterparts in headquarters and at the highest levels of management. Two 

units in particular—the OIG’s Office of Counsel and the Office of Evaluation 

and Inspections—also had marked declines in morale. Both reported 

significantly lower levels of trust and confidence in the organization and less 

job satisfaction, compared to 1 year earlier. 

The Inspector General generally disagreed with some of our findings. In our 

response, we address why these findings raise concerns about the 

management of the OIG. We also provided our draft report to the Office of 

the HHS Secretary, but did not receive comments. 

Janet Rehnquist became the 

Inspector General of the 

Department of Health and Human 

Services (HHS) in August 2001. 

GAO was asked to conduct a 

review of the Inspector General’s 

organization and assess her 

leadership, independence, and 

judgment in carrying out the 

mission of the Office of Inspector 

General (OIG). GAO examined 

indicators of the OIG’s productivity 

and compared them to the 

organization’s past performance. 

GAO also determined whether 

employee morale has been 

sustained by surveying all OIG 

employees and comparing the 

results to those obtained through 

an identical survey administered in 

2002. 

On March 4, 2003, the Inspector 

General resigned her office 

effective June 1, 2003. However, in 

this report we refer to Ms. 

Rehnquist as the Inspector General. 

www.gao.gov/cgi-bin/getrpt?GAO-03-685.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact William J. 

Scanlon (202) 512-7114. 

Highlights of GAO-03-685, a report to the 

Chairman and Ranking Minority Member, 

Senate Committee on Finance and the 

Ranking Minority Member, Senate Special 

Committee on Aging 

June 2003 

DEPARTMENT OF HEALTH AND HUMAN 

SERVICES 

Review of the Management of Inspector 

General Operations 
Page i GAO-03-685 Review of HHS OIG Operations 

Letter 1

Results in Brief 2

Background 3

Examination of the Inspector General’s Actions Regarding 

Independence and Judgment 7

Evaluation of OIG Productivity 20

Measure of Employee Morale 28

Agency Comments and Our Evaluation 31

Appendix I Scope and Methodology 36 

Appendix II Insufficient Internal Controls Over the OIG’s 

Credentialing System 42 

Appendix III Comments from the Inspector General 44 

Appendix IV GAO Contacts and Staff Acknowledgments 50 

GAO Contacts 50

Acknowledgments 50

Tables 

Table 1: Select OIG Performance Measures—Fiscal Year 1997 

through Fiscal Year 2002 21

Table 2: Medicare Exclusions Imposed—Fiscal Year 1997 through 

Fiscal Year 2002 22

Table 3: Number and Amount of False Claims Act Settlements, 

Fiscal Years 2000 through 2002a

 22

Table 4: Number and Amount of CMPs Imposed, Fiscal Year 1997 

through Fiscal Year 2002 23

Table 5: Number of Active CIAs and Newly Negotiated CIAs for 

Fiscal Year 1997 through Fiscal Year 2002 24

Table 6: Testimonies, Speeches, and Other Presentations by 

Component for Fiscal Years 2000, 2001, and 2002 25

Contents 
Page ii GAO-03-685 Review of HHS OIG Operations 

Table 7: Number and Percentage of OEI Projects That Were Begun 

in Fiscal Years 2000, 2001, and 2002 and Canceled by 

February 28, 2003 27

Abbreviations 

CIA Corporate Integrity Agreement 

CMP Civil Monetary Penalty 

CMS Centers for Medicare & Medicaid Services 

DOJ Department of Justice 

GS General Schedule 

HHS U.S. Department of Health and Human Services 

MOU Memorandum of Understanding 

OAS Office of Audit Services 

OCIG Office of Counsel to the Inspector General 

OEI Office of Evaluation and Inspections 

OI Office of Investigations 

OIG Office of Inspector General 

OMP Office of Management and Policy 

PCIE President’s Council on Integrity and Efficiency 

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Page 1 GAO-03-685 Review of HHS OIG Operations 

June 10, 2003 

The Honorable Charles E. Grassley 

Chairman 

The Honorable Max Baucus 

Ranking Minority Member 

Committee on Finance 

United States Senate 

The Honorable John Breaux 

Ranking Minority Member 

Special Committee on Aging 

United States Senate 

This report responds to your October 21, 2002, letter asking us to conduct 

a review of the Department of Health and Human Services (HHS) Office of 

Inspector General (OIG). As agreed with your office, we examined the 

activities at the OIG under the leadership of Inspector General Janet 

Rehnquist, who took office in August 2001 and resigned her office 

effective June 1, 2003.1

 Accordingly, the objectives of our review were to 

(1) assess the Inspector General’s leadership, independence, and judgment 

in carrying out the OIG’s mission, (2) identify changes in the OIG’s 

productivity over the last 3 years, and (3) determine whether employee 

morale has been sustained over the last few years. 

To perform our review, we interviewed more than 200 current and former 

OIG employees. We examined more than 8,000 pages of documents—

including OIG reports, internal studies, personnel records, and policies 

and procedures. We also replicated a Web-based employee survey 

conducted by the OIG in January 2002—administered in January and 

February 2003—to assess any changes in employee views about their work 

environment.2

 In addition, to assess the level of cooperation between the 

OIG and some of its law enforcement partners, we spoke with officials 

from the Department of Justice (DOJ), Medicaid Fraud Control Units from 

 1

Although Ms. Rehnquist recently resigned, for purposes of this report, we will refer to her 

as the Inspector General. 

2

We included three additional questions regarding employee morale and trust, and obtained 

demographic information about respondents that was not captured in the OIG’s survey. 

United States General Accounting Office 

Washington, DC 20548 
Page 2 GAO-03-685 Review of HHS OIG Operations 

several states, and the National Association of Medicaid Fraud Control 

Units. We also interviewed three current or former inspectors general 

from other federal agencies to better understand their role and the 

conduct expected of them. We performed our review from October 2002 

through May 2003 in accordance with generally accepted government 

auditing standards. For a detailed description of our scope and 

methodology, see appendix I. 

During her tenure, the Inspector General took a number of actions that 

damaged her credibility and ultimately created an atmosphere of anxiety 

and distrust within certain segments of the OIG. Concerns regarding her 

independence—including those arising from her decision to delay a 

politically sensitive audit and her intervention in ongoing cases in 

response to external requests—and personnel changes she initiated among 

senior management, disillusioned members of her senior staff, 

headquarters employees, and employees working in two OIG units. In 

addition, the Inspector General’s brief possession of a firearm at the 

workplace and law enforcement credentials represented serious lapses in 

judgment. We also believe that the Inspector General should have devoted 

more attention to some aspects of OIG operations, such as a major 

budgetary shortfall, which limited travel and training and required senior 

managers to reallocate staff positions regardless of where those positions 

were most needed. 

Examining the productivity of the OIG in a given time period is complex. 

The OIG engages in a variety of activities so that its productivity involves 

several dimensions. Moreover, comparing success from one year to the 

next is difficult because results are dependent on work in the pipeline that 

was initiated in prior years. Given these constraints, measures of the OIG’s 

performance over the last 3 years reveal gains in some productivity 

indicators and declines in others. On one hand, overall savings attributable 

to its work increased from $15.6 billion in fiscal year 2000 to $21.8 billion 

in fiscal year 2002. On the other hand, we identified some downward 

changes. For example, there was a significant decline in the number of 

settlements with providers who submitted false claims to the government. 

As a consequence, the recoveries associated with these settlements also 

declined, from about $974 million in fiscal year 2000 to about $519 million 

in fiscal year 2002. We also found that the OIG’s outreach activities that 

increase public and provider awareness of fraud and abuse problems in 

health care, and the OIG’s efforts to combat them, have dropped 

appreciably since fiscal year 2001. 

Results in Brief 
Page 3 GAO-03-685 Review of HHS OIG Operations 

Employee views of the organization, management, and their personal job 

satisfaction remained positive and relatively unchanged from 2002 through 

2003, in the aggregate. However, we identified several groups of OIG 

employees whose morale had been adversely affected during this time 

period. In particular, there were considerably more negative views 

expressed by those at headquarters and those in senior management 

positions than their counterparts in the field and in lower level positions. 

These groups were concerned with a range of issues including the 

organization’s respect for staff, clarity of goals, and communication 

efforts. In addition, there were distinct declines since 2002 in the positive 

views of employees working in the evaluation unit and the Office of 

Counsel. These groups had low levels of trust and confidence in the 

organization and expressed a significantly lower level of job satisfaction 

compared to 1 year earlier. 

In written comments on a draft of this report, the Inspector General 

disagreed with some of our findings related to her independence and 

judgment, the agency’s productivity, and employee morale. In our 

response, we address why these findings raise concerns about the 

management of the OIG. We also provided our draft report to the Office of 

the HHS Secretary, but did not receive comments. 

In 1978, Congress passed the Inspector General Act, creating Inspector 

General offices in 12 federal agencies.3

 This followed growing reports of 

serious and widespread breakdowns in agencies’ internal controls. These 

new OIGs were established as independent and objective offices within 

their respective agencies to promote economy, efficiency, and 

effectiveness in government programs and operations and to prevent and 

detect fraud and abuse. In addition, they were created to keep agency 

heads and Congress fully informed about problems and deficiencies in 

program operations, as well as needed corrective action. Over the years, 

the act has been amended to increase the number of inspectors general. 

The President, with the advice and consent of the Senate, appoints 

inspectors general at cabinet-level departments and other large agencies, 

including HHS. The inspectors general at smaller, independent agencies 

and other federal entities are appointed by the heads of their organizations 

and have essentially the same authorities and duties as those appointed by 

 3

Pub. L. No. 95-452, 92 Stat. 1101 (1978) (5 U.S.C. App. (2000)). 

Background 
Page 4 GAO-03-685 Review of HHS OIG Operations 

the President. Presently, there are 28 inspectors general appointed by the 

President and 29 appointed by their agency heads. 

Inspectors general hold a unique place in the executive branch of 

government. They report to and are subject to the general supervision of 

their agency heads, but carry out their duties independently. In addition, 

they have reporting obligations to both the heads of their agencies and 

Congress.4

 Those that are presidentially appointed are among the few such 

appointees that are to be selected “without regard to political affiliation 

and solely on the basis of integrity and demonstrated ability.”

5

 To help 

maintain their independence and fulfill their mission—which often 

involves being publicly critical of their own departments—inspectors 

general must familiarize their departmental colleagues with their special 

role. 

Because they are charged with independently protecting the integrity of 

federal programs, inspectors general must be impartial in fact and 

appearance. Government Auditing Standards,

6

 effective in January 2003, 

call for auditors to “be free, both in fact and appearance from personal, 

external, and organizational impairments to independence.” These 

standards also require that auditors “avoid situations that could lead 

reasonable third parties with knowledge of the relevant facts and 

circumstances to conclude that the auditor is not capable of exercising 

objective and impartial judgment . . ..” Given that their independence and 

impartiality is so critical, inspectors general need to be sensitive to how 

their actions might be perceived and interpreted by their staffs, the 

administration, Congress, and the public. 

 4

The inspector general Act of 1978, as amended, requires that Inspectors General report 

semiannually to the head of the department or agency and Congress on the activities of the 

office during the 6-month periods ending March 31 and September 30. The semiannual 

reports are intended to keep the agency heads and Congress fully informed of significant 

findings and recommendations initiated by the inspectors general. 

