Health Center Program: Improved Oversight Needed to Ensure Grantee Compliance with Requirements
Released: 2012-06-21T00:00:00

Letter

Background

Health Center Program grantees are private, nonprofit community-based organizations or, less commonly, public organizations such as public health department clinics. Health centers funded through HRSA’s Health Center Program are typically managed by an executive director, a financial officer, and a clinical director, and provide comprehensive primary care services including enabling services, such as translation and transportation, that help facilitate access to health care.

HRSA’s Health Center Program

HRSA identified 19 program requirements, which it indicated were based on Section 330 of the Public Health Service Act and regulations, which health center grantees must meet to continue receiving grant funding. HRSA groups these 19 program requirements into four broad categories: patient need, the provision of services, management and finance, and governance. Table 1 provides a summary of the 19 requirements.

HRSA uses a competitive process to award Health Center Program grants. This process applies both to health centers receiving a grant for the first time—known as new starts—and to existing health center grantees that must compete periodically for grants. In either case, prospective or existing grantees are required to submit the applicable grant application to HRSA, and if approved, receive grants to provide services to individuals located in a specified area, known as their service area.

HRSA approves funding for health centers for a specified time period, known as a project period. Currently, HRSA approves new start grantees funding for a 2-year project period, and existing grantees funding for project periods of 1, 3, or 5 years. The length of the project period for existing grantees is determined, in part, based on how well grantees are complying with the 19 program requirements. Each year of a project period is referred to as a budget period. After the competitive award of a grant for the first year, or budget period, HRSA awards noncompetitive continuation grants for each remaining budget period if funds are available, and the grantee demonstrates satisfactory progress in providing its services. A grantee demonstrates satisfactory progress by submitting a budget period progress report for HRSA’s review. In both the competitive grant application and the budget period progress report, a grantee is, among other things, required to describe the services offered, provide a listing of its key management staff, and include a detailed narrative description of the current status and any changes in its operations related to the 19 program requirements.

In addition to maintaining compliance with the 19 program requirements and submitting annual budget period progress reports, health center grantees are required to periodically submit other information to HRSA. For example, grantees are required to submit to HRSA an annual independent financial audit in accordance with federal audit requirements. In addition, in the first quarter of every year, grantees must submit a variety of information to HRSA’s Uniform Data System (UDS); UDS tracks a variety of information on Health Center Program grantees, including information on their patient demographics (e.g., race/ethnicity, insurance status, income level); revenues; expenses; quality of care measures; and health center staffing and patient utilization patterns.

HRSA’s Bureau of Primary Health Care

HRSA’s BPHC has primary responsibility for overseeing health center grantees’ compliance with program requirements. This includes monitoring grantees to determine if they are in compliance with the 19 program requirements and addressing cases of grantee noncompliance. BPHC has four operating divisions, each containing five branches; the branches correspond to specified geographic locations. Within each branch there are project officers who are responsible for the ongoing oversight of an assigned portfolio of grantees. As of March 2012, HRSA had 111 project officers, whose portfolios ranged from 4 to 17 health center grantees; the average portfolio size was 10 grantees per project officer. Each project officer reports to a supervisor, known as a branch chief. HRSA project officers use an on-line electronic system, called the Electronic Handbook, to document their oversight activities, as well as correspond with and exchange documents with health center grantees. The system contains several different modules within which project officers record such information.

To help them conduct their oversight, project officers have a variety of internal and external resources. For example, officials from the BPHC’s Office of Policy and Program Development can assist project officers in interpreting program guidance and Health Center Program requirements. In addition, project officers have access to consultants through an over $30-million, 4-year contract with Management Solutions Consulting Group, a nationwide management consulting firm that provides HRSA access to approximately 300 to 350 consultants. The consultants are to provide a range of services, including conducting site visits and helping assess the results of health center grantees’ annual financial audits.

HRSA Uses Three Main Methods to Oversee Grantee Compliance and Has a Process to Address Noncompliance

HRSA primarily relies on three main methods to oversee grantees’ compliance with Health Center Program requirements: annual compliance reviews, site visits, and routine communications. Additionally, when HRSA identifies noncompliance with these requirements, the agency has a recently revised process to address this with its grantees.

