Medicare: Health Care Fraud and Abuse Control Program for Fiscal 
Years 2000 and 2001 (03-JUN-02, GAO-02-731).			 
                                                                 
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 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 some 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. GAO's review 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.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-731 					        
    ACCNO:   A03488						        
  TITLE:     Medicare: Health Care Fraud and Abuse Control Program for
Fiscal Years 2000 and 2001					 
     DATE:   06/03/2002 
  SUBJECT:   Accountability					 
	     Budget outlays					 
	     Fraud						 
	     Health insurance					 
	     Internal controls					 
	     Program abuses					 
	     Intergovernmental relations			 
	     Reporting requirements				 
	     Funds management					 
	     DOJ/HHS Health Care Fraud and Abuse		 
	     Control Program					 
                                                                 
	     Federal Hospital Insurance Trust Fund		 
	     HCFA Integrated General Ledger			 
	     Accounting System					 
                                                                 
	     Medicaid Program					 
	     Medicare Program					 

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GAO-02-731
     
A

Report to Congressional Committees

June 2002 MEDICARE Health Care Fraud and Abuse Control Program for Fiscal
Years 2000 and 2001

GAO- 02- 731

Letter 1 Results in Brief 3 Background 5 Objectives, Scope, and Methodology
9 DOJ Made Errors in Reporting Collections; However, the Trust Fund

Was Minimally Affected 11 HIPAA Appropriations Were Properly Supported 13
DOJ?s Controls over Expenditures Need Reinforcement 17 HHS and DOJ Do Not
Separately Track Non- Medicare

Expenditures 20 Conclusions 22 Recommendations for Executive Action 23
Agency Comments and Our Evaluation 23

Appendixes

Appendix I: Objectives, Scope, and Methodology 28

Appendix II: Comments from the Department of Health and Human Services 33

Appendix III: Comments from the Department of Justice 36

Appendix IV: Staff Acknowledgments 39 Related GAO Products 40 Table Table 1:
HHS/ OIG Funding Sources (Unaudited) 7 Figures Figure 1: Reported Fiscal
Years 2000 and 2001 Deposits to the Trust

Fund Pursuant to HIPAA (Unaudited) 12 Figure 2: Reported Fiscal Year 2000
Allocations (Unaudited) 14 Figure 3: Reported Fiscal Year 2001 Allocations
(Unaudited) 15 Figure 4: Reported Fiscal Years 2000 and 2001 HCFAC

Expenditures at DOJ (Unaudited) 17 Figure 5: Reported Fiscal Years 2000 and
2001 HCFAC

Expenditures at HHS (Unaudited) 20

Letter

June 3, 2002 Congressional Committees 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 1 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. 2 1 The Hospital Insurance Trust Fund funds the
Medicare Part A program, which helps pay for

hospital, home health, skilled nursing facility, and hospice care for the
aged and disabled. The trust fund is funded primarily through employment
taxes (taxes on payroll and selfemployment). 2 Department of Justice and
Department of Health and Human Services, Annual Report of the Department of
Justice and Department of Health and Human Services, Health Care Fraud and
Abuse Control Program 1997 (Washington, D. C.: January 1998); Annual Report
of the Department of Justice and Department of Health and Human Services,
Health Care Fraud and Abuse Control Program 1998 (Washington, D. C.:
February 1999); Annual Report of the Department of Justice and Department of
Health and Human Services, Health Care Fraud and Abuse Control Program 1999
(Washington, D. C.: January 2000);

Annual Report of the Department of Justice and Department of Health and
Human Services, Health Care Fraud and Abuse Control Program 2000
(Washington, D. C.: January 2001); and Annual Report of the Department of
Justice and Department of Health and Human Services, Health Care Fraud and
Abuse Control Program 2001 (Washington, D. C.: April 2002).

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. 3 This
report represents the results of our review of fiscal years 2000 and 2001
HCFAC program activities and fulfills our 2002 reporting requirement. 3 As
we have previously reported in our report on fiscal years 1998 and 1999
HCFAC program

activities, even if the HHS and DOJ joint report was issued on time (January
2002), this would not have provided sufficient time for us to perform our
review procedures and to meet our legislated reporting date of January 2002.