5

5 U.S.C. App. § 3(a). 

6

U.S. General Accounting Office, Government Auditing Standards: Amendment No. 3 

Independence, GAO-02-338G (Washington, D.C.: Jan. 25, 2002). Although issued in 2002, 

this revised standard on independence did not become effective until January 1, 2003, to 

allow audit organizations sufficient implementation time. However, the previous standard 

also stressed the importance of independence. For example, it required auditors to “be free 

from personal and external impairments to independence” and stated that auditors “should 

be organizationally independent and should maintain an independent attitude and 

appearance.” 
Page 5 GAO-03-685 Review of HHS OIG Operations 

About 300 of the approximately 1,600 HHS OIG employees are employed in 

its Washington D.C. headquarters. The remainder work in its 8 regional 

offices and 85 field offices in all 50 states. The OIG consists of five 

components, or major units, each headed by a deputy inspector general. 

The office is led by 13 Senior Executive Service level employees, who all 

work in headquarters, and about 60 GS-15 level employees.7

 About twothirds of the GS-15 employees are spread across the various components 

in headquarters with the remaining third located in the OIG’s regional 

offices. 

Consistent with the act, the OIG maintains the Office of Audit Services 

(OAS) and the Office of Investigations (OI).8

 They each represent about 40 

percent of the OIG’s budget. OAS is responsible for auditing a variety of 

HHS health care programs and generally spends about 80 percent of its 

resources on projects related to the Medicare and Medicaid programs.9

 Its 

findings can result in program improvements and the return of 

overpayments to the federal government. In addition, OAS provides audit 

support to OI. OI investigators typically pursue allegations of criminal 

conduct that they receive from contractors that process Medicare claims, 

state Medicaid Fraud Control Units, officials involved in administering 

HHS’s many grant programs, and others. When investigators find evidence 

of potential wrongdoing, they refer the matter to DOJ for possible 

prosecution or the OIG may opt to impose other sanctions. 

The OIG has established three additional components to enable it to fulfill 

its mission. The Office of Evaluation and Inspections (OEI) conducts 

short-term management evaluations of HHS programs that generally 

involve significant expenditures and services to beneficiaries or in which 

important management issues have surfaced. Its reports are expected to 

identify opportunities for improvement in departmental programs. While 

OAS may audit the same federal programs examined by OEI, the scope of 

 7

The General Schedule (GS) is a personnel classification and pay system used by the 

federal government. It includes a range of levels of difficulty and responsibility for 

positions graded GS-1 through GS-15. Senior Executive Service managers are subject to a 

different system of promotion criteria and higher pay. 

8

Section 3(d) of the Inspector General Act requires each inspector general to appoint an 

assistant inspector general for auditing and an assistant inspector general for 

investigations. 

9

Medicare is the federal health insurance program that serves the nation’s elderly and 

certain disabled individuals. Medicaid is a jointly funded, federal-state health insurance 

program for certain low-income people. 
Page 6 GAO-03-685 Review of HHS OIG Operations 

OEI studies is typically broader and would more likely involve the use of 

surveys, interviews, and other qualitative research methods. A relatively 

small component, OEI represents about 10 percent of the office’s 

resources. The Office of Counsel to the Inspector General (OCIG) provides 

legal services to the OIG. Among other things, it renders advisory opinions 

to health care providers and develops model industry guidance for 

compliance with relevant laws and regulations. It also has several 

sanctions at its disposal to penalize those who abuse HHS programs. 

Finally, the Office of Management and Policy (OMP) is responsible for the 

administration of the office, which includes overseeing the budget, 

supporting the office’s information technology needs, and working with 

the media. It is also responsible for the OIG’s human resource 

management activities, but obtains significant personnel support from the 

department’s centralized Program Support Center. OCIG and OMP each 

represent about 5 percent of the OIG’s budget. 

The OIG plays an instrumental role in identifying and investigating 

individuals and entities that may have abused HHS programs. It may make 

referrals to DOJ for possible prosecution under applicable criminal 

statutes. In addition, health care providers who violate federal laws and 

regulations may face a variety of civil sanctions. The OIG may make use of 

the False Claims Act10—the federal government’s primary civil remedy for 

false or fraudulent claims—and refer such matters to DOJ. The act 

imposes substantial penalties on those who knowingly submit false claims 

to Medicare and other federal programs. 

If a provider has filed a false claim that DOJ opts not to pursue through the 

use of the False Claims Act, the OIG may impose other sanctions, such as 

civil monetary penalties (CMP), against that health care provider. CMPs 

are also imposed for other types of improper conduct, such as violations 

of statutory prohibitions on “kickbacks” in connection with patient 

referrals.11 The OIG also can assess CMPs against hospitals for “patient 

dumping,” that is, failing to provide appropriate treatment to patients 

 1031 U.S.C. §§ 3729-3733. 

11The antikickback provisions of the Social Security Act generally prohibit persons from 

paying or soliciting remuneration in order to induce another to refer business reimbursed 

under a federal health care program. See 42 U.S.C. § 1320a-7b(b). 
Page 7 GAO-03-685 Review of HHS OIG Operations 

presenting a medical emergency.12 The amount of the CMP imposed is 

related to each provider’s specific violation. The OIG may also exclude 

health care providers from participating in Medicare, Medicaid, and other 

federal health programs if they have, for example, been convicted of a 

criminal offense related to Medicare—including health care fraud or 

patient abuse and neglect—or had their license suspended or revoked. 

OCIG may also opt to negotiate corporate integrity agreements with health 

care providers.13

Although the OIG focuses the majority of its attention on health care 

programs, its activities extend to other areas as well. For example, the OIG 

has made the detection, investigation, and prosecution of absent parents 

who fail to pay court-ordered child support a priority. The OIG works with 

other federal, state, and local agencies to expedite the collection of these 

payments. Parents who repeatedly fail to honor such obligations are 

subject to criminal prosecution. The OIG’s recent activities with respect to 

parents who have defaulted on their child support payments resulted in 

152 convictions and more than $7 million in court-ordered criminal 

restitution in fiscal year 2002. 

We examined the independence that was reflected in the Inspector 

General’s decision-making during her tenure. In addition, we reviewed 

personnel changes that she initiated and evaluated her judgment in several 

instances. We interviewed appropriate staff, including the Inspector 

General herself, and examined relevant documentation. 

Current and former OIG headquarters employees frequently expressed 

concerns about the Inspector General’s independence. These concerns 

centered on several incidents—some of which were widely reported by 

the media. Employees also identified other audits and investigations that 

 12Under the Emergency Medical Treatment and Active Labor Act (EMTALA), all hospitals 

that participate in Medicare are required to screen—and if an emergency medical condition 

is present, stabilize—any patient who comes to the emergency department, regardless of 

the individual’s ability to pay. See 42 U.S.C. § 1395dd(a). 

13Under corporate integrity agreements, providers agree to take affirmative steps to 

improve compliance and report periodically to the OIG. The OIG, in turn, agrees not to 

seek further administrative penalties for the behavior in question. 

Examination of the 

Inspector General’s 

Actions Regarding 

Independence and 

Judgment 

The Inspector General’s 

Independence 
Page 8 GAO-03-685 Review of HHS OIG Operations 

they felt may have suffered from inappropriate management intervention. 

We concluded that the following four incidents involved actions on the 

part of the Inspector General that at least contributed to the perception of 

a lack of independence. 

In the spring of 2002, the OIG was scheduled to begin an audit of the 

Florida Retirement System. The objective was to evaluate whether the 

state appropriately charged the federal government for the pension 

expenses of state agency employees who help administer federal 

programs. The auditors specifically wanted to determine whether funds 

designated as federal contributions to the retirement system were used to 

provide for pension expenses, and whether the federal contribution rates 

were reasonable. 

The OIG’s first meeting to discuss this audit with Florida pension officials 

was scheduled for April 16, 2002. The day before, the Chief of Staff to the 

Florida governor placed an urgent call to the Office of the HHS Secretary, 

requesting that the audit be delayed to accommodate the new pension 

department director who was going to assume his position in a few weeks. 

This call was ultimately referred to the Inspector General, who instructed 

her Deputy for Audit Services to delay the audit for a few days. The 

Inspector General subsequently ordered a second delay until July. Due to 

subsequent scheduling problems affecting both OIG and Florida pension 

staff, the audit team did not begin its work until September 2002. 

Allegations made by OIG employees and the media suggested that the 

federal government’s contributions to the Florida retirement system could 

be excessive and that a report on these contributions might affect the 

outcome of the Florida governor’s race that November. 

When asked about the incident, the Inspector General stated that she 

agreed to temporarily postpone the audit until she could determine the 

appropriate response to the request and did not have any involvement in 

subsequent delays. She also insisted that audits are frequently delayed, 

that her decision to delay the audit was not politically motivated, and that, 

even if the audit had begun in April, it would not have been completed 

before the election. She told us that, in hindsight, she could have handled 

the situation differently by referring the request to the Deputy for Audit 

Services, but she did not believe she acted inappropriately in these 

circumstances. 

We believe that the Inspector General did not appropriately investigate the 

implications of her decision before agreeing to delay what ultimately 

resulted in a report containing significant monetary findings. First, Florida 

Florida Pension Audit 
Page 9 GAO-03-685 Review of HHS OIG Operations 

pension department officials could have known that a substantial 

overpayment existed, and that a delay in the OIG’s audit could have 

benefited the state by changing the time frames used to calculate the 

amount it owed. In fact, the draft report on the Florida pension audit 

contains a finding that there were excessive federal contributions totaling 

about $517 million, which the state will be required to return or offset 

against the amount of future federal contributions to the retirement fund. 

Second, given that the team was scheduled to begin its work in April 2002 

and had estimated that the audit report would be drafted in 6 months, it is 

conceivable that the report could have been available by election day, if 

the audit had begun when originally planned. Finally, contrary to the 

Inspector General’s recollection, we found that she sent an e-mail message 

to her Deputy for Audit Services in April 2002 instructing him to postpone 

the audit until July 2002. The Inspector General acknowledged that, 

although short delays in commencing audits are common, it was 

admittedly unusual for a request for a delay to be directed to, and resolved 

at, her level. 

In February 2000, the OIG alleged that York Hospital—located in York, 

Pennsylvania—had submitted improper claims for services provided to 

Medicare beneficiaries. The OIG had notified the hospital that it planned 

to impose a CMP and was engaged in negotiations with the hospital when 

the Inspector General assumed office.14 The OIG attorneys had estimated 

that York Hospital’s potential liability was $726,000. 

Soon after taking office, the Inspector General received a letter from three 

members of Congress encouraging her to settle the case quickly. 

According to the former Chief Counsel,15 the Inspector General told him, “I 

hate this case; get rid of it.” Feeling as though they had to move fast, OIG 

attorneys lost the benefit of time—which they explained is a key factor in 

resolving a case in the government’s favor—and quickly settled the matter. 

The former Chief Counsel also noted that the settlement amount of 

 14Prior to imposing a CMP, the OIG typically seeks to resolve the matter through 

negotiations. The negotiation process allows the government to obtain a monetary 

recovery and spares the provider from having to admit liability. When a settlement is not 

pursued or cannot be reached, the OIG must give the provider the opportunity for a 

hearing. 

15On January 8, 2003, the Inspector General waived the attorney-client privilege pertaining 

to both her former and current Chief Counsels concerning matters that arose during her 

tenure, except with respect to open investigations pending before the grand jury, matters 

under court seal, confidential sources, or other open inquiries. 

York Hospital 
Page 10 GAO-03-685 Review of HHS OIG Operations 

$270,000 was far less than the attorneys believed the government could 

have received had negotiations proceeded as they had planned. 