HRSA Primarily Relies on Annual Compliance Reviews, Site Visits, and Routine Communications to Oversee Grantees

HRSA relies on three main methods to oversee grantees’ compliance with Health Center program requirements.

To oversee health center grantees’ compliance with the 19 program requirements, HRSA requires project officers to conduct an annual compliance review for each of the grantees in their assigned portfolios. During this review, project officers are responsible for determining whether a health center grantee is in compliance with each of the 19 program requirements. The annual compliance review process begins when a health center grantee submits an application for a competitive grant or submits a budget period progress report to HRSA. When conducting a compliance review, HRSA project officers are responsible for reviewing information contained in the grantee’s submission, such as information on the grantee’s policies and a narrative explaining how the grantee believes it meets, or plans to meet, the 19 program requirements. HRSA also expects project officers to review other available information about the grantee, such as results from the grantee’s annual financial audit and UDS information. Project officers generally have the option to contact the grantee during their annual review if they need clarification about the information in a grantee’s application or budget period progress report.

HRSA provides guidance to project officers for determining whether grantees are meeting each of the 19 program requirements. In particular, HRSA provides project officers with a list of key factors and questions related to the 19 program requirements to consider when making their assessment of compliance. Table 2 includes examples of the factors and questions provided to project officers for the 6 program requirements we selected for more in-depth review.

To conduct and document their compliance review, project officers use an electronic evaluation tool that is contained in the Electronic Handbook. The evaluation tool lists each of the 19 program requirements, and, among other things, asks project officers to indicate whether the grantee is in or out of compliance. If after reviewing available information, the project officer remains uncertain whether or not the grantee has demonstrated compliance with a requirement, then, according to HRSA’s guidance, the project officer should indicate that the grantee is in compliance until noncompliance is clearly determined. In such cases, HRSA’s guidance instructs project officers to document their concerns about compliance by writing a comment in a text field of the evaluation tool. In addition, as part of the review, a project officer may decide to designate a performance improvement area. According to HRSA, performance improvement areas are actions or other measures that project officers recommend to help grantees improve their delivery of services and, ultimately, patient outcomes. Performance improvement areas are intended to promote continuous improvement for grantees above and beyond compliance with the 19 program requirements; they are not intended to address findings of noncompliance with these requirements. Once project officers complete their review, branch chiefs are responsible for reviewing and approving project officers’ assessments, including their determinations regarding compliance and the identification of performance improvement areas. According to HRSA officials, branch chiefs are responsible for providing leadership and guidance in areas such as program evaluation and monitoring, which establishes an important quality control for the annual compliance reviews.

While HRSA has conducted annual reviews of grantees’ compliance for several years, the process for conducting these reviews has changed. To improve their oversight process, in 2008 HRSA officials revised the annual compliance evaluation tool to link the annual compliance reviews to each of the Health Center Program requirements. As a result of this change, project officers now make an assessment of whether grantees are in compliance with each requirement, rather than just an overall assessment of compliance. In addition, HRSA officials indicated that they continually assess the annual review process, and have recently made changes such as requiring grantees to submit more detailed narrative descriptions and an updated sliding fee discount schedule for the fiscal year 2012 reviews.

HRSA’s Process for Identifying Noncompliance Is Insufficient, and It Is Too Soon to Assess the Revised Process for Addressing Noncompliance

HRSA’s process for identifying noncompliance is insufficient as annual compliance reviews do not identify all instances of noncompliance and the extent to which HRSA uses site visits to assess compliance is unclear, but appears to be limited. Moreover, HRSA’s project officers do not consistently identify and document grantee noncompliance. Finally, HRSA’s ability to address noncompliance is unclear as the agency’s process for doing so has recently changed.

