oversight

Department of Health and Human Services: Review of the Management of Inspector General Operations

Published by the Government Accountability Office on 2003-06-10.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States General Accounting Office

GAO          Report to Congressional Committees




June 2003
             DEPARTMENT OF
             HEALTH AND
             HUMAN SERVICES
             Review of the
             Management of
             Inspector General
             Operations




GAO-03-685
                                                June 2003


                                                DEPARTMENT OF HEALTH AND HUMAN
                                                SERVICES

Highlights of GAO-03-685, a report to the       Review of the Management of Inspector
Chairman and Ranking Minority Member,
Senate Committee on Finance and the             General Operations
Ranking Minority Member, Senate Special
Committee on Aging




Janet Rehnquist became the                      The credibility of inspectors general is largely premised on their ability to act
Inspector General of the                        objectively and impartially—both in substance and in perception. Some of
Department of Health and Human                  the HHS Inspector General’s actions—including her decision to delay a
Services (HHS) in August 2001.                  politically sensitive audit—created the perception that she lacked
GAO was asked to conduct a
                                                appropriate independence in certain situations. The Inspector General
review of the Inspector General’s
organization and assess her                     exhibited serious lapses in judgment that further troubled many OIG staff.
leadership, independence, and                   For example, she inappropriately obtained a firearm that she briefly
judgment in carrying out the                    possessed at her workplace and OIG credentials that identified her as a law
mission of the Office of Inspector              enforcement officer. The Inspector General also initiated a variety of
General (OIG). GAO examined                     personnel changes in a manner that resulted in the resignation or retirement
indicators of the OIG’s productivity            of a significant portion of senior management, disillusioned a number of
and compared them to the                        higher level OIG officials and other employees, and fostered an atmosphere
organization’s past performance.                of anxiety and distrust. Ultimately, the collective effect of these actions
GAO also determined whether                     compromised her ability to serve as an effective leader of HHS’s Office of
employee morale has been                        Inspector General.
sustained by surveying all OIG
employees and comparing the
results to those obtained through               Examining productivity trends is difficult because the work of the OIG often
an identical survey administered in             involves multiyear efforts and the results recorded for a single year are
2002.                                           heavily dependent on work initiated in prior years. Similarly, savings
                                                achieved in any one year can be attributable to the culmination of efforts
On March 4, 2003, the Inspector                 made over several years. Given these constraints, GAO noted that
General resigned her office                     productivity at the OIG over the last 3 years increased in some areas and
effective June 1, 2003. However, in             declined in others. Overall savings attributable to the OIG’s efforts—as
this report we refer to Ms.                     reported in its semiannual reports to the Congress—increased from $15.6
Rehnquist as the Inspector General.             billion in fiscal year 2000 to $21.8 billion in fiscal year 2002. The number of
                                                individuals convicted for violating HHS program statutes and regulations—
                                                another key indicator of the OIG’s performance—also increased. On the
                                                other hand, declines were noted in the number of settlements with providers
                                                who submitted false claims to the government and the OIG’s education and
                                                outreach activities.

                                                GAO’s survey results showed that employees’ overall views of the
                                                organization, management, and their personal job satisfaction generally
                                                remained positive and relatively unchanged between 2002 and 2003.
                                                However, field office staff and those in lower level positions were
                                                considerably more positive in their views of the organization than their
                                                counterparts in headquarters and at the highest levels of management. Two
                                                units in particular—the OIG’s Office of Counsel and the Office of Evaluation
                                                and Inspections—also had marked declines in morale. Both reported
                                                significantly lower levels of trust and confidence in the organization and less
                                                job satisfaction, compared to 1 year earlier.
www.gao.gov/cgi-bin/getrpt?GAO-03-685.
                                                The Inspector General generally disagreed with some of our findings. In our
To view the full product, including the scope   response, we address why these findings raise concerns about the
and methodology, click on the link above.       management of the OIG. We also provided our draft report to the Office of
For more information, contact William J.
Scanlon (202) 512-7114.
                                                the HHS Secretary, but did not receive comments.
Contents


Letter                                                                                   1
               Results in Brief                                                          2
               Background                                                                3
               Examination of the Inspector General’s Actions Regarding
                 Independence and Judgment                                              7
               Evaluation of OIG Productivity                                          20
               Measure of Employee Morale                                              28
               Agency Comments and Our Evaluation                                      31

Appendix I     Scope and Methodology                                                    36



Appendix II    Insufficient Internal Controls Over the OIG’s
               Credentialing System                                                     42



Appendix III   Comments from the Inspector General                                      44



Appendix IV    GAO Contacts and Staff Acknowledgments                                   50
               GAO Contacts                                                            50
               Acknowledgments                                                         50


Tables
               Table 1: Select OIG Performance Measures—Fiscal Year 1997
                        through Fiscal Year 2002                                       21
               Table 2: Medicare Exclusions Imposed—Fiscal Year 1997 through
                        Fiscal Year 2002                                               22
               Table 3: Number and Amount of False Claims Act Settlements,
                                                       a
                        Fiscal Years 2000 through 2002                                 22
               Table 4: Number and Amount of CMPs Imposed, Fiscal Year 1997
                        through Fiscal Year 2002                                       23
               Table 5: Number of Active CIAs and Newly Negotiated CIAs for
                        Fiscal Year 1997 through Fiscal Year 2002                      24
               Table 6: Testimonies, Speeches, and Other Presentations by
                        Component for Fiscal Years 2000, 2001, and 2002                25




               Page i                              GAO-03-685 Review of HHS OIG Operations
Table 7: Number and Percentage of OEI Projects That Were Begun
         in Fiscal Years 2000, 2001, and 2002 and Canceled by
         February 28, 2003                                                                27




Abbreviations

CIA               Corporate Integrity Agreement
CMP               Civil Monetary Penalty
CMS               Centers for Medicare & Medicaid Services
DOJ               Department of Justice
GS                General Schedule
HHS               U.S. Department of Health and Human Services
MOU               Memorandum of Understanding
OAS               Office of Audit Services
OCIG              Office of Counsel to the Inspector General
OEI               Office of Evaluation and Inspections
OI                Office of Investigations
OIG               Office of Inspector General
OMP               Office of Management and Policy
PCIE              President’s Council on Integrity and Efficiency




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Page ii                                       GAO-03-685 Review of HHS OIG Operations
United States General Accounting Office
Washington, DC 20548




                                   June 10, 2003

                                   The Honorable Charles E. Grassley
                                   Chairman
                                   The Honorable Max Baucus
                                   Ranking Minority Member
                                   Committee on Finance
                                   United States Senate

                                   The Honorable John Breaux
                                   Ranking Minority Member
                                   Special Committee on Aging
                                   United States Senate

                                   This report responds to your October 21, 2002, letter asking us to conduct
                                   a review of the Department of Health and Human Services (HHS) Office of
                                   Inspector General (OIG). As agreed with your office, we examined the
                                   activities at the OIG under the leadership of Inspector General Janet
                                   Rehnquist, who took office in August 2001 and resigned her office
                                   effective June 1, 2003.1 Accordingly, the objectives of our review were to
                                   (1) assess the Inspector General’s leadership, independence, and judgment
                                   in carrying out the OIG’s mission, (2) identify changes in the OIG’s
                                   productivity over the last 3 years, and (3) determine whether employee
                                   morale has been sustained over the last few years.

                                   To perform our review, we interviewed more than 200 current and former
                                   OIG employees. We examined more than 8,000 pages of documents—
                                   including OIG reports, internal studies, personnel records, and policies
                                   and procedures. We also replicated a Web-based employee survey
                                   conducted by the OIG in January 2002—administered in January and
                                   February 2003—to assess any changes in employee views about their work
                                   environment.2 In addition, to assess the level of cooperation between the
                                   OIG and some of its law enforcement partners, we spoke with officials
                                   from the Department of Justice (DOJ), Medicaid Fraud Control Units from


                                   1
                                    Although Ms. Rehnquist recently resigned, for purposes of this report, we will refer to her
                                   as the Inspector General.
                                   2
                                    We included three additional questions regarding employee morale and trust, and obtained
                                   demographic information about respondents that was not captured in the OIG’s survey.



                                   Page 1                                         GAO-03-685 Review of HHS OIG Operations
                   several states, and the National Association of Medicaid Fraud Control
                   Units. We also interviewed three current or former inspectors general
                   from other federal agencies to better understand their role and the
                   conduct expected of them. We performed our review from October 2002
                   through May 2003 in accordance with generally accepted government
                   auditing standards. For a detailed description of our scope and
                   methodology, see appendix I.


                   During her tenure, the Inspector General took a number of actions that
Results in Brief   damaged her credibility and ultimately created an atmosphere of anxiety
                   and distrust within certain segments of the OIG. Concerns regarding her
                   independence—including those arising from her decision to delay a
                   politically sensitive audit and her intervention in ongoing cases in
                   response to external requests—and personnel changes she initiated among
                   senior management, disillusioned members of her senior staff,
                   headquarters employees, and employees working in two OIG units. In
                   addition, the Inspector General’s brief possession of a firearm at the
                   workplace and law enforcement credentials represented serious lapses in
                   judgment. We also believe that the Inspector General should have devoted
                   more attention to some aspects of OIG operations, such as a major
                   budgetary shortfall, which limited travel and training and required senior
                   managers to reallocate staff positions regardless of where those positions
                   were most needed.

                   Examining the productivity of the OIG in a given time period is complex.
                   The OIG engages in a variety of activities so that its productivity involves
                   several dimensions. Moreover, comparing success from one year to the
                   next is difficult because results are dependent on work in the pipeline that
                   was initiated in prior years. Given these constraints, measures of the OIG’s
                   performance over the last 3 years reveal gains in some productivity
                   indicators and declines in others. On one hand, overall savings attributable
                   to its work increased from $15.6 billion in fiscal year 2000 to $21.8 billion
                   in fiscal year 2002. On the other hand, we identified some downward
                   changes. For example, there was a significant decline in the number of
                   settlements with providers who submitted false claims to the government.
                   As a consequence, the recoveries associated with these settlements also
                   declined, from about $974 million in fiscal year 2000 to about $519 million
                   in fiscal year 2002. We also found that the OIG’s outreach activities that
                   increase public and provider awareness of fraud and abuse problems in
                   health care, and the OIG’s efforts to combat them, have dropped
                   appreciably since fiscal year 2001.



                   Page 2                                 GAO-03-685 Review of HHS OIG Operations
             Employee views of the organization, management, and their personal job
             satisfaction remained positive and relatively unchanged from 2002 through
             2003, in the aggregate. However, we identified several groups of OIG
             employees whose morale had been adversely affected during this time
             period. In particular, there were considerably more negative views
             expressed by those at headquarters and those in senior management
             positions than their counterparts in the field and in lower level positions.
             These groups were concerned with a range of issues including the
             organization’s respect for staff, clarity of goals, and communication
             efforts. In addition, there were distinct declines since 2002 in the positive
             views of employees working in the evaluation unit and the Office of
             Counsel. These groups had low levels of trust and confidence in the
             organization and expressed a significantly lower level of job satisfaction
             compared to 1 year earlier.

             In written comments on a draft of this report, the Inspector General
             disagreed with some of our findings related to her independence and
             judgment, the agency’s productivity, and employee morale. In our
             response, we address why these findings raise concerns about the
             management of the OIG. We also provided our draft report to the Office of
             the HHS Secretary, but did not receive comments.


