Seventeen of Thirty Selected Health Centers Did Not Use or May Not Have Used Their Hrsa Co

Summary

Report No. A-02-21-02005, dated May 2023, from the Department of Health and Human Services Office of Inspector General, Office of Audit Services, titled Seventeen of Thirty Selected Health Centers Did Not Use or May Not Have Used Their HRSA COVID-19 Supplemental Grant Funding in Accordance With Federal Requirements. The audit covered COVID-19 supplemental grant funding totaling $70,305,389 awarded during fiscal year 2020 to 30 selected health centers. The report states that 10 health centers charged unallowable costs totaling $787,152 and 13 health centers may not have properly allocated salary and fringe benefits costs totaling $15,056,835. It states that HRSA partially concurred with the recommendations, including that health centers refund unallowable and improperly allocated costs to the Federal Government.

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Department of Health and Human Services
OFFICE OF
INSPECTOR GENERAL
SEVENTEEN OF THIRTY SELECTED
HEALTH CENTERS DID NOT USE OR
MAY NOT HAVE USED THEIR HRSA
COVID-19 SUPPLEMENTAL GRANT
FUNDING IN ACCORDANCE WITH
FEDERAL REQUIREMENTS
Inquiries about this report may be addressed to the Office of Public Affairs at
Public.Affairs@oig.hhs.gov.
Amy J. Frontz
Deputy Inspector General
for Audit Services
May 2023
A-02-21-02005

Office of Inspector General
https://oig.hhs.gov
The mission of the Office of Inspector General (OIG) is to provide objective oversight to promote the
economy, efficiency, effectiveness, and integrity of the Department of Health and Human Services (HHS)
programs, as well as the health and welfare of the people they serve.  Established by Public Law
No. 95-452, as amended, OIG carries out its mission through audits, investigations, and evaluations
conducted by the following operating components:
Office of Audit Services. OAS provides auditing services for HHS, either by conducting audits
with its own audit resources or by overseeing audit work done by others. The audits examine the
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responsibilities and provide independent assessments of HHS programs and operations to reduce waste,
abuse, and mismanagement.
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and the public with timely, useful, and reliable information on significant issues. To promote impact,
OEI reports also provide practical recommendations for improving program operations.
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public health entities to minimize adverse patient impacts following enforcement operations.  OI also
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cases. In addition, OCIG publishes advisory opinions, compliance program guidance documents, fraud
alerts, and other resources regarding compliance considerations, the anti-kickback statute, and other
OIG enforcement authorities.

Notices
THIS REPORT IS AVAILABLE TO THE PUBLIC
at https://oig.hhs.gov
Section 8M of the Inspector General Act, 5 U.S.C. App., requires
that OIG post its publicly available reports on the OIG website.
OFFICE OF AUDIT SERVICES FINDINGS AND OPINIONS
The designation of financial or management practices as
questionable, a recommendation for the disallowance of costs
incurred or claimed, and any other conclusions and
recommendations in this report represent the findings and
opinions of OAS.  Authorized officials of the HHS operating
divisions will make final determination on these matters.

