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Focus on Regulation

HHS and NSF Release Office of Inspector General Fiscal Year 2014 Work Plans With Focus on Financial Oversight of Federal Grantees

The U.S. Department of Health and Human Services (“HHS”) and the National Science Foundation (“NSF”) Offices of Inspector General (“OIG”) recently released their Work Plans for Fiscal Year 2014 (“Work Plan(s)”).  In each Plan, the OIG discusses the investigative focus of the organization for the upcoming year.  As is typical, this year’s Work Plans include many items concerned with financial oversight of grantees.  Below is a summary of select actions related to Federal grant matters included in each Work Plan.

One of the major programs both OIGs will investigate is compliance with cost principles in expenditures charged to HHS and NSF awards.  In particular, HHS OIG remains focused on university compliance with cost principles currently located at OMB Circular A-21, but which will be embodied in the so-called Super Circular effective December 26, 2014.  NSF will similarly continue its audit work of universities and other NSF awardees to determine whether costs charged to NSF awards are allowable, allocable and reasonable in compliance with Federal law and NSF policy.

Second, both agencies plan to review American Recovery and Reinvestment Act of 2009 (“ARRA”) expenditures.  ARRA awards tend to be higher risk because they include complex terms and conditions and reporting requirements.  Further, many ARRA awardees accelerated spending to meet an OMB-imposed deadline of September 30, 2013 to spend all ARRA funds, which may have put pressure on internal control infrastructure.

Finally, both OIGs will look at the quality of OMB Circular A-133 audits to ensure that they detect and effectively address areas of concern.  A-133 audits are currently required for covered entities that expend $500,000 or more a year in Federal awards, but this threshold amount will be raised to $750,000 for audits of fiscal years beginning on or after December 26, 2014.  2 C.F.R. §§ 200.110(b), 200.501(a).

HHS OIG plans numerous other reviews that may impact research organizations, including an assessment of CDC oversight of HIV/AIDS prevention and research grants; the CDC award process for PEPFAR cooperative agreements; NIH extramural construction grant expenditures; compliance with Federal requirements for the registration, storage and transfer of select agents and toxins; and compliance with current good manufacturing practices for generic drug manufacturers.

Areas identified in these OIG Work Plans will receive increased Federal scrutiny and may be ripe for audit or enforcement actions. A notable development is that NSF OIG recently recommended that NSF pursue an action under the Program Fraud Civil Remedies Act (PFCRA) following an awardee’s failure to properly account for ARRA funds.  PFCRA allows agencies to initiate an administrative hearing to determine liability for false claims and false statements and is designed to provide a remedy for fraud with a low amount in damages.  NSF’s PFCRA regulations allow NSF to recover up to twice the amount of the false claim along with a penalty of $5,000 per false claim.  NSF OIG states that “we are now considering the use of PFCRA as a possible remedy in all substantiated fraud investigations.”  Nat’l Sci. Found. Office of Inspector Gen., Semiannual Report to Congress 17 (2013), available at http://www.nsf.gov/pubs/2014/oig14001/oig14001.pdf.

The HHS OIG FY 2014 work plan is available at: http://oig.hhs.gov/reports-and-publications/archives/workplan/2014/Work-Plan-2014.pdf.

The NSF OIG FY 2014 work plan is available at: http://www.nsf.gov/oig/2014auditplan.pdf.