Agreement Between HHS and USDA To Finance the Construction and Renovation of Rural Health Centers Is Improper

HRD-82-27: Published: Jan 7, 1982. Publicly Released: Jan 7, 1982.

Additional Materials:

Contact:

Robert A. Peterson
(202) 275-6207
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO reviewed a 1978 agreement between the Department of Health and Human Services (HHS) and the Department of Agriculture for financing the construction and renovation of rural health center facilities using Farmers Home Administration (FmHA) loans.

GAO concluded that the repayment of FmHA loans for new construction with grant funds awarded under the Public Health Service Act was improper, constituted a circumvention of statutory restrictions, and should be discontinued. The Act states that grant funds may be awarded for projects to plan, develop, and operate community health centers and may include the cost of acquiring and modernizing existing buildings. The Act does not authorize projects for the erection or expansion of health facilities. After the agreement was executed, the HHS Office of the General Counsel stated that grant funds under the Act could be used to pay the costs of amortizing the principal of and paying the interest on loans undertaken for the construction of health facilities for eligible projects as part of the operating costs of those projects. GAO reviewed the loan agreement and found that HHS does not have the authority to use the grant moneys to fund construction of new buildings whether such funding is done directly or indirectly for the repayment of construction loans. GAO believed that the effect of the agreement was to make the funds available, indirectly, to finance construction and thereby circumvent the statutory restriction. Previously, GAO has recommended that HHS reevaluate the eligibility of existing grantees and phase out those that cannot be justified. GAO did not believe that any useful purpose would be served by withdrawing support in locations where facilities are needed and justified.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should stop supporting new loans for construction under the HHS/Agriculture loan agreement.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should discontinue support of all loans for health center projects where construction has not started.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should withdraw support for projects completed or underway where facilities are not needed and, to the extent appropriate, work with the Farmers Home Administration to find other uses for the facilities. A determination of need should be made during the process of implementing the recommendation in an earlier GAO report.

    Agency Affected: Department of Health and Human Services

 

Explore the full database of GAO's Open Recommendations »

Sep 15, 2016

Sep 14, 2016

Sep 12, 2016

Sep 9, 2016

Sep 6, 2016

Aug 31, 2016

Looking for more? Browse all our products here