             In 1978, Congress passed the Inspector General Act, creating Inspector
Background   General offices in 12 federal agencies.3 This followed growing reports of
             serious and widespread breakdowns in agencies’ internal controls. These
             new OIGs were established as independent and objective offices within
             their respective agencies to promote economy, efficiency, and
             effectiveness in government programs and operations and to prevent and
             detect fraud and abuse. In addition, they were created to keep agency
             heads and Congress fully informed about problems and deficiencies in
             program operations, as well as needed corrective action. Over the years,
             the act has been amended to increase the number of inspectors general.
             The President, with the advice and consent of the Senate, appoints
             inspectors general at cabinet-level departments and other large agencies,
             including HHS. The inspectors general at smaller, independent agencies
             and other federal entities are appointed by the heads of their organizations
             and have essentially the same authorities and duties as those appointed by



             3
             Pub. L. No. 95-452, 92 Stat. 1101 (1978) (5 U.S.C. App. (2000)).




             Page 3                                         GAO-03-685 Review of HHS OIG Operations
the President. Presently, there are 28 inspectors general appointed by the
President and 29 appointed by their agency heads.

Inspectors general hold a unique place in the executive branch of
government. They report to and are subject to the general supervision of
their agency heads, but carry out their duties independently. In addition,
they have reporting obligations to both the heads of their agencies and
Congress.4 Those that are presidentially appointed are among the few such
appointees that are to be selected “without regard to political affiliation
and solely on the basis of integrity and demonstrated ability.”5 To help
maintain their independence and fulfill their mission—which often
involves being publicly critical of their own departments—inspectors
general must familiarize their departmental colleagues with their special
role.

Because they are charged with independently protecting the integrity of
federal programs, inspectors general must be impartial in fact and
appearance. Government Auditing Standards,6 effective in January 2003,
call for auditors to “be free, both in fact and appearance from personal,
external, and organizational impairments to independence.” These
standards also require that auditors “avoid situations that could lead
reasonable third parties with knowledge of the relevant facts and
circumstances to conclude that the auditor is not capable of exercising
objective and impartial judgment . . ..” Given that their independence and
impartiality is so critical, inspectors general need to be sensitive to how
their actions might be perceived and interpreted by their staffs, the
administration, Congress, and the public.



4
 The inspector general Act of 1978, as amended, requires that Inspectors General report
semiannually to the head of the department or agency and Congress on the activities of the
office during the 6-month periods ending March 31 and September 30. The semiannual
reports are intended to keep the agency heads and Congress fully informed of significant
findings and recommendations initiated by the inspectors general.
5
5 U.S.C. App. § 3(a).
6
 U.S. General Accounting Office, Government Auditing Standards: Amendment No. 3
Independence, GAO-02-338G (Washington, D.C.: Jan. 25, 2002). Although issued in 2002,
this revised standard on independence did not become effective until January 1, 2003, to
allow audit organizations sufficient implementation time. However, the previous standard
also stressed the importance of independence. For example, it required auditors to “be free
from personal and external impairments to independence” and stated that auditors “should
be organizationally independent and should maintain an independent attitude and
appearance.”




Page 4                                        GAO-03-685 Review of HHS OIG Operations
About 300 of the approximately 1,600 HHS OIG employees are employed in
its Washington D.C. headquarters. The remainder work in its 8 regional
offices and 85 field offices in all 50 states. The OIG consists of five
components, or major units, each headed by a deputy inspector general.
The office is led by 13 Senior Executive Service level employees, who all
work in headquarters, and about 60 GS-15 level employees.7 About two-
thirds of the GS-15 employees are spread across the various components
in headquarters with the remaining third located in the OIG’s regional
offices.

Consistent with the act, the OIG maintains the Office of Audit Services
(OAS) and the Office of Investigations (OI).8 They each represent about 40
percent of the OIG’s budget. OAS is responsible for auditing a variety of
HHS health care programs and generally spends about 80 percent of its
resources on projects related to the Medicare and Medicaid programs.9 Its
findings can result in program improvements and the return of
overpayments to the federal government. In addition, OAS provides audit
support to OI. OI investigators typically pursue allegations of criminal
conduct that they receive from contractors that process Medicare claims,
state Medicaid Fraud Control Units, officials involved in administering
HHS’s many grant programs, and others. When investigators find evidence
of potential wrongdoing, they refer the matter to DOJ for possible
prosecution or the OIG may opt to impose other sanctions.

The OIG has established three additional components to enable it to fulfill
its mission. The Office of Evaluation and Inspections (OEI) conducts
short-term management evaluations of HHS programs that generally
involve significant expenditures and services to beneficiaries or in which
important management issues have surfaced. Its reports are expected to
identify opportunities for improvement in departmental programs. While
OAS may audit the same federal programs examined by OEI, the scope of


7
 The General Schedule (GS) is a personnel classification and pay system used by the
federal government. It includes a range of levels of difficulty and responsibility for
positions graded GS-1 through GS-15. Senior Executive Service managers are subject to a
different system of promotion criteria and higher pay.
8
 Section 3(d) of the Inspector General Act requires each inspector general to appoint an
assistant inspector general for auditing and an assistant inspector general for
investigations.
9
 Medicare is the federal health insurance program that serves the nation’s elderly and
certain disabled individuals. Medicaid is a jointly funded, federal-state health insurance
program for certain low-income people.




Page 5                                          GAO-03-685 Review of HHS OIG Operations
OEI studies is typically broader and would more likely involve the use of
surveys, interviews, and other qualitative research methods. A relatively
small component, OEI represents about 10 percent of the office’s
resources. The Office of Counsel to the Inspector General (OCIG) provides
legal services to the OIG. Among other things, it renders advisory opinions
to health care providers and develops model industry guidance for
compliance with relevant laws and regulations. It also has several
sanctions at its disposal to penalize those who abuse HHS programs.
Finally, the Office of Management and Policy (OMP) is responsible for the
administration of the office, which includes overseeing the budget,
supporting the office’s information technology needs, and working with
the media. It is also responsible for the OIG’s human resource
management activities, but obtains significant personnel support from the
department’s centralized Program Support Center. OCIG and OMP each
represent about 5 percent of the OIG’s budget.

The OIG plays an instrumental role in identifying and investigating
individuals and entities that may have abused HHS programs. It may make
referrals to DOJ for possible prosecution under applicable criminal
statutes. In addition, health care providers who violate federal laws and
regulations may face a variety of civil sanctions. The OIG may make use of
the False Claims Act10—the federal government’s primary civil remedy for
false or fraudulent claims—and refer such matters to DOJ. The act
imposes substantial penalties on those who knowingly submit false claims
to Medicare and other federal programs.

If a provider has filed a false claim that DOJ opts not to pursue through the
use of the False Claims Act, the OIG may impose other sanctions, such as
civil monetary penalties (CMP), against that health care provider. CMPs
are also imposed for other types of improper conduct, such as violations
of statutory prohibitions on “kickbacks” in connection with patient
referrals.11 The OIG also can assess CMPs against hospitals for “patient
dumping,” that is, failing to provide appropriate treatment to patients




10
  31 U.S.C. §§ 3729-3733.
11
 The antikickback provisions of the Social Security Act generally prohibit persons from
paying or soliciting remuneration in order to induce another to refer business reimbursed
under a federal health care program. See 42 U.S.C. § 1320a-7b(b).




Page 6                                        GAO-03-685 Review of HHS OIG Operations
                          presenting a medical emergency.12 The amount of the CMP imposed is
                          related to each provider’s specific violation. The OIG may also exclude
                          health care providers from participating in Medicare, Medicaid, and other
                          federal health programs if they have, for example, been convicted of a
                          criminal offense related to Medicare—including health care fraud or
                          patient abuse and neglect—or had their license suspended or revoked.
                          OCIG may also opt to negotiate corporate integrity agreements with health
                          care providers.13

                          Although the OIG focuses the majority of its attention on health care
                          programs, its activities extend to other areas as well. For example, the OIG
                          has made the detection, investigation, and prosecution of absent parents
                          who fail to pay court-ordered child support a priority. The OIG works with
                          other federal, state, and local agencies to expedite the collection of these
                          payments. Parents who repeatedly fail to honor such obligations are
                          subject to criminal prosecution. The OIG’s recent activities with respect to
                          parents who have defaulted on their child support payments resulted in
                          152 convictions and more than $7 million in court-ordered criminal
                          restitution in fiscal year 2002.


                          We examined the independence that was reflected in the Inspector
Examination of the        General’s decision-making during her tenure. In addition, we reviewed
Inspector General’s       personnel changes that she initiated and evaluated her judgment in several
                          instances. We interviewed appropriate staff, including the Inspector
Actions Regarding         General herself, and examined relevant documentation.
Independence and
Judgment

The Inspector General’s   Current and former OIG headquarters employees frequently expressed
Independence              concerns about the Inspector General’s independence. These concerns
                          centered on several incidents—some of which were widely reported by
                          the media. Employees also identified other audits and investigations that


                          12
                            Under the Emergency Medical Treatment and Active Labor Act (EMTALA), all hospitals
                          that participate in Medicare are required to screen—and if an emergency medical condition
                          is present, stabilize—any patient who comes to the emergency department, regardless of
                          the individual’s ability to pay. See 42 U.S.C. § 1395dd(a).
                          13
                           Under corporate integrity agreements, providers agree to take affirmative steps to
                          improve compliance and report periodically to the OIG. The OIG, in turn, agrees not to
                          seek further administrative penalties for the behavior in question.




                          Page 7                                        GAO-03-685 Review of HHS OIG Operations
                        they felt may have suffered from inappropriate management intervention.
                        We concluded that the following four incidents involved actions on the
                        part of the Inspector General that at least contributed to the perception of
                        a lack of independence.

Florida Pension Audit   In the spring of 2002, the OIG was scheduled to begin an audit of the
                        Florida Retirement System. The objective was to evaluate whether the
                        state appropriately charged the federal government for the pension
                        expenses of state agency employees who help administer federal
                        programs. The auditors specifically wanted to determine whether funds
                        designated as federal contributions to the retirement system were used to
                        provide for pension expenses, and whether the federal contribution rates
                        were reasonable.

                        The OIG’s first meeting to discuss this audit with Florida pension officials
                        was scheduled for April 16, 2002. The day before, the Chief of Staff to the
                        Florida governor placed an urgent call to the Office of the HHS Secretary,
                        requesting that the audit be delayed to accommodate the new pension
                        department director who was going to assume his position in a few weeks.
                        This call was ultimately referred to the Inspector General, who instructed
                        her Deputy for Audit Services to delay the audit for a few days. The
                        Inspector General subsequently ordered a second delay until July. Due to
                        subsequent scheduling problems affecting both OIG and Florida pension
                        staff, the audit team did not begin its work until September 2002.
                        Allegations made by OIG employees and the media suggested that the
                        federal government’s contributions to the Florida retirement system could
                        be excessive and that a report on these contributions might affect the
                        outcome of the Florida governor’s race that November.

                        When asked about the incident, the Inspector General stated that she
                        agreed to temporarily postpone the audit until she could determine the
                        appropriate response to the request and did not have any involvement in
                        subsequent delays. She also insisted that audits are frequently delayed,
                        that her decision to delay the audit was not politically motivated, and that,
                        even if the audit had begun in April, it would not have been completed
                        before the election. She told us that, in hindsight, she could have handled
                        the situation differently by referring the request to the Deputy for Audit
                        Services, but she did not believe she acted inappropriately in these
                        circumstances.

                        We believe that the Inspector General did not appropriately investigate the
                        implications of her decision before agreeing to delay what ultimately
                        resulted in a report containing significant monetary findings. First, Florida


                        Page 8                                 GAO-03-685 Review of HHS OIG Operations
                pension department officials could have known that a substantial
                overpayment existed, and that a delay in the OIG’s audit could have
                benefited the state by changing the time frames used to calculate the
                amount it owed. In fact, the draft report on the Florida pension audit
                contains a finding that there were excessive federal contributions totaling
                about $517 million, which the state will be required to return or offset
                against the amount of future federal contributions to the retirement fund.
                Second, given that the team was scheduled to begin its work in April 2002
                and had estimated that the audit report would be drafted in 6 months, it is
                conceivable that the report could have been available by election day, if
                the audit had begun when originally planned. Finally, contrary to the
                Inspector General’s recollection, we found that she sent an e-mail message
                to her Deputy for Audit Services in April 2002 instructing him to postpone
                the audit until July 2002. The Inspector General acknowledged that,
                although short delays in commencing audits are common, it was
                admittedly unusual for a request for a delay to be directed to, and resolved
                at, her level.

