Medicare: Health Care Fraud and Abuse Control Program for Fiscal Years 2000 and 2001
Published: 2002-06-03T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Medicare program is the nation's largest health insurer with almost 40 million beneficiaries and outlays of over $219 billion annually. Because of the susceptibility of the program to fraud and abuse, Congress enacted the Health Care Fraud and Abuse Control (HCFAC) Program as part of the Health Insurance Portability and Accountability Act (HIPPAA) of 1996. HCFAC, which is administered by the Department of Health and Human Services' (HHS) Office of Inspector General (OIG) and the Department of Justice (DOJ), established a national framework to coordinate federal, state, and local law enforcement efforts to detect, prevent, and prosecute health care fraud and abuse in the public and private sectors. HIPPAA requires HHS and DOJ to issue a joint annual report no later than January 1 of each year to Congress for the proceeding fiscal year. The joint HCFAC reports included deposits of $210 million for fiscal year 2000 and $464 million for fiscal year 2001, pursuant to the act. In testing at DOJ, GAO found errors in the recording of criminal fines deposits to the Federal Hospital Insurance Trust Fund in fiscal year 2001 that resulted in an estimated overstatement to the trust fund of $169,765.
section_title: What GAO Found
paragraphs: GAO found that the planned use of HCFAC appropriations was in keeping with the stated purpose in the act. Although GAO found expenditures from the trust fund were generally appropriate at HHS, at DOJ GAO found $480,000 in interest penalties not related to HCFAC activities that were charged to the HCFAC appropriation. GAO was unable to identify expenditures from the HCFAC trust fund for activities unrelated to Medicare because the HHS/OIG and DOJ do not separately account for or monitor these activities. Likewise, GAO was unable to identify savings specifically attributable to activities funded by the HCFAC program.

section_title: Letter
paragraphs: The Medicare program is the nation’s largest health insurer with almost 40  million beneficiaries and outlays of over $219 billion annually.  Because of  the susceptibility of the program to fraud and abuse, the Congress enacted  the Health Care Fraud and Abuse Control (HCFAC) Program as part of the  Health Insurance Portability and Accountability Act of 1996 (HIPAA),  Public Law 104-91.  HCFAC, which is administered by the Department of  Health and Human Services’ (HHS) Office of Inspector General (OIG) and  the Department of Justice (DOJ), established a national framework to  coordinate federal, state, and local law enforcement efforts to detect,  prevent, and prosecute health care fraud and abuse in the public and  private sectors.
HIPAA requires HHS and DOJ to issue a joint annual report no later than  January 1 of each year to the Congress for the preceding fiscal year on  (1) amounts deposited to the Federal Hospital Insurance Trust Fund  pursuant to HIPAA and the source of the amounts and (2) amounts  appropriated from the trust fund for the HCFAC program and the  justification for the expenditure of such amounts.  HHS and DOJ have  issued five joint reports, which individually covered HCFAC-related  activities for fiscal years 1997 through 2001.
HIPAA, as amended by the Balanced Budget Act of 1997, Public Law 105-33,  also requires that we submit reports no later than January 1, 2002, and  2004, that identify certain collections, appropriations, expenditures, and  savings related to HCFAC and other aspects of the program as we consider  appropriate.  Accordingly, the objectives of our review were to identify and  assess the propriety of amounts reported as (1) deposits to the trust fund,  (2) appropriations from the trust fund for HCFAC activities,  (3) expenditures at DOJ for HCFAC activities, (4) expenditures at HHS for  HCFAC activities, (5) expenditures for non-Medicare anti–fraud and abuse  activities, and (6) savings to the trust fund, as well as other savings,  resulting from expenditures from the trust fund for the HCFAC program.
The HHS and DOJ joint HCFAC report for fiscal year 2001, which was  required to be issued in January 2002 but was not issued until April 2002,  contained information needed to perform this review.  Therefore, it was  impossible for us to meet our reporting deadline of January 1, 2002, and in  all likelihood, we will also not be able to meet our 2004 commitment.  This  report represents the results of our review of fiscal years 2000 and 2001  HCFAC program activities and fulfills our 2002 reporting requirement.
subsections: section_title: Background
paragraphs: In 1990, we designated the Medicare program, which is administered by the  Centers for Medicare and Medicaid Services (CMS) in HHS, as at high risk  for improper payments because of its sheer size and vast range of  participants—including about 40 million beneficiaries and nearly 1 million  physicians, hospitals, and other providers.  The program remains at high  risk today.  In fiscal year 2001, Medicare outlays totaled over $219 billion,  and the HHS/OIG reported that $12.1 billion in fiscal year 2001 Medicare  fee-for-service payments did not comply with Medicare laws and  regulations.  The Congress enacted HIPAA, in part, to respond to the  problem of health care fraud and abuse.  HIPAA consolidated and  strengthened ongoing efforts to combat fraud and abuse in health programs  and provided new criminal enforcement tools as well as expanded  resources for fighting health care fraud, including $158 million in fiscal year  2000 and $182 million in fiscal year 2001.
