Internal Controls:

Second-Year Implementation of the Financial Integrity Act in HHS

HRD-86-9: Published: Nov 8, 1985. Publicly Released: Nov 8, 1985.

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GAO reviewed the Department of Health and Human Services' (HHS) second-year implementation of the Federal Managers' Financial Integrity Act (FMFIA) and the reasonableness of its 1984 annual report on the status of its internal controls and accounting systems.

GAO noted that: (1) on January 31, 1985, HHS issued an annual report on its accounting and internal control systems which stated that 180 of the 200 material internal control weaknesses identified in 1983 had been corrected; and (2) most of the uncorrected weaknesses and instances of nonconformance were to be resolved in 1985. GAO found that: (1) the 1984 report did not state whether HHS internal controls complied with the required standards and objectives or whether its accounting systems conformed to the Comptroller General's requirements; (2) internal controls for some major HHS programs and activities were not evaluated, including major automatic data processing (ADP) controls; (3) there were many material internal control weaknesses that remained uncorrected; and (4) three major accounting systems did not conform to the Comptroller General's requirements. GAO also found that: (1) internal control reviews focused too narrowly on physical security controls and did not include evaluations of computer application controls; (2) reviews in both the ADP and accounting system areas did not adequately document sufficient testing; (3) the Health Care Financing Administration's (HCFA) internal controls over benefit payments made under Medicare and Medicaid programs were inadequate; (4) the Social Security Administration's (SSA) assessment of its internal controls was not sufficient to determine whether it complied with the act's requirements; and (5) the Public Health Service did not adequately test whether controls were in place and functioning effectively.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: HHS officials informed GAO that this recommendation is not consistent with advice they received from OMB. HHS officials stated that HHS is an executive agency and is, thus, more influenced by OMB than GAO.

    Recommendation: The Secretary of Health and Human Services, in future year-end FMFIA statements to the President and Congress, should clearly state whether all or any HHS accounting systems do or do not conform to the Comptroller General's principles, standards, and related requirements.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Not Implemented

    Comments: HHS officials informed GAO that this recommendation is not consistent with advice they received from OMB. HHS officials stated that HHS is an executive agency and is, thus, more influenced by OMB than GAO.

    Recommendation: The Secretary of Health and Human Services, in future year-end FMFIA statements to the President and Congress, should identify the internal control and accounting systems that have not been sufficiently evaluated to determine whether they comply with or conform to applicable requirements.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: Although GAO was informed that the Secretary is not going to issue the recommended directive, and the Assistant Secretary for Management and Budget is not taking direct action on this recommendation, most HHS components are working toward this goal. As a part of future GAO FMFIA work, GAO plans to monitor HHS progress and will make future recommendations as necessary.

    Recommendation: The Secretary of Health and Human Services should direct the Assistant Secretary for Management and Budget to issue policy and procedures to ensure that accounting systems are sufficiently tested to determine conformance with the Comptroller General's principles, standards, and related requirements. Specifically, testing should determine whether valid transactions are processed in accordance with the system design and whether the system reacts appropriately to invalid transactions.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: Although GAO was informed that the Secretary is not going to issue the recommended directive, and the Assistant Secretary for Management and Budget is not taking any direct action, most HHS components are working to achieve adequate testing. As a part of future GAO FMFIA work, GAO plans to monitor HHS progress and will make additional recommendations as necessary.

    Recommendation: The Secretary of Health and Human Services should direct the Assistant Secretary for Management and Budget to issue policy and procedures to ensure that system reviewers are provided proper guidance on the degree, types, and completeness of testing.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Implemented

    Comments: HHS stated that it does not plan to implement this recommendation. However, progress is being made to improve the guidance for and quality of accounting system reviews. As part of future GAO FMFIA work, GAO plans to monitor HHS progress and will make future recommendations as necessary.

    Recommendation: The Secretary of Health and Human Services should direct the Assistant Secretary for Management and Budget to issue policy and procedures to ensure that system reviewers are effectively monitored to ensure that the reviews are complete and adequately document conclusions regarding system compliance.

    Agency Affected: Department of Health and Human Services

  6. Status: Closed - Implemented

    Comments: HHS stated that it does not plan to implement this recommendation. However, HHS is making progress toward improving its guidance for ADP reviews. As part of future GAO FIA work, GAO plans to monitor HHS progress and will make future recommendations as necessary.

    Recommendation: The Secretary of Health and Human Services should direct the Assistant Secretary for Management and Budget to issue policy and procedures to ensure that ADP application controls are evaluated and both ADP general and application controls are adequately tested and work performed documented. This guidance should extend not only to automated accounting systems but also to other automated systems used by HHS.