York Hospital   In February 2000, the OIG alleged that York Hospital—located in York,
                Pennsylvania—had submitted improper claims for services provided to
                Medicare beneficiaries. The OIG had notified the hospital that it planned
                to impose a CMP and was engaged in negotiations with the hospital when
                the Inspector General assumed office.14 The OIG attorneys had estimated
                that York Hospital’s potential liability was $726,000.

                Soon after taking office, the Inspector General received a letter from three
                members of Congress encouraging her to settle the case quickly.
                According to the former Chief Counsel,15 the Inspector General told him, “I
                hate this case; get rid of it.” Feeling as though they had to move fast, OIG
                attorneys lost the benefit of time—which they explained is a key factor in
                resolving a case in the government’s favor—and quickly settled the matter.
                The former Chief Counsel also noted that the settlement amount of



                14
                 Prior to imposing a CMP, the OIG typically seeks to resolve the matter through
                negotiations. The negotiation process allows the government to obtain a monetary
                recovery and spares the provider from having to admit liability. When a settlement is not
                pursued or cannot be reached, the OIG must give the provider the opportunity for a
                hearing.
                15
                  On January 8, 2003, the Inspector General waived the attorney-client privilege pertaining
                to both her former and current Chief Counsels concerning matters that arose during her
                tenure, except with respect to open investigations pending before the grand jury, matters
                under court seal, confidential sources, or other open inquiries.




                Page 9                                         GAO-03-685 Review of HHS OIG Operations
                     $270,000 was far less than the attorneys believed the government could
                     have received had negotiations proceeded as they had planned.

                     The Inspector General indicated that she in no way directed a settlement
                     or personally involved herself in the York Hospital negotiations. She also
                     stated that if her OCIG staff perceived that they were under pressure to
                     settle the case quickly, they misinterpreted her instructions. She told us
                     that she simply wanted to settle this case in a timely manner.

                     Although the Inspector General said she did not intend to pressure her
                     staff, the former Chief Counsel told us that he and those responsible for
                     negotiating with hospital officials clearly perceived a sense of urgency. He
                     also told us that her staff perceived that timing, rather than maximizing the
                     settlement amount, was her main concern. We believe that her staff acted
                     accordingly, possibly against the government’s financial interest.

Lithotripsy Claims   Two medical societies representing providers of lithotripsy16 services
                     threatened to sue the Centers for Medicare & Medicaid Services (CMS)
                     over a regulation resulting in the denial of claims submitted for payment to
                     the Medicare program. The CMS regulation implemented statutory
                     restrictions on physician referrals to providers in which the physicians
                     have an ownership interest and included lithotripsy services within the
                     scope of these restrictions. The medical societies maintained that
                     Congress did not intend to include lithotripsy services within the scope of
                     the statute and intended to litigate this matter, if a settlement could not be
                     reached quickly.

                     A partner in the law firm representing the two medical societies, who was
                     also a friend of the Inspector General, contacted her for assistance in
                     expediting this case. The Inspector General directed her former Chief
                     Counsel to contact the law firm and begin negotiating the matter, which
                     was under the jurisdiction of CMS and not the OIG. The former OIG Chief
                     Counsel was hesitant to intervene until the appropriate attorney
                     representing CMS in this matter could be consulted. Because CMS’s
                     attorney was unavailable for about a week, the former Chief Counsel took
                     no action during this time. According to the former Chief Counsel, the
                     Inspector General admonished him severely when she discovered that he
                     had not followed her instructions to immediately contact the law firm.



                     16
                      Lithotripsy is a procedure typically performed by urologists to break up kidney stones
                     without the need for surgery.




                     Page 10                                       GAO-03-685 Review of HHS OIG Operations
                            The Inspector General asserted that her office had a legitimate role in this
                            matter. Although the issue was being disputed between the medical
                            societies representing the lithotripsy providers and CMS, the Inspector
                            General believed that her OCIG staff, which advised Congress on
                            physician referral matters, was in a unique position to resolve the issue.
                            She pointed out that she did not personally involve herself in the matter,
                            nor instruct her staff about how to resolve the issue. Instead, she stated
                            that her goal was to help resolve a matter in which her attorneys had vast
                            expertise.

                            Despite the OIG’s expertise in this matter, we agree with the former Chief
                            Counsel that it would have been inappropriate for the OIG to intervene by
                            contacting the law firm to initiate discussions, particularly in the absence
                            of CMS’s attorney. If the Inspector General wanted OCIG’s expertise to be
                            offered to CMS, it would have made sense for OCIG to contact CMS’s
                            attorney before proceeding. CMS’s attorney responsible for handling this
                            matter told us that she would have been troubled if the OIG had
                            commenced discussions without her agency’s participation. Given the
                            Inspector General’s personal relationship with the medical societies’
                            attorney and the OIG’s lack of jurisdiction in the matter, her actions
                            created the impression that she was more interested in helping a friend
                            than offering advice to CMS, which called her independence into question.

Adjusted Community Rating   On February 20, 2001, the OIG sent its draft report on adjusted community
Audit                       rate proposals for Medicare+Choice organizations17 to CMS for comment.
                            This report was of potentially significant interest to congressional
                            committees, which were then considering the adequacy of payments in the
                            Medicare+Choice program. While OIG guidelines generally provide up to
                            45 days for audited entities to comment on its draft reports, the
                            publication of this report was delayed for 14 months while the OIG waited
                            for comments from CMS. Ultimately CMS agreed with the OIG’s findings in
                            written comments on April 16, 2002.

                            Some employees alleged that the delay in issuing this report reflected a
                            lack of independence on the Inspector General’s part. They suggested that
                            the Inspector General should have taken a more active role in expediting


                            17
                             Medicare+Choice was designed to expand Medicare beneficiaries’ health plan choices by
                            encouraging the wider availability of HMOs and other types of health plans, such as
                            preferred provider organizations. Adjusted community rate proposals detail the revenue
                            that Medicare+Choice organizations project is needed to cover contributions to profit or
                            reserves and the direct medical and administrative costs of delivering services to enrollees.




                            Page 11                                        GAO-03-685 Review of HHS OIG Operations
                          the report’s issuance. They pointed out that the CMS Administrator
                          initially disagreed with the draft report’s findings and hired a consultant to
                          validate the OIG’s results. According to these employees, it took CMS
                          more than a year to replicate the OIG’s work and determine that it agreed
                          with the report’s findings. OIG employees told us that the Inspector
                          General tolerated this situation because she was unwilling to issue a
                          relatively controversial report without the benefit of CMS’s agreement.
                          The delay in issuing this report diminished its usefulness because
                          congressional committees were focused on other concerns by the time the
                          report was finalized.

                          The Inspector General stated that she was only vaguely familiar with this
                          project but was certain that she did not direct her audit team to delay the
                          report’s issuance. Although she recalled that the CMS Administrator
                          initially disagreed with the report’s conclusions, she told us that she did
                          not remember the specific time frames associated with it.

                          Our evidence shows that the Inspector General’s staff tried to enlist her
                          assistance in expediting CMS’s comments to no avail. By permitting CMS
                          to delay the report’s publication, the Inspector General created the
                          appearance among her staff of being unduly influenced by CMS. In our
                          view, a time sensitive report of congressional interest should have, at the
                          very least, garnered more of the Inspector General’s attention.


The Inspector General’s   During the Inspector General’s tenure, staff turnover among the OIG
Personnel Changes         senior headquarters staff has been considerable. Between September 2001
                          and November 2002, at least 20 OIG senior managers retired, resigned, or
                          were reassigned. Ten of these were Senior Executive Service18 employees,
                          most of whom had over 25 years of government service and had played an
                          important leadership role at the OIG for many years. The others were
                          GS-15 employees who were instrumental in carrying out specific office
                          functions.19 The Inspector General’s representative characterized these
                          changes as voluntary and beneficial to the overall mission of the office.


                          18
                           In several important areas, including reassignments and reductions in grade, federal
                          regulations allow greater flexibility for personnel decisions regarding Senior Executive
                          Service employees than for general schedule employees. Under these regulations, the
                          Inspector General had more discretion with respect to Senior Executive Service-level
                          managers in the OIG than GS-15-level managers.
                          19
                           The Inspector General made many of these changes by taking advantage of opportunities
                          presented to her when two of the Deputy Inspectors General decided to retire.




                          Page 12                                        GAO-03-685 Review of HHS OIG Operations
The Inspector General told us that these changes were made to provide
senior managers with new insights into agency operations and to
capitalize on the fresh perspectives they could bring to their new jobs.
However, we found that the sudden and unexplained nature of many of the
Inspector General’s actions resulted in a widespread perception of
unfairness among her staff. In addition, the promotion of a close advisor to
the Inspector General, to the position of Director of Public and
Congressional Affairs, raises a legal concern.

We found the circumstances surrounding the departures of eight senior
OIG managers to be particularly troubling. Four of these eight managers
who left the OIG or were detailed elsewhere were members of the Senior
Executive Service. One of the four took an early retirement after the
Inspector General proposed that the department assign him to a position
outside of his local commuting area with the assumption that he would
retire instead. Another retired after most of his responsibilities were
reassigned to another official or eliminated. A third resigned about 6
weeks after the Inspector General reassigned his job responsibilities and
directed that he not report to his office and instead spend his time seeking
new employment. Finally, one manager was detailed to a temporary
position within HHS and was also instructed not to return to his OIG
office. He is currently seeking new employment.

These four individuals told us that the Inspector General had not informed
them of specific deficiencies in their performance, given them any
opportunity to improve their performance, worked with them to find a
mutually satisfactory resolution to her concerns, or provided an adequate
rationale for her decisions to remove them from their positions. Moreover,
three of these managers told us that they were shocked with the urgency
she displayed when asking them to leave the OIG, and two perceived that a
single event ultimately led to the Inspector General’s decision to remove
them. For example, in one instance, a senior manager linked his removal
to an incident in which a problem had to be resolved in the Inspector
General’s absence. Although he successfully contacted her and proposed a
solution, she did not wish to address the matter until her return to the
office. He delayed taking action, as she directed. However, according to
this official, when the Inspector General returned, she was angry and
suggested that he had tried to pressure her into accepting his proposed
solution, essentially excluding her from the decision-making process.
Describing their departures from the OIG, these four individuals told us
that they felt they had no alternative but to leave their positions. Other
OIG staff also told us that these four changes—all of which were initiated
by the Inspector General—were involuntary.


Page 13                               GAO-03-685 Review of HHS OIG Operations
The other four individuals whose departures were particularly troubling
were GS-15 level managers from OMP, OCIG, OI, and the Inspector
General’s Immediate Office.20 One manager resigned after being reassigned
twice within 9 months. According to several OIG employees, the purpose
of this manager’s second reassignment was to accommodate the Inspector
General’s preference that this manager no longer work in the OIG
headquarters building. The Inspector General gave no explanation why she
wanted this individual to work in a remote location. A second was
reassigned to an interagency task force for an indefinite period after his
position was abolished. The Inspector General reportedly no longer
wanted him in the OIG headquarters building. The third individual was
temporarily reassigned to a position at another HHS agency and
subsequently resigned. He told us that his duties were curtailed following
a briefing of congressional staff in which he voiced an official OIG opinion
that conflicted with that of CMS. The fourth individual retired after being
reassigned from the Inspector General’s Immediate Office to another
component. Some staff members perceived that the reassignment of this
individual resulted, in part, from her requesting—without the Inspector
General’s knowledge—a gun safe to properly store a firearm that the
Inspector General had recently acquired. Like the reassignments at the
senior executive level, the Inspector General initiated these changes.