Under the joint direction of the Attorney General and the Secretary of HHS  (acting through the HHS/OIG), the HCFAC program goals are as follows:  coordinate federal, state, and local law enforcement efforts to control  fraud and abuse associated with health plans;  conduct investigations, audits, and other studies of delivery and  payment for health care for the United States;  facilitate the enforcement of the civil, criminal, and administrative  statutes applicable to health care;  provide guidance to the health care industry, including the issuance of  advisory opinions, safe harbor notices, and special fraud alerts; and  establish a national database of adverse actions against health care  providers.
Funds for the HCFAC program are appropriated from the trust fund to an  expenditure account, referred to as the Health Care Fraud and Abuse  Control Account, maintained within the trust fund.  The Attorney General  and the Secretary of HHS jointly certify that the funds transferred to the  control account are necessary to finance health care anti–fraud and abuse  activities, subject to limits for each fiscal year as specified by HIPAA.   HIPAA authorizes annual minimum and maximum amounts earmarked for  HHS/OIG activities for the Medicare and Medicaid programs.  For example,  of the $182 million available in fiscal year 2001, a minimum of $120 million  and a maximum of $130 million were earmarked for the HHS/OIG.  By  earmarking funds specifically for the HHS/OIG, the Congress ensured  continued efforts by the HHS/OIG to detect and prevent fraud and abuse in  the Medicare and Medicaid programs.
CMS performs the accounting for the control account, from which all  HCFAC expenditures are made.  CMS sets up allotments in its accounting  system for each of the HHS and DOJ entities receiving HCFAC funds.  The  HHS and DOJ entities account for their HCFAC obligations and  expenditures in their respective accounting systems and report them to  CMS monthly.  CMS then records the obligations and expenditures against  the appropriate allotments in its accounting system.
At DOJ, payroll constituted 78 percent of its total expenditures in fiscal  year 2000 and 69 percent in fiscal year 2001.  Within DOJ, the Executive  Office for the United States Attorneys (EOUSA) receives the largest  allotment of HCFAC funds.  In EOUSA, each district is allocated a  predetermined number of full-time equivalent (FTE) positions based on  the historical workload of the district.  Specific personnel who ordinarily  work on health care activities, such as the Health Care Fraud Coordinator,  are designated within the DOJ accounting system to have their payroll  costs charged to the HCFAC account.  In some districts, one FTE could be  shared among several individuals, each contributing a portion of time to  HCFAC assignments.  EOUSA staff track the portion of time devoted to  health care activity and other types of cases and investigations in the  Monthly Resource Summary System on a daily or monthly basis.  DOJ  monitors summary information from the Monthly Resource Summary  System to determine how staff members’ time is being used.
The HHS/OIG expenditures represented over 96 percent of HHS’s total  HCFAC expenditures in fiscal years 2000 and 2001.  At HHS/OIG, HCFAC  expenditures are allocated based on relative proportions of the HCFAC  budget authority and the discretionary funding sources.  Table 1 below  identifies the relative percentages HHS/OIG used in fiscal years 2000 and  2001.
HHS/OIG uses these percentages to compute the amounts of payroll and  nonpayroll expenditures to be charged to their two funding sources.   HHS/OIG tracks staff time spent on various assignments in separate  management information systems (MIS).  The information in the MIS is  summarized and monitored quarterly to adjust the type of work planned  and performed, if necessary, so that the use of the funds is consistent with  the funding sources’ intended use.
HIPAA also requires that amounts equal to the following types of  collections be deposited into the trust fund:  criminal fines recovered in cases involving a federal health care offense,  including collections pursuant to section 1347 of Title 18, United States  Code;  civil monetary penalties and assessments imposed in health care fraud   amounts resulting from the forfeiture of property by reason of a federal  health care offense, including collections under section 982(a)(7) of  Title 18, United States Code;   penalties and damages obtained and otherwise creditable to  miscellaneous receipts of the Treasury’s general fund obtained under  the False Claims Act (sections 3729 through 3733 of Title 31, United  States Code), in cases involving claims related to the provision of health  care items and services (other than funds awarded to a relator, for  restitution, or otherwise authorized by law); and   unconditional gifts and bequests.
Criminal fines resulting from health care fraud cases are collected through  the Clerks of the Administrative Office of the United States Courts.   Criminal fines collections are reported to DOJ’s Financial Litigation Unit  associated with their districts.  Based on cash receipt documentation  received from the Clerks, the Financial Litigation Units then post the  criminal fines collection to a database.  The database generates at least a  biannual report of the amount of criminal fines collected, which is sent to  the Department of the Treasury.  Treasury relies on this report to determine  the amount to deposit to the trust fund.  Civil monetary penalties for  federal health care offenses are imposed by CMS regional offices or the  HHS/OIG against skilled nursing facilities or long-term care facilities and  doctors.  CMS collects civil monetary penalty amounts and reports them to  the Department of the Treasury for deposit to the trust fund.  Penalties and  multiple damages resulting from health care fraud cases are collected by  DOJ’s Civil Division in Washington, D.C., and by Financial Litigation Units  in the United States Attorneys’ offices located throughout the country.  The  Civil Division and United States Attorneys’ offices report collection  information to DOJ’s Debt Accounting Operations Group, which reports  the amount of penalties and multiple damages to the Department of the  Treasury for deposit to the trust fund.  HIPAA also allows CMS to accept  unconditional gifts and bequests made to the trust fund.
section_title: Objectives, Scope, and Methodology
paragraphs: The objectives of our review were to identify and assess the propriety of  amounts for fiscal years 2000 and 2001 reported as (1) deposits to the trust  fund, (2) appropriations from the trust fund for HCFAC activities,  (3) expenditures at DOJ for HCFAC activities, (4) expenditures at HHS for  HCFAC activities, (5) expenditures for non-Medicare anti–fraud and abuse  activities, and (6) savings to the trust fund.  To identify and assess the  propriety of deposits, we reviewed the joint HCFAC reports, interviewed  personnel at various HHS and DOJ entities, obtained electronic data and  reports from HHS and DOJ for the various types of deposits, and tested  selected transactions to determine whether the proper amounts were  deposited to the trust fund.