The Inspector General indicated that she in no way directed a settlement 

or personally involved herself in the York Hospital negotiations. She also 

stated that if her OCIG staff perceived that they were under pressure to 

settle the case quickly, they misinterpreted her instructions. She told us 

that she simply wanted to settle this case in a timely manner. 

Although the Inspector General said she did not intend to pressure her 

staff, the former Chief Counsel told us that he and those responsible for 

negotiating with hospital officials clearly perceived a sense of urgency. He 

also told us that her staff perceived that timing, rather than maximizing the 

settlement amount, was her main concern. We believe that her staff acted 

accordingly, possibly against the government’s financial interest. 

Two medical societies representing providers of lithotripsy16 services 

threatened to sue the Centers for Medicare & Medicaid Services (CMS) 

over a regulation resulting in the denial of claims submitted for payment to 

the Medicare program. The CMS regulation implemented statutory 

restrictions on physician referrals to providers in which the physicians 

have an ownership interest and included lithotripsy services within the 

scope of these restrictions. The medical societies maintained that 

Congress did not intend to include lithotripsy services within the scope of 

the statute and intended to litigate this matter, if a settlement could not be 

reached quickly. 

A partner in the law firm representing the two medical societies, who was 

also a friend of the Inspector General, contacted her for assistance in 

expediting this case. The Inspector General directed her former Chief 

Counsel to contact the law firm and begin negotiating the matter, which 

was under the jurisdiction of CMS and not the OIG. The former OIG Chief 

Counsel was hesitant to intervene until the appropriate attorney 

representing CMS in this matter could be consulted. Because CMS’s 

attorney was unavailable for about a week, the former Chief Counsel took 

no action during this time. According to the former Chief Counsel, the 

Inspector General admonished him severely when she discovered that he 

had not followed her instructions to immediately contact the law firm. 

 16Lithotripsy is a procedure typically performed by urologists to break up kidney stones 

without the need for surgery. 

Lithotripsy Claims 
Page 11 GAO-03-685 Review of HHS OIG Operations 

The Inspector General asserted that her office had a legitimate role in this 

matter. Although the issue was being disputed between the medical 

societies representing the lithotripsy providers and CMS, the Inspector 

General believed that her OCIG staff, which advised Congress on 

physician referral matters, was in a unique position to resolve the issue. 

She pointed out that she did not personally involve herself in the matter, 

nor instruct her staff about how to resolve the issue. Instead, she stated 

that her goal was to help resolve a matter in which her attorneys had vast 

expertise. 

Despite the OIG’s expertise in this matter, we agree with the former Chief 

Counsel that it would have been inappropriate for the OIG to intervene by 

contacting the law firm to initiate discussions, particularly in the absence 

of CMS’s attorney. If the Inspector General wanted OCIG’s expertise to be 

offered to CMS, it would have made sense for OCIG to contact CMS’s 

attorney before proceeding. CMS’s attorney responsible for handling this 

matter told us that she would have been troubled if the OIG had 

commenced discussions without her agency’s participation. Given the 

Inspector General’s personal relationship with the medical societies’

attorney and the OIG’s lack of jurisdiction in the matter, her actions 

created the impression that she was more interested in helping a friend 

than offering advice to CMS, which called her independence into question. 

On February 20, 2001, the OIG sent its draft report on adjusted community 

rate proposals for Medicare+Choice organizations17 to CMS for comment. 

This report was of potentially significant interest to congressional 

committees, which were then considering the adequacy of payments in the 

Medicare+Choice program. While OIG guidelines generally provide up to 

45 days for audited entities to comment on its draft reports, the 

publication of this report was delayed for 14 months while the OIG waited 

for comments from CMS. Ultimately CMS agreed with the OIG’s findings in 

written comments on April 16, 2002. 

Some employees alleged that the delay in issuing this report reflected a 

lack of independence on the Inspector General’s part. They suggested that 

the Inspector General should have taken a more active role in expediting 

 17Medicare+Choice was designed to expand Medicare beneficiaries’ health plan choices by 

encouraging the wider availability of HMOs and other types of health plans, such as 

preferred provider organizations. Adjusted community rate proposals detail the revenue 

that Medicare+Choice organizations project is needed to cover contributions to profit or 

reserves and the direct medical and administrative costs of delivering services to enrollees. 

Adjusted Community Rating 

Audit 
Page 12 GAO-03-685 Review of HHS OIG Operations 

the report’s issuance. They pointed out that the CMS Administrator 

initially disagreed with the draft report’s findings and hired a consultant to 

validate the OIG’s results. According to these employees, it took CMS 

more than a year to replicate the OIG’s work and determine that it agreed 

with the report’s findings. OIG employees told us that the Inspector 

General tolerated this situation because she was unwilling to issue a 

relatively controversial report without the benefit of CMS’s agreement. 

The delay in issuing this report diminished its usefulness because 

congressional committees were focused on other concerns by the time the 

report was finalized. 

The Inspector General stated that she was only vaguely familiar with this 

project but was certain that she did not direct her audit team to delay the 

report’s issuance. Although she recalled that the CMS Administrator 

initially disagreed with the report’s conclusions, she told us that she did 

not remember the specific time frames associated with it. 

Our evidence shows that the Inspector General’s staff tried to enlist her 

assistance in expediting CMS’s comments to no avail. By permitting CMS 

to delay the report’s publication, the Inspector General created the 

appearance among her staff of being unduly influenced by CMS. In our 

view, a time sensitive report of congressional interest should have, at the 

very least, garnered more of the Inspector General’s attention. 

During the Inspector General’s tenure, staff turnover among the OIG 

senior headquarters staff has been considerable. Between September 2001 

and November 2002, at least 20 OIG senior managers retired, resigned, or 

were reassigned. Ten of these were Senior Executive Service18 employees, 

most of whom had over 25 years of government service and had played an 

important leadership role at the OIG for many years. The others were 

GS-15 employees who were instrumental in carrying out specific office 

functions.19 The Inspector General’s representative characterized these 

changes as voluntary and beneficial to the overall mission of the office. 

 18In several important areas, including reassignments and reductions in grade, federal 

regulations allow greater flexibility for personnel decisions regarding Senior Executive 

Service employees than for general schedule employees. Under these regulations, the 

Inspector General had more discretion with respect to Senior Executive Service-level 

managers in the OIG than GS-15-level managers. 

19The Inspector General made many of these changes by taking advantage of opportunities 

presented to her when two of the Deputy Inspectors General decided to retire. 

The Inspector General’s 

Personnel Changes 
Page 13 GAO-03-685 Review of HHS OIG Operations 

The Inspector General told us that these changes were made to provide 

senior managers with new insights into agency operations and to 

capitalize on the fresh perspectives they could bring to their new jobs. 

However, we found that the sudden and unexplained nature of many of the 

Inspector General’s actions resulted in a widespread perception of 

unfairness among her staff. In addition, the promotion of a close advisor to 

the Inspector General, to the position of Director of Public and 

Congressional Affairs, raises a legal concern. 

We found the circumstances surrounding the departures of eight senior 

OIG managers to be particularly troubling. Four of these eight managers 

who left the OIG or were detailed elsewhere were members of the Senior 

Executive Service. One of the four took an early retirement after the 

Inspector General proposed that the department assign him to a position 

outside of his local commuting area with the assumption that he would 

retire instead. Another retired after most of his responsibilities were 

reassigned to another official or eliminated. A third resigned about 6 

weeks after the Inspector General reassigned his job responsibilities and 

directed that he not report to his office and instead spend his time seeking 

new employment. Finally, one manager was detailed to a temporary 

position within HHS and was also instructed not to return to his OIG 

office. He is currently seeking new employment. 

These four individuals told us that the Inspector General had not informed 

them of specific deficiencies in their performance, given them any 

opportunity to improve their performance, worked with them to find a 

mutually satisfactory resolution to her concerns, or provided an adequate 

rationale for her decisions to remove them from their positions. Moreover, 

three of these managers told us that they were shocked with the urgency 

she displayed when asking them to leave the OIG, and two perceived that a 

single event ultimately led to the Inspector General’s decision to remove 

them. For example, in one instance, a senior manager linked his removal 

to an incident in which a problem had to be resolved in the Inspector 

General’s absence. Although he successfully contacted her and proposed a 

solution, she did not wish to address the matter until her return to the 

office. He delayed taking action, as she directed. However, according to 

this official, when the Inspector General returned, she was angry and 

suggested that he had tried to pressure her into accepting his proposed 

solution, essentially excluding her from the decision-making process. 

Describing their departures from the OIG, these four individuals told us 

that they felt they had no alternative but to leave their positions. Other 

OIG staff also told us that these four changes—all of which were initiated 

by the Inspector General—were involuntary. 
Page 14 GAO-03-685 Review of HHS OIG Operations 

The other four individuals whose departures were particularly troubling 

were GS-15 level managers from OMP, OCIG, OI, and the Inspector 

General’s Immediate Office.20 One manager resigned after being reassigned 

twice within 9 months. According to several OIG employees, the purpose 

of this manager’s second reassignment was to accommodate the Inspector 

General’s preference that this manager no longer work in the OIG 

headquarters building. The Inspector General gave no explanation why she 

wanted this individual to work in a remote location. A second was 

reassigned to an interagency task force for an indefinite period after his 

position was abolished. The Inspector General reportedly no longer 

wanted him in the OIG headquarters building. The third individual was 

temporarily reassigned to a position at another HHS agency and 

subsequently resigned. He told us that his duties were curtailed following 

a briefing of congressional staff in which he voiced an official OIG opinion 

that conflicted with that of CMS. The fourth individual retired after being 

reassigned from the Inspector General’s Immediate Office to another 

component. Some staff members perceived that the reassignment of this 

individual resulted, in part, from her requesting—without the Inspector 

General’s knowledge—a gun safe to properly store a firearm that the 

Inspector General had recently acquired. Like the reassignments at the 

senior executive level, the Inspector General initiated these changes. 

Some of the employees we interviewed were skeptical that these changes 

were necessary and asserted that they actually damaged the organization’s 

effectiveness. Specifically, they were concerned with the sheer number of 

personnel moves made in a relatively brief period of time and that their 

new component heads lacked experience in the areas that they were going 

to lead. They also expressed concerns about the Inspector General’s 

motivations because they felt that the changes generally had not been 

adequately explained to the employees involved. The abruptness of these 

changes and the lack of any overall explanation for them heightened 

employees’ mistrust. Although some employees were supportive of the 

Inspector General’s organizational changes or felt unaffected by her 

actions, comments made during our interviews and in our employee 

survey highlighted the frustration many employees—especially at 

headquarters—felt due to the perception of unfairness associated with 

 20The Immediate Office provides direct support to the Inspector General. It is not affiliated 

with the OIG’s five components, and it maintains a relatively small staff of about 10 

employees. 
Page 15 GAO-03-685 Review of HHS OIG Operations 

these personnel changes. We found that the magnitude and abruptness of 

the Inspector General’s actions raised fear and anxiety among her staff. 

We asked the Inspector General about each of the individuals to obtain her 

rationale in making these personnel decisions. The Inspector General told 

us that she was concerned about the individuals’ privacy and that she was 

uncomfortable discussing the circumstances involving these managers 

with us. 