Some of the employees we interviewed were skeptical that these changes
were necessary and asserted that they actually damaged the organization’s
effectiveness. Specifically, they were concerned with the sheer number of
personnel moves made in a relatively brief period of time and that their
new component heads lacked experience in the areas that they were going
to lead. They also expressed concerns about the Inspector General’s
motivations because they felt that the changes generally had not been
adequately explained to the employees involved. The abruptness of these
changes and the lack of any overall explanation for them heightened
employees’ mistrust. Although some employees were supportive of the
Inspector General’s organizational changes or felt unaffected by her
actions, comments made during our interviews and in our employee
survey highlighted the frustration many employees—especially at
headquarters—felt due to the perception of unfairness associated with




20
 The Immediate Office provides direct support to the Inspector General. It is not affiliated
with the OIG’s five components, and it maintains a relatively small staff of about 10
employees.




Page 14                                        GAO-03-685 Review of HHS OIG Operations
these personnel changes. We found that the magnitude and abruptness of
the Inspector General’s actions raised fear and anxiety among her staff.

We asked the Inspector General about each of the individuals to obtain her
rationale in making these personnel decisions. The Inspector General told
us that she was concerned about the individuals’ privacy and that she was
uncomfortable discussing the circumstances involving these managers
with us.

Finally, we identified one matter giving rise to a legal concern. We
obtained information suggesting that a member of the OIG’s staff may
have been preselected for a GS-15 position as the Director of Public and
Congressional Affairs.21 Specifically, as explained below, e-mail
communication by one of the Inspector General’s closest advisors implies
that a decision had been made to promote this employee to the GS-15 level
prior to the initiation of a competitive selection process. Citing the
individual’s outstanding performance as a GS-14 in the same office,22 the
Inspector General had directed the employee’s supervisor to promote her
to a GS-15 at the earliest opportunity. Shortly thereafter, an advisor to the
Inspector General contacted the individual’s supervisor and emphasized
that the Inspector General believed that it was important for the individual
to have a GS-15 in her current position. The advisor urged him to initiate
the promotion process so that the GS-15 would be effective on the date of
her eligibility for promotion, or soon thereafter. The advisor further
explained that the Inspector General had made a commitment when the
individual agreed to take the GS-14 position that she would be promoted
to a GS-15 one year later. In addition, the OIG included a “selective
placement factor” in the GS-15 position description, reportedly to favor the
employee. OIG staff told us that, although the GS-15 position was
advertised both inside and outside of the agency, there was a widespread
perception that the selection had already been made. This perception may



21
  Preselection is prohibited under federal law. Specifically, under 5 U.S.C. § 2302(b)(6), an
employee with personnel authority may not grant any preference or advantage not
authorized by law, rule, or regulation to any employee or applicant for employment
(including defining the scope or manner of competition or the requirements for any
position) for the purpose of improving or injuring the prospects of any particular person
for employment.
22
 One year before her promotion to a GS-15, this individual had been promoted from a GS-
13 position in OCIG to a supervisory GS-14 position in the OIG’s Office of Public and
Congressional Affairs, following the reassignment of the GS-15 staff person who had
previously performed similar duties.




Page 15                                         GAO-03-685 Review of HHS OIG Operations
                            account for the fact that there was only one applicant for the position.
                            While the information we obtained raises concern about a possible
                            preselection, we have not conducted the type of formal, factual inquiry
                            that would ultimately be necessary to determine whether the Inspector
                            General’s actions were unlawful.23


The Inspector General’s     We identified several matters that raised concerns about the adequacy of
Judgment                    the Inspector General’s leadership. Some employees questioned the
                            Inspector General’s judgment in regard to her possession of a firearm in
                            the office, as well as law enforcement credentials. Others raised concerns
                            about the manner in which she conducted her business travel. In addition,
                            several employees interpreted some of the Inspector General’s actions as
                            demonstrating a lack of interest in key office operations.

Report by the President’s   In the fall of 2002, the Integrity Committee of the President’s Council on
Council on Integrity and    Integrity and Efficiency (PCIE)24 received an allegation that the Inspector
Efficiency                  General had improperly requested and obtained a firearm from her Deputy
                            Inspector General for Investigations. Subsequently, the Integrity
                            Committee received a second allegation that the Inspector General had
                            improperly obtained supervisory special agent law enforcement
                            credentials. After consulting with DOJ officials, who declined to pursue
                            these allegations, the Integrity Committee proceeded with its investigation.
                            The PCIE forwarded its report to the Deputy Secretary of HHS on April 4,
                            2003.

                            The PCIE found that the Inspector General had obtained a firearm from an
                            OIG special agent and maintained it in her Washington, D.C. office for a
                            short period of time. An OIG Memorandum of Understanding (MOU) with
                            DOJ and the Federal Bureau of Investigation set forth a process for
                            deputizing OIG special agents to allow them to carry firearms, make
                            arrests, and execute warrants when carrying out their law enforcement



                            23
                             We are referring this matter to the Office of Special Counsel of the Merit Systems
                            Protection Board, which is tasked with investigating such allegations.
                            24
                              The PCIE, an organization composed primarily of the presidentially appointed inspectors
                            general, was created to address integrity, economy, and effectiveness issues that transcend
                            individual government agencies, and increase the professionalism and effectiveness of
                            inspector general personnel throughout the government. The PCIE’s Integrity Committee is
                            charged with receiving, reviewing, and investigating allegations of administrative
                            misconduct against Inspectors General, and, in certain cases, members of their staffs.




                            Page 16                                       GAO-03-685 Review of HHS OIG Operations
functions.25 However, the PCIE found that the Inspector General had not
met the job classification and training requirements outlined in the MOU
and had not been deputized. In an interview with PCIE investigators, the
Inspector General stated that she believed that inspectors general were
statutorily authorized to possess firearms and that she had not reviewed
the MOU for deputation of OIG special agents.

In regard to the second allegation, the PCIE found that the Deputy
Inspector General for Investigations obtained supervisory special agent
credentials for the Inspector General because she did not want the
Inspector General to have any difficulty gaining access to secured areas in
the event of a terrorist incident.26 The Inspector General told PCIE
investigators that other inspectors general did not seem to know how to
handle the issue of access to secured areas in the event of a terrorist
attack, but she had never asked them if they had law enforcement
credentials. She also told investigators that she had the credentials in her
possession for a short time, and returned them to her Deputy for
Investigations to store in a safe. (Before the PCIE investigated this issue,
concerns about the ease with which OIG credentials could be obtained
came to our attention. We examined the internal controls for the
credentialing system and identified several weaknesses, which are
described in appendix II. OIG officials have since told us that they have
taken steps to correct these weaknesses.)

The PCIE report identified several criminal statutes as relevant to the
allegations, including provisions of federal and District of Columbia law
concerning the possession of firearms, which are applicable to those
working in federal buildings. At the conclusion of the investigation, DOJ
officials advised the PCIE that it declined to prosecute the Inspector
General for any possible violations of criminal statutes regarding the
possession of a firearm or law enforcement credentials. In addition, in the
letter to the Deputy Secretary of HHS accompanying its report, the PCIE
advised that the Inspector General’s resignation mooted the need to take
any administrative actions against her. It also expressed deep concern




25
  The PCIE report stated that under OIG policy employees could not possess or carry
firearms without being deputized, as set forth in the MOU.
26
 The credentials stated that Ms. Rehnquist was a supervisory special agent of the Office of
Inspector General authorized to carry firearms, execute warrants, administer oaths, make
arrests, and perform other duties as authorized by law and/or departmental regulations.




Page 17                                       GAO-03-685 Review of HHS OIG Operations
                                 about the actions of some OIG employees who facilitated the Inspector
                                 General’s acquisition of these items.

The Inspector General’s Travel   Another issue that persistently surfaced during our review was
                                 perceptions of the propriety of the Inspector General’s business travel. As
                                 the head of a large organization with offices nationwide, the Inspector
                                 General is entitled—and expected—to periodically visit these offices to
                                 provide oversight, guidance, and support to her staff. In addition, the
                                 Inspector General may engage in other business-related travel, such as
                                 attending conferences and meeting with provider organizations and other
                                 external groups. Inspectors general—like other government employees—
                                 are not prohibited from planning personal travel in conjunction with their
                                 business trips. However, we spoke with current and former inspectors
                                 general from other federal agencies, and they told us that they generally
                                 refrain from including personal travel with their business trips for fear of
                                 raising suspicion about their motivation or integrity. While no one alleged
                                 that the Inspector General violated travel regulations, some current and
                                 former officials questioned her motivation for planning certain trips that
                                 included a personal element, such as sightseeing activities—sometimes
                                 with two senior OIG managers.

                                 To better understand the purpose of the Inspector General’s travel, we
                                 examined all of the documentation related to her trips, including travel
                                 orders, vouchers, and detailed itineraries prepared by her office. We found
                                 that during the first 4 months of the Inspector General’s tenure she took
                                 four trips outside of the Washington D.C. area. None of these trips
                                 included a personal element or any companions. However, over the next
                                 12 months, the Inspector General traveled eight more times and included
                                 personal activities on half of these trips. In addition, she invited one or two
                                 senior managers to accompany her on six of these eight trips.

                                 Three of the Inspector General’s trips in particular raised concerns, arising
                                 from a perception that this travel was motivated by other than official
                                 duties. In some of these cases, large blocks of time could not always be
                                 accounted for. For example, the Inspector General took one trip to San
                                 Francisco and Phoenix that spanned 8 days and included 2 days of
                                 personal time on a weekend. In examining the business portion of this trip,
                                 we were only able to determine that the Inspector General made two half-
                                 hour speeches and traveled between these cities and Washington, D.C.
                                 Further, in some cases, personal activities—sometimes involving the
                                 participation of the two senior managers—were included. While we did
                                 not validate the managers’ activities on these trips beyond their own
                                 assertions, we believe that it is appropriate for the Inspector General to


                                 Page 18                                 GAO-03-685 Review of HHS OIG Operations
                          ask managers to accompany her as needed on business-related travel.
                          However, including her colleagues in her personal activities during travel
                          contributed to a perception that the business reasons for these trips were
                          pretexts and that the trips were planned solely for nonbusiness purposes.

                          In responding to our inquiries regarding the Inspector General’s travel, she
                          indicated that all of her trips were made for legitimate business purposes.
                          She also told us that she was not concerned with any perceptions OIG
                          employees may have had about her travel. Finally, in a written response to
                          our inquiry regarding approximately 3 days of unaccounted time during
                          her San Francisco and Phoenix trip, she indicated that she spent her time
                          performing office work and preparing for one of her two speeches. She
                          offered no other elaboration on her business activity.

The Inspector General’s   During our study, the Deputy Inspectors General were grappling with a
Leadership in Resolving   major budgetary shortfall due to aggressive hiring in fiscal year 2002,
Budgetary Problems        lower than expected attrition throughout the OIG, and uncertain funding
                          levels for fiscal year 2003 that had yet to be resolved. Senior OIG officials
                          told us that they were concerned that, without a quick solution, they might
                          ultimately violate the Antideficiency Act.27 In February 2003, the Deputy
                          Inspectors General were developing various proposals to react to their
                          forecasted budget shortfall. The deputies had severely limited travel,
                          training, and other human resource activities in their components. In
                          addition, they were reallocating staff positions to accommodate the
                          budget—regardless of where the positions were actually needed. Positions
                          that became vacant through attrition were transferred to the overstaffed
                          components. By gaining the vacant positions, the overstaffed components
                          were able to reduce the number of staff considered to be in excess in their
                          units.

                          Some of the deputies expressed strong resentment about the chaos this
                          situation caused within their components. For example, a relatively small
                          component that lost a key member of one of its functional teams could not
                          replace that individual, and instead had to continue to meet mission goals
                          with one fewer supervisor. Other component heads explained that the lack
                          of funds to perform routine duties in the field affected morale and could
                          impact long-term productivity.