To identify and assess the propriety of amounts appropriated from the trust  fund, we reviewed the joint HCFAC reports, and reviewed and analyzed  documentation to support the allocation and certification of the HCFAC  appropriation.   To identify and assess the propriety of expenditure  amounts at HHS, we interviewed personnel, obtained electronic data and  reports supporting nonpayroll transactions, tested selected nonpayroll  transactions, reviewed payroll allocation methodologies, and interviewed  selected employees to assess the reasonableness of time and attendance  charges to the HCFAC appropriation account for payroll expenditures.  To  identify and assess the propriety of expenditure amounts at DOJ, we  interviewed personnel, obtained electronic data and reports supporting  nonpayroll transactions, tested selected nonpayroll transactions,  performed analytical procedures, and interviewed selected employees to  assess the reasonableness of time and attendance charges to the HCFAC  appropriation account for payroll expenditures.
We were unable to identify and assess the propriety expenditures for non- Medicare antifraud activities because HHS/OIG and DOJ do not separately  account for or monitor such expenditures.  To identify and assess the  propriety of savings to the trust fund, as well as any other savings, resulting  from expenditures from the trust fund for the HCFAC program, we  reviewed the joint reports, interviewed personnel, reviewed  recommendations and the resulting cost savings as reported in the  HHS/OIG’s fiscal years 2000 and 2001 semiannual reports, and tested  selected cost savings.  We were unable to directly associate the reported  cost savings to HCFAC because HHS and DOJ officials do not track them as  such due to the nature of health care anti–fraud and abuse activities.
We interviewed and obtained documentation from officials at the CMS in  Baltimore, Maryland; HHS headquarters—including the Administration on  Aging (AOA), the Assistant Secretary for Budget, Technology and Finance  (ASBTF) which was formerly the Assistant Secretary for Management and  Budget (ASMB), the OIG, and the Office of General Counsel (OGC)—in  Washington, D.C.; HHS’s Program Support Center (PSC) in Rockville,  Maryland; and DOJ’s Justice Management Division, EOUSA, Criminal  Division, Civil Division, and Civil Rights Division in Washington, D.C.
We conducted our work in two phases, from April 2001 through June 2001  focusing primarily on fiscal year 2000 HCFAC activity, and from October  2001 through April 2002 focusing primarily on fiscal year 2001 HCFAC  activity, in accordance with generally accepted government auditing  standards.  A detailed discussion of our objectives, scope, and  methodology is contained in appendix I of this report.  We requested  comments on a draft of this report from the Secretary of HHS and the  Attorney General or their designees.  We received written comments from  the Inspector General of HHS and the Acting Assistant Attorney General for  Administration at DOJ.  We have reprinted their responses in appendices II  and III, respectively.
section_title: DOJ Made Errors in Reporting Collections; However, the Trust Fund Was Minimally Affected
paragraphs: The joint HCFAC reports included deposits of about $210 million in fiscal  year 2000 and $464 million in fiscal year 2001, pursuant to HIPAA.  As  shown in figure 1, the sources of these deposits were primarily penalties  and multiple damages.
In testing at DOJ, we identified some errors in the recording of HCFAC  collections that resulted in an estimated overstatement of $169,765 to the  trust fund in fiscal year 2001.  These uncorrected errors, which related to  criminal fines deposited to the trust fund, were not detected by DOJ  officials responsible for submitting collection reports to the Department of  the Treasury.  Our work did not identify errors in recording collections in  any of the other categories for fiscal years 2000 and 2001.  We did not  identify errors related to fiscal year 2000 criminal fines.
Of the 58 statistically sampled criminal fines transactions, we tested the  collection of 2 fines reported at $8,693 and $50,007 that were supported by  documentation for $6,097 and $25,000, respectively, and resulted in  overstatements to the trust fund totaling over $27,000.  We estimated the  most likely overstatement of collections of criminal fines deposited to the  trust fund as a result of transactions incorrectly recorded was $169,765.   In both cases, the errors were not detected by DOJ staff responsible for  submitting the criminal fines report to the Department of the Treasury.    DOJ officials told us that there was a programming mistake in generating  the criminal fines report that resulted in these errors.  DOJ officials also  told us that the mistake has been corrected to address the problem in the  future and they plan to research the impact of the programming oversight  to determine what, if any, adjustments or offsets are needed and will make  the necessary corrections next quarter.  While the total estimated  overstatement is relatively insignificant compared to the total amount of  $464 million in HCFAC collections that was reported to the trust fund in  fiscal year 2001, the control weaknesses that gave rise to these errors could  result in more significant misstatements.
section_title: HIPAA Appropriations Were Properly Supported
paragraphs: As reported in the joint HCFAC reports for fiscal years 2000 and 2001, the  Attorney General and the Secretary of HHS certified the entire  $158.2 million and $181.9 million appropriations, respectively, as necessary  to carry out the HCFAC program.  Based on our review, the requests for  fiscal years 2000 and 2001 HCFAC appropriations were properly supported  for valid purposes under HIPAA.  Figures 2 and 3 present fiscal years 2000  and 2001 allocations for the HCFAC program, respectively.