    Agency Affected: Department of Health and Human Services

  7. Status: Closed - Not Implemented

    Comments: HCFA insists that it is impractical to be fully responsive to this recommendation. However, HCFA has begun to conduct FMFIA evaluations of its monitoring programs, an action which could lead to oversight of carriers' claims selection and reporting results. The GAO ongoing FMFIA work includes monitoring these evaluations.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to strengthen the Medicare and Medicaid monitoring programs to better ensure that the paying agents' internal controls are adequate to prevent waste, fraud, and abuse. As part of these efforts, HCFA should monitor the processes of: (1) selecting claims for review; and (2) reporting review results under the Carrier Quality Assurance Program.

    Agency Affected: Department of Health and Human Services

  8. Status: Closed - Not Implemented

    Comments: HCFA believed that it was already appropriately reporting weaknesses in accordance with HHS, Brooks Committee, and OMB definitions of a material weakness. It believed that the unreported benefit payment weaknesses GAO identified did not fit these definitions. The GAO ongoing FMFIA work includes follow-up on HCFA application of material weakness definitions.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to include, in the FMFIA reporting and tracking system, internal control weaknesses identified by HCFA benefit payment monitoring programs, as well as those identified in GAO, Office of the Inspector General, and other reports.

    Agency Affected: Department of Health and Human Services

  9. Status: Closed - Not Implemented

    Comments: HHS officials informed GAO that they do not believe that the Office of the Assistant Secretary for Management and Budget should be monitoring the implementation of FMFIA at SSA. The officials stated that other monitoring procedures are sufficient. GAO disagreed, and will follow up on this issue during future FMFIA evaluations at HHS.

    Recommendation: The Secretary of Health and Human Services should direct the Assistant Secretary for Management and Budget to monitor SSA progress in completing its evaluations of the internal controls of its major entitlement programs.

    Agency Affected: Department of Health and Human Services

  10. Status: Closed - Implemented

    Comments: The action HCFA agreed to take will not correct the basic weakness underlying this recommendation, that HCFA oversight of the carrier monitoring programs is inadequate. However, HCFA has begun to conduct FMFIA evaluations of its monitoring programs, an action which could lead to correcting this weakness. The GAO ongoing FMFIA work includes monitoring these evaluations.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to strengthen the Medicare and Medicaid monitoring programs to better ensure that the paying agents' internal controls are adequate to prevent waste, fraud, and abuse. As part of these efforts, HCFA should include in the Carrier Quality Assurance Program: (1) a specific requirement that regional reviewers conduct analyses to identify systemic problems that cause program staff to miss errors; and (2) more emphasis on identifying and correcting the underlying internal control weaknesses that allow payment errors.

    Agency Affected: Department of Health and Human Services

  11. Status: Closed - Not Implemented

    Comments: HCFA has not implemented this recommendation, but has begun to conduct FMFIA evaluations of its monitoring programs, an action which could lead to better controls to detect claims of questionable coverage or medical necessity. GAO plans to monitor these evaluations in its ongoing FMFIA work.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to strengthen the Medicare and Medicaid monitoring programs to better ensure that the paying agents' internal controls are adequate to prevent waste, fraud, and abuse. As part of these efforts, HCFA should assess the adequacy and effectiveness of carriers' screens to detect claims of questionable coverage or medical necessity.

    Agency Affected: Department of Health and Human Services

  12. Status: Closed - Not Implemented

    Comments: HHS officials informed GAO that this recommendation is not consistent with advice they received from the Office of Management and Budget (OMB). HHS officials also informed GAO that HHS is an executive agency and is, thus, more influenced by OMB than GAO.

    Recommendation: The Secretary of Health and Human Services, in future year-end FMFIA statements to the President and Congress, should clearly state whether all or any of HHS internal control systems do or do not comply with the act's requirements that they be established in accordance with the Comptroller General's standards and provide reasonable assurance that the three statutory objectives are satisfied.

    Agency Affected: Department of Health and Human Services

  13. Status: Closed - Not Implemented

    Comments: HCFA has not implemented this recommendation, but has begun to conduct FMFIA evaluations of its monitoring programs, an action which could lead to better controls to ensure that unlicensed providers are not paid. GAO plans to monitor these evaluations in its ongoing FMFIA work.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to strengthen the Medicare and Medicaid monitoring programs to better ensure that the paying agents' internal controls are adequate to prevent waste, fraud, and abuse. As part of these efforts, HCFA should evaluate the adequacy of carriers' procedures for ensuring that claims from unlicensed providers are not paid.

    Agency Affected: Department of Health and Human Services

 

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