                          27
                           Among other things, the Antideficiency Act prohibits agencies from incurring financial
                          obligations that exceed their available budget authority. See 31 U.S.C. § 1341(a).




                          Page 19                                       GAO-03-685 Review of HHS OIG Operations
                            This situation could have been avoided if OIG leadership had developed a
                            human resource hiring and development plan that contained realistic
                            budget projections and hiring goals that all deputies would have to follow.
                            Historically, the Inspector General’s Principal Deputy was responsible for
                            ensuring that component heads worked together to carry out such a plan,
                            but the Principal Deputy position had been vacant for months. As a result,
                            component heads we spoke with felt that they did not have the authority
                            to fill the leadership void that developed in this instance, and relied on the
                            Inspector General to impose whatever fiscal constraints were necessary to
                            establish an equitable budget allocation among the components. While the
                            Inspector General expressed concern about funding issues, she did not
                            take aggressive steps to remedy the situation. Although the deputies
                            ultimately resolved their financial situation, at the time of her resignation,
                            the component heads were still struggling among themselves with these
                            budgetary challenges.


                            The OIG conducts a variety of activities that aim to improve program
Evaluation of OIG           operations, identify and recover overpayments, and investigate and
Productivity                sanction those who violate statutes and regulations governing HHS
                            programs. Evaluating the effect of the Inspector General’s recent actions
                            on productivity is difficult to assess in the short term. For example, in
                            addition to the decisions she made and the personnel moves she initiated,
                            a variety of other factors contribute to productivity. Two factors make it
                            impossible to reach an overall conclusion about OIG productivity for any
                            limited period of time. First, fluctuations in performance are to be
                            expected in any given year, given the multitude of the OIG’s activities.
                            Second, it is difficult to compare performance from one year to the next
                            because the results in one period are heavily dependent on work in the
                            pipeline that was initiated in prior years. For example, it could take 2 or 3
                            years from the time a project is initiated until a recommendation is made
                            and subsequently implemented; investigating potential criminal activity
                            and prosecuting the individuals involved could take even longer. Many of
                            the OIG’s productivity measures remain comparable to prior years or
                            showed increases, but we found that several other key indicators of
                            performance have declined since the Inspector General took office.


Savings, OAS Reports, and   We analyzed a wide variety of performance measures to evaluate the OIG’s
Convictions                 effectiveness and found that many of these measures indicated that the




                            Page 20                                GAO-03-685 Review of HHS OIG Operations
                           OIG may be performing well, as table 1 shows. For example, in its
                           semiannual reports covering fiscal year 2002, the OIG identified almost $22
                           billion in savings attributable to its work.28 The OIG consistently reported
                           increases in these savings since fiscal year 1997. In addition, the number of
                           OAS reports published has increased each year since fiscal year 2000.
                           Also, the number of convictions resulting from the OIG’s investigative
                           referrals has steadily increased over the last 6 years.

                           Table 1: Select OIG Performance Measures—Fiscal Year 1997 through Fiscal
                           Year 2002

                                                     Fiscal     Fiscal      Fiscal     Fiscal     Fiscal     Fiscal
                                                       year       year        year       year       year       year
                                                      1997       1998        1999       2000       2001       2002
                            Savings (in billions
                            of dollars)                $7.6      $11.6      $12.6      $15.6      $18.0       $21.8
                            Number of OAS
                            reports                     324        187        207        300        311         333
                            Convictions                 215        261        401        414        423         517

                           Source: HHS OIG.



                           OI officials, who told us that the number of convictions is an important
                           measure of their success, also said that they appear to be on target in
                           achieving even more convictions in fiscal year 2003. At the midpoint of the
                           current fiscal year—March 31, 2003—the OIG reported 320 convictions.

                           Although it is difficult to measure the “sentinel” effect of some of the OIG’s
                           activities, it has taken steps to encourage lawful and ethical conduct by
                           the health care industry, which we believe should be acknowledged. For
                           example, in recent years the OIG has actively worked with the private
                           sector to develop compliance guidance to prevent the submission of
                           improper claims and to discourage inappropriate conduct by providers. In
                           March 2003, the OIG issued compliance guidance for ambulance suppliers.
                           This was followed by the publication of compliance guidance for
                           pharmaceutical manufacturers in April 2003.

Exclusions from Medicare   Like convictions, the number of providers excluded from the Medicare
                           program is a strong indicator of OI effectiveness. Although the number of



                           28
                            This amount consisted of almost $20 billion in savings related to the implementation of
                           OIG recommendations and other actions, $426 million saved as a result of OIG audits, and
                           $1.5 billion recovered due to OIG investigations.




                           Page 21                                       GAO-03-685 Review of HHS OIG Operations
                           exclusions imposed declined in fiscal year 2002, reversing a trend of
                           increases since fiscal year 1999, we were unable to determine whether this
                           decline reflects diminishing productivity. The OIG Chief Counsel
                           explained that, in 2002, the Department of Education became responsible
                           for processing most of the exclusions of health care providers who had
                           defaulted on the repayment of their federally funded student loans. The
                           Chief Counsel told us that in 2001, when the OIG still had this
                           responsibility, it excluded 518 providers who had defaulted on these loans.
                           In 2002—the transition year—the number of such providers excluded by
                           the OIG dropped to 166. Table 2 shows the OIG’s exclusions imposed since
                           fiscal year 1997.

                           Table 2: Medicare Exclusions Imposed—Fiscal Year 1997 through Fiscal Year 2002

                               Fiscal year    Fiscal year      Fiscal year      Fiscal year      Fiscal year        Fiscal year
                               1997                 1998             1999             2000             2001               2002
                               2,719               3,021            2,976            3,350            3,756              3,448

                           Source: HHS OIG.




Settlements, Recoveries,   We found declines in the use of sanctions available to the OIG. For
CMPs, and CIAs             example, we noted reductions in the number of settlements and recovery
                           amounts that result from the OIG’s False Claims Act referrals to DOJ.
                           Similarly, there were declines in the number of CMPs and CIAs recently
                           imposed. Table 3 shows that both the number of settlements and amount
                           of recoveries declined significantly in fiscal year 2002, compared to fiscal
                           years 2000 and 2001.

                           Table 3: Number and Amount of False Claims Act Settlements, Fiscal Years 2000
                                        a
                           through 2002

                                                                          Fiscal year          Fiscal year          Fiscal year
                                                                                2000                 2001                 2002
                               Number of settlements                              245                  248                  161
                                                                                                          b
                               Amounts recovered (in millions)                $974.0             $2,063.0               $518.7

                           Source: HHS OIG.
                           a
                           The OIG was unable to provide comparable data for fiscal years 1997 through 1999.
                           b
                           A substantial portion of the amount recovered in fiscal year 2001 is attributable to a single settlement
                           of $875 million.




                           Page 22                                              GAO-03-685 Review of HHS OIG Operations
OIG officials told us that its False Claims Act cases are strongly tied to
DOJ’s efforts to combat health care fraud, which have had to compete
with investigative resources dedicated to the September 11, 2001, terrorist
attacks. In addition, DOJ has reduced the number of its national health
care antifraud initiatives in recent years as well as the number of
individual cases that it pursues under the auspices of each initiative. OIG
officials also attribute this decline to its increasing emphasis on program
compliance, which the OIG believes has had a sentinel effect on providers.
Although the number of False Claims Act settlements and recoveries have
declined, DOJ officials and the Medicaid Fraud Control Unit
representatives we spoke to told us that they were pleased with the quality
of the support they received from the OIG in pursuing abusive or
fraudulent providers. However, several of these officials were concerned
that the OIG could not devote more resources to assist them in their
investigations.

Another important indicator of OIG productivity is the imposition of
CMPs. As shown in table 4, the number of these cases had a marked
decline since fiscal year 2000.

Table 4: Number and Amount of CMPs Imposed, Fiscal Year 1997 through Fiscal
Year 2002

                              Fiscal   Fiscal   Fiscal   Fiscal   Fiscal   Fiscal
                                year     year     year     year     year     year
                               1997     1998     1999     2000     2001     2002
 Number of CMP cases              16       58       67       58       30       34
 Amount of CMPs
 (in millions of dollars)       $0.5     $2.2    $1.9     $9.7     $1.1     $2.4

Source: HHS OIG.



In explaining the declining number of CMPs imposed, OIG officials offered
two explanations. First, they told us that the increase in convictions may
account for the decline in CMPs, which are typically imposed when more
stringent penalties cannot be used. Because convictions have recently
increased, there would be fewer opportunities to impose CMPs. Second,
officials suggested that the office’s previous aggressiveness in pursuing
patient dumping cases—which generally made up between 65 and 90
percent of all CMPs imposed each year—has been a strong deterrent. The
officials also emphasized that patient dumping cases have proven to be
resource intensive. As a result, the OIG can only afford to pursue the most
egregious cases.




Page 23                                 GAO-03-685 Review of HHS OIG Operations
CIAs, typically negotiated in conjunction with False Claims Act
settlements, are also an indicator of the OIG’s productivity. CIAs consist of
“integrity provisions” that are intended to ensure that a provider’s future
transactions with Medicare and other federal health care programs are
proper and valid. Such provisions include implementing an OIG-approved
compliance program, use of an independent review organization to
annually review provider billings, and other periodic monitoring and
reporting requirements. Providers accept the imposition of the CIAs and,
in turn, OCIG agrees not to seek additional administrative sanctions. As
table 5 shows, the number of active CIAs, as well as the number of newly
negotiated CIAs, has declined since 2001.

Table 5: Number of Active CIAs and Newly Negotiated CIAs for Fiscal Year 1997
through Fiscal Year 2002

                               Fiscal   Fiscal   Fiscal   Fiscal   Fiscal Fiscal
                                 year     year     year     year     year   year
                                1997     1998     1999     2000     2001 2002
 CIAs active at end of the
 fiscal year                     122      340      418      470      498        324
 New CIAs negotiated during
 the fiscal year                  83      233      138      101      112         63

Source: HHS OIG.



OCIG officials attributed the most recent decline to several factors. First,
the number of civil False Claims Act settlements declined between 2001
and 2002, resulting in fewer providers with whom to negotiate CIAs.
Second, in fiscal year 2002, OCIG began implementing the Inspector
General’s November 20, 2001, “Open Letter to Health Care Providers”
regarding CIAs. CIAs had long been a concern of providers because of the
costs associated with implementing the specified integrity provisions—
such as retaining an independent review organization each year to review
a statistically valid sample of billings. The November open letter
announced that the OIG’s policies and practices regarding CIAs were
being modified in response to those concerns.

The letter noted, in part, that the OIG would no longer seek to negotiate
CIAs with every provider settling a False Claims Act case with the
government. In some situations, corporate compliance matters would be
negotiated separately, after settlement of the False Claims Act case. The
letter also indicated that the OIG would consider increasing its reliance on
providers’ internal audit capabilities. For example, some providers may
not be required to retain an independent review organization. Similarly,



Page 24                                  GAO-03-685 Review of HHS OIG Operations
                         not all billing reviews would be subject to statistically valid random
                         sampling. Instead, these providers would be able to self-certify compliance
                         based on the error rate indicated by reviewing an initial sample of their
                         billings. Further, the new approach to CIAs could also be applied to
                         previously negotiated CIAs. As a result, in fiscal year 2002, OCIG
                         renegotiated 94 existing CIAs associated with False Claims Act
                         settlements. The revised CIAs contained “certification agreements,”
                         permitting providers to self-certify their compliance with the specific
                         provisions contained in their agreements, instead of retaining an external
                         review organization for this verification.