Based on our review, we found that the planned use of HCFAC  appropriations was intended for purposes as stated in HIPAA statute.   According to the joint HCFAC reports, HCFAC’s increased resources have  enabled HHS/OIG to broaden its efforts both to detect fraud and abuse and  to help deter the severity and frequency of it.  The HHS/OIG reported that  HCFAC funding allowed it to open 14 new investigative offices and increase  its staff levels by 61 during fiscal year 2000, with the result that OIG is  closer to its goal of extending its investigative and audit staff to cover all  geographical areas in the country.
As shown in figures 2 and 3, we also found that DOJ and other HHS  organizations requested and were granted $38.9 million in fiscal year 2000  and $51.9 million in fiscal year 2001.  DOJ’s funds were used primarily to  continue its efforts to litigate health care fraud cases and provide health  care fraud training courses.  In fiscal year 2001, $4 million of HHS’s HCFAC  allocation was approved by designees of the Attorney General and the  Secretary of HHS for reallocation to DOJ to support the federal  government’s tobacco litigation activities for fiscal year 2001.  In addition,  $12 million of fiscal year 2001 HCFAC funds allocated to DOJ’s Civil  Division were used to support the federal government’s suit against the  major tobacco companies, as allowed under HIPAA.
In addition, other HHS organizations used their HCFAC allocations for the  following purposes in fiscal years 2000 and 2001:  The Office of General Counsel used its funds primarily for litigation  activity, both administrative and judicial.
CMS, the agency with primary responsibility for administering the  Medicare and Medicaid programs, along with the ASMB, used its HCFAC  funds allocated in fiscal year 2000 to fund contractual consultant  services on establishing a formal risk management function within each  organization.  CMS used its HCFAC funds allocated in fiscal year 2001 to  assist states in developing Medicaid payment accuracy measurements  methodologies and to conduct pilot studies to measure and reduce state  Medicaid payment errors.
The AOA was allocated funds to develop and disseminate consumer  education information to older Americans and to train staff to recognize  and report fraud, waste, and abuse in the Medicare and Medicaid  programs.
The ASBTF, formerly the ASMB, used its HCFAC funds for consultant  services that will help ensure that the new HHS integrated financial  management system, of which the CMS Healthcare Integrated General  Ledger Accounting System will be a major component, is being  developed to meet the department’s financial management goals, which  include helping to prevent waste and abuse in HHS health care  programs.
section_title: DOJ’s Controls over Expenditures Need Reinforcement
paragraphs: At DOJ, we identified problems indicating that oversight of HCFAC  expenditure transaction processing needs to be reemphasized.  These  problems include charging non-HCFAC transactions to the HCFAC  appropriation and the inability to provide us with a detailed list of HCFAC  expenditure transactions to support summary totals on their internal  financial report in a timely manner. These problems could impede DOJ’s  ability to adequately account for growing HCFAC expenditures, which  totaled over $23.7 million for fiscal year 2000 and $26.6 million for fiscal  year 2001, as shown in figure 4.
We found that over $480,000 in interest penalties not related to HCFAC  activities were miscoded and inadvertently charged to the HCFAC  appropriation.  The DOJ officials responsible for recording this transaction  told us there was an offsetting error of $482,000 in HCFAC-related  expenditures that were not recorded to the HCFAC account.  Regardless of  whether these errors essentially offset, they are indicative of a weakness in  DOJ’s financial processes for recording HCFAC and other expenditures.
DOJ was also unable to provide a complete and timely reconciliation of  detailed transactions to summary expenditure amounts reported in its  internal reports.  DOJ made several attempts beginning in January 2002 to  provide us with an electronic file that reconciled to its internal expenditure  report.  As of mid-May 2002, we have not received a reconciled file for fiscal  year 2001 HCFAC expenditures.  We did, however, receive a reconciled file  for fiscal year 2000 HCFAC expenditures on April 23, 2002.  To their credit,  DOJ officials responsible for maintaining DOJ financial systems identified  problems associated with earlier attempts to provide this essential  information to support its internal reports.  While we were ultimately able  to obtain this information for fiscal year 2000, we did not receive it in  sufficient time to apply statistical sampling techniques for selecting  expenditure transactions for review as we had done at HHS.  While we used  other procedures to compensate for not obtaining this detailed data file in a  timely manner, we cannot project the results of our procedures to the  population of DOJ expenditures.  Both Office of Management and Budget  Circular (OMB) A-127, Financial Management Systems, and the  Comptroller General’s Standards for Internal Control in the Federal  Government require that all transactions be clearly documented and that  documentation be readily available for examination.