Annual Compliance Reviews Do Not Identify All Instances of Noncompliance

HRSA’s annual compliance reviews do not identify all instances of health center grantee noncompliance that other methods, such as site visits, have identified. Among the eight grantees included in our review, we identified 10 instances where the project officer determined that a grantee was in compliance with a program requirement during the annual compliance review, but a site visit a short time later found the grantee to be noncompliant with the same requirement. For example, in April 2010, a project officer completed an annual compliance review and found that a grantee was in compliance with 16 of the 19 program requirements. However, in July 2010, just 3 months later, a HRSA consultant completed an operational assessment site visit and found that the grantee was not in compliance with 10 of the 19 requirements; this included 7 requirements for which the project officer had previously concluded the grantee was in compliance. During the annual compliance review, for instance, the project officer determined that the grantee was in compliance with both the board composition and board authority program requirements. However, the site visit found, among other things, that the board had less than the minimum number of required members, did not meet monthly as required, and was not fulfilling its required duties and responsibilities to oversee the operations of the center—key aspects of these 2 program requirements. HRSA officials could not definitively explain why the site visit identified these issues of noncompliance, when the annual compliance review had failed to do so. HRSA officials speculated that because this grantee was having management problems, its performance may have rapidly deteriorated since the annual review was completed. Although the grantee may have been experiencing management problems, the consultant’s site visit report indicates that the grantee did not fall out of compliance with all 7 of these requirements in the intervening 3 months. Rather, the report indicated that several of these noncompliance issues were ongoing, including one that had existed for several years. Additionally, none of the 10 annual compliance review decisions included an indication that the project officer was uncertain about whether or not the grantee demonstrated compliance. Thus, it does not appear that the affirmative compliance decisions were due to project officers indicating that a grantee is in compliance until noncompliance is clearly determined.

In addition to finding instances where the annual compliance review failed to identify grantee noncompliance, our review of HRSA’s oversight documentation of selected grantees revealed that project officers frequently determined a grantee was in compliance with selected program requirements without having sufficient information to make such decisions. Our analysis of 48 compliance decisions that project officers made during their fiscal year 2011 annual compliance reviews for our eight selected grantees found that in 43 cases (90 percent) project officers determined grantees were in compliance with requirements.However, in 23 of these 43 cases (53 percent), we were unable to find sufficient information to support the project officer’s compliance decision and the project officers did not indicate that they were unable to clearly determine compliance, which is what HRSA guidance instructs them to do if they are uncertain about whether or not the grantee demonstrated compliance, for example:

Project officers determined that all eight selected health center grantees were in compliance with the after hours coverage requirement. However, it appears that six of the eight project officers had insufficient information when making their assessments. Our review of HRSA’s oversight documentation found that information grantees provided ranged from a sentence or two in their budget period progress report narrative stating they had a 24-hour answering service that will arrange for contact with an on-call clinician, to no mention of how they were meeting the after hours coverage requirement. In contrast, we found the other two project officers had information from recent site visits to assess compliance with this requirement.

Project officers determined that six of the eight selected health center grantees were in compliance with the sliding fee discounts requirement. However, we found that four of six project officers who made this determination did not, at the time, have a current, updated version of their grantees’ sliding fee discount schedule to review. These project officers made their compliance decisions based on limited information, including grantee assertions that they had a current and up-to-date schedule. According to HRSA officials, beginning with the fiscal year 2012 annual compliance reviews, grantees will be required to submit an updated sliding fee discount schedule.

While HRSA requires project officers to document their basis for finding a grantee out of compliance with a requirement, it does not require project officers to document their basis for finding a grantee in compliance. Therefore, there were often no records documenting how or why a project officer determined a health center grantee was in compliance with the requirements. In 26 of the 43 compliance decisions (60 percent) we reviewed in which project officers determined grantees were in compliance with selected program requirements, the project officers had not documented the basis for their decisions. The lack of documentation is not consistent with internal control standards for the federal government, which indicate “that all transactions and other significant events need to be clearly documented” and stress the importance of “the creation and maintenance of related records which provide evidence of execution of these activities as well as appropriate documentation.”