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Report in Brief
Date: May 2023
Report No. A-02-21-02005
Why OIG Did This Audit
In response to the unprecedented
crisis of COVID-19, Congress
appropriated approximately $2 billion
for supplemental grant funding to the
Health Resources and Services
Administration (HRSA) Health Center
Program. HRSA awarded this
supplemental grant funding to health
centers and made the funds
immediately available to help
vulnerable populations and
underserved communities detect,
prevent, diagnose, and treat
COVID-19. This audit is part of the
OIG’s COVID-19 response strategic
plan.
Our objective was to determine
whether selected health centers used
their COVID-19 supplemental grant
funding in accordance with Federal
requirements and grant terms.
How OIG Did This Audit
Our audit covered COVID-19
supplemental grant funding totaling
$70,305,389 awarded during fiscal
year 2020 to 30 selected health
centers.  We judgmentally selected
these health centers for audit based
on their geographic location, financial
risk level, and grant award amounts.
For each of the sampled health
centers, we interviewed financial and
program officials and reviewed
financial documentation and other
records.
Seventeen of Thirty Selected Health Centers Did Not
Use or May Not Have Used Their HRSA COVID-19
Supplemental Grant Funding in Accordance With
Federal Requirements
What OIG Found
Seventeen of the 30 selected health centers did not use or may not have used
a portion of their COVID-19 supplemental grant funding in accordance with
Federal requirements and grant terms. Specifically, 10 health centers charged
unallowable costs totaling $787,152 and 13 health centers may not have
properly allocated salary and fringe benefits costs totaling $15,056,835 to
their COVID-19 supplemental grant funding. (The total exceeds 17 because 6
health centers had more than 1 deficiency.) These funds could have been
used to support health centers’ activities related to COVID-19 response,
including providing essential testing services to monitor and suppress
COVID-19.
These deficiencies occurred because health centers did not always follow
HRSA’s guidance for financial management systems and internal controls to
ensure that only allowable, allocable, and documented costs were charged to
their COVID-19 supplemental grant funding.
What OIG Recommends and HRSA Comments
We made a series of recommendations to HRSA, including that it require
health centers in our sample to refund unallowable and improperly allocated
costs to the Federal Government. In addition, we recommended that HRSA
assist the 17 health centers to implement HRSA’s guidance for developing and
maintaining financial management systems and internal controls that ensure
only allowable, allocable, and documented costs to their HRSA supplemental
grant funding.
In written comments on our draft report, HRSA partially concurred with our
recommendations and described actions it plans to take to address them.
HRSA stated that it is committed to reviewing health centers’ documentation
and following up on those claims that can be substantiated, and will work with
the identified health centers to resolve any issues. We maintain that our
findings and recommendations are valid and acknowledge HRSA’s efforts to
ensure appropriate use and oversight of COVID-19 supplemental grant
funding.
The full report can be found at https://oig.hhs.gov/oas/reports/region2/22102005.asp.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Why We Did This Audit ...................................................................................................1
Objective .........................................................................................................................1
Background .....................................................................................................................1
The Health Center Program..................................................................................1
COVID-19 Supplemental Grant Funding...............................................................2
How We Conducted This Audit.......................................................................................3
FINDINGS.....................................................................................................................................3
Health Centers Charged Unallowable Costs ...................................................................4
Health Centers Charged Costs for Testing Services Paid by HRSA
COVID-19 Uninsured Program...........................................................................5
Costs Not Related to the Grants or Adequately Supported.................................5
Costs Not Consistent with Grant Funding Purpose..............................................6
Duplicate Salaries Charged to Multiple Funding Sources ....................................7
Salary Exceeded Federal Executive Level II Salary Limit ......................................7
Health Centers May Not Have Properly Allocated Costs to Their COVID-19
Supplemental Grant Funding .......................................................................................7
Salary and Fringe Benefits Costs Charged Based on Budget Estimates...............7
Salary and Fringe Benefits Costs May Not Be Consistent with Grant
Funding Purpose ................................................................................................8
Cause of Unallowable and Potentially Improperly Allocated Costs ...............................8
RECOMMENDATIONS .................................................................................................................9
HEALTH RESOURCES AND SERVICES ADMINISTRATION COMMENTS ........................................9
OFFICE OF INSPECTOR GENERAL RESPONSE ............................................................................10
APPENDICES
A: Audit Scope and Methodology.................................................................................12
B: Health Resources and Services Administration Comments ....................................14
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)

INTRODUCTION
WHY WE DID THIS AUDIT
In January 2020, the Department of Health and Human Services (HHS) declared the outbreak of
COVID-19 in the United States a public health emergency.  In response to this unprecedented
crisis, Congress appropriated approximately $2 billion for supplemental grant funding for the
Health Resources and Services Administration (HRSA) Health Center Program.  HRSA awarded
this supplemental grant funding to health centers and made the funds immediately available to
help vulnerable populations and underserved communities detect, prevent, diagnose, and treat
COVID-19.
COVID-19 created extraordinary challenges for the delivery of health care and human services
to the American people.  As the oversight agency for HHS, the Office of Inspector General (OIG)
oversees HHS’s COVID-19 response and recovery efforts.  This audit is part of the OIG’s COVID­
19 response strategic plan.1, 2
OBJECTIVE
Our objective was to determine whether selected health centers used their COVID-19
supplemental grant funding in accordance with Federal requirements and grant terms.
BACKGROUND
The Health Center Program
The Health Center Program, authorized under section 330 of the Public Health Service Act
(42 U.S.C. § 254b), awards grants to health centers to provide primary health care services to
medically underserved communities and vulnerable populations with limited access to health
care.  Health centers focus on integrating care for their patients across a full range of statutorily
required and additional services, including medical, dental, mental health, substance use
disorder, and vision services.  Within HHS, HRSA administers the Health Center Program.
1 OIG’s COVID-19 response strategic plan and oversight activities can be accessed at HHS-OIG’s Oversight of COVID­
19 Response and Recovery | HHS-OIG.
2 In a separate audit, we plan to review HRSA’s monitoring of high-risk COVID-19 grantees.
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
1