DOJ’s financial statement auditor noted several problems related to the  Department’s internal controls over financial reporting, such as  (1) untimely recording of financial transactions, (2) weak general and  application controls over financial management systems, and  (3) inadequate financial statement preparation controls.  The financial  statement audit report specifically discusses problems related to untimely  recording of financial transactions and inadequate financial statement  preparation controls at offices, boards, and divisions that process HCFAC  transactions.  The financial statement auditor recommended that DOJ  monitor compliance with its policies and procedures.  Further, the auditor  recommended that DOJ consider centralizing information systems that  capture redundant financial data, or consider standardizing the  accumulation and recording of financial transactions in accordance with  the department’s requirements.
subsections: section_title: HHS Expenditures Were Generally Appropriate
paragraphs: Overall, we generally found adequate documentation to support $114.9 million in fiscal year 2000 and $129.8 million in fiscal year 2001  HCFAC expenditures shown in figure 5.  However, we found that a  purchase for an HHS/OIG employee award in fiscal year 2001 was  questionable because it did not have adequate documentation to support  that it was a valid HCFAC expenditure.  We also found that HHS’s policies  and procedures for employee awards did not include specific guidance on  documenting the purchase of such nonmonetary awards.  As stated before,  the Comptroller General’s Standards for Internal Control in the Federal  Government calls for appropriate control activities to ensure that  transactions and internal control policies and procedures are clearly  documented.  HHS/OIG has since provided us with documentation to  support the award as a valid HCFAC transaction and told us that it is  revising its current policies and procedures to include nonmonetary  employee awards.
section_title: HHS and DOJ Do Not Separately Track Non- Medicare Expenditures
paragraphs: We were not able to identify HCFAC program trust fund expenditures that  were unrelated to Medicare because the HHS/OIG and DOJ do not  separately account for or monitor such expenditures.  Even though HIPAA  requires us to report on expenditures related to non-Medicare activities, it  does not specifically require HHS or DOJ to separately track Medicare and  non-Medicare expenditures.  However, HIPAA does restrict the HHS/OIG’s  use of HCFAC funds to Medicare and Medicaid programs.  According to  HHS/OIG officials, they use HCFAC funds only for audits, evaluations, or  investigations related to Medicare and Medicaid.  The officials also stated  that while some activities may be limited to either Medicare or Medicaid,  most activities are generally related to both programs.  Because HIPAA  does not preclude the HHS/OIG from using HCFAC funds for Medicaid  efforts, HHS/OIG officials have stated they do not believe it is necessary or  beneficial to account for such expenditures separately.
Similarly, DOJ officials told us that it is not practical or beneficial to  account separately for non-Medicare expenditures because of the nature of  health care fraud cases.  HIPAA permits DOJ to use HCFAC funds for  health care fraud activities involving other health programs.  According to  DOJ officials, health care fraud cases usually involve several health care  programs, including Medicare and health care programs administered by  other federal agencies, such as the Department of Veterans Affairs, the  Department of Defense, and the Office of Personnel Management.   Consequently, it is difficult to allocate personnel costs and other litigation  expenses to specific parties in health care fraud cases.  Also, according to  DOJ officials, even if Medicare is not a party in a health care fraud case, the  case may provide valuable experience in health care fraud matters,  allowing auditors, investigators, and attorneys to become more effective in  their efforts to combat Medicare fraud.  Since there is no requirement to do  so, HHS and DOJ continue to assert that they do not plan to identify these  expenditures in the future.  Nonetheless, attributing HCFAC activity costs  to particular programs would be helpful information for the Congress and  other decision makers to use in determining how to allocate federal  resources, authorize and modify programs, and evaluate program  performance.   The Congress also saw value in having this information  when it tasked us with reporting expenditures for HCFAC activities not  related to Medicare.  We believe that there is intrinsic value in having this  information.  For example, HCFAC managers face decisions involving  alternative actions, such as whether to pursue certain cases.  Making these  decisions should include a cost awareness along with other available  information to assess the case potential.  Further, having more refined data  on HCFAC expenditures is an essential element to developing effective  performance measures to assess the program’s effectiveness.
subsections: section_title: Savings to the Trust Fund Cannot Be Identified
paragraphs: In the joint HCFAC reports, HHS/OIG reported approximately $14.1 billion  of cost savings during fiscal year 2000 and over $16 billion of cost savings  during fiscal year 2001 from implementation of its recommendations and  other initiatives.  We were unable to directly associate these savings to  HCFAC and other program expenditures from the trust fund, as required by  HIPAA, because HHS and DOJ officials do not track them as such due to  the nature of health care anti–fraud and abuse activities.  HIPAA does not  specifically require HHS and DOJ to attribute savings to HCFAC  expenditures.  Of the reported cost savings, $2.1 billion in fiscal year 2000  and $3.1 billion in fiscal year 2001 were reported as related to the Medicaid  program, which is funded through the general fund of the Treasury, not the  Medicare trust fund.  Our analysis indicated that the vast majority of  HHS/OIG work related to the reported cost savings of $14 billion and $16 billion was performed prior to the passage of HCFAC.   Based on our  review, we found that amounts reported as cost savings were adequately  supported.
Cost savings represent funds or resources that will be used more efficiently  as a result of documented measures taken by the Congress or management  in response to HHS/OIG audits, investigations, and inspections.  These  savings are often changes in program design or control procedures  implemented to minimize improper use of program funds.    Cost savings  are annualized amounts that are determined based on Congressional  Budget Office estimates over a 5-year period.