Results in Brief The joint HCFAC reports included deposits of about $210
million for fiscal year 2000 and $464 million for fiscal year 2001, pursuant
to HIPAA. 4 The

sources of these deposits were primarily penalties and multiple damages,
which were about $147 million in fiscal year 2000 and $455 million in fiscal
year 2001, and criminal fines, which were about $57.2 million in fiscal year
2000 and $2.9 million in fiscal year 2001, resulting from health care fraud
audits, evaluations, investigations, and litigations. 5 In testing at DOJ,
we identified some errors in the recording of criminal fines deposits to the
trust fund in fiscal year 2001 that resulted in an estimated overstatement
to the trust fund of $169,765. 6 While this is a relatively insignificant
amount in relation to the total of $464 million in HCFAC collections
reported in fiscal year 2001, the programming mistake that gave rise to
these errors could result in more significant misstatements. Our work did
not identify any errors in recording other HCFAC collections made during
fiscal years 2000 and 2001, including fiscal year 2000 criminal fines. Our
review found that the planned use of HCFAC appropriations was in

keeping with the stated purpose in HIPAA. HHS and DOJ allocated $119.3
million in fiscal year 2000 and $130 million in fiscal year 2001 to the HHS/
OIG to continue its Medicare fraud enforcement activities. DOJ and other HHS
components were allocated $38.9 million in fiscal year 2000 and $51.9
million in fiscal year 2001 to continue litigation, provide health care
fraud training, and fund contractual services to support combating health
care fraud and abuse.

While we found expenditures from the trust fund were generally appropriate
at HHS, at DOJ we identified $480,000 in interest penalties not related to
HCFAC activities that were charged to the HCFAC appropriation. DOJ officials
told us there was an offsetting error of $482,000 related to HCFAC
expenditures that was not charged to the HCFAC appropriation. 4 To
illustrate their total fraud and abuse efforts, HHS and DOJ included in
their joint reports

other amounts collected as a result of health care fraud activities totaling
about $507. 5 million and $901.3 million in fiscal years 2000 and 2001,
respectively. Because HIPAA does not require that these amounts be deposited
into the trust fund, they were not covered by our review. According to HHS
and DOJ, to the extent that they represent repayments to Medicare, these
amounts are returned to the trust fund.

5 HIPAA also required that amounts resulting from the forfeiture of property
in federal health care cases be deposited to the trust fund; however, there
were no such reported forfeitures in fiscal years 2000 and 2001.

6 Our estimate is based on a 95 percent confidence level, with a tolerable
error of $144,711.

Regardless of whether these errors essentially offset, they are indicative
of a weakness in DOJ?s financial processes for recording HCFAC and other
expenditures. Further, DOJ could not provide us with a detailed list of
HCFAC expenditure transactions to support summary totals in its internal
financial report in a timely manner. These problems could impede DOJ?s
ability to account for growing HCFAC expenditures.

We were 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, we were unable
to identify savings specifically attributable to activities funded by the
HCFAC program. While HIPAA requires that we report expenditures for non-
Medicare activities and savings to the trust fund resulting from HCFAC
expenditures, it does not specifically require HHS and DOJ to do so, which
has had the result of impeding our ability to perform this analysis. The
ability to associate specific HCFAC activity costs and savings

to particular programs could be helpful to the Congress in making decisions
about resource allocation and evaluating program performance.

Improving oversight and internal controls over HCFAC collection and
expenditure processing at DOJ is necessary to minimize the potential for
improperly recording these activities. In addition, associating HCFAC
expenditures and cost savings by program would be helpful for decision
makers. This report makes recommendations to address these issues.

In commenting on a draft of this report, DOJ acknowledged weaknesses that
led to the financial reporting errors cited in this report and described
steps it had taken to respond to the recommendations. DOJ agreed with four
of the recommendations directed to it, but took exception to certain
statements regarding the effect of problems found during our review and
problems cited by its financial statement auditors, which we have considered
and address at the end of this letter. Further, regarding a fifth
recommendation which we made to both HHS and DOJ to assess the

feasibility of linking cost savings associated with efforts financed by
HCFAC, the HHS/ OIG agreed to evaluate whether such benefits can reasonably
be tied to resources used. However, DOJ said that such an effort was
impractical and would offer little programmatic benefit. We believe there is
merit in capturing such information to assist the Congress

and other decision makers in evaluating program performance and results.
HHS?s and DOJ?s comments are reprinted in appendixes II and III,
respectively.