The absence of such documentation may limit HRSA’s ability to ensure that project officers have identified all cases of grantee noncompliance during the annual compliance review and make it more difficult for HRSA to keep track of issues affecting grantee compliance especially when oversight responsibilities transfer among staff. For example, without such documentation, it is difficult for supervisors to appropriately assess the basis for project officers’ decisions. Further, according to HRSA, about 40 percent of grantees have had a change in their assigned project officer and branch chief over the past few years due in part to HRSA’s hiring of a significant number of new project officers to meet the expected increase in the number of health center grantees. While HRSA officials indicated they have a process to ensure a smooth transition between oversight staff, we found the absence of documentation can present challenges. For example, each of the eight project officers we interviewed had been assigned to their grantee for 2 years or less, and some of the project officers were unable to answer questions about why previous project officers determined their grantees were in compliance with specific requirements.

Additionally, when project officers are uncertain about compliance, HRSA instructs project officers to consider grantees in compliance. As noted earlier, HRSA’s guidance indicates that project officers are to document these instances when compliance is unclear by writing a comment in a text field of the evaluation tool, but HRSA has no centralized or automated mechanism to ensure this occurs. The lack of such a mechanism, coupled with the lack of documentation of project officers’ basis for finding a grantee in compliance, limits HRSA’s ability to determine whether a project officer decided a grantee was in compliance with a requirement because the file contained evidence demonstrating compliance, or because the project officer was unsure about compliance and simply defaulted to an affirmative compliance decision without including documentation of his or her concerns.

HRSA’s Use of Site Visits to Assess Compliance Is Unclear, but Appears to Be Limited

Data limitations make it difficult to determine the extent to which HRSA uses site visits to assess compliance; however, our analysis of these data suggest that the number of compliance-related site visits is limited. HRSA does not have aggregate, readily available data on site visits conducted prior to January 2011. Consequently, to determine which health center grantees had compliance-related site visits prior to January 2011, HRSA officials would have to manually compile a list by accessing each site visit report located in each individual grantee’s file.

To help the agency in planning site visits, HRSA began requiring that all site visits be recorded in its on-line Electronic Handbook in January 2011. However, the reliability of at least some of the data elements, including the type of site visit, is uncertain. After a site visit record is created in the Electronic Handbook, which is the first step for documenting a planned a site visit, the system prevents project officers from editing certain fields, As a result, if the including the field for the type of site visit conducted.site visit type changes after project officers create the site visit record, the record will be inaccurate. Further, project officers are not required to update certain other fields, such as the site visit start and end dates, which increases the potential for data inaccuracies. While HRSA officials indicated that the type of site visit does not frequently change, when we compared the site visit data to information contained in site visit reports, we found that the type of site visit had changed for one of the five visits that took place at our selected grantees since January 2011. After discussing this with HRSA officials, the officials indicated that they would alter their electronic system to allow project officers to revise the site visit type; however, they have yet to do so. In addition, HRSA officials indicated the electronic system does not have a mechanism to ensure that a cancelled site visit is properly recorded. Therefore, when a planned site visit is cancelled, the record is removed only if a project officer proactively takes action to remove it. If the project officer fails to remove the record, the database will contain inaccurate information. From the programwide site visit data we received, we determined that the data included at least one site visit that had been cancelled, but not removed from the database. However, there may be other instances that we were unable to identify based on the available data.

As noted earlier, HRSA considers site visits an important tool for assessing and assuring grantee compliance with Health Center Program requirements. According to our analysis, site visits were conducted at 417 (37 percent) of the 1,128 health center grantees between January 1, 2011 and October 27, 2011. A total of 472 site visits were conducted during this period because some grantees had multiple visits. Although HRSA’s data on the type of site visit conducted has inaccuracies, these data suggest that only a small portion of grantees had compliance-related visits. HRSA’s data indicate that 58 grantees, or 5 percent of all health center grantees, had site visits to review compliance with all 19 program requirements during this time period.(6 percent) had a site visit that may have assessed compliance with some of the 19 program requirements. The remaining grantees either did not have a site visit during the period or had a site visit which was not intended to assess compliance with the 19 program requirements.

