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. 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.