HEW Must Improve Control Over Billions in Cash Advances

FGMSD-80-6: Published: Dec 28, 1979. Publicly Released: Dec 28, 1979.

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The Department of Health, Education, and Welfare's (HEW) Federal Assistance Financing System was established to improve HEW cash management. However, it allowed premature cash withdrawals because of poor organizational aspects and serious design deficiencies. HEW advanced over $38 billion to about 14,000 nonfederal organizations through the system.

The system used the direct Treasury check method and the letter-of-credit method to meet recipients' immediate cash needs. Despite Department of the Treasury regulations, the agreements for advances did not always state that recipients should limit cash withdrawals to only immediate needs. Therefore, many recipients withdrew cash far in advance of need. Letters of credit had not been extended to many eligible recipients because the system's staff was insufficient to handle this task. These letters of credit would allow recipients to operate with small or no federal cash balances, further reducing public debt interest. There was no authority to handle loans and contract advances through the fund. Because of the significance of HEW loan programs, the authority to make loans and contract advances would give Congress a chance to learn the extent of advances made and to specify operational reports needed for its oversight. The splitting of responsibilities within the system was inefficient. Staffing was inadequate and may have been the underlying cause of many of the problems. Since HEW advanced money without required information on the recipients' planned expenditures, there were no assurances that the advances would be spent in accord with approved assistance agreements or for authorized purposes. The system design did not provide for the generation of data needed for effective cash management.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should finish developing a control system that would emphasize recipients' monthly disbursement plans and that would provide for monitoring of all recipients' cash balances.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should provide the system with adequate staff.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should extend letters of credit to all recipients eligible to use them.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should obtain specific congressional approval to handle loan funds through the grants accounting system.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should make sure that the new system is used for all aspects of cash management, such as the collecting of all excess advances.

    Agency Affected: Department of Health and Human Services

  6. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should specify in agreements the terms and conditions of withdrawals, advise the recipients that advances will be discontinued if abuses persist, and provide for enforcing the discontinuance.

    Agency Affected: Department of Health and Human Services

  7. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should work with the Treasury and Office of Management and Budget to have states remove legal and administrative impediments that cause premature and excessive cash withdrawals and, when appropriate, have states use single letters of credit.

    Agency Affected: Department of Health and Human Services

  8. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should provide resources to ensure that the new system becomes operational as scheduled, and should monitor the redesign efforts to ensure the fastest possible completion.

    Agency Affected: Department of Health and Human Services

  9. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should require that the revised system have adequately detailed accounting records that will show the cash balances held by recipients and that will contain data to control cash advances by specific appropriations.

    Agency Affected: Department of Health and Human Services

  10. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should develop a better approach to charge amounts of advances against specific appropriations, such as an approach that would use data furnished by recipients to support payment requests.

    Agency Affected: Department of Health and Human Services

  11. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should require HEW internal auditors to investigate disbursements reported in excess of authorizations, and to establish how much, if any, of the money should be recovered by the government.

    Agency Affected: Department of Health and Human Services

  12. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System, on February 6, 1984, to replace the one covered by the recommendation.

    Recommendation: The Secretary, HEW, should recover federal cash excesses held by recipients wherever feasible.

    Agency Affected: Department of Health and Human Services

  13. Status: Closed - Not Implemented

    Comments: Problems with the system have been brought to HEW attention on several occasions since the report was issued. It implemented a new system, the Payments Management System on February 6, 1984, to replace the one covered by this recommendation and is addressing continuing efforts to improve the system under the Financial Integrity Act process.

    Recommendation: The Secretary, HEW, should require the revised system to provide for promptly investigating and resolving excessive disbursements reported by recipients, for eliminating duplicative agency records, and for prompt reporting of Antideficiency Act violations.

    Agency Affected: Department of Health and Human Services

 

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