Although HRSA’s standard operating procedures do not currently specify how frequently compliance-related site visits should be conducted, HRSA officials indicated that, beginning in 2012, the agency is requiring that project officers schedule an operational assessment—a site visit intended to assess compliance with all 19 program requirements—for each grantee at least every 5 years. At their current rate and assuming the number of grantees remains the same, it would take HRSA over 15 years to conduct an operational assessment visit at each of the over 1,100 health center grantees. HRSA officials recognized that in order to meet this goal, they will have to increase the number of operational assessment site visits which are conducted annually. Along those lines, officials indicated that HRSA increased the amount of funding and planned number of operational assessment site visits to be provided through their current nationwide contract for conducting site visits.

HRSA’s Project Officers Do Not Consistently Identify and Document Grantee Noncompliance

HRSA’s project officers do not consistently identify noncompliance and document it through the placement of conditions. For three of the six program requirements we reviewed, the HRSA project officers we interviewed did not have consistent interpretations of what constitutes compliance and what should therefore result in the placement of a condition on a health center’s grant, raising concerns about the adequacy of HRSA’s guidance and training for project officers. The project officers we spoke with had different interpretations regarding the board composition, after hours coverage, and key management requirements.

Health center grantees are required, by statute and regulations, to have a governing board, the majority of whose members are patients of the center and who demographically represent the population served by the grantee. However, some project officers we spoke with indicated that the lack of an appropriately representative board would not result in a condition; these project officers did not consider the lack of an appropriately representative board an issue of noncompliance.

While HRSA’s guidance for project officers indicates that, at a minimum, a grantee’s after hours coverage system should ensure that patients have telephone access to a clinician who can assess whether they need emergency medical care, some of the project officers we spoke with indicated that they would consider using a performance improvement area, not a condition, if a health center had only an answering machine directing patients to the emergency room. Other project officers stated that if a grantee had only an answering machine directing patients to the emergency room they would not be in compliance with this requirement.

HRSA guidance instructs project officers to assess whether a health center grantee maintains a fully staffed management team as appropriate for the size and need of their health center. When asked about the criteria they use for determining whether grantees are in or out of compliance with the key management staff requirement, two project officers told us that they base their compliance decision on whether the grantee’s management staff includes a Chief Executive, Financial, and Medical Officer. In contrast, the other six project officers said that a grantee did not necessarily need to have all of these positions staffed.

We also found one instance where HRSA’s guidance on what constitutes compliance is inconsistent with Health Center Program requirements, and thus project officers may not be making correct decisions regarding grantee compliance and appropriately addressing noncompliance. In this particular instance, HRSA guidance instructs project officers to use a performance improvement area, not a condition, if a grantee has not used the most recent federal poverty guidelines for developing their sliding fee discounts; the guidance therefore indicates that grantees are to be considered in compliance with the requirement even if their sliding fee discount schedule is outdated. Health Center Program regulations, however, require a grantee’s sliding fee discounts to be based on the most recent guidelines. As a result, a grantee that has not used the correct federal poverty guidelines should be deemed noncompliant with this program requirement and a condition should be placed on its grant. When we raised this issue with HRSA officials, they acknowledged that the guidance was not consistent with requirements, and that it would be revised. They also confirmed that if a grantee has not used the correct federal poverty guidelines in its sliding fee discount schedule, a project officer should deem the grantee noncompliant and that a condition should be issued. HRSA officials further indicated they are developing a policy notice on the sliding fee discounts program requirement, and the guidance will specify that a grantee’s sliding fee discounts must be revised annually to reflect updates to the most recent federal poverty guidelines.

Finally, we found instances where grantee noncompliance was identified through site visits, but HRSA failed to place conditions on the grant. According to HRSA’s standard operating procedures, when a site visit determines that a grantee is noncompliant with at least one of the 19 program requirements, a project officer must place a condition on the health center’s grant. However, as part of our review of the eight selected grantees, we identified five site visits from 2009 through August 2011 that clearly identified findings of noncompliance with some of the 19 program requirements, but HRSA did not issue conditions to grantees for the majority of these findings. For example, one site visit found that a grantee was not in compliance with 16 of the 19 requirements, but HRSA did not issue any conditions to the grantee. At the time of the site visit, this grantee had been receiving HRSA funding for about 15 months, and had been experiencing compliance issues for at least 12 months. Despite this, HRSA officials told us that because it was a new grantee that was receptive to technical assistance, HRSA wanted to give the grantee more time to address their compliance issues before placing numerous conditions on it. Another site visit found that a grantee was not in compliance with the board authority and conflict-of-interest policy requirements, but HRSA did not issue any conditions to the grantee as a result of this site visit. Instead, HRSA arranged for a consultant to provide the grantee with technical assistance to revise and update its bylaws to address these issues.