Outreach and Education   We also found that there has been a considerable drop in the testimonies
Activities               and outreach and education activities performed by OIG employees. Prior
                         to the current Inspector General’s tenure, the OIG frequently provided
                         assistance to congressional staff developing legislative proposals related
                         to HHS programs, offered informal advice about program oversight, and
                         testified at congressional hearings. In addition, OIG employees routinely
                         presented the results of their work at conferences, meetings, and in other
                         educational forums. However, as shown in table 6, the number of
                         testimonies and speeches and other presentations by OIG employees
                         revealed a significant decline in the assistance provided during the last
                         fiscal year—especially among OCIG employees.

                         Table 6: Testimonies, Speeches, and Other Presentations by Component for Fiscal
                         Years 2000, 2001, and 2002

                                                                                                   Speeches and other
                                                                        Testimonies                   presentations
                                                                 Fiscal     Fiscal    Fiscal     Fiscal   Fiscal Fiscal
                                                                   year       year      year       year     year    year
                                                                  2000       2001      2002       2000     2001     2002
                          Inspector General and                       7          3         6          3         3      7
                          Principal Deputy
                          OAS                                        0         1           0          4       24       17
                          OI                                         1         0           0         25       93       49
                          OEI                                        5         4           0         52       45       32
                          OMP                                        0         0           0          0        0        8
                          OCIG                                       1         2           0         58       49       15
                          Total                                     14        10           6        142      214      128

                         Source: GAO analyses of HHS OIG data.




                         Page 25                                                   GAO-03-685 Review of HHS OIG Operations
              We spoke with several congressional staff working for committees with
              jurisdiction over HHS programs who told us that they were not satisfied
              with the level of support they were currently receiving from the OIG.
              While formal requests for assistance were fulfilled, congressional staff
              indicated that OIG employees no longer discussed issues with them
              informally, as they had in the past. In our interviews, primarily at
              headquarters, several OIG employees recognized that they were no longer
              providing what congressional staff members considered to be a valuable
              service and what they considered to be a meaningful part of their work.

              OIG officials emphasized that their responsiveness to Congress is still an
              extremely high priority. They explained that the Inspector General
              instituted a more centralized approach to providing assistance to
              congressional staff and other external groups than had her predecessors in
              an attempt to ensure the quality and appropriateness of the assistance
              provided. In response to the declining number of testimonies, OIG senior
              officials told us that they are very willing to appear at congressional
              hearings when they have relevant material to present. However, they
              explained that the Inspector General does not consider the number of
              testimonies to be a relevant performance measure.

              In regard to speeches and other presentations, the decline was partly due
              to a policy change in the spring of 2002 that moved approval authority for
              these activities from the individual component heads to the Director of
              Public and Congressional Affairs. A lack of travel funds for collateral
              activities in the first half of the fiscal year also limited OIG’s staff
              participation in discretionary events. According to this Director, because
              she could not approve all of the requests, she considered the nature and
              size of the audience, in addition to the cost of the trip, in deciding whether
              approval would be granted.


OEI Reports   A number of employees of OEI told us that they have been frustrated with
              the cancelation of projects since the Inspector General took office.
              According to these individuals, many projects were well under way at the
              time of their termination. Although OEI managers could not tell us how
              many projects have been canceled under the current Inspector General’s
              tenure, they could tell us how many of the OEI projects begun in fiscal
              years 2000, 2001, and 2002 were subsequently canceled. As table 7 shows,
              27 reports, or about 26 percent of reports started in 2002, were canceled
              by the end of February 2003. According to OEI management, although
              some projects have been canceled, the work performed on these projects
              has been used by OEI teams involved in related OEI projects.


              Page 26                                GAO-03-685 Review of HHS OIG Operations
Table 7: Number and Percentage of OEI Projects That Were Begun in Fiscal Years
2000, 2001, and 2002 and Canceled by February 28, 2003

                                        Fiscal year 2000   Fiscal year 2001   Fiscal year 2002
 Reports Started                                     103                 80                103
 Number Subsequently
 Canceled                                            18                 14                 27
 Percent Subsequently
 Canceled                                            18                 18                 26

Source: GAO analysis of HHS OIG data.



We followed up on several projects that recently had been canceled to
better understand management’s rationale for doing so. Staff members
brought these projects to our attention during the course of our work.29 In
one instance, a project was canceled 7 months after the team had
conducted the exit conference with the agency. More than 4,000 staff
hours had been expended on this project, which included three full-time
and one part-time staff and a paid intern. The Deputy Inspector General
ultimately told the team that the report lacked sufficient evidence and
would not be presented to the Inspector General for signature. Although
the team subsequently prepared two memoranda as substitutes for the
report, no product was ever issued—despite interest from the provider
community and relevant agency.

We have learned that OEI projects continue to be canceled. For example,
in March 2003 the Inspector General took the unusual step of recalling a
draft report, which had been sent to the relevant agency for comment in
February 2003. Both the Deputy Inspector General for OEI and the
Inspector General approved this draft. Also in March 2003, a related
project, which had begun in fiscal year 2002, was canceled as the OEI team
prepared for an exit conference with the agency it had evaluated. OEI
management decided to combine the results of both projects into a single
report. Although the OEI staff involved with these projects contend that
they briefed management several times over the course of these
assignments, the Deputy Inspector General for OEI explained that he
made this decision once he realized there were inconsistencies between
the two projects that needed to be reconciled. As of late April 2003, no
report had been published.



29
 We could not determine whether these examples were representative of the average
amount of staff time expended on canceled projects, as OEI does not retain these data.




Page 27                                              GAO-03-685 Review of HHS OIG Operations
                      In conversations with the Inspector General and the Deputy for OEI, we
                      learned that they had been particularly concerned with the
                      appropriateness of criteria used by OEI staff in evaluations. They told us
                      that they were uncomfortable with the policy-oriented work that OEI had
                      done and were taking actions in the pipeline of OEI reports to address
                      what they viewed as shortcomings in the accuracy and sufficiency of
                      evidence in OEI products. The Deputy for OEI also explained that they
                      were providing training to all OEI staff on evidence standards with the
                      hope of improving the quality of future projects. OEI managers and staff
                      that we spoke to expressed surprise and frustration at these concerns and
                      pointed out that in the past, OEI had been recognized and praised by
                      Congress, the public, and the press for its high-quality evaluation work.


                      Based on our survey and extensive interviews, we found in the aggregate
Measure of Employee   that employee views about the organization, management, and their
Morale                personal job satisfaction remained positive and relatively unchanged
                      between 2002 and 2003. However, we identified several groups of
                      employees whose morale was of concern, namely, employees working at
                      headquarters, those at the highest levels of management, and staff working
                      in two OIG components. Our analysis of open-ended survey comments
                      also revealed areas of dissatisfaction that were not fully captured by other
                      items on our survey.

                      Our survey and interviews found, in the aggregate, a high level of
                      satisfaction among OIG employees. Overall, positive responses to survey
                      items in both 2002 and 2003 averaged over 80 percent and no item
                      responses changed more than 5 percentage points between the 2 years.
                      Positive responses were especially prevalent both years for statements
                      such as “All things considered, my component is a good place to work” (89
                      percent and 87 percent, respectively) and “I believe that my work is
                      important to the success of the component” (94 percent and 93 percent,
                      respectively). Similarly, our interviews revealed an overall high level of job
                      satisfaction, typified by comments such as “I believe my work makes a
                      difference.” Staff repeatedly cited their close relationships with their
                      immediate work groups and their involvement on important issues as
                      reasons for their job satisfaction. We also identified some examples of
                      improvement. For instance, in both the survey and interviews, OI
                      employees indicated there had been an increase in communication with
                      upper management in their component over the last year.

                      We found that positive responses to most survey items were lower for
                      headquarters employees than for field staff. For example, we found that


                      Page 28                                GAO-03-685 Review of HHS OIG Operations
there was a marked difference in positive responses—10 percentage
points—to the statement that “Everyone is treated with respect.” We also
found a 14 percentage point difference in positive responses to the
statement, “I have confidence and trust in my organization.” This pattern
of more positive responses from the field was consistent with statements
made during our interviews. Whereas many headquarters staff expressed
concern about the Inspector General’s actions, most field employees told
us that they felt insulated from, and largely unaffected by, the personnel
and other changes that occurred in headquarters.

In addition, our survey indicated that senior management staff—
specifically members of the Senior Executive Service and GS-15
employees—were considerably more concerned than all other employees
about OIG leadership. While 88 percent of employees at the GS-14 and
lower levels agreed with the statement, “As an organization, the OIG has
clear goals,” only 67 percent of the senior management staff—those at the
GS-15 level and members of the Senior Executive Service—responded
positively to that statement. Further, about 70 percent of the employees at
the GS-14 level and lower levels indicated that they had confidence and
trust in the organization. On the other hand, only 56 percent of senior
managers agreed with that statement. In our interviews, some senior
management staff were extremely clear about, and supportive of, the
Inspector General’s goals, but others expressed confusion about the
Inspector General’s priorities for their components. Many in senior
management were disquieted by the decisions that resulted in some of
their colleagues retiring, resigning, or being reassigned during 2002. These
managers explained that they were uncomfortable because they did not
fully understand the motivations behind the Inspector General’s actions.

Our survey revealed a substantial deterioration in OEI employees’ views of
the organization, management, and their personal job satisfaction. For
example, a statement focusing on whether “upper management clearly
communicates the goals of my component,” elicited an almost 50
percentage point drop in positive responses between January 2002 and
February 2003 (compared to a 1 percentage point decrease in the
aggregate). Similarly, there was a 34 percentage point drop in positive
responses to the statement about being “fully informed about major issues
affecting my job” (compared to a 5 percentage point drop overall). Finally,
about 62 percent of OEI employees indicated a lack of trust and
confidence in their organization (compared to 30 percent overall).

The decline in the overall climate in OEI can be linked to a number of
changes that profoundly affected the staff in that component. OEI staff


Page 29                                GAO-03-685 Review of HHS OIG Operations
told us that they were negatively affected by the abrupt departure of the
Deputy Inspector General, decreased communications from headquarters
management, changes and delays in the report review process, canceled
projects, and a narrowing of the scope of their work. In addition, OEI staff
explained that they have been disappointed by a decrease in the number of
their assignments that has resulted in what are considered to be “high-
profile” products—those signed by the Inspector General, those issued as
standard blue-cover reports, and those placed on the OIG’s Web site.30

Our employee survey also identified a distinct decline in positive
responses to survey items among OCIG employees—almost all of whom
work in headquarters. Of particular concern were answers to survey
statements addressing the adequacy of communication and job
satisfaction. For example, compared with 2002 survey results, there was a
22 percentage point drop in positive responses to the statement about
being kept fully informed about major job issues. OCIG employees also
reported a 16 percentage point drop in positive responses to the item “I am
satisfied with my job” and a 12 percentage point drop in their opinion that
“everyone is treated with respect,” compared with last year’s survey. Our
results also showed that 54 percent of OCIG employees lack trust and
confidence in their organization. The decline in the views of OCIG staff
can, in part, be attributed to changes implemented by the Inspector
General, and the atmosphere of anxiety and distrust that her actions
created. OCIG employees expressed concern about the circumstances
under which the former Chief Counsel and other senior managers left the
OIG. In addition, we were told that the curtailment of education and
outreach activities and contact with congressional committee staff had an
adverse effect on OCIG employee morale.

Finally, we analyzed the written comments that some employees opted to
write in the comment box provided on our survey. In total, 578 of the 1,451
survey respondents (40 percent) elected to write comments, which
allowed them to express opinions about issues that were not covered in
detail in our other survey items. Our analysis of these comments showed
that the majority were negative in tone (75 percent). Overall, the most


30
 OEI products can be signed by the Inspector General or a variety of individuals within the
component. Products may also be issued as a standard blue-cover report, a white-cover
report, a memorandum, or, on rare occasions, an e-mail. Reports signed by the Inspector
General receive the widest distribution and blue-cover reports are considered the most
prominent. In contrast, white-cover reports or memoranda signed by a regional OIG official
are considered to be of less importance and may receive only minimal distribution.