HHS and DOJ officials have stated that audits, evaluations, and  investigations can take several years to complete.  Once they have been  completed, it can take several more years before recommendations or  initiatives are implemented.  Likewise, it is not uncommon for litigation  activities to span many years before a settlement is reached.
According to DOJ and HHS officials, any savings resulting from health care  anti–fraud and abuse activities funded by the HCFAC program in fiscal  years 2000 and 2001 will likely not be realized until subsequent years.   Because the HCFAC program has been in existence for over 4 years,  information may now be available for agencies to determine the cost  savings associated with expenditures from the trust fund pursuant to  HIPAA.  Associating specific cost savings with related HCFAC expenditures  is an important step in helping the Congress and other decision makers  evaluate the effectiveness of the HCFAC program.
section_title: Conclusions
paragraphs: Our review of fiscal years 2000 and 2001 HCFAC activities found that  appropriations, HHS expenditures, and reported cost savings were  adequately supported, but we did identify some errors in the recording of  collections and expenditures at DOJ.  These errors indicate the need to  strengthen controls over DOJ’s processing of HCFAC collections and  expenditures to ensure that (1) moneys collected from fraudulent acts  against the Medicare program are accurately recorded and  (2) expenditures for health care antifraud activities are justified and  accurately recorded.  Effective internal control procedures and  management oversight are critical to supporting management’s fiduciary  role and its ability to manage the HCFAC program responsibly.  Further,  separately tracking Medicare and non-Medicare expenditures and cost  savings and associating them by program could provide valuable  information to assist the Congress, management, and others in making  difficult programmatic choices.
section_title: Recommendations for Executive Action
paragraphs: To improve DOJ’s accountability for the HCFAC program collections, we  recommend that the Attorney General   fully implement plans to make all necessary correcting adjustments for  collections transferred to the trust fund in error and  ensure that subsequent collection reports submitted to the Department  of the Treasury are accurate.
To improve DOJ’s accountability for HCFAC program expenditures, we  recommend that the Attorney General   make correcting adjustments for expenditures improperly charged to   reinforce financial management policies and procedures to minimize  errors in recording HCFAC transactions.
To facilitate providing the Congress and other decision makers with  relevant information on program performance and results, we recommend  that the Attorney General and the Secretary of HHS assess the feasibility of  tracking cost savings and expenditures attributable to HCFAC activities by  the various federal programs affected.
section_title: Agency Comments and Our Evaluation
paragraphs: A draft of this report was provided to HHS and DOJ for their review and  comment.  In written comments, HHS concurred with our recommendation  to assess the feasibility of tracking cost savings and expenditures  attributable to HCFAC activities by the various federal programs affected.
In its written comments, DOJ agreed with all but one of our  recommendations, and expressed concern with some of our findings.  The  following discussion provides highlights of the agencies’ comments and our  evaluation.  Letters from HHS and DOJ are reprinted in appendixes II and  III.
DOJ acknowledged the two errors we found in fiscal year 2001 criminal  fine amounts and attributed them to a programming problem.  As we  discussed in the report, DOJ indicated it had already taken action to  address our recommendations by correcting the programming error to  address future amounts reported for criminal fines.  DOJ also stated that an  effort is currently under way to research the impact of the programming  error and plans to determine what, if any, adjustments or offsets are needed  to correct amounts previously reported to the Department of the Treasury.   DOJ indicated that it had already discovered and fixed the programming  error prior to our review.  However, as we reported, DOJ was not aware of  the errors we identified, nor did it call our attention to the possibility of  errors occurring due to this programming problem.  In addition, DOJ  acknowledged in its comments that errors have occurred in the recording  of valid HCFAC expenditure transactions and stated that corrections have  been made to address our related recommendation.
Additionally, DOJ incorrectly interpreted our statement that the problems  identified in our review could impede its ability to account for growing  HCFAC expenditures.  In its comments, DOJ construed this to mean that  we concluded that program managers lack timely access to financial  reports or supporting transactions.  That was not our intent nor the focus  of our review.  As stated in our report, the problems we encountered  indicate that additional emphasis should be placed on DOJ’s financial  management policies and procedures to minimize errors in recording  HCFAC transactions.  DOJ did state that it will continue its standing  practice of continually educating its staff and reinforcing its financial  management policies and procedures to minimize errors in recording  HCFAC and all other transactions within DOJ.  However, based on our  findings, this standing practice needs modification in order to bolster its  effectiveness.  DOJ also stated that our reference to the findings for  departmental systems as cited in the Audit Report: U.S. Department of  Justice Annual Financial Statement Fiscal Year 2001, Report No. 02-06,  was inapplicable.  To address DOJ’s concerns, we clarified the report to cite  problems that its financial statement auditors found at entities within DOJ  that process HCFAC transactions.