HRSA’s Ability to Address Noncompliance Is Unclear As the Agency’s Process Has Recently Changed

The extent to which HRSA’s revised process—the progressive action process—is adequately resolving conditions or terminating grantee funding is unclear because HRSA’s experience with this revised process is too recent to make any overall assessment. The progressive action process, which was implemented in April 2010, can potentially take over a year to move through all of the phases. Completing the first three phases of the progressive action process can take up to 9 months, while grantees with conditions that allow for a 120-day implementation phase can take Thus, HRSA has limited up to 19 months to fully complete the process.experience with the process to date, and does not have sufficient data to assess the extent to which the process is effective in bringing grantees into compliance or in addressing those grantees that have failed to achieve compliance by the end of the final phase.

During the first 18 months that the progressive action process has been in place—from April 9, 2010, through October 7, 2011—HRSA issued 1,017 conditions for grantee noncompliance to a total of 417 different grantees (approximately 37 percent of all grantees), with some grantees having multiple conditions. Over half of the conditions were for grantee noncompliance with requirements related to the management and finance category. (See app. II for additional information about the conditions placed during this time period.) As of November 10, 2011, 775 conditions (76 percent) were resolved and 240 conditions (24 percent) were still in process. The remaining 2 conditions, which belonged to the same grantee, were not resolved in the allotted time; thus, HRSA officials indicated that the agency was is in the process of terminating the grantee’s funding.

Conclusions

HRSA’s Health Center Program provides access to health care for people who are uninsured or who face other barriers to receiving needed care. Over the past decade the program has expanded and, given the additional funding appropriated by PPACA, will likely continue to do so over the next few years. As such, it will play an increasingly greater role as a health care safety net for vulnerable populations. Particularly in light of the growing federal investment in health centers, it is important for HRSA to ensure that health centers are operating effectively and in compliance with Health Center Program requirements. HRSA has taken steps to improve its oversight of health center grantees over the past few years, such as by standardizing its process for addressing grantee noncompliance. Despite these efforts, however, HRSA’s oversight is insufficient to ensure that it consistently identifies all instances of grantee noncompliance with Health Center Program requirements.

Although HRSA has devoted substantial resources to overseeing grantees—including having over 100 project officers to perform annual compliance reviews and having a more than $30-million contract for consultants who conduct site visits and provide other assistance— limitations in HRSA’s oversight methods have affected the agency’s performance in identifying issues of noncompliance. The annual compliance reviews place too little emphasis on documenting project officers’ basis for making their compliance decisions, while HRSA’s guidance instructs project officers to indicate that a grantee is in compliance with Health Center Program requirements, even if the project officer is uncertain about the grantee’s compliance. Further, HRSA does not have a systematic process for tracking and following-up on instances when project officers are uncertain about a grantee’s compliance to ensure that compliance is ultimately demonstrated. The lack of such a process, coupled with the lack of documentation of project officers’ basis for finding a grantee in compliance, limits HRSA’s ability to assess whether project officers accurately determined that grantees were actually in compliance with a requirement, or whether they were simply unsure about compliance. This is especially problematic because project officers we interviewed had different interpretations of what constitutes compliance with certain requirements and therefore, when they should place a condition on a health center’s grant.

Additionally, while HRSA officials indicated, and we found, that site visits are an important tool for overseeing grantees and verifying compliance with Health Center Program requirements, the agency’s use of compliance-related site visits appears to be limited. HRSA has a goal of having an operational assessment visit to each grantee at least once every 5 years. The agency’s ability to effectively meet this goal, however, is challenged by a lack of comprehensive and reliable data on which grantees have had various types of site visits. To the extent HRSA is able to develop and analyze accurate data on site visits, it will be in a better position to target its resources to those grantees that may be in greater need of such visits. Furthermore, HRSA needs to ensure that when site visits are conducted, the information obtained is appropriately used, for example, by ensuring that instances of noncompliance identified during a site visit result in the placement of a condition on a health center’s grant.

