IHS, an operating division of HHS, is responsible for providing health services to federally recognized tribes of American Indians and Alaska Natives. According to IHS, in 2008, it provided health services to approximately 1.9 million American Indians and Alaska Natives from more than 562 federally recognized tribes. As an operating division of HHS, IHS is included in the agency’s consolidated financial statement and has not been audited independently since 2002. IHS is divided into 12 regions with 161 service units throughout the country. Service units may contain one or more health facilities, including hospitals, health centers, village clinics, health stations, and school health centers. There are 124 IHS-operated health facilities and 522 tribally operated health facilities. The IHS budget appropriation in 2008 was $3.39 billion. Overall, over 40 percent of the IHS budget authority appropriation is administered by tribes, primarily through various contracts and compacts with the federal government. We found that property continues to be lost or stolen at IHS at an alarming rate. From October 2007 through January 2009, IHS identified about 1,400 items with an acquisition value of about $3.5 million that were lost or stolen agencywide. These property losses are in addition to what we identified in our June 2008 report. Our full headquarters inventory testing and our random sample testing of six field offices estimated that over a million dollars worth of IT equipment was lost, stolen, or unaccounted for, confirming that property management weaknesses continue at IHS. Also, IHS headquarters and many IHS regions continue to reconcile 2008 inventory as of March 2009. In addition to the $3.5 million reported as lost or stolen, IHS also had thousands of unreconciled and unaccounted for property items with an acquisition value of $14.5 million missing about 2 months after conducting its 2008 inventory. These unreconciled and unaccounted for items had largely been located at four field locations that had over 40 percent of inventory items missing. Some of these items will likely be reported as lost or stolen. We analyzed IHS Report of Survey documents from fiscal years 2008 and 2009 covering the period of October 2007 through January 2009 for IHS headquarters, National Programs, and the 12 regions. These reports identified that about 1,400 items with an acquisition value of about $3.5 million were reported lost or stolen in little over a year. Some of the more egregious examples of lost or stolen property during October 2007 through January 2009 on reports of survey include the following: An audiometer—a machine used for evaluating hearing loss—with an acquisition value of $961 was “put out for trash” at an Oklahoma location that was new and listed in “UNUSED-GOOD” condition. A laboratory analyzer at a Navajo health care facility with an acquisition value of $37,000. A defibrillator with an acquisition value of $7,000 and over $13,000 in desktop and laptop computers that were new in June 2007 at a Tucson location. A telephone switch from National Programs in Albuquerque with an acquisition value of $25,500. A trailer with an acquisition value of $7,300 stolen from a Nashville Region Office parking lot over the weekend when the security gates were broken and remained open. We also found that about 2 months after conducting its 2008 inventory, IHS was still looking for about $14.5 million in items it identified as missing. Items that IHS continued to search for include the following: A 2002 ultrasound unit valued at $170,000, a 2003 X-ray mammography machine valued at $100,795, and a 2004 medication dispensing system valued at $168,285. A new pharmacy tablet counter with an acquisition value of $4,000 from a Washington location. A new electrocardiograph—a machine used to record the electrical activity of the heart—with an acquisition value of $4,000. Seven vital sign monitors from a South Dakota Hospital purchased at $731 each. Multiple dental chairs from a Kansas location with acquisition values of $3,200 each. High-dollar-value IT equipment purchased in 2006 including a Central Processing Unit with an acquisition value over $30,000 and two servers worth $29,000 and $12,000. A $14,000 John Deere tractor purchased in 2005. Unused IT equipment purchased in 2007 including laptops, desktops, an $11,000 server, and a television. Our physical inventory testing results were similar to IHS’s inventory results and confirmed lost, stolen, or unaccounted for property. Our full inventory testing at IHS headquarters identified that out of the 1,518 items tested that were on IHS’s inventory records as of December 5, 2008, 126 items with an acquisition value of $216,000 (or about 8 percent of the items tested) were lost, stolen, or unaccounted for—including 13 computers purchased in the summer of 2008. These 126 missing items were in addition to the 35 assets that IHS stated were missing in their physical inventory ending September 2008. The types of equipment missing included digital