Finally, regarding our recommendation to both HHS and DOJ to assess the  feasibility of tracking cost savings and expenditures attributable to HCFAC  activities by the various federal programs affected, HHS/OIG stated in its  written comments that it had previously considered alternatives that would  allow it to track and attribute cost savings and expenditures but had  identified obstacles to doing so.  At the same time, HHS/OIG agreed with  our recommendation to perform an assessment of tracking cost savings  and expenditures by program, which is critical to developing effective  performance measures.  However, DOJ stated that it is neither practical nor  beneficial to track cost savings or non-Medicare expenditures associated  with HCFAC enforcement activities.  Without capturing such information,  the Congress and other decision makers do not have the ability to fully  assess the effectiveness of the HCFAC program.  Therefore, we continue to  believe that, at a minimum, DOJ should study this further, as HHS has  agreed to do.
We are sending copies of this report to the Secretary of HHS, the Attorney  General, and other interested parties.  Copies will be made available to  others on request.  In addition, the report will be available at no charge on  the GAO Web site at http://www.gao.gov.  If you or your staffs have any  questions, please contact me at (202) 512-9508 or by e-mail at  calboml@gao.gov or Kay L. Daly, Assistant Director, at (202) 512-9312 or by  e-mail at dalykl@gao.gov.   Key contributors to this assignment are listed in  appendix IV.
section_title: Objectives, Scope, and Methodology
paragraphs: To accomplish the first objective, identifying and assessing the propriety of  amounts reported for deposits in fiscal years 2000 and 2001 as (1) penalties  and multiple damages, (2) criminal fines, (3) civil monetary penalties, and  (4) gifts and bequests, we did the following:  Reviewed the joint HHS and DOJ HCFAC reports for fiscal years 2000  and 2001 to identify amounts deposited to the trust fund.
Interviewed personnel at various HHS and DOJ entities to update our  understanding of procedures related to collections/deposits.
Obtained access to databases and reports from HHS and DOJ for the  various collections/deposits as of September 30, 2000, and September 30, 2001.
Tested selected transactions to determine whether the proper amounts  were deposited to the trust fund.  We obtained and recomputed  supporting documentation from various sources depending on the type  of collection/deposit.  We traced amounts reported on the supporting  documentation to reports and other records to confirm that proper  amounts were appropriately reported.  To perform these tests, we did  the following:  Drew dollar unit samples of 60 items from a population of 626  penalties and multiple damages (PMD), totaling $454,615,907, from  an electronic database for CMS PMDs and from the FMIS Dept  Management Transfer of Funds from the U.S. Department of  Justice Via OPAC Report for DOJ PMDs for fiscal year 2001, and 60  items from a population of 479 penalties and multiple damages,  totaling $147,268,092, from an electronic database for CMS PMDs and  from the FMIS Dept Management Detail Report for DOJ PMDs for  fiscal year 2000.
Drew dollar unit samples of 58 items from a population of 179  criminal fines, totaling $2,894,234, from the Criminal Fines Report  for fiscal year 2001, and 58 items from a population of 178 criminal  fines totaling $57,209,390 from the Criminal Fines Report for fiscal  year 2000.
Drew dollar unit samples of 29 items from a population of 2,381 civil  monetary penalties, totaling $6,060,481, from an electronic database  for fiscal year 2001, and 57 items from a population of 1,221 civil  monetary penalties, totaling $5,220,177, from an electronic database  for fiscal year 2000.
Reviewed the entire population of four gifts and bequests, totaling  $5,501, for fiscal year 2001.  We obtained and analyzed supporting  documentation including the letters and checks retained at CMS.   There were no gifts and bequests reported for fiscal year 2000,  therefore none were tested.
To accomplish our second objective, identifying and assessing the  propriety of amounts reported in fiscal years 2000 and 2001 as  appropriations from the trust fund for HCFAC activities, we did the  following:  Obtained the funding decision memorandum and reallocation  documents to verify the HCFAC funds certified by HHS and DOJ  officials.
Analyzed the reasons for requesting HCFAC funds to determine that  amounts appropriated from the trust fund met the purposes stated in  HIPAA to, among other things, coordinate federal, state, and local law  enforcement efforts; conduct investigations, audits, and studies related  to health care; and provide guidance to the health care industry  regarding fraudulent practices.
Compared allocations amount reported in the joint HCFAC reports to  the approved funding decision memorandum and reallocation  documents to verify the accuracy of amounts reported.
To accomplish our third objective, identifying and assessing the propriety  of amounts for HCFAC expenditures at DOJ for fiscal years 2000 and 2001,  we obtained DOJ’s internal financial report, the Expenditure and Allotment  Report, EA101, which detailed total expenditure data for each component  by subobject class for fiscal year 2000 and fiscal year 2001.  To test our  population, we further requested that DOJ provide us with a complete  detailed population of transactions to support the summary totals on the  internal financial report.  Because the data were not provided to us on time,  nor were they fully reconciled, we could not statistically select a sample  and project the results to the population as a whole.  We modified our  methodology and nonstatistically selected 19 transactions, totaling  $2,695,211 in fiscal year 2000, and 38 transactions, totalling $1,362,579 in  fiscal year 2001, from DOJ focusing on large dollar amounts, unusual items,  and other transactions, which would enhance our understanding of the  expenditure process.  To determine whether these transactions were  properly classified as HCFAC transactions, we interviewed DOJ officials to  obtain an understanding of the source and processing of transactions and  reviewed, analyzed, and recomputed supporting documentation, such as  purchase orders, invoices, and receipts, to determine the propriety of the  expenditures.
