Problems in Administration of Two Health Grant Projects in Region VIII

HRD-78-61: Published: Jul 20, 1978. Publicly Released: Jul 20, 1978.

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The actions of the Department of Health, Education, and Welfare (HEW) in region VIII were reviewed concerning: (1) use of federal funds for construction of a medical facility by the Neighborhood Health Center in Salt Lake City, Utah; and (2) accountability for federal grant funds awarded to Sweetwater Health Services, Inc., in Rock Springs, Wyoming. The Neighborhood Health Center is currently being used by a federally qualified health maintenance organization (HMO), and Sweetwater Health Services was an HMO project that has been terminated. The review was prompted by allegations of mismanagement of the HMO program in region VIII, conflicts of interest involving federal employees, and possible misappropriation of federal funds.

HEW management decisions concerning grants to the Neighborhood Health Center from 1971 through 1977 were conflicting, unclear, and untimely with regard to interpretation and application of federal regulations and policies concerning grant conditions and grant-related income, departmental policy governing construction, and clarification of the federal interest in a medical facility constructed for the Neighborhood Health Center. Region VIII management allowed the center to collect funds from several program sources intended to pay medical care expenses of low-income consumers and to place those funds in a contingency reserve fund to construct a medical facility. These actions were contrary to HEW policy. Public Health Service headquarters officials ratified the region's decision without determining whether they complied with special grant conditions. The region did not adequately monitor Sweetwater Health Services' grant activities to ensure that adequate accounting records and supporting documents were available; HEW was not in a position to ensure that grant funds and grant-related income were properly accounted for.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary, HEW, should direct the Regional Health Administrator to: (1) initiate collection of interest earned on grant funds by the Neighborhood Health Center; (2) initiate collection of all unallowable grant expenditures incurred by Sweetwater Health Services; (3) determine whether Sweetwater Health Services acted in good faith to become a federally qualified HMO; (4) determine whether Sweetwater has an obligation to return federal HMO grant funds; and (5) establish management policies and procedures to prevent a recurrence of grant management problems.

    Agency Affected:


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