Finally, we identified one matter giving rise to a legal concern. We 

obtained information suggesting that a member of the OIG’s staff may 

have been preselected for a GS-15 position as the Director of Public and 

Congressional Affairs.21 Specifically, as explained below, e-mail 

communication by one of the Inspector General’s closest advisors implies 

that a decision had been made to promote this employee to the GS-15 level 

prior to the initiation of a competitive selection process. Citing the 

individual’s outstanding performance as a GS-14 in the same office,22 the 

Inspector General had directed the employee’s supervisor to promote her 

to a GS-15 at the earliest opportunity. Shortly thereafter, an advisor to the 

Inspector General contacted the individual’s supervisor and emphasized 

that the Inspector General believed that it was important for the individual 

to have a GS-15 in her current position. The advisor urged him to initiate 

the promotion process so that the GS-15 would be effective on the date of 

her eligibility for promotion, or soon thereafter. The advisor further 

explained that the Inspector General had made a commitment when the 

individual agreed to take the GS-14 position that she would be promoted 

to a GS-15 one year later. In addition, the OIG included a “selective 

placement factor” in the GS-15 position description, reportedly to favor the 

employee. OIG staff told us that, although the GS-15 position was 

advertised both inside and outside of the agency, there was a widespread 

perception that the selection had already been made. This perception may 

 21Preselection is prohibited under federal law. Specifically, under 5 U.S.C. § 2302(b)(6), an 

employee with personnel authority may not grant any preference or advantage not 

authorized by law, rule, or regulation to any employee or applicant for employment 

(including defining the scope or manner of competition or the requirements for any 

position) for the purpose of improving or injuring the prospects of any particular person 

for employment. 

22One year before her promotion to a GS-15, this individual had been promoted from a GS13 position in OCIG to a supervisory GS-14 position in the OIG’s Office of Public and 

Congressional Affairs, following the reassignment of the GS-15 staff person who had 

previously performed similar duties. 
Page 16 GAO-03-685 Review of HHS OIG Operations 

account for the fact that there was only one applicant for the position. 

While the information we obtained raises concern about a possible 

preselection, we have not conducted the type of formal, factual inquiry 

that would ultimately be necessary to determine whether the Inspector 

General’s actions were unlawful.23

We identified several matters that raised concerns about the adequacy of 

the Inspector General’s leadership. Some employees questioned the 

Inspector General’s judgment in regard to her possession of a firearm in 

the office, as well as law enforcement credentials. Others raised concerns 

about the manner in which she conducted her business travel. In addition, 

several employees interpreted some of the Inspector General’s actions as 

demonstrating a lack of interest in key office operations. 

In the fall of 2002, the Integrity Committee of the President’s Council on 

Integrity and Efficiency (PCIE)24 received an allegation that the Inspector 

General had improperly requested and obtained a firearm from her Deputy 

Inspector General for Investigations. Subsequently, the Integrity 

Committee received a second allegation that the Inspector General had 

improperly obtained supervisory special agent law enforcement 

credentials. After consulting with DOJ officials, who declined to pursue 

these allegations, the Integrity Committee proceeded with its investigation. 

The PCIE forwarded its report to the Deputy Secretary of HHS on April 4, 

2003. 

The PCIE found that the Inspector General had obtained a firearm from an 

OIG special agent and maintained it in her Washington, D.C. office for a 

short period of time. An OIG Memorandum of Understanding (MOU) with 

DOJ and the Federal Bureau of Investigation set forth a process for 

deputizing OIG special agents to allow them to carry firearms, make 

arrests, and execute warrants when carrying out their law enforcement 

 23We are referring this matter to the Office of Special Counsel of the Merit Systems 

Protection Board, which is tasked with investigating such allegations. 

24The PCIE, an organization composed primarily of the presidentially appointed inspectors 

general, was created to address integrity, economy, and effectiveness issues that transcend 

individual government agencies, and increase the professionalism and effectiveness of 

inspector general personnel throughout the government. The PCIE’s Integrity Committee is 

charged with receiving, reviewing, and investigating allegations of administrative 

misconduct against Inspectors General, and, in certain cases, members of their staffs. 

The Inspector General’s 

Judgment 

Report by the President’s 

Council on Integrity and 

Efficiency 
Page 17 GAO-03-685 Review of HHS OIG Operations 

functions.25 However, the PCIE found that the Inspector General had not 

met the job classification and training requirements outlined in the MOU 

and had not been deputized. In an interview with PCIE investigators, the 

Inspector General stated that she believed that inspectors general were 

statutorily authorized to possess firearms and that she had not reviewed 

the MOU for deputation of OIG special agents. 

In regard to the second allegation, the PCIE found that the Deputy 

Inspector General for Investigations obtained supervisory special agent 

credentials for the Inspector General because she did not want the 

Inspector General to have any difficulty gaining access to secured areas in 

the event of a terrorist incident.26 The Inspector General told PCIE 

investigators that other inspectors general did not seem to know how to 

handle the issue of access to secured areas in the event of a terrorist 

attack, but she had never asked them if they had law enforcement 

credentials. She also told investigators that she had the credentials in her 

possession for a short time, and returned them to her Deputy for 

Investigations to store in a safe. (Before the PCIE investigated this issue, 

concerns about the ease with which OIG credentials could be obtained 

came to our attention. We examined the internal controls for the 

credentialing system and identified several weaknesses, which are 

described in appendix II. OIG officials have since told us that they have 

taken steps to correct these weaknesses.) 

The PCIE report identified several criminal statutes as relevant to the 

allegations, including provisions of federal and District of Columbia law 

concerning the possession of firearms, which are applicable to those 

working in federal buildings. At the conclusion of the investigation, DOJ 

officials advised the PCIE that it declined to prosecute the Inspector 

General for any possible violations of criminal statutes regarding the 

possession of a firearm or law enforcement credentials. In addition, in the 

letter to the Deputy Secretary of HHS accompanying its report, the PCIE 

advised that the Inspector General’s resignation mooted the need to take 

any administrative actions against her. It also expressed deep concern 

 25The PCIE report stated that under OIG policy employees could not possess or carry 

firearms without being deputized, as set forth in the MOU. 

26The credentials stated that Ms. Rehnquist was a supervisory special agent of the Office of 

Inspector General authorized to carry firearms, execute warrants, administer oaths, make 

arrests, and perform other duties as authorized by law and/or departmental regulations. 
Page 18 GAO-03-685 Review of HHS OIG Operations 

about the actions of some OIG employees who facilitated the Inspector 

General’s acquisition of these items. 

Another issue that persistently surfaced during our review was 

perceptions of the propriety of the Inspector General’s business travel. As 

the head of a large organization with offices nationwide, the Inspector 

General is entitled—and expected—to periodically visit these offices to 

provide oversight, guidance, and support to her staff. In addition, the 

Inspector General may engage in other business-related travel, such as 

attending conferences and meeting with provider organizations and other 

external groups. Inspectors general—like other government employees—

are not prohibited from planning personal travel in conjunction with their 

business trips. However, we spoke with current and former inspectors 

general from other federal agencies, and they told us that they generally 

refrain from including personal travel with their business trips for fear of 

raising suspicion about their motivation or integrity. While no one alleged 

that the Inspector General violated travel regulations, some current and 

former officials questioned her motivation for planning certain trips that 

included a personal element, such as sightseeing activities—sometimes 

with two senior OIG managers. 

To better understand the purpose of the Inspector General’s travel, we 

examined all of the documentation related to her trips, including travel 

orders, vouchers, and detailed itineraries prepared by her office. We found 

that during the first 4 months of the Inspector General’s tenure she took 

four trips outside of the Washington D.C. area. None of these trips 

included a personal element or any companions. However, over the next 

12 months, the Inspector General traveled eight more times and included 

personal activities on half of these trips. In addition, she invited one or two 

senior managers to accompany her on six of these eight trips. 

Three of the Inspector General’s trips in particular raised concerns, arising 

from a perception that this travel was motivated by other than official 

duties. In some of these cases, large blocks of time could not always be 

accounted for. For example, the Inspector General took one trip to San 

Francisco and Phoenix that spanned 8 days and included 2 days of 

personal time on a weekend. In examining the business portion of this trip, 

we were only able to determine that the Inspector General made two halfhour speeches and traveled between these cities and Washington, D.C. 

Further, in some cases, personal activities—sometimes involving the 

participation of the two senior managers—were included. While we did 

not validate the managers’ activities on these trips beyond their own 

assertions, we believe that it is appropriate for the Inspector General to 

The Inspector General’s Travel
Page 19 GAO-03-685 Review of HHS OIG Operations 

ask managers to accompany her as needed on business-related travel. 

However, including her colleagues in her personal activities during travel 

contributed to a perception that the business reasons for these trips were 

pretexts and that the trips were planned solely for nonbusiness purposes. 

In responding to our inquiries regarding the Inspector General’s travel, she 

indicated that all of her trips were made for legitimate business purposes. 

She also told us that she was not concerned with any perceptions OIG 

employees may have had about her travel. Finally, in a written response to 

our inquiry regarding approximately 3 days of unaccounted time during 

her San Francisco and Phoenix trip, she indicated that she spent her time 

performing office work and preparing for one of her two speeches. She 

offered no other elaboration on her business activity. 

During our study, the Deputy Inspectors General were grappling with a 

major budgetary shortfall due to aggressive hiring in fiscal year 2002, 

lower than expected attrition throughout the OIG, and uncertain funding 

levels for fiscal year 2003 that had yet to be resolved. Senior OIG officials 

told us that they were concerned that, without a quick solution, they might 

ultimately violate the Antideficiency Act.27 In February 2003, the Deputy 

Inspectors General were developing various proposals to react to their 

forecasted budget shortfall. The deputies had severely limited travel, 

training, and other human resource activities in their components. In 

addition, they were reallocating staff positions to accommodate the 

budget—regardless of where the positions were actually needed. Positions 

that became vacant through attrition were transferred to the overstaffed 

components. By gaining the vacant positions, the overstaffed components 

were able to reduce the number of staff considered to be in excess in their 

units. 

Some of the deputies expressed strong resentment about the chaos this 

situation caused within their components. For example, a relatively small 

component that lost a key member of one of its functional teams could not 

replace that individual, and instead had to continue to meet mission goals 

with one fewer supervisor. Other component heads explained that the lack 

of funds to perform routine duties in the field affected morale and could 

impact long-term productivity. 

 27Among other things, the Antideficiency Act prohibits agencies from incurring financial 

obligations that exceed their available budget authority. See 31 U.S.C. § 1341(a). 

The Inspector General’s 

Leadership in Resolving 

Budgetary Problems 
Page 20 GAO-03-685 Review of HHS OIG Operations 

This situation could have been avoided if OIG leadership had developed a 

human resource hiring and development plan that contained realistic 

budget projections and hiring goals that all deputies would have to follow. 

Historically, the Inspector General’s Principal Deputy was responsible for 

ensuring that component heads worked together to carry out such a plan, 

but the Principal Deputy position had been vacant for months. As a result, 

component heads we spoke with felt that they did not have the authority 

to fill the leadership void that developed in this instance, and relied on the 

Inspector General to impose whatever fiscal constraints were necessary to 

establish an equitable budget allocation among the components. While the 

Inspector General expressed concern about funding issues, she did not 

take aggressive steps to remedy the situation. Although the deputies 

ultimately resolved their financial situation, at the time of her resignation, 

the component heads were still struggling among themselves with these 

budgetary challenges. 

The OIG conducts a variety of activities that aim to improve program 

operations, identify and recover overpayments, and investigate and 

sanction those who violate statutes and regulations governing HHS 

programs. Evaluating the effect of the Inspector General’s recent actions 

on productivity is difficult to assess in the short term. For example, in 

addition to the decisions she made and the personnel moves she initiated, 

a variety of other factors contribute to productivity. Two factors make it 

impossible to reach an overall conclusion about OIG productivity for any 

limited period of time. First, fluctuations in performance are to be 

expected in any given year, given the multitude of the OIG’s activities. 