Page 30                                       GAO-03-685 Review of HHS OIG Operations
                     frequently mentioned categories were: morale (82 percent negative),
                     recent changes in headquarters management (61 percent negative),
                     sufficiency of training or equipment (85 percent negative), and quality of
                     headquarters management (80 percent negative). The demographic
                     characteristics of those who wrote comments were generally similar to the
                     overall sample of respondents, although those planning to leave the OIG in
                     the next 5 years and OEI staff were more likely to provide comments than
                     other survey respondents.


                     We met with officials from the OIG and the Office of the HHS Secretary
Agency Comments      and briefed them on our findings. We also provided them with a copy of
and Our Evaluation   our draft report. In written comments on a draft of this report, the
                     Inspector General disagreed with some of our findings and
                     characterizations of certain events. The Office of the Secretary did not
                     provide comments.

                     In reference to our discussion about the OIG’s productivity, the Inspector
                     General stated that the OIG had achieved substantial accomplishments
                     under her leadership and direction and cited the savings attributable to its
                     work in fiscal year 2002. In addition, she highlighted some of the OIG’s
                     nonmonetary achievements during her tenure. As we noted in our draft
                     report, many of the OIG’s productivity measures have remained steady or
                     improved, including those cited in the Inspector General’s letter. However,
                     we also pointed out that making a conclusive determination regarding
                     productivity in the short term is extremely difficult because current
                     savings are often the result of efforts started in prior years. Our draft also
                     identified declines in other important areas, such as settlements and
                     recoveries.

                     In addressing our findings related to employee morale, the Inspector
                     General pointed out that our survey of OIG employees showed that
                     employee morale remained positive and relatively unchanged during her
                     tenure. However, our survey also identified several groups of employees
                     whose morale was of concern. For example, senior managers were
                     considerably more disturbed than all other employees about OIG
                     leadership. Further, headquarters employees expressed less satisfaction
                     with the organization and leadership than their counterparts in the field.
                     While the majority of OIG staff are located in field offices and generally
                     were more satisfied with their work environment than headquarters
                     employees, they also felt less affected by the changes instituted by the
                     Inspector General than their colleagues in headquarters. A striking
                     exception to field office employee satisfaction, as discussed in our draft,


                     Page 31                                GAO-03-685 Review of HHS OIG Operations
was staff in OEI, whose dissatisfaction increased substantially compared
to last year.

The Inspector General also took issue with our discussion of the
circumstances surrounding the delay in beginning the Florida pension
audit. We included this example of her decision-making in our draft
because we believe that it demonstrated a lack of awareness and
appreciation of the need for the Inspector General to closely safeguard her
independence. We believe it is imperative that an inspector general
perform due diligence when responding to external requests—particularly
where independence could be questioned. We continue to believe that the
Inspector General’s decision to intervene at the request of senior officials
in the Florida governor’s office and her subsequent instructions to her
staff to delay the audit created a perception that her independence was
compromised. The Inspector General did not address the issue of her
independence in her comments. Instead, she disagreed with our
suggestion that the OIG’s report could have been available prior to the
November 2002 election, if the audit had begun 7 months earlier, in April
2002, as initially planned. While we cannot be certain that the final report
would have been issued by the election, we believe that it is likely that the
findings would have been made public—particularly since the actual
findings of the audit were reported by the media in March 2003, 6 months
after the work commenced.

Regarding the York Hospital matter, the Inspector General stated that she
discussed her concerns about the proposed settlement with her staff and
that she believed that seeking a larger settlement was not fair or
justifiable. However, during the course of our work, the Inspector General
told us that she did not direct a settlement or involve herself in
negotiations with the hospital. In any case, we believe that the Inspector
General’s actions in response to a letter from several members of
Congress contributed to the perception that she was not independent. The
Inspector General stated in her comments that she discussed this matter
with her attorneys and determined the OIG’s case was weak. However, the
former Chief Counsel and other OCIG attorneys told us that when she
instructed them to “get rid of” the case, she did not address the specific
facts or sufficiency of the evidence collected in this matter. Further, the
former OIG Chief Counsel did not share the Inspector General’s belief that
this was a weak case, and told us that he believed the government could
have obtained a higher settlement, absent any pressure to close the case
quickly.




Page 32                                GAO-03-685 Review of HHS OIG Operations
Concerning the OIG’s delayed report on the adjusted community rate
proposals, the Inspector General pointed out that the report was already
delayed 7 months by the time she took office. While we acknowledge this
fact, in our view, the already lengthy delay should have prompted her to
take more aggressive action to either obtain CMS’s comments or publish
the OIG’s report without them. Although the Inspector General stated that
she relied on the advice of her senior staff in delaying the issuance of this
report, our evidence indicates that some of her senior managers were very
concerned that she took little action to expedite CMS’s comments. The
Inspector General indicated that she spoke to the CMS administrator
regarding this matter, but she did not indicate when this discussion
occurred or how CMS responded. However, the Inspector General did not
indicate—nor did we find any evidence to suggest—that she took more
rigorous steps to obtain CMS’s comments, such as imposing a deadline for
the publication of the report, regardless of the status of the comments. The
Inspector General also stressed that the delay in publishing the OIG’s
report had nothing to do with her independence. However, the fact that
CMS strenuously objected to the OIG’s findings, and that CMS was allowed
to delay its comments for over a year, in our view, at least contributed to
the perception that the Inspector General was not independent. In
addition, the Inspector General disputed our statement that this report
was a time sensitive one of congressional interest. We disagree. During the
summer and fall of 2001, Medicare+Choice legislative proposals were
developed in both the House and Senate. Also congressional hearings were
held on the status of the Medicare+Choice progam, which included the
issue of adjusted community ratings.

Regarding our assessment of personnel changes in the OIG, the Inspector
General stated that her actions were appropriate and that the nature of the
Senior Executive Service encourages rotations among staff. While we do
not dispute the Inspector General’s authority to reassign staff to meet
office needs, the manner in which she made these changes clearly created
an atmosphere of anxiety in the OIG. The Inspector General stated that
she explained the rationale for her decisions “over and over again.”
However, our discussions with staff members revealed that they did not
understand why many of the changes had been made. Moreover, most of
the eight senior managers whose departures we found particularly
troubling told us that the Inspector General never explained to them why
she wanted them to leave their positions. The Inspector General also
commented that our employee survey suggested that there were no
widespread negative perceptions among staff concerning her personnel
decisions. We disagree with this observation because our survey did not
contain a question related to her personnel changes. Instead, our survey


Page 33                                GAO-03-685 Review of HHS OIG Operations
focused on employee satisfaction within their immediate work groups—
most of which are in the field where the consequences of the Inspector
General’s changes were least felt. The Inspector General noted that most
of the individuals who left the OIG following her changes were in new
positions that were “at least equal to or better than” the ones they
occupied at the OIG and that she always promoted from within the
organization. We do not think that the current employment situations of
these former staff members are relevant to the Inspector General’s
personnel decisions, nor is her practice of promoting other employees
from within the organization.

In our draft report, we also discussed the OIG’s budgetary difficulties. In
her comments, the Inspector General described her efforts to respond to
this situation, which primarily consisted of directing one of her senior
managers—who was in an acting deputy position—to develop strategies
for resolving the OIG’s financial problems and to work with other senior
OIG managers to develop a spending plan. While we would fully expect
that the Inspector General would want to call on her management team to
confront the agency’s budgetary problems, our concern was that she
personally played only a minor role in resolving this matter, particularly in
the absence of a Principal Deputy. Given the Inspector General’s limited
personal involvement, the OIG’s senior management team lacked a leader
with sufficient authority to mediate any disagreements between them and
to take aggressive steps to identify appropriate solutions to the
organization’s fiscal challenges.

Finally, the Inspector General’s comments pointed out that OI had taken
steps to correct the deficiencies we noted in its credentialing system. We
acknowledged that corrective action has been initiated and this was
reflected in our draft report.

We have reprinted the Inspector General’s letter in appendix III.


We are sending copies of this report to the Secretary of HHS, the HHS
Acting Principal Deputy Inspector General, the former Inspector General,
and other interested parties. We will also make copies available to others
upon request. In addition, this report will be available at no charge on
GAO’s Web site at http://www.gao.gov. We will also make copies available
to others upon request.




Page 34                                GAO-03-685 Review of HHS OIG Operations
If you or your staffs have any questions about this report, please call me at
(202) 512-7114. Additional GAO contacts and other staff members who
made key contributions to this report are listed in appendix IV.




William J. Scanlon
Director, Health Care Issues




Page 35                                GAO-03-685 Review of HHS OIG Operations
                          Appendix I: Scope and Methodology
Appendix I: Scope and Methodology


                          To conduct our review, we focused on three key areas—the leadership
                          exhibited by the current Inspector General, Janet Rehnquist, the
                          productivity of the Office of Inspector General (OIG) in recent years, and
                          employee morale. To do our work, we became familiar with the
                          organization and structure of the OIG and many of its policies and
                          procedures related to its budgeting, work planning, and report processing
                          activities. We also examined its personnel practices and controls over
                          certain OIG operations. As part of our efforts, we interviewed over 200
                          current and former OIG employees—including the Inspector General—and
                          conducted a Web-based survey of all employees to obtain their views
                          about their work environment. We also interviewed two current and one
                          former inspectors general from other federal agencies to better
                          understand their unique role and the principles they embraced to manage
                          their offices.

                          Our review included the examination of more than 8,000 pages of
                          documents, including material related to the OIG’s general policies and
                          procedures, human resource management, productivity measures, and
                          reporting standards. Many of these documents were given to us by OIG
                          managers and other employees. In addition, we requested—and were
                          given access to—the e-mail accounts of eight senior OIG managers. This
                          enabled us to retrieve selected messages that these individuals sent or
                          received for approximately a 6-month period on a wide variety of topics
                          affecting the management of the office. We also obtained documentation
                          from other organizations, including the President’s Council on Integrity
                          and Efficiency (PCIE), which recently issued a report on some of the
                          Inspector General’s actions.1


Interviews with Current   To obtain the views of OIG employees, we conducted a series of
and Former Employees      semistructured interviews. These interviews relied on open-ended
                          questions regarding the Inspector General’s leadership, productivity,
                          morale, and other OIG operations. We interviewed three categories of
                          employees—those who were selected randomly, those who volunteered
                          for interviews, and those we selected because of their knowledge or
                          position within the OIG.


                          1
                           The PCIE’s review focused on allegations that the Inspector General improperly possessed
                          a firearm and law enforcement credentials. Before these allegations were brought to the
                          attention of the PCIE, we planned to examine these matters. However, once the PCIE
                          commenced its investigation, we agreed with our requestors to exclude these matters from
                          the scope of our work and report on the PCIE’s findings.




                          Page 36                                      GAO-03-685 Review of HHS OIG Operations
Appendix I: Scope and Methodology




The randomly selected staff were chosen for interviews from five of the
OIG’s eight regional offices as well as employees in OIG headquarters. This
provided us with a broad geographic representation of OIG employees.
Our regional interviews were conducted in Atlanta, Boston, Chicago,
Dallas, and San Francisco. In order to afford confidentiality to
interviewees, we conducted our regional interviews in GAO offices in
those cities or in other non-OIG space. Some regional interviews were also
conducted by telephone. Headquarters staff were given the option of being
interviewed in either the OIG headquarters or GAO headquarters building.

At each of the five regional offices we visited, we interviewed
approximately 20 randomly selected employees who ranged from the GS-7
through the GS-15 levels. One hundred and six randomly selected regional
staff members were interviewed in total. Interviewees were selected using
a stratified, random sampling technique. Employees from the Office of
Audit Services (OAS), the Office of Investigations (OI), and the Office of
Evaluation and Inspections (OEI) were included in our random interviews
at each regional location.2 We also interviewed 32 randomly selected staff
from the OIG’s headquarters in Washington, D.C. and in nearby field
offices, including those in Baltimore, Columbia, and Rockville, Maryland.