Background 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 7 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 8 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 9 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. 7 U. S. General Accounting Office, High- Risk Series: An Update,
GAO- 01- 263 (Washington, D. C.: January 2001). 8 Department of Health and
Human Services, Department of Health and Human Services Office of Inspector
General, Improper Fiscal Year 2001 Medicare Fee- For- Service Payments, A-
17- 01- 02002 (Washington, D. C.: February 2002).

9 These statutes include sections 1128, 1128A, and 1128B of the Social
Security Act, as well as other statutes that apply to health care fraud and
abuse.

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 10 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

10 FTE employment is the measure of the total number of regular
(nonovertime) hours worked by an employee divided by the number of
compensable hours applicable to each fiscal year. A typical FTE workyear is
equal to 2,080 hours. Office of Management and Budget, The Budget for Fiscal
Year 2003, Historical Table, (Washington, D. C.: U. S. Government Printing
Office, 2002).

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.

Table 1: HHS/ OIG Funding Sources (Unaudited) Appropriation Amount
Percentage

Fiscal year 2000 discretionary appropriation $31,381, 000 21% Fiscal year
2000 HCFAC appropriation $119,250, 000 79% Fiscal year 2000 total $150,631,
000 100%

Fiscal year 2001 discretionary appropriation $33,586, 000 21% Fiscal year
2001 HCFAC appropriation $130,000, 000 79% Fiscal year 2001 total $163,586,
000 100% Source: Department of Health and Human Services, Department of
Health and Human Services - Fiscal Year 2002 - Office of Inspector General -
Justification for Appropriations Committees

(Washington, D. C.: March 2001). Department of Health and Human Services,
Department of Health and Human Services - Fiscal Year 2003 - Office of
Inspector General - Justification for Appropriations Committees (Washington,
D. C.: January 2002).

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
cases;

 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, 11 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.

11 A relator is a private citizen who files suit on behalf of the federal
government under the

qui tam- whistle- blower provisions of the False Claims Act.

Objectives, Scope, and The objectives of our review were to identify and
assess the propriety of

Methodology 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
nonMedicare 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, 12 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.

12 Department of Health and Human Services, Department of Health and Human
Services, Office of Inspector General, Semiannual Report, October 1, 1999,
Through March 31, 2000; Department of Health and Human Services, Office of
Inspector General, Semiannual Report, April 1, 2000, Through September 30,
2000; Department of Health

and Human Services, Office of Inspector General, Semiannual Report, October
1, 2000, Through March 31, 2001; and Department of Health and Human
Services, Office of Inspector General, Semiannual Report, April 1, 2001,
Through September 30, 2001. The Inspector General Act of 1978 (Public Law
95- 452), as amended, requires the HHS/ OIG to submit semiannual reports on
the OIG?s activities and accomplishments for the reporting period to the
Secretary of HHS for transmittal to the Congress.

DOJ Made Errors in The joint HCFAC reports included deposits of about $210
million in fiscal

year 2000 and $464 million in fiscal year 2001, pursuant to HIPAA. 13 As
Reporting Collections;

shown in figure 1, the sources of these deposits were primarily penalties
However, the Trust

and multiple damages. 14 Fund Was Minimally Affected

13 To demonstrate the results of their total fraud and abuse efforts, HHS
and DOJ included in their joint reports other amounts collected as a result
of health care fraud activities totaling about $507.5 million and $901.3
million in fiscal years 2000 and 2001, respectively. Because

HIPAA does not require that these amounts be deposited to the trust fund,
they were not covered by our review.

14 HIPAA also required that amounts resulting from the forfeiture of
property in federal health care cases be deposited into the trust fund;
however, there were no such reported forfeitures in fiscal years 2000 and
2001.