Second, it is difficult to compare performance from one year to the next 

because the results in one period are heavily dependent on work in the 

pipeline that was initiated in prior years. For example, it could take 2 or 3 

years from the time a project is initiated until a recommendation is made 

and subsequently implemented; investigating potential criminal activity 

and prosecuting the individuals involved could take even longer. Many of 

the OIG’s productivity measures remain comparable to prior years or 

showed increases, but we found that several other key indicators of 

performance have declined since the Inspector General took office. 

We analyzed a wide variety of performance measures to evaluate the OIG’s 

effectiveness and found that many of these measures indicated that the 

Evaluation of OIG 

Productivity 

Savings, OAS Reports, and 

Convictions 
Page 21 GAO-03-685 Review of HHS OIG Operations 

OIG may be performing well, as table 1 shows. For example, in its 

semiannual reports covering fiscal year 2002, the OIG identified almost $22 

billion in savings attributable to its work.28 The OIG consistently reported 

increases in these savings since fiscal year 1997. In addition, the number of 

OAS reports published has increased each year since fiscal year 2000. 

Also, the number of convictions resulting from the OIG’s investigative 

referrals has steadily increased over the last 6 years. 

Table 1: Select OIG Performance Measures—Fiscal Year 1997 through Fiscal 

Year 2002 

Fiscal 

year 

1997

Fiscal 

year 

1998 

Fiscal 

year 

1999 

Fiscal 

year 

2000 

Fiscal 

year 

2001

Fiscal 

year 

2002 

Savings (in billions 

of dollars) $7.6 $11.6 $12.6 $15.6 $18.0 $21.8 

Number of OAS 

reports 324 187 207 300 311 333 

Convictions 215 261 401 414 423 517 

Source: HHS OIG. 

OI officials, who told us that the number of convictions is an important 

measure of their success, also said that they appear to be on target in 

achieving even more convictions in fiscal year 2003. At the midpoint of the 

current fiscal year—March 31, 2003—the OIG reported 320 convictions. 

Although it is difficult to measure the “sentinel” effect of some of the OIG’s 

activities, it has taken steps to encourage lawful and ethical conduct by 

the health care industry, which we believe should be acknowledged. For 

example, in recent years the OIG has actively worked with the private 

sector to develop compliance guidance to prevent the submission of 

improper claims and to discourage inappropriate conduct by providers. In 

March 2003, the OIG issued compliance guidance for ambulance suppliers. 

This was followed by the publication of compliance guidance for 

pharmaceutical manufacturers in April 2003. 

Like convictions, the number of providers excluded from the Medicare 

program is a strong indicator of OI effectiveness. Although the number of 

 28This amount consisted of almost $20 billion in savings related to the implementation of 

OIG recommendations and other actions, $426 million saved as a result of OIG audits, and 

$1.5 billion recovered due to OIG investigations. 

Exclusions from Medicare 
Page 22 GAO-03-685 Review of HHS OIG Operations 

exclusions imposed declined in fiscal year 2002, reversing a trend of 

increases since fiscal year 1999, we were unable to determine whether this 

decline reflects diminishing productivity. The OIG Chief Counsel 

explained that, in 2002, the Department of Education became responsible 

for processing most of the exclusions of health care providers who had 

defaulted on the repayment of their federally funded student loans. The 

Chief Counsel told us that in 2001, when the OIG still had this 

responsibility, it excluded 518 providers who had defaulted on these loans. 

In 2002—the transition year—the number of such providers excluded by 

the OIG dropped to 166. Table 2 shows the OIG’s exclusions imposed since 

fiscal year 1997. 

Table 2: Medicare Exclusions Imposed—Fiscal Year 1997 through Fiscal Year 2002 

Fiscal year 

1997 

Fiscal year 

1998

Fiscal year 

1999

Fiscal year 

2000 

Fiscal year 

2001 

Fiscal year 

2002 

2,719 3,021 2,976 3,350 3,756 3,448 

Source: HHS OIG. 

We found declines in the use of sanctions available to the OIG. For 

example, we noted reductions in the number of settlements and recovery 

amounts that result from the OIG’s False Claims Act referrals to DOJ. 

Similarly, there were declines in the number of CMPs and CIAs recently 

imposed. Table 3 shows that both the number of settlements and amount 

of recoveries declined significantly in fiscal year 2002, compared to fiscal 

years 2000 and 2001. 

Table 3: Number and Amount of False Claims Act Settlements, Fiscal Years 2000 

through 2002a 

Fiscal year 

2000

Fiscal year 

2001 

Fiscal year 

2002 

Number of settlements 245 248 161 

Amounts recovered (in millions) $974.0 $2,063.0b

 $518.7 

Source: HHS OIG.

a

The OIG was unable to provide comparable data for fiscal years 1997 through 1999. 

b

A substantial portion of the amount recovered in fiscal year 2001 is attributable to a single settlement 

of $875 million. 

Settlements, Recoveries, 

CMPs, and CIAs 
Page 23 GAO-03-685 Review of HHS OIG Operations 

OIG officials told us that its False Claims Act cases are strongly tied to 

DOJ’s efforts to combat health care fraud, which have had to compete 

with investigative resources dedicated to the September 11, 2001, terrorist 

attacks. In addition, DOJ has reduced the number of its national health 

care antifraud initiatives in recent years as well as the number of 

individual cases that it pursues under the auspices of each initiative. OIG 

officials also attribute this decline to its increasing emphasis on program 

compliance, which the OIG believes has had a sentinel effect on providers. 

Although the number of False Claims Act settlements and recoveries have 

declined, DOJ officials and the Medicaid Fraud Control Unit 

representatives we spoke to told us that they were pleased with the quality 

of the support they received from the OIG in pursuing abusive or 

fraudulent providers. However, several of these officials were concerned 

that the OIG could not devote more resources to assist them in their 

investigations. 

Another important indicator of OIG productivity is the imposition of 

CMPs. As shown in table 4, the number of these cases had a marked 

decline since fiscal year 2000. 

Table 4: Number and Amount of CMPs Imposed, Fiscal Year 1997 through Fiscal 

Year 2002 

Fiscal 

year 

1997 

Fiscal 

year 

1998 

Fiscal 

year 

1999 

Fiscal 

year 

2000 

Fiscal 

year 

2001

Fiscal 

year 

2002

Number of CMP cases 16 58 67 58 30 34

Amount of CMPs 

(in millions of dollars) $0.5 $2.2 $1.9 $9.7 $1.1 $2.4

Source: HHS OIG. 

In explaining the declining number of CMPs imposed, OIG officials offered 

two explanations. First, they told us that the increase in convictions may 

account for the decline in CMPs, which are typically imposed when more 

stringent penalties cannot be used. Because convictions have recently 

increased, there would be fewer opportunities to impose CMPs. Second, 

officials suggested that the office’s previous aggressiveness in pursuing 

patient dumping cases—which generally made up between 65 and 90 

percent of all CMPs imposed each year—has been a strong deterrent. The 

officials also emphasized that patient dumping cases have proven to be 

resource intensive. As a result, the OIG can only afford to pursue the most 

egregious cases. 
Page 24 GAO-03-685 Review of HHS OIG Operations 

CIAs, typically negotiated in conjunction with False Claims Act 

settlements, are also an indicator of the OIG’s productivity. CIAs consist of 

“integrity provisions” that are intended to ensure that a provider’s future 

transactions with Medicare and other federal health care programs are 

proper and valid. Such provisions include implementing an OIG-approved 

compliance program, use of an independent review organization to 

annually review provider billings, and other periodic monitoring and 

reporting requirements. Providers accept the imposition of the CIAs and, 

in turn, OCIG agrees not to seek additional administrative sanctions. As 

table 5 shows, the number of active CIAs, as well as the number of newly 

negotiated CIAs, has declined since 2001. 

Table 5: Number of Active CIAs and Newly Negotiated CIAs for Fiscal Year 1997 

through Fiscal Year 2002 

Fiscal 

year 

1997 

Fiscal 

year 

1998 

Fiscal 

year 

1999 

Fiscal 

year 

2000

Fiscal 

year 

2001 

Fiscal 

year 

2002 

CIAs active at end of the 

fiscal year 122 340 418 470 498 324 

New CIAs negotiated during 

the fiscal year 83 233 138 101 112 63 

Source: HHS OIG. 

OCIG officials attributed the most recent decline to several factors. First, 

the number of civil False Claims Act settlements declined between 2001 

and 2002, resulting in fewer providers with whom to negotiate CIAs. 

Second, in fiscal year 2002, OCIG began implementing the Inspector 

General’s November 20, 2001, “Open Letter to Health Care Providers”

regarding CIAs. CIAs had long been a concern of providers because of the 

costs associated with implementing the specified integrity provisions—

such as retaining an independent review organization each year to review 

a statistically valid sample of billings. The November open letter 

announced that the OIG’s policies and practices regarding CIAs were 

being modified in response to those concerns. 

The letter noted, in part, that the OIG would no longer seek to negotiate 

CIAs with every provider settling a False Claims Act case with the 

government. In some situations, corporate compliance matters would be 

negotiated separately, after settlement of the False Claims Act case. The 

letter also indicated that the OIG would consider increasing its reliance on 

providers’ internal audit capabilities. For example, some providers may 

not be required to retain an independent review organization. Similarly, 
Page 25 GAO-03-685 Review of HHS OIG Operations 

not all billing reviews would be subject to statistically valid random 

sampling. Instead, these providers would be able to self-certify compliance 

based on the error rate indicated by reviewing an initial sample of their 

billings. Further, the new approach to CIAs could also be applied to 

previously negotiated CIAs. As a result, in fiscal year 2002, OCIG 

renegotiated 94 existing CIAs associated with False Claims Act 

settlements. The revised CIAs contained “certification agreements,”

permitting providers to self-certify their compliance with the specific 

provisions contained in their agreements, instead of retaining an external 

review organization for this verification. 

We also found that there has been a considerable drop in the testimonies 

and outreach and education activities performed by OIG employees. Prior 

to the current Inspector General’s tenure, the OIG frequently provided 

assistance to congressional staff developing legislative proposals related 

to HHS programs, offered informal advice about program oversight, and 

testified at congressional hearings. In addition, OIG employees routinely 

presented the results of their work at conferences, meetings, and in other 

educational forums. However, as shown in table 6, the number of 

testimonies and speeches and other presentations by OIG employees 

revealed a significant decline in the assistance provided during the last 

fiscal year—especially among OCIG employees. 

Table 6: Testimonies, Speeches, and Other Presentations by Component for Fiscal 

Years 2000, 2001, and 2002 

 Testimonies 

Speeches and other 

presentations 

Fiscal 

year 

2000 

Fiscal 

year 

2001 

Fiscal 

year 

2002 

Fiscal 

year 

2000 

Fiscal 

year 

2001

Fiscal 

year 

2002

Inspector General and 

Principal Deputy 

7 3 6 3 3 7

OAS 0 1 0 4 24 17

OI 1 0 0 25 93 49

OEI 5 4 0 52 45 32

OMP 0 0 0 0 0 8

OCIG 1 2 0 58 49 15

Total 14 10 6 142 214 128

Source: GAO analyses of HHS OIG data. 

Outreach and Education 

Activities 
Page 26 GAO-03-685 Review of HHS OIG Operations 

We spoke with several congressional staff working for committees with 

jurisdiction over HHS programs who told us that they were not satisfied 

with the level of support they were currently receiving from the OIG. 