cameras, laptops, PDAs, and cell phones. Furthermore, we performed limited testing on new purchases made in fiscal year 2008 at IHS headquarters. We analyzed 19 new purchases to determine if the items existed and were on IHS books. We found that 10 of the 19 items that we tested were not in IHS’s inventory records as of December 2008. In addition, IHS could not account for 7 of the 19 items— 37 percent of the newly purchased equipment. We also identified examples of waste that we observed during our audit of IHS headquarters. During our exit conference discussions, IHS agreed some equipment may be underutilized. We identified the following examples of waste: One employee was issued a PDA but told GAO that he had not used it in 2 years. Another employee was issued a laptop and never used the laptop. One user was assigned three laptops but only used one of them. The employee stated that one of the laptops was to be disposed of but provided no explanation for the third laptop. We selected a probability sample of IT equipment inventory at six IHS field offices to determine whether the lack of accountability for inventory was confined to headquarters or present elsewhere within the agency. Our estimates are based on a probability sample of 250 items from a population of 6,085 IT equipment items worth over $19 million recorded in property records for IT equipment at the six field locations. Similar to our finding at IHS headquarters, our sample results indicate that a substantial number of pieces of IT equipment such as laptops, desktops, and printers were lost, stolen, or unaccounted for. Specifically, we estimate that for the six locations, about 800 equipment items with an acquisition value of $1.7 million were lost, stolen, or unaccounted for. This amounts to about 13 percent of all the IT equipment at these six locations. Table 1 below summarizes the disposition of the 250 sampled IT items. Weak “tone at the top” persists at IHS, with senior leadership failing to fully implement and enforce 8 of the 10 recommendations we made in June 2008. These failures strongly contribute to the continued loss and theft of property at IHS. Aside from issuing a memorandum from the IHS Director that restated and refined existing IHS policies, IHS has taken little action to provide assurance that employees are aware of and complying with property policies. One way to enforce policies involves holding individuals accountable. However, we found little evidence that IHS has held employees accountable for thousands of lost or stolen items worth millions of dollars. For example, in December 2008, the IHS executive in charge of the property group and other areas received a $13,000 performance award (8 percent of the executive’s salary) from IHS senior leadership. This award was granted 5 months after the July 2008 hearing exposed mismanagement of property under the executive’s purview. By failing to hold this key property management official accountable, the IHS Director and senior managers missed an opportunity to communicate the seriousness of IHS property problems to the responsible official. Although IHS has taken steps to update policy and perform physical inventories, most of our recommendations were only partially implemented. Of the 10 recommendations, IHS has fully implemented 2 and has begun taking steps to implement the remaining items. Table 2 shows the IHS action and status of implementing our recommendations. Although IHS took some steps in implementing our recommendations such as changing their policy on handling sensitive items to include Blackberries regardless of the threshold, we identified the following examples of problems fully implementing these corrective actions. Investigating circumstances surrounding missing property. We saw little improvement in investigating incidents of lost or stolen property. Without these investigations, IHS remains unable to hold individuals financially liable. Out of 1,400 items with an acquisition value of $3.5 million reported as lost or stolen in IHS Reports of Survey for fiscal year 2008 through January 2009, IHS could only provide one example in which an employee was found to be financially liable for lost or stolen property. However, as of February 2009, the individual has still not reimbursed the government for the loss—4 months after he was found financially liable. We identified other examples where individuals were not held accountable: One employee who was assigned a laptop that was missing told IHS property managers that she could not remember what happened to the laptop. IHS wrote the laptop off its books in September 2008 without holding the employee responsible. A laptop was given to an employee in Oklahoma to use at home but IHS did not issue a hand receipt. The employee left the agency and did not return the laptop. According to the Report of Survey, IHS did not hold the employee accountable because the employee left the agency. A Phoenix employee’s cellular phone was stolen after he left the phone on his desk overnight.