Figure 1: Reported Fiscal Years 2000 and 2001 Deposits to the Trust Fund
Pursuant to HIPAA (Unaudited) (Dollars in millions) 500

Dollars

454.6

450 150

147.3

100

57.2

50

2.9 5.2 6.1

0 Penalties and

Criminal fines Civil monetary multiple damages

penalties

Fiscal year 2000 Fiscal year 2001

Note: HIPAA also required that amounts resulting from the forfeiture of
property in federal health care cases, as well as gifts and bequests, be
deposited into the trust fund. However, there were no such forfeitures in
fiscal years 2000 and 2001. Gifts and bequests totaled $5,501 for fiscal
year 2000, but there were no amounts reported for fiscal year 2001.

Source: Department of Justice and Department of Health and Human Services,
Annual Report of the Department of Justice and Department of Health and
Human Services, Health Care Fraud and Abuse Control Program 2000
(Washington, D. C.: January 2001); and Annual Report of the Department of

Justice and Department of Health and Human Services, Health Care Fraud and
Abuse Control Program 2001 (Washington, D. C.: April 2002).

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. 15
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.

HIPAA Appropriations As reported in the joint HCFAC reports for fiscal years
2000 and 2001, the Were Properly Attorney General and the Secretary of HHS
certified the entire

$158.2 million and $181.9 million appropriations, respectively, as necessary
Supported

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.

15 Our estimate is based on a 95 percent confidence level, with a tolerable
error of $144,711.

Figure 2: Reported Fiscal Year 2000 Allocations (Unaudited) (Dollars in
millions) 130

Dollars 120

119.3

110 100

90 30

23.2

20

10.8

10

1.9 1.9 1.1

0 HHS

HHS Other DOJ

Civil Other DOJ

Office of Office of

HHS United States

Division components

Inspector General

components Attorney

General Counsel

Organization

Source: Allocation information was obtained from the Department of Justice
and Department of Health and Human Services, Annual Report of the Department
of Justice and Department of Health and Human Services, Health Care Fraud
and Abuse Control Program 2000 (Washington, D. C.: January 2001) and the
Fiscal Year 2000 Health Care Fraud and Abuse Control (HCFAC) Account Funding
Agreement - Action Memorandum and subsequent Allotment Advices.

Figure 3: Reported Fiscal Year 2001 Allocations (Unaudited) (Dollars in
millions) 140

Dollars 130

130.0

120 110 100

30

24.2

20

16.8

10

3.9 4.6 2.4

0 HHS

HHS Other

DOJ Civil Division Other DOJ

Office of Office of

HHS United States

components Inspector

General components

Attorney General

Counsel Organization

Source: Allocation information was obtained from the Department of Justice
and Department of Health and Human Services, Annual Report of the Department
of Justice and Department of Health and Human Services, Health Care Fraud
and Abuse Control Program 2001 (Washington, D. C.: April 2002) and the
Fiscal Year 2001 Health Care Fraud and Abuse Control (HCFAC) Account Funding
Agreement - Action Memorandum and subsequent Allotment Advices. 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.

DOJ?s Controls over At DOJ, we identified problems indicating that oversight
of HCFAC

Expenditures Need expenditure transaction processing needs to be
reemphasized. These

problems include charging non- HCFAC transactions to the HCFAC Reinforcement

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.

Figure 4: Reported Fiscal Years 2000 and 2001 HCFAC Expenditures at DOJ
(Unaudited) (Dollars in millions)

30 Dollars

20

18.4 18.6

10

8.2 5.1

0 DOJ

DOJ fiscal year

fiscal year 2000

2001

Payroll Nonpayroll

Source: DOJ?s Expenditure and Allotment Report for fiscal years 2000 and
2001.

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, 16 and the

Comptroller General?s Standards for Internal Control in the Federal
Government 17 require that all transactions be clearly documented and that
documentation be readily available for examination.

16 OMB Circular A- 127 requires that agencies implement and maintain
financial management systems that minimize data redundancy, ensure that
consistent information is collected for similar transactions throughout the
agency, encourage consistent formats for entering data directly into the
financial management systems, and ensure that consistent information is
readily available and provided to internal managers at all levels within the
organization.