While formal requests for assistance were fulfilled, congressional staff 

indicated that OIG employees no longer discussed issues with them 

informally, as they had in the past. In our interviews, primarily at 

headquarters, several OIG employees recognized that they were no longer 

providing what congressional staff members considered to be a valuable 

service and what they considered to be a meaningful part of their work. 

OIG officials emphasized that their responsiveness to Congress is still an 

extremely high priority. They explained that the Inspector General 

instituted a more centralized approach to providing assistance to 

congressional staff and other external groups than had her predecessors in 

an attempt to ensure the quality and appropriateness of the assistance 

provided. In response to the declining number of testimonies, OIG senior 

officials told us that they are very willing to appear at congressional 

hearings when they have relevant material to present. However, they 

explained that the Inspector General does not consider the number of 

testimonies to be a relevant performance measure. 

In regard to speeches and other presentations, the decline was partly due 

to a policy change in the spring of 2002 that moved approval authority for 

these activities from the individual component heads to the Director of 

Public and Congressional Affairs. A lack of travel funds for collateral 

activities in the first half of the fiscal year also limited OIG’s staff 

participation in discretionary events. According to this Director, because 

she could not approve all of the requests, she considered the nature and 

size of the audience, in addition to the cost of the trip, in deciding whether 

approval would be granted. 

A number of employees of OEI told us that they have been frustrated with 

the cancelation of projects since the Inspector General took office. 

According to these individuals, many projects were well under way at the 

time of their termination. Although OEI managers could not tell us how 

many projects have been canceled under the current Inspector General’s 

tenure, they could tell us how many of the OEI projects begun in fiscal 

years 2000, 2001, and 2002 were subsequently canceled. As table 7 shows, 

27 reports, or about 26 percent of reports started in 2002, were canceled 

by the end of February 2003. According to OEI management, although 

some projects have been canceled, the work performed on these projects 

has been used by OEI teams involved in related OEI projects. 

OEI Reports 
Page 27 GAO-03-685 Review of HHS OIG Operations 

Table 7: Number and Percentage of OEI Projects That Were Begun in Fiscal Years 

2000, 2001, and 2002 and Canceled by February 28, 2003 

 Fiscal year 2000 Fiscal year 2001 Fiscal year 2002 

Reports Started 103 80 103 

Number Subsequently 

Canceled 18 14 27 

Percent Subsequently 

Canceled 18 18 26 

Source: GAO analysis of HHS OIG data. 

We followed up on several projects that recently had been canceled to 

better understand management’s rationale for doing so. Staff members 

brought these projects to our attention during the course of our work.29 In 

one instance, a project was canceled 7 months after the team had 

conducted the exit conference with the agency. More than 4,000 staff 

hours had been expended on this project, which included three full-time 

and one part-time staff and a paid intern. The Deputy Inspector General 

ultimately told the team that the report lacked sufficient evidence and 

would not be presented to the Inspector General for signature. Although 

the team subsequently prepared two memoranda as substitutes for the 

report, no product was ever issued—despite interest from the provider 

community and relevant agency. 

We have learned that OEI projects continue to be canceled. For example, 

in March 2003 the Inspector General took the unusual step of recalling a 

draft report, which had been sent to the relevant agency for comment in 

February 2003. Both the Deputy Inspector General for OEI and the 

Inspector General approved this draft. Also in March 2003, a related 

project, which had begun in fiscal year 2002, was canceled as the OEI team 

prepared for an exit conference with the agency it had evaluated. OEI 

management decided to combine the results of both projects into a single 

report. Although the OEI staff involved with these projects contend that 

they briefed management several times over the course of these 

assignments, the Deputy Inspector General for OEI explained that he 

made this decision once he realized there were inconsistencies between 

the two projects that needed to be reconciled. As of late April 2003, no 

report had been published. 

 29We could not determine whether these examples were representative of the average 

amount of staff time expended on canceled projects, as OEI does not retain these data. 
Page 28 GAO-03-685 Review of HHS OIG Operations 

In conversations with the Inspector General and the Deputy for OEI, we 

learned that they had been particularly concerned with the 

appropriateness of criteria used by OEI staff in evaluations. They told us 

that they were uncomfortable with the policy-oriented work that OEI had 

done and were taking actions in the pipeline of OEI reports to address 

what they viewed as shortcomings in the accuracy and sufficiency of 

evidence in OEI products. The Deputy for OEI also explained that they 

were providing training to all OEI staff on evidence standards with the 

hope of improving the quality of future projects. OEI managers and staff 

that we spoke to expressed surprise and frustration at these concerns and 

pointed out that in the past, OEI had been recognized and praised by 

Congress, the public, and the press for its high-quality evaluation work. 

Based on our survey and extensive interviews, we found in the aggregate 

that employee views about the organization, management, and their 

personal job satisfaction remained positive and relatively unchanged 

between 2002 and 2003. However, we identified several groups of 

employees whose morale was of concern, namely, employees working at 

headquarters, those at the highest levels of management, and staff working 

in two OIG components. Our analysis of open-ended survey comments 

also revealed areas of dissatisfaction that were not fully captured by other 

items on our survey. 

Our survey and interviews found, in the aggregate, a high level of 

satisfaction among OIG employees. Overall, positive responses to survey 

items in both 2002 and 2003 averaged over 80 percent and no item 

responses changed more than 5 percentage points between the 2 years. 

Positive responses were especially prevalent both years for statements 

such as “All things considered, my component is a good place to work” (89 

percent and 87 percent, respectively) and “I believe that my work is 

important to the success of the component” (94 percent and 93 percent, 

respectively). Similarly, our interviews revealed an overall high level of job 

satisfaction, typified by comments such as “I believe my work makes a 

difference.” Staff repeatedly cited their close relationships with their 

immediate work groups and their involvement on important issues as 

reasons for their job satisfaction. We also identified some examples of 

improvement. For instance, in both the survey and interviews, OI 

employees indicated there had been an increase in communication with 

upper management in their component over the last year. 

We found that positive responses to most survey items were lower for 

headquarters employees than for field staff. For example, we found that 

Measure of Employee 

Morale 
Page 29 GAO-03-685 Review of HHS OIG Operations 

there was a marked difference in positive responses—10 percentage 

points—to the statement that “Everyone is treated with respect.” We also 

found a 14 percentage point difference in positive responses to the 

statement, “I have confidence and trust in my organization.” This pattern 

of more positive responses from the field was consistent with statements 

made during our interviews. Whereas many headquarters staff expressed 

concern about the Inspector General’s actions, most field employees told 

us that they felt insulated from, and largely unaffected by, the personnel 

and other changes that occurred in headquarters. 

In addition, our survey indicated that senior management staff—

specifically members of the Senior Executive Service and GS-15 

employees—were considerably more concerned than all other employees 

about OIG leadership. While 88 percent of employees at the GS-14 and 

lower levels agreed with the statement, “As an organization, the OIG has 

clear goals,” only 67 percent of the senior management staff—those at the 

GS-15 level and members of the Senior Executive Service—responded 

positively to that statement. Further, about 70 percent of the employees at 

the GS-14 level and lower levels indicated that they had confidence and 

trust in the organization. On the other hand, only 56 percent of senior 

managers agreed with that statement. In our interviews, some senior 

management staff were extremely clear about, and supportive of, the 

Inspector General’s goals, but others expressed confusion about the 

Inspector General’s priorities for their components. Many in senior 

management were disquieted by the decisions that resulted in some of 

their colleagues retiring, resigning, or being reassigned during 2002. These 

managers explained that they were uncomfortable because they did not 

fully understand the motivations behind the Inspector General’s actions. 

Our survey revealed a substantial deterioration in OEI employees’ views of 

the organization, management, and their personal job satisfaction. For 

example, a statement focusing on whether “upper management clearly 

communicates the goals of my component,” elicited an almost 50 

percentage point drop in positive responses between January 2002 and 

February 2003 (compared to a 1 percentage point decrease in the 

aggregate). Similarly, there was a 34 percentage point drop in positive 

responses to the statement about being “fully informed about major issues 

affecting my job” (compared to a 5 percentage point drop overall). Finally, 

about 62 percent of OEI employees indicated a lack of trust and 

confidence in their organization (compared to 30 percent overall). 

The decline in the overall climate in OEI can be linked to a number of 

changes that profoundly affected the staff in that component. OEI staff 
Page 30 GAO-03-685 Review of HHS OIG Operations 

told us that they were negatively affected by the abrupt departure of the 

Deputy Inspector General, decreased communications from headquarters 

management, changes and delays in the report review process, canceled 

projects, and a narrowing of the scope of their work. In addition, OEI staff 

explained that they have been disappointed by a decrease in the number of 

their assignments that has resulted in what are considered to be “highprofile” products—those signed by the Inspector General, those issued as 

standard blue-cover reports, and those placed on the OIG’s Web site.30

Our employee survey also identified a distinct decline in positive 

responses to survey items among OCIG employees—almost all of whom 

work in headquarters. Of particular concern were answers to survey 

statements addressing the adequacy of communication and job 

satisfaction. For example, compared with 2002 survey results, there was a 

22 percentage point drop in positive responses to the statement about 

being kept fully informed about major job issues. OCIG employees also 

reported a 16 percentage point drop in positive responses to the item “I am 

satisfied with my job” and a 12 percentage point drop in their opinion that 

“everyone is treated with respect,” compared with last year’s survey. Our 

results also showed that 54 percent of OCIG employees lack trust and 

confidence in their organization. The decline in the views of OCIG staff 

can, in part, be attributed to changes implemented by the Inspector 

General, and the atmosphere of anxiety and distrust that her actions 

created. OCIG employees expressed concern about the circumstances 

under which the former Chief Counsel and other senior managers left the 

OIG. In addition, we were told that the curtailment of education and 

outreach activities and contact with congressional committee staff had an 

adverse effect on OCIG employee morale. 

Finally, we analyzed the written comments that some employees opted to 

write in the comment box provided on our survey. In total, 578 of the 1,451 

survey respondents (40 percent) elected to write comments, which 

allowed them to express opinions about issues that were not covered in 

detail in our other survey items. Our analysis of these comments showed 

that the majority were negative in tone (75 percent). Overall, the most 

 30OEI products can be signed by the Inspector General or a variety of individuals within the 

component. Products may also be issued as a standard blue-cover report, a white-cover 

report, a memorandum, or, on rare occasions, an e-mail. Reports signed by the Inspector 

General receive the widest distribution and blue-cover reports are considered the most 

prominent. In contrast, white-cover reports or memoranda signed by a regional OIG official 

are considered to be of less importance and may receive only minimal distribution. 
Page 31 GAO-03-685 Review of HHS OIG Operations 

frequently mentioned categories were: morale (82 percent negative), 

recent changes in headquarters management (61 percent negative), 

sufficiency of training or equipment (85 percent negative), and quality of 

headquarters management (80 percent negative). The demographic 

characteristics of those who wrote comments were generally similar to the 

overall sample of respondents, although those planning to leave the OIG in 

the next 5 years and OEI staff were more likely to provide comments than 

other survey respondents. 

We met with officials from the OIG and the Office of the HHS Secretary 

and briefed them on our findings. We also provided them with a copy of 

our draft report. In written comments on a draft of this report, the 

Inspector General disagreed with some of our findings and 

characterizations of certain events. The Office of the Secretary did not 

provide comments. 