We performed analytical procedures and tested DOJ payroll on the largest  component, EOUSA offices. To assess the reasonableness of payroll  expenses, we performed a high-level analytical review.  To enhance our  understanding of how personnel record their work activity in the Monthly  Resource Summary System, we nonstatistically selected 20 individuals  from 10 districts for fiscal years 2000 and 2001.  We interviewed these  individuals on their method for charging time to the HCFAC program for  fiscal year 2000 and 2001 and to verify whether time charged to the Monthly  Resource Summary System was accurate. In the interview, employees were  asked whether the time that was recorded in the system was accurate and  how and where they received guidance on charging of time.
To accomplish our fourth objective, identifying and assessing the propriety  of amounts for HCFAC expenditures at HHS for fiscal years 2000 and 2001,  we  obtained internal reports generated from the agency’s accounting  system to identify HCFAC expenditure amounts,  obtained detailed records to support HHS payroll and nonpayroll   tested selected payroll and nonpayroll transactions to determine  whether they were accurately reported.
To evaluate payroll charges to the HCFAC appropriation by HHS/OIG  employees during fiscal years 2000 and 2001, we performed analytical  procedures.  We analyzed the methodology used by the HHS/OIG to verify  that expenditures were within the predetermined allocation percentages  for HCFAC and non-HCFAC expenditures.
We also reviewed 10 HHS/OIG employee time charges for fiscal years 2000  and 2001.  The selected employees were interviewed regarding their time  charges for fiscal years 2000 and 2001.  In the interview, employees were  asked to verify the time that was recorded by the department’s  management information systems or timecards.  We also inquired as to how  and where employees received guidance on charging their time and  whether they understood the various funding sources used to support OIG  activities.  We verified that the pay rate listed on the employees Standard  Form 50 Notification of Personnel Action was the same as the amount  charged to the Department of Health and Human Services Regional Core  Accounting System Data Flowback Name List (CORE - Central Accounting  System).  We verified that the summary hours as recorded in the U.S.  Department of Health & Human Services Employee Data Report (TAIMS -  Time and Attendance application) traced to the management information  system or time and attendance records.  We interviewed the employees to  verify that the time charged to the management information system or time  and attendance records were accurate.
We drew dollar unit samples of 44 items from a population of 36,380  nonpayroll expenditures, totaling $34,156,369, from HHS’s internal  accounting records for fiscal year 2001, and 39 items from a population of  27,884 nonpayroll expenditures, totaling $32,914,328, for fiscal year 2000.   To assess the propriety of these transactions, we obtained supporting  documentation such as invoices, purchase orders, and receipts.  We  recomputed the documentation as appropriate to the transaction.
We were unable to accomplish our fifth objective, to identify and assess the  propriety of amounts reported as fiscal years 2000 and 2001 expenditures  for non-Medicare anti–fraud and abuse activities, because HHS/OIG and  DOJ do not separately account for or monitor such expenditures.  Even  though HIPAA requires that we report on expenditures related to non- Medicare activities, it does not specifically require HHS or DOJ to  separately track Medicare and non-Medicare expenditures.
To accomplish our sixth objective, to identify and assess the propriety of  amounts reported as savings to the trust fund, we  obtained the fiscal years 2000 and 2001 HHS/OIG semiannual reports to  identify cost savings as reported in the joint reports and   tested selected cost saving transactions to determine whether the  amounts were substantiated.
We were unable to attribute the reported cost savings to HCFAC  expenditures as well as identify any other savings from the trust fund  because, according to DOJ and HHS officials, any savings resulting from  health care anti–fraud and abuse activities funded by the HCFAC program  in fiscal years 2000 and 2001 will likely not be realized until subsequent  years.
We interviewed and obtained documentation from officials at CMS in  Baltimore, Maryland; HHS headquarters–AOA, ASBTF, OIG and the OGC–in  Washington, D.C.; HHS’s Program Support Center in Rockville, Maryland;  and DOJ’s Justice Management Division, EOUSA, Criminal Division, Civil  Division, and Civil Rights Division in Washington, D.C.
We conducted our work in two phases, from April 2001 through June 2001  focusing primarily on fiscal year 2000 HCFAC activity, and from October  2001 through April 2002 focusing primarily on fiscal year 2001 HCFAC  activity, in accordance with generally accepted government auditing  standards.  We requested comments on a draft of this report from the  Secretary of HHS and the Attorney General.  We received written  comments from the Inspector General of HHS and the Acting Assistant  Attorney General for Administration at DOJ.  We have reprinted their  responses in appendixes II and III, respectively.
section_title: Comments from the Department of Health and Human Services
section_title: Comments from the Department of Justice
section_title: Staff Acknowledgments
paragraphs: Ronald Bergman, Sharon Byrd, Lisa Crye, Jacquelyn Hamilton, Corinne  Robertson, Gina Ross, Sabrina Springfield, and Shawnda Wilson made key  contributions to this report.
section_title: Related GAO Products
paragraphs: Civil Fines and Penalties Debt:  Review of OSM’s Management and  Collection Processes.  GAO-02-211.  Washington, D.C.:  December 31, 2001.
Criminal Debt:  Oversight and Actions Needed to Address Deficiencies in  Collection Processes.  GAO-01-664.  Washington, D.C.:  July 16, 2001.
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