17 U. S. General Accounting Office, Standards for Internal Control in the
Federal Government, GAO/ AIMD- 00- 21.3.1 (Washington, D. C.: November
1999).

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. 18 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. HHS
Expenditures Were

Overall, we generally found adequate documentation to support Generally
Appropriate

$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. 18
Department of Justice Office of the Inspector General Audit Division, Audit
Report: U. S.

Department of Justice Annual Financial Statement Fiscal Year 2001, Report
Number 02- 06 (Washington, D. C.: February 2002).

Figure 5: Reported Fiscal Years 2000 and 2001 HCFAC Expenditures at HHS
(Unaudited) (Dollars in millions)

130 Dollars

120 110 100

90 80

$94.4 $81.2

70 60 50 40 30 20

$33.6 $35.4

10 0

HHS HHS

Fiscal year Fiscal year

2000 2001

Payroll Nonpayroll

Source: HHS?s Major/ Minor Object Class Report by Appropriation - 301 C
Report.

HHS and DOJ Do Not We were not able to identify HCFAC program trust fund
expenditures that

Separately Track NonMedicare were unrelated to Medicare because the HHS/ OIG
and DOJ do not

separately account for or monitor such expenditures. Even though HIPAA
Expenditures

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.

Savings to the Trust Fund In the joint HCFAC reports, HHS/ OIG reported
approximately $14.1 billion

Cannot Be Identified 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. Conclusions 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.

Recommendations for To improve DOJ?s accountability for the HCFAC program
collections, we

Executive Action 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 the
HCFAC appropriation and

 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.

Agency Comments and A draft of this report was provided to HHS and DOJ for
their review and

Our Evaluation 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.

Linda M. Calbom Director, Financial Management and Assurance

List of Committees The Honorable Max Baucus Chairman The Honorable Charles
E. Grassley Ranking Minority Member Committee on Finance United States
Senate

The Honorable Edward M. Kennedy Chairman The Honorable Judd Gregg Ranking
Minority Member Committee on Health, Education, Labor, and Pensions United
States Senate

The Honorable Patrick J. Leahy Chairman The Honorable Orrin G. Hatch Ranking
Minority Member Committee on the Judiciary United States Senate

The Honorable W. J. Tauzin Chairman The Honorable John D. Dingell Ranking
Minority Member Committee on Energy and Commerce House of Representatives

The Honorable F. James Sensenbrenner, Jr. Chairman The Honorable John
Conyers, Jr. Ranking Minority Member Committee on the Judiciary House of
Representatives

The Honorable William M. Thomas Chairman The Honorable Charles B. Rangel
Ranking Minority Member Committee on Ways and Means House of Representatives

Appendi Appendi xes x I

Objectives, Scope, and Methodology 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 19 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 20 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 19 U. S.
Department of Justice FMIS Dept Management Module Detail Listing to Support
Transfer of Funds From the U. S. Department of Justice VIA OPAC. 20 U. S.
Department of Justice FMIS Dept Management Module Detail Report of COA,
CSAI, FRFC, FRHC, FRME, FROM, and FRTR From 19991001 to 20000930 as of 04/
10/ 01.

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
expenditures, and

 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 nonMedicare
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.

Comments from the Department of Health and

Appendi x II Human Services

Appendi x III Comments from the Department of Justice

Now on p. 18. Now on p. 19.

Appendi x IV

Staff Acknowledgments Ronald Bergman, Sharon Byrd, Lisa Crye, Jacquelyn
Hamilton, Corinne Robertson, Gina Ross, Sabrina Springfield, and Shawnda
Wilson made key contributions to this report.

Related GAO Products

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.

(190039)

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a

GAO United States General Accounting Office

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Contents

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Appendix I

Appendix I Objectives, Scope, and Methodology

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Appendix I Objectives, Scope, and Methodology

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Appendix I Objectives, Scope, and Methodology

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Appendix I Objectives, Scope, and Methodology

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Appendix II

Appendix II Comments from the Department of Health and Human Services

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Appendix II Comments from the Department of Health and Human Services

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Appendix III

Appendix III Comments from the Department of Justice

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Appendix III Comments from the Department of Justice

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Appendix IV

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