In reference to our discussion about the OIG’s productivity, the Inspector 

General stated that the OIG had achieved substantial accomplishments 

under her leadership and direction and cited the savings attributable to its 

work in fiscal year 2002. In addition, she highlighted some of the OIG’s 

nonmonetary achievements during her tenure. As we noted in our draft 

report, many of the OIG’s productivity measures have remained steady or 

improved, including those cited in the Inspector General’s letter. However, 

we also pointed out that making a conclusive determination regarding 

productivity in the short term is extremely difficult because current 

savings are often the result of efforts started in prior years. Our draft also 

identified declines in other important areas, such as settlements and 

recoveries. 

In addressing our findings related to employee morale, the Inspector 

General pointed out that our survey of OIG employees showed that 

employee morale remained positive and relatively unchanged during her 

tenure. However, our survey also identified several groups of employees 

whose morale was of concern. For example, senior managers were 

considerably more disturbed than all other employees about OIG 

leadership. Further, headquarters employees expressed less satisfaction 

with the organization and leadership than their counterparts in the field. 

While the majority of OIG staff are located in field offices and generally 

were more satisfied with their work environment than headquarters 

employees, they also felt less affected by the changes instituted by the 

Inspector General than their colleagues in headquarters. A striking 

exception to field office employee satisfaction, as discussed in our draft, 

Agency Comments 

and Our Evaluation 
Page 32 GAO-03-685 Review of HHS OIG Operations 

was staff in OEI, whose dissatisfaction increased substantially compared 

to last year. 

The Inspector General also took issue with our discussion of the 

circumstances surrounding the delay in beginning the Florida pension 

audit. We included this example of her decision-making in our draft 

because we believe that it demonstrated a lack of awareness and 

appreciation of the need for the Inspector General to closely safeguard her 

independence. We believe it is imperative that an inspector general 

perform due diligence when responding to external requests—particularly 

where independence could be questioned. We continue to believe that the 

Inspector General’s decision to intervene at the request of senior officials 

in the Florida governor’s office and her subsequent instructions to her 

staff to delay the audit created a perception that her independence was 

compromised. The Inspector General did not address the issue of her 

independence in her comments. Instead, she disagreed with our 

suggestion that the OIG’s report could have been available prior to the 

November 2002 election, if the audit had begun 7 months earlier, in April 

2002, as initially planned. While we cannot be certain that the final report 

would have been issued by the election, we believe that it is likely that the 

findings would have been made public—particularly since the actual 

findings of the audit were reported by the media in March 2003, 6 months 

after the work commenced. 

Regarding the York Hospital matter, the Inspector General stated that she 

discussed her concerns about the proposed settlement with her staff and 

that she believed that seeking a larger settlement was not fair or 

justifiable. However, during the course of our work, the Inspector General 

told us that she did not direct a settlement or involve herself in 

negotiations with the hospital. In any case, we believe that the Inspector 

General’s actions in response to a letter from several members of 

Congress contributed to the perception that she was not independent. The 

Inspector General stated in her comments that she discussed this matter 

with her attorneys and determined the OIG’s case was weak. However, the 

former Chief Counsel and other OCIG attorneys told us that when she 

instructed them to “get rid of” the case, she did not address the specific 

facts or sufficiency of the evidence collected in this matter. Further, the 

former OIG Chief Counsel did not share the Inspector General’s belief that 

this was a weak case, and told us that he believed the government could 

have obtained a higher settlement, absent any pressure to close the case 

quickly. 
Page 33 GAO-03-685 Review of HHS OIG Operations 

Concerning the OIG’s delayed report on the adjusted community rate 

proposals, the Inspector General pointed out that the report was already 

delayed 7 months by the time she took office. While we acknowledge this 

fact, in our view, the already lengthy delay should have prompted her to 

take more aggressive action to either obtain CMS’s comments or publish 

the OIG’s report without them. Although the Inspector General stated that 

she relied on the advice of her senior staff in delaying the issuance of this 

report, our evidence indicates that some of her senior managers were very 

concerned that she took little action to expedite CMS’s comments. The 

Inspector General indicated that she spoke to the CMS administrator 

regarding this matter, but she did not indicate when this discussion 

occurred or how CMS responded. However, the Inspector General did not 

indicate—nor did we find any evidence to suggest—that she took more 

rigorous steps to obtain CMS’s comments, such as imposing a deadline for 

the publication of the report, regardless of the status of the comments. The 

Inspector General also stressed that the delay in publishing the OIG’s 

report had nothing to do with her independence. However, the fact that 

CMS strenuously objected to the OIG’s findings, and that CMS was allowed 

to delay its comments for over a year, in our view, at least contributed to 

the perception that the Inspector General was not independent. In 

addition, the Inspector General disputed our statement that this report 

was a time sensitive one of congressional interest. We disagree. During the 

summer and fall of 2001, Medicare+Choice legislative proposals were 

developed in both the House and Senate. Also congressional hearings were 

held on the status of the Medicare+Choice progam, which included the 

issue of adjusted community ratings. 

Regarding our assessment of personnel changes in the OIG, the Inspector 

General stated that her actions were appropriate and that the nature of the 

Senior Executive Service encourages rotations among staff. While we do 

not dispute the Inspector General’s authority to reassign staff to meet 

office needs, the manner in which she made these changes clearly created 

an atmosphere of anxiety in the OIG. The Inspector General stated that 

she explained the rationale for her decisions “over and over again.”

However, our discussions with staff members revealed that they did not 

understand why many of the changes had been made. Moreover, most of 

the eight senior managers whose departures we found particularly 

troubling told us that the Inspector General never explained to them why 

she wanted them to leave their positions. The Inspector General also 

commented that our employee survey suggested that there were no 

widespread negative perceptions among staff concerning her personnel 

decisions. We disagree with this observation because our survey did not 

contain a question related to her personnel changes. Instead, our survey 
Page 34 GAO-03-685 Review of HHS OIG Operations 

focused on employee satisfaction within their immediate work groups—

most of which are in the field where the consequences of the Inspector 

General’s changes were least felt. The Inspector General noted that most 

of the individuals who left the OIG following her changes were in new 

positions that were “at least equal to or better than” the ones they 

occupied at the OIG and that she always promoted from within the 

organization. We do not think that the current employment situations of 

these former staff members are relevant to the Inspector General’s 

personnel decisions, nor is her practice of promoting other employees 

from within the organization. 

In our draft report, we also discussed the OIG’s budgetary difficulties. In 

her comments, the Inspector General described her efforts to respond to 

this situation, which primarily consisted of directing one of her senior 

managers—who was in an acting deputy position—to develop strategies 

for resolving the OIG’s financial problems and to work with other senior 

OIG managers to develop a spending plan. While we would fully expect 

that the Inspector General would want to call on her management team to 

confront the agency’s budgetary problems, our concern was that she 

personally played only a minor role in resolving this matter, particularly in 

the absence of a Principal Deputy. Given the Inspector General’s limited 

personal involvement, the OIG’s senior management team lacked a leader 

with sufficient authority to mediate any disagreements between them and 

to take aggressive steps to identify appropriate solutions to the 

organization’s fiscal challenges. 

Finally, the Inspector General’s comments pointed out that OI had taken 

steps to correct the deficiencies we noted in its credentialing system. We 

acknowledged that corrective action has been initiated and this was 

reflected in our draft report. 

We have reprinted the Inspector General’s letter in appendix III. 

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

Acting Principal Deputy Inspector General, the former Inspector General, 

and other interested parties. We will also make copies available to others 

upon request. In addition, this report will be available at no charge on 

GAO’s Web site at http://www.gao.gov. We will also make copies available 

to others upon request. 
Page 35 GAO-03-685 Review of HHS OIG Operations 

If you or your staffs have any questions about this report, please call me at 

(202) 512-7114. Additional GAO contacts and other staff members who 

made key contributions to this report are listed in appendix IV. 

William J. Scanlon 

Director, Health Care Issues 
Appendix I: Scope and Methodology 

Page 36 GAO-03-685 Review of HHS OIG Operations 

To conduct our review, we focused on three key areas—the leadership 

exhibited by the current Inspector General, Janet Rehnquist, the 

productivity of the Office of Inspector General (OIG) in recent years, and 

employee morale. To do our work, we became familiar with the 

organization and structure of the OIG and many of its policies and 

procedures related to its budgeting, work planning, and report processing 

activities. We also examined its personnel practices and controls over 

certain OIG operations. As part of our efforts, we interviewed over 200 

current and former OIG employees—including the Inspector General—and 

conducted a Web-based survey of all employees to obtain their views 

about their work environment. We also interviewed two current and one 

former inspectors general from other federal agencies to better 

understand their unique role and the principles they embraced to manage 

their offices. 

Our review included the examination of more than 8,000 pages of 

documents, including material related to the OIG’s general policies and 

procedures, human resource management, productivity measures, and 

reporting standards. Many of these documents were given to us by OIG 

managers and other employees. In addition, we requested—and were 

given access to—the e-mail accounts of eight senior OIG managers. This 

enabled us to retrieve selected messages that these individuals sent or 

received for approximately a 6-month period on a wide variety of topics 

affecting the management of the office. We also obtained documentation 

from other organizations, including the President’s Council on Integrity 

and Efficiency (PCIE), which recently issued a report on some of the 

Inspector General’s actions.1

To obtain the views of OIG employees, we conducted a series of 

semistructured interviews. These interviews relied on open-ended 

questions regarding the Inspector General’s leadership, productivity, 

morale, and other OIG operations. We interviewed three categories of 

employees—those who were selected randomly, those who volunteered 

for interviews, and those we selected because of their knowledge or 

position within the OIG. 

 1

The PCIE’s review focused on allegations that the Inspector General improperly possessed 

a firearm and law enforcement credentials. Before these allegations were brought to the 

attention of the PCIE, we planned to examine these matters. However, once the PCIE 

commenced its investigation, we agreed with our requestors to exclude these matters from 

the scope of our work and report on the PCIE’s findings. 

Appendix I: Scope and Methodology 

Interviews with Current 

and Former Employees 
Appendix I: Scope and Methodology 

Page 37 GAO-03-685 Review of HHS OIG Operations 

The randomly selected staff were chosen for interviews from five of the 

OIG’s eight regional offices as well as employees in OIG headquarters. This 

provided us with a broad geographic representation of OIG employees. 

Our regional interviews were conducted in Atlanta, Boston, Chicago, 

Dallas, and San Francisco. In order to afford confidentiality to 

interviewees, we conducted our regional interviews in GAO offices in 

those cities or in other non-OIG space. Some regional interviews were also 

conducted by telephone. Headquarters staff were given the option of being 

interviewed in either the OIG headquarters or GAO headquarters building. 

At each of the five regional offices we visited, we interviewed 

approximately 20 randomly selected employees who ranged from the GS-7 

through the GS-15 levels. One hundred and six randomly selected regional 

staff members were interviewed in total. Interviewees were selected using 

a stratified, random sampling technique. Employees from the Office of 

Audit Services (OAS), the Office of Investigations (OI), and the Office of 

Evaluation and Inspections (OEI) were included in our random interviews 

at each regional location.2

 We also interviewed 32 randomly selected staff 

from the OIG’s headquarters in Washington, D.C. and in nearby field 

offices, including those in Baltimore, Columbia, and Rockville, Maryland. 

To supplement our random interviews and to enhance identification of 

issues of concern to all OIG employees, regardless of their location, we 

invited all employees, through an OIG officewide e-mail, to contact us if 

they wished to participate in an interview. We received 28 requests for 

interviews and conducted many of these by telephone. We generally used 

the same set of questions that were posed during the random interviews. 