To supplement our random interviews and to enhance identification of
issues of concern to all OIG employees, regardless of their location, we
invited all employees, through an OIG officewide e-mail, to contact us if
they wished to participate in an interview. We received 28 requests for
interviews and conducted many of these by telephone. We generally used
the same set of questions that were posed during the random interviews.

In both the random interviews and in discussions with those employees
who requested to be interviewed, we asked individuals to bring to our
attention any topic that they felt was noteworthy but which our questions
did not address. Some interviewees provided us with supporting
documentation that they felt was relevant. In some instances, interviewees
were reluctant to provide us with documentary evidence and were also
concerned about confidentiality. In these situations, we attempted to
corroborate the information they shared with us through other means,
without jeopardizing their confidentiality.


2
 The OIG does not employ members of the Senior Executive Service in its regional
locations. In addition, the Office of Management and Policy (OMP) and the Office of
Counsel to the Inspector General (OCIG) typically maintain only a few staff members in
regional offices.




Page 37                                      GAO-03-685 Review of HHS OIG Operations
                              Appendix I: Scope and Methodology




                              As our work progressed, we identified a number of individuals whom we
                              believed would be able to supply us with important information in areas
                              we had identified as potential areas of concern, including the
                              independence of the Inspector General, turnover among senior OIG
                              personnel, and changes in productivity and morale. In total, we
                              interviewed 44 such individuals, many of whom were current or former
                              OIG employees with first-hand knowledge about issues central to our
                              review.


Evaluation of the Inspector   To determine the extent to which policies and procedures were in place to
General’s Independence        ensure that all OIG employees maintained a high degree of independence,
                              we reviewed existing OIG policies, procedures, and protocols. We also
                              reviewed guidance issued to the Inspector General community by the
                              PCIE and the Government Auditing Standards pertaining to independence.
                              We also discussed the OIG’s protocols for responding to requests for
                              information or assistance from external entities with selected current and
                              former senior-level OIG officials. In addition, we obtained information
                              regarding specific instances concerning the Inspector General’s
                              independence from interviews with current and former OIG officials as
                              well as the Inspector General.


Review of Personnel           To evaluate recent personnel changes among OIG officials, we examined
Information                   detailed personnel information for 24 current or former OIG employees
                              who had resigned, retired, been reassigned, or promoted during the
                              Inspector General’s tenure.3 We reviewed the official personnel files for
                              these individuals and collected relevant information including their history
                              of government service; time employed by the OIG; and any awards,
                              bonuses, and letters of commendation that they had received. We also
                              reviewed the performance appraisals these individuals had received for
                              the prior 3 years.

                              Finally, we reviewed documentation specifically concerning the
                              promotion of an OIG staff member to the position of Director of Public
                              and Congressional Affairs. Among other things, we examined relevant
                              position descriptions, job announcements, and e-mail communications.




                              3
                              We requested the official personnel files of 25 individuals but 1 file could not be located.
                              We do not believe that this had a material effect on our review.




                              Page 38                                         GAO-03-685 Review of HHS OIG Operations
                             Appendix I: Scope and Methodology




                             We also interviewed OIG officials regarding this and other personnel
                             decisions made during the Inspector General’s tenure.


Examination of the           To understand the purpose, frequency, and duration of the Inspector
Inspector General’s Travel   General’s travel, we examined the itineraries, travel orders, and travel
                             vouchers for all of the trips she had taken from August 2001 through
                             November 2002. For trips for which the itineraries lacked sufficient
                             information about the Inspector General’s business activities, we
                             requested additional information and discussed these trips with the
                             Inspector General. We also identified all OIG employees that accompanied
                             her when she traveled. We obtained similar travel records for two senior
                             staff members who accompanied the Inspector General on several
                             occasions and discussed their roles during these trips with them.


Analysis of OIG              To determine whether the OIG has experienced any changes in
Performance Measures         productivity since the current Inspector General took office in August
                             2001, we reviewed OIG publications, such as its semi-annual reports, to
                             determine how savings, recommendations, and other performance
                             indicators changed since fiscal year 2000. From OAS and OEI, we
                             collected data about the number of projects initiated, reports published,
                             and reports canceled in fiscal year 2002. We compared these data to the
                             number of reports that were initiated, published, and canceled from fiscal
                             years 2000 and 2001—before the current Inspector General’s tenure.

                             To measure productivity in OI and OCIG, we reviewed data on
                             investigations, prosecutions, and convictions, and exclusions from fiscal
                             year 1997 through fiscal year 2002. We also examined relevant monetary
                             accomplishments including the number and amounts of fines and penalties
                             assessed, civil settlements and judgments, cost savings claimed, and
                             recoveries and court-ordered restitutions. Our review included an
                             examination of OCIG files pertaining to eight civil monetary penalty cases.
                             We also judgmentally selected 18 corporate integrity agreements instituted
                             since fiscal year 2000, to determine the extent to which new policies
                             outlined in the Inspector General’s November 20, 2001, open letter to
                             providers had been implemented.

                             In addition, we discussed the OIG’s productivity with some of its partners
                             in the law enforcement community to determine whether there have been
                             recent changes in the level of OI’s or OCIG’s support. Specifically, we
                             spoke to officials from the Department of Justice and seven of its U.S.
                             Attorneys’ Offices. We also discussed this matter with officials from


                             Page 39                               GAO-03-685 Review of HHS OIG Operations
                        Appendix I: Scope and Methodology




                        Medicaid Fraud Control Units in California, Florida, Illinois, and New York
                        and a representative from the National Association of Medicaid Fraud
                        Control Units.

                        Finally, we assessed the OIG’s productivity in terms of its outreach and
                        education activities. To do this, we collected information regarding the
                        number of speeches, presentations, and testimonies given by various OIG
                        employees. We also discussed this matter with OIG employees and
                        professional staff members at several congressional committees with
                        jurisdiction over Medicare and other federal health programs.


Analysis of Web-Based   To elicit broad-based views of OIG employees on morale and other issues,
Survey Results          we conducted a Web-based survey. We solicited OIG employee
                        participation by e-mail, using an e-mail list provided by the OIG. We first
                        sent a notification e-mail alerting the employees to the upcoming survey
                        and to check for inaccurate e-mail addresses. We verified with the OIG
                        that the individuals whose e-mails were returned as “not deliverable” were
                        no longer active OIG employees. We then sent an activation e-mail to each
                        employee, containing a unique user name, password, and instructions for
                        accessing the survey on the GAO Web site. We sent three follow-up
                        reminder e-mails to nonrespondents. Employees were given 1 month to
                        complete the survey. Of the 1,621 employees on our list, 1,451 completed
                        the survey for a response rate of 90 percent.

                        The survey contained 29 items asking employees for their views on the
                        organization, management, and their personal job satisfaction. The four
                        possible responses were: strongly agree, somewhat agree, somewhat
                        disagree, and strongly disagree. The first 26 items on the survey were
                        identical to those from an employee survey conducted by the OIG in
                        January 2002, which we used as a basis for comparing our survey results.
                        We included three additional items: “Overall, the OIG is improving as a
                        place to work and make a difference,” “I have confidence and trust in my
                        organization,” and “In the last 15 months, morale in my work group has
                        improved.” We also included seven demographic items and provided an
                        open-ended comment box. We included a final item for the respondent to
                        mark the survey as “Completed,” which, if checked, indicated that the
                        respondent gave us permission to include his or her responses in our
                        analyses.

                        In total, 578 of the 1,451 survey respondents (40 percent) elected to write
                        open-ended comments. We coded 573 of the comments for tone (positive,
                        negative, neutral) and content. To code content, we used 36 categories


                        Page 40                               GAO-03-685 Review of HHS OIG Operations
Appendix I: Scope and Methodology




related to morale, productivity, management, personnel issues,
independence, propriety, and other topics. The comments of three
respondents were not coded because they did not fit into any of our
coding categories. The comments of two additional respondents were not
coded because they did not mark their surveys as “Completed.” The unit of
analysis was the comment—not the respondent. For example, if one
respondent made several comments that fell into different categories, each
comment was coded separately.




Page 41                              GAO-03-685 Review of HHS OIG Operations
               Appendix II: Insufficient Internal Controls
Appendix II: Insufficient Internal Controls
               Over the OIG’s Credentialing System



Over the OIG’s Credentialing System

               In response to allegations that certain employees, including the Inspector
               General, possessed improper credentials, we evaluated the security of the
               OIG’s credentialing system. OIG employees are issued credentials that
               display their photographs, signatures, job titles, and, in the case of OI
               investigators, their status as law enforcement officers. Because adequate
               internal controls are key to preventing mismanagement and operational
               problems, our evaluation centered on the controls governing this
               computer-based system, physically located in the OIG headquarters
               building. In addition, recent advances in information technology have
               heightened the importance of ensuring that controls over electronically
               stored information are frequently reviewed and updated to minimize the
               threat of improper use. Changes in information technology led to revisions
               in Standards for Internal Controls in the Federal Government,1 which
               became effective at the beginning of fiscal year 2000, to reflect new
               guidance for modern computer systems. Our work revealed serious
               weaknesses in the internal controls governing the OIG’s credentialing
               system.

               The physical security of the computer system used to produce credentials
               was inadequate. The system was housed in a public file room with
               unrestricted access. Because the room also contained a copier machine,
               many individuals routinely entered the area. The system’s backup tapes
               were located in an unlocked drawer in the credentialing system desk. In
               addition, we also found the stock paper containing the agency’s insignia,
               used in the production of all credentials, stored unlocked in a cabinet in
               the same room.

               In addition, we found deficiencies in the system itself, making it even more
               vulnerable to misuse. For example, we found that neither the computer’s
               screen saver nor the credentialing software programs on the computer
               were password protected, and the employee photo and signature files
               were not adequately protected. The system also did not have the capability
               to create a history log or audit trail to identify past users. Given the
               system’s unsecured location, we determined that the system itself was
               easily susceptible to unauthorized access through the use of several
               techniques, such as a device that could identify recent keystrokes to
               capture the names of recent users and their passwords.




               1
               U.S. General Accounting Office, Standards for Internal Controls in the Federal
               Government, (GAO/AIMD-00-21.3.1, November 1999).



               Page 42                                       GAO-03-685 Review of HHS OIG Operations
Appendix II: Insufficient Internal Controls
Over the OIG’s Credentialing System




When we visited the credentialing room we found it empty, the computer
on, and the screensaver active. By touching the computer’s mouse we
were able to cancel the screensaver and observed an open record on
display. We found that we could access, copy, modify, and delete sensitive
files including employee photos, digital signatures, and personnel
information with little likelihood of detection or system recovery. It would
also have been possible to create a false, unauthorized set of credentials.
OIG officials have since told us that they have taken steps to correct these
weaknesses.




Page 43                                       GAO-03-685 Review of HHS OIG Operations
              Appendix III: Comments from the Inspector
Appendix III: Comments from the Inspector
              General



General




              Page 44                                     GAO-03-685 Review of HHS OIG Operations
Appendix III: Comments from the Inspector
General




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Appendix III: Comments from the Inspector
General




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Appendix III: Comments from the Inspector
General




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Appendix III: Comments from the Inspector
General




Page 49                                     GAO-03-685 Review of HHS OIG Operations
                  Appendix IV: GAO Contacts and Staff
Appendix IV: GAO Contacts and Staff
                  Acknowledgments



Acknowledgments

                  Leslie G. Aronovitz, (312) 220-7600
GAO Contacts      Geraldine Redican-Bigott, (312) 220-7678


                  Major contributors to this report were Enchelle D. Bolden, Helen
Acknowledgments   Desaulniers, Curtis Groves, Shirin Hormozi, Behn Kelly, Terry Richardson,
                  Christi Turner, and Anne Welch.




(290242)
                  Page 50                               GAO-03-685 Review of HHS OIG Operations
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