Finally, HRSA’s recently revised process for addressing grantee noncompliance with the 19 program requirements seems to provide both the agency and grantees with a uniform structure for addressing compliance deficiencies. However, given the length of time the progressive action process provides grantees to address noncompliance, HRSA has had limited experience with the process, and thus it is too early to tell whether this revised process is effective. As HRSA gains more experience with the process, it will be important for the agency to assess whether the process is functioning as intended and whether any changes are needed to make the process more effective.

Recommendations for Executive Action

To improve HRSA’s ability to identify and address noncompliance with Health Center Program requirements, the Administrator of HRSA should take the following six actions:

Develop and implement a mechanism for recording, tracking, and following-up on instances when project officers are unable to determine compliance during the annual compliance review process.

Require that when completing annual compliance reviews, project officers clearly document their basis for determining that grantees are in compliance with program requirements.

Clarify agency guidance and provide training, as needed, to better ensure that project officers are accurately and consistently assessing grantees’ compliance with program requirements.

Ensure that site visit data contained in HRSA’s electronic system are complete, reliable, and accurate to better target the use of available resources and to help ensure that all grantees have compliance- related site visits at regular and timely intervals.

Develop and implement procedures to ensure that instances of noncompliance with program requirements consistently result in the placement of a condition on a health center’s grant.

Periodically assess whether its new progressive action process for addressing grantee noncompliance, including the time frames allotted for grantees to respond, is working as intended and make any needed improvements to the process.

Agency Comments and Our Evaluation

We provided a draft of this report to HHS for its review, and HHS provided written comments (see app. III). HHS concurred with all six of our recommendations and indicated that while resource availability may impact the extent of certain actions, HRSA is already in the process of planning and implementing many of the recommendations. For example, HHS indicated that HRSA is in the process of enhancing the electronic evaluation tool, known as the Program Analysis and Recommendations tool, which project officers use to conduct and document annual compliance reviews. HRSA is also working on issuing additional policies, procedures, and guidance documents to better ensure that project officers are consistently assessing grantee compliance and documenting noncompliance.

While HHS concurred with our recommendations and indicated that the report’s findings were helpful in informing ongoing efforts to improve oversight of the Health Center Program, it did not concur with what it characterized as some of the central conclusions drawn from the report’s findings. First, HHS indicated that it did not concur with what it characterized as our conclusion that HRSA’s process for identifying noncompliance is insufficient because annual compliance reviews do not identify all instances of noncompliance. HHS indicated that HRSA’s active monitoring of grantees is not limited to the project officer’s annual compliance review, but is accomplished through a variety of available resources including, but not limited to, the review of grantee data reports, independent annual audit reports, quarterly conference calls, site visits, and correspondence from the grant recipient. We agree with HHS’s statement, and our report reflects that HRSA uses multiple methods to oversee grantees. However, we believe that HHS mischaracterized the nature of our conclusion. Our conclusion that HRSA’s oversight of health center grantees is insufficient was not based solely on our assessment of HRSA’s annual compliance reviews, but rather was based on our assessment of several key oversight methods described throughout our report including HRSA’s use of site visits, the consistency of project officers’ oversight, and the use of programwide data to aid oversight across grantees.