In both the random interviews and in discussions with those employees 

who requested to be interviewed, we asked individuals to bring to our 

attention any topic that they felt was noteworthy but which our questions 

did not address. Some interviewees provided us with supporting 

documentation that they felt was relevant. In some instances, interviewees 

were reluctant to provide us with documentary evidence and were also 

concerned about confidentiality. In these situations, we attempted to 

corroborate the information they shared with us through other means, 

without jeopardizing their confidentiality. 

 2

The OIG does not employ members of the Senior Executive Service in its regional 

locations. In addition, the Office of Management and Policy (OMP) and the Office of 

Counsel to the Inspector General (OCIG) typically maintain only a few staff members in 

regional offices. 
Appendix I: Scope and Methodology 

Page 38 GAO-03-685 Review of HHS OIG Operations 

As our work progressed, we identified a number of individuals whom we 

believed would be able to supply us with important information in areas 

we had identified as potential areas of concern, including the 

independence of the Inspector General, turnover among senior OIG 

personnel, and changes in productivity and morale. In total, we 

interviewed 44 such individuals, many of whom were current or former 

OIG employees with first-hand knowledge about issues central to our 

review. 

To determine the extent to which policies and procedures were in place to 

ensure that all OIG employees maintained a high degree of independence, 

we reviewed existing OIG policies, procedures, and protocols. We also 

reviewed guidance issued to the Inspector General community by the 

PCIE and the Government Auditing Standards pertaining to independence. 

We also discussed the OIG’s protocols for responding to requests for 

information or assistance from external entities with selected current and 

former senior-level OIG officials. In addition, we obtained information 

regarding specific instances concerning the Inspector General’s 

independence from interviews with current and former OIG officials as 

well as the Inspector General. 

To evaluate recent personnel changes among OIG officials, we examined 

detailed personnel information for 24 current or former OIG employees 

who had resigned, retired, been reassigned, or promoted during the 

Inspector General’s tenure.3

 We reviewed the official personnel files for 

these individuals and collected relevant information including their history 

of government service; time employed by the OIG; and any awards, 

bonuses, and letters of commendation that they had received. We also 

reviewed the performance appraisals these individuals had received for 

the prior 3 years. 

Finally, we reviewed documentation specifically concerning the 

promotion of an OIG staff member to the position of Director of Public 

and Congressional Affairs. Among other things, we examined relevant 

position descriptions, job announcements, and e-mail communications. 

 3

We requested the official personnel files of 25 individuals but 1 file could not be located. 

We do not believe that this had a material effect on our review. 

Evaluation of the Inspector 

General’s Independence 

Review of Personnel 

Information 
Appendix I: Scope and Methodology 

Page 39 GAO-03-685 Review of HHS OIG Operations 

We also interviewed OIG officials regarding this and other personnel 

decisions made during the Inspector General’s tenure. 

To understand the purpose, frequency, and duration of the Inspector 

General’s travel, we examined the itineraries, travel orders, and travel 

vouchers for all of the trips she had taken from August 2001 through 

November 2002. For trips for which the itineraries lacked sufficient 

information about the Inspector General’s business activities, we 

requested additional information and discussed these trips with the 

Inspector General. We also identified all OIG employees that accompanied 

her when she traveled. We obtained similar travel records for two senior 

staff members who accompanied the Inspector General on several 

occasions and discussed their roles during these trips with them. 

To determine whether the OIG has experienced any changes in 

productivity since the current Inspector General took office in August 

2001, we reviewed OIG publications, such as its semi-annual reports, to 

determine how savings, recommendations, and other performance 

indicators changed since fiscal year 2000. From OAS and OEI, we 

collected data about the number of projects initiated, reports published, 

and reports canceled in fiscal year 2002. We compared these data to the 

number of reports that were initiated, published, and canceled from fiscal 

years 2000 and 2001—before the current Inspector General’s tenure. 

To measure productivity in OI and OCIG, we reviewed data on 

investigations, prosecutions, and convictions, and exclusions from fiscal 

year 1997 through fiscal year 2002. We also examined relevant monetary 

accomplishments including the number and amounts of fines and penalties 

assessed, civil settlements and judgments, cost savings claimed, and 

recoveries and court-ordered restitutions. Our review included an 

examination of OCIG files pertaining to eight civil monetary penalty cases. 

We also judgmentally selected 18 corporate integrity agreements instituted 

since fiscal year 2000, to determine the extent to which new policies 

outlined in the Inspector General’s November 20, 2001, open letter to 

providers had been implemented. 

In addition, we discussed the OIG’s productivity with some of its partners 

in the law enforcement community to determine whether there have been 

recent changes in the level of OI’s or OCIG’s support. Specifically, we 

spoke to officials from the Department of Justice and seven of its U.S. 

Attorneys’ Offices. We also discussed this matter with officials from 

Examination of the 

Inspector General’s Travel 

Analysis of OIG 

Performance Measures 
Appendix I: Scope and Methodology 

Page 40 GAO-03-685 Review of HHS OIG Operations 

Medicaid Fraud Control Units in California, Florida, Illinois, and New York 

and a representative from the National Association of Medicaid Fraud 

Control Units. 

Finally, we assessed the OIG’s productivity in terms of its outreach and 

education activities. To do this, we collected information regarding the 

number of speeches, presentations, and testimonies given by various OIG 

employees. We also discussed this matter with OIG employees and 

professional staff members at several congressional committees with 

jurisdiction over Medicare and other federal health programs. 

To elicit broad-based views of OIG employees on morale and other issues, 

we conducted a Web-based survey. We solicited OIG employee 

participation by e-mail, using an e-mail list provided by the OIG. We first 

sent a notification e-mail alerting the employees to the upcoming survey 

and to check for inaccurate e-mail addresses. We verified with the OIG 

that the individuals whose e-mails were returned as “not deliverable” were 

no longer active OIG employees. We then sent an activation e-mail to each 

employee, containing a unique user name, password, and instructions for 

accessing the survey on the GAO Web site. We sent three follow-up 

reminder e-mails to nonrespondents. Employees were given 1 month to 

complete the survey. Of the 1,621 employees on our list, 1,451 completed 

the survey for a response rate of 90 percent. 

The survey contained 29 items asking employees for their views on the 

organization, management, and their personal job satisfaction. The four 

possible responses were: strongly agree, somewhat agree, somewhat 

disagree, and strongly disagree. The first 26 items on the survey were 

identical to those from an employee survey conducted by the OIG in 

January 2002, which we used as a basis for comparing our survey results. 

We included three additional items: “Overall, the OIG is improving as a 

place to work and make a difference,” “I have confidence and trust in my 

organization,” and “In the last 15 months, morale in my work group has 

improved.” We also included seven demographic items and provided an 

open-ended comment box. We included a final item for the respondent to 

mark the survey as “Completed,” which, if checked, indicated that the 

respondent gave us permission to include his or her responses in our 

analyses. 

In total, 578 of the 1,451 survey respondents (40 percent) elected to write 

open-ended comments. We coded 573 of the comments for tone (positive, 

negative, neutral) and content. To code content, we used 36 categories 

Analysis of Web-Based 

Survey Results 
Appendix I: Scope and Methodology 

Page 41 GAO-03-685 Review of HHS OIG Operations 

related to morale, productivity, management, personnel issues, 

independence, propriety, and other topics. The comments of three 

respondents were not coded because they did not fit into any of our 

coding categories. The comments of two additional respondents were not 

coded because they did not mark their surveys as “Completed.” The unit of 

analysis was the comment—not the respondent. For example, if one 

respondent made several comments that fell into different categories, each 

comment was coded separately. 
Appendix II: Insufficient Internal Controls 

Over the OIG’s Credentialing System 

Page 42 GAO-03-685 Review of HHS OIG Operations 

In response to allegations that certain employees, including the Inspector 

General, possessed improper credentials, we evaluated the security of the 

OIG’s credentialing system. OIG employees are issued credentials that 

display their photographs, signatures, job titles, and, in the case of OI 

investigators, their status as law enforcement officers. Because adequate 

internal controls are key to preventing mismanagement and operational 

problems, our evaluation centered on the controls governing this 

computer-based system, physically located in the OIG headquarters 

building. In addition, recent advances in information technology have 

heightened the importance of ensuring that controls over electronically 

stored information are frequently reviewed and updated to minimize the 

threat of improper use. Changes in information technology led to revisions 

in Standards for Internal Controls in the Federal Government,

1

 which 

became effective at the beginning of fiscal year 2000, to reflect new 

guidance for modern computer systems. Our work revealed serious 

weaknesses in the internal controls governing the OIG’s credentialing 

system. 

The physical security of the computer system used to produce credentials 

was inadequate. The system was housed in a public file room with 

unrestricted access. Because the room also contained a copier machine, 

many individuals routinely entered the area. The system’s backup tapes 

were located in an unlocked drawer in the credentialing system desk. In 

addition, we also found the stock paper containing the agency’s insignia, 

used in the production of all credentials, stored unlocked in a cabinet in 

the same room. 

In addition, we found deficiencies in the system itself, making it even more 

vulnerable to misuse. For example, we found that neither the computer’s 

screen saver nor the credentialing software programs on the computer 

were password protected, and the employee photo and signature files 

were not adequately protected. The system also did not have the capability 

to create a history log or audit trail to identify past users. Given the 

system’s unsecured location, we determined that the system itself was 

easily susceptible to unauthorized access through the use of several 

techniques, such as a device that could identify recent keystrokes to 

capture the names of recent users and their passwords. 

 1

U.S. General Accounting Office, Standards for Internal Controls in the Federal 

Government, (GAO/AIMD-00-21.3.1, November 1999). 

Appendix II: Insufficient Internal Controls 

Over the OIG’s Credentialing System 
Appendix II: Insufficient Internal Controls 

Over the OIG’s Credentialing System 

Page 43 GAO-03-685 Review of HHS OIG Operations 

When we visited the credentialing room we found it empty, the computer 

on, and the screensaver active. By touching the computer’s mouse we 

were able to cancel the screensaver and observed an open record on 

display. We found that we could access, copy, modify, and delete sensitive 

files including employee photos, digital signatures, and personnel 

information with little likelihood of detection or system recovery. It would 

also have been possible to create a false, unauthorized set of credentials. 

OIG officials have since told us that they have taken steps to correct these 

weaknesses. 
Appendix III: Comments from the Inspector 

General 

Page 44 GAO-03-685 Review of HHS OIG Operations 

Appendix III: Comments from the Inspector 

General 
Appendix III: Comments from the Inspector 

General 

Page 45 GAO-03-685 Review of HHS OIG Operations 
Appendix III: Comments from the Inspector 

General 

Page 46 GAO-03-685 Review of HHS OIG Operations 
Appendix III: Comments from the Inspector 

General 

Page 47 GAO-03-685 Review of HHS OIG Operations 
Appendix III: Comments from the Inspector 

General 

Page 48 GAO-03-685 Review of HHS OIG Operations 
Appendix III: Comments from the Inspector 

General 

Page 49 GAO-03-685 Review of HHS OIG Operations 
Appendix IV: GAO Contacts and Staff 

Acknowledgments 

Page 50 GAO-03-685 Review of HHS OIG Operations 

Leslie G. Aronovitz, (312) 220-7600 

Geraldine Redican-Bigott, (312) 220-7678 

Major contributors to this report were Enchelle D. Bolden, Helen 

Desaulniers, Curtis Groves, Shirin Hormozi, Behn Kelly, Terry Richardson, 

Christi Turner, and Anne Welch. 

Appendix IV: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts 

Acknowledgments 

(290242) 
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