HHS also did not concur with what it characterized as our conclusion that HRSA’s process for identifying noncompliance is insufficient because HRSA’s project officers do not consistently identify and document grantee noncompliance. In explaining its concerns, HHS focused on instances where project officers cannot definitively determine whether or not grantees are complying with program requirements. For example, HHS noted that when project officers are uncertain about compliance, HRSA’s standard operating procedures require project officers to record these areas of uncertainty for follow-up action. However, our findings about the lack of consistency in the identification and documentation of grantee noncompliance are not limited to instances when project officers are uncertain about compliance. Rather, as the report indicates, we found that project officers we interviewed did not have consistent interpretations of the criteria for assessing compliance and what should therefore result in the placement of a condition on a health center’s grant. Furthermore, we found one instance where HRSA’s guidance on what constitutes compliance is inconsistent with Health Center Program requirements and found several instances where identified noncompliance did not result in the placement of a condition on a health center’s grant. As the report notes, in cases when project officers may be uncertain about compliance, we found that HRSA did not have a centralized mechanism to ensure that project officers are recording such instances. Additionally, despite HHS’s comment stating that HRSA’s procedures provide for such follow-up, it agreed with our recommendation that HRSA should develop a mechanism for ensuring that recording, tracking, and following up on such instances occurs.

Finally, HHS did not concur with our finding that the lack of documentation in the annual compliance review is not consistent with internal control standards for the federal government. HHS indicated that HRSA established its annual compliance review tool to record documented findings of noncompliance and utilizes a standard progressive action process to resolve these areas consistent with its overall internal control procedures. While we agree that HRSA’s process provides for both documenting areas of identified noncompliance and a standard process for resolving these issues, our findings were not limited to an assessment of what HRSA has included in its oversight process, but also takes into account what HRSA did not include in this process. Thus, our findings take into account the fact that HRSA does not require project officers to document their basis for finding a grantee in compliance. Therefore, as stated in the report, we found there were often no records documenting how or why a project officer determined a health center grantee was in compliance with the requirements. The lack of such documentation makes it difficult for managers to assess the accuracy of project officers’ decisions and assure that grantees are in compliance with applicable laws and regulations, which is a key purpose to having effective internal controls. Thus, we continue to believe that this lack of documentation is not consistent with internal control standards for the federal government, which indicate “that all transactions and other significant events need to be clearly documented” and stress the importance of the creation and maintenance of related records which provide evidence of execution of these activities as well as appropriate documentation.

As noted above, our conclusion that HRSA’s oversight of health center grantees is insufficient was based on our overall assessment of HRSA’s key oversight methods. In addition to finding limitations with HRSA’s annual compliance reviews and a lack of consistency among HRSA project officers, we also found that HRSA’s use of site visits to assess compliance has been limited. Thus, we stand by our conclusion that HRSA’s process for identifying noncompliance is insufficient. We are pleased that HRSA is already taking steps to implement our recommendations and encourage the agency to continue to take actions to help to improve its oversight of health center grantees.

HHS also provided technical comments, which we incorporated as appropriate.

As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Administrator of HRSA. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-7114 or draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.

Appendix I: Characteristics of Selected Health Center Grantees

As part of our assessment of the extent to which the Health Resources and Services Administration’s (HRSA) process identifies and addresses noncompliance with Health Center Program requirements, we reviewed HRSA’s oversight of eight selected health center grantees. The grantees were selected to provide variation in: size, as determined by the number of delivery sites; length of time as a Health Center Program grantee; and compliance experience, as determined by the number of the number of findings of noncompliance—referred to as conditions—that HRSA had cited for each grantee that were unresolved as of July 11, 2011. (See table 4.)

Appendix II: Summary of Noncompliance Data for the Health Center Program

During the first 18 months of HRSA’s progressive action process, from April 9, 2010, through October 7, 2011, HRSA issued 1,017 conditions to 417 health center grantees, with some grantees having multiple conditions during this time period. Specifically, the number of conditions HRSA issued to the 417 grantees ranged between 1 and 17 conditions per grantee, with HRSA issuing between 1 and 3 conditions to most of these grantees. (See fig. 2.) HRSA issued conditions for each of the 19 program requirements, with the greatest numbers issued for the financial management and control policies, program and data system reporting, and board composition requirements. (See fig. 3.) Grantees can have multiple and simultaneous conditions associated with the same program requirements, with each condition being related to a different component of the requirement. For example, in fiscal year 2011, there were 3 possible conditions related to the financial management and control policy requirement.

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

Appendix IV: Contacts and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, key contributors to this report were Michelle B. Rosenberg, Assistant Director; Krister P. Friday; David Lichtenfeld; Lillian Shields; and Jennifer M. Whitworth.