COVID-19 Supplemental Grant Funding
In fiscal year (FY) 2020, HRSA awarded approximately $2 billion in supplemental grant funding
to 1,387 health centers nationwide to respond to the COVID-19 public health emergency.3 The
funding was intended to support health centers’ activities related to the detection, prevention,
diagnosis, and treatment of COVID-19, including maintaining or increasing health center
capacity and staffing levels during the pandemic.  It also provided funding for health centers to
purchase, administer, and expand capacity for testing to monitor and suppress COVID-19.4
HRSA separately awarded grants for each of the COVID-19 supplemental grant funding
appropriations with different activity codes to support its tracking of COVID-19-related
spending.5, 6
To expedite distribution of the COVID-19 supplemental grant funding, HRSA did not require
health centers to apply for these funds.  Instead, HRSA made the funds immediately available to
health centers and required the health centers to submit activity overviews and budget
information within 30 days of the award release date.7 Health centers were also required to
submit quarterly progress reports to HRSA on the status of activities supported with each
supplemental grant funding appropriation.8 Specifically, health centers were required to report
on activities in five categories: (1) staff and patient safety, (2) testing, (3) maintaining or
increasing health center capacity and staffing levels, (4) telehealth, and (5) minor
3 This included funding from three COVID-19 appropriation bills: (1) the Coronavirus Aid, Relief and Economic
Security (CARES) Act ($1.32 billion), (2) the Paycheck Protection Program and Health Care Enhancement Act ($583
million), and (3) the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 ($100
million).  We refer to the amount appropriated through these laws as COVID-19 supplemental grant funding.  The
performance period for these one-time supplemental awards was 12 months and health centers were permitted
to charge pre-award costs to the awards to support expenses related to the COVID-19 public health emergency
dating back to January 20, 2020.  Health centers could request for an extension period up to 12 months to
complete approved projects or programs by submitting prior approval requests to HRSA.
4 This funding was from the $583 million COVID-19 supplemental grant funding appropriation awarded for
expanding capacity for COVID-19 testing.  See footnote 3.
5 Funding appropriated by the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020,
the CARES Act, and the Paycheck Protection Program and Health Care Enhancement Act were issued under activity
codes H8C, H8D, and H8E, respectively.
6 The COVID-19 supplemental grant funding was one of many Federal programs to address the pandemic, including
the HRSA COVID-19 Uninsured Program, which allowed providers, including health centers, to enroll and submit
claims for reimbursement of COVID-19 testing and treatment made to uninsured individuals. Health centers also
received operational and other supplemental grants.  Operational grants are generally ongoing funding while
supplemental grants are usually one-time funding for a specific purpose.
7 During a normal grant application process, this information is usually submitted to, reviewed, and approved by
HRSA before funds are awarded to a grant recipient.
8 HRSA reviewed quarterly progress reports submitted by health centers for each award and monitored health
centers’ drawdown activities.
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
2

alteration/renovation, as applicable.9 HRSA provided guidance to the health centers on
allowable uses of the supplemental funds, including terms and conditions in grant award
notices.  It also maintained technical assistance webpages, online Frequently Asked Questions
(FAQs), and recorded webinars.
HOW WE CONDUCTED THIS AUDIT
Our audit covered COVID-19 supplemental grant funding totaling $70,305,389 awarded during
FY 2020 to 30 selected health centers.  We judgmentally selected these health centers for audit
based on their geographic location, financial risk level, and grant award amounts.10, 11 For each
of the sampled health centers, we interviewed financial and program officials and reviewed
financial documentation and other records to determine whether the health center (1) used the
awarded supplemental grant funding to prepare for, prevent, and respond to COVID-19,
including maintaining or increasing its capacity and staffing level; (2) purchased, administered,
and expanded capacity for testing to monitor and suppress COVID-19; (3) complied with grant
reporting requirements; and (4) charged allowable costs for all awarded COVID-19
supplemental grant funding.
We conducted this performance audit in accordance with generally accepted government
auditing standards.  Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives.  We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
Appendix A contains the details of our audit scope and methodology.
FINDINGS
Seventeen of the 30 selected health centers did not use or may not have used a portion of their
COVID-19 supplemental grant funding in accordance with Federal requirements and grant
terms. Of the 17 health centers, 10 charged unallowable costs and 13 may not have properly
allocated costs to their COVID-19 supplemental grant funding. The total number of health
centers with deficiencies exceeds 17 because 6 health centers had more than 1 deficiency.
9 Health centers are also required to submit annual Federal Financial Reports and Tangible Personal Property
Reports after the completion of each project.
10 We selected health centers located within the counties with the highest number of COVID-19 cases in calendar
year (CY) 2020.  We obtained the COVID-19 case data by county from the USAFacts.org website in January 2021.
11 The health centers’ financial risk levels were determined by HRSA’s Division of Financial Integrity.  HRSA
considered 6 of the 30 health centers to be at high or moderate risk levels at the time of award or as of
March 31, 2021.
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
3

These deficiencies occurred because although HRSA provided supplemental grant funding
guidance, including allowable uses of funds, and monitored each award, health centers did not
always follow HRSA’s guidance. Specifically, health centers’ financial management systems and
internal controls did not always ensure that only allowable, allocable, and documented costs
were charged to their COVID-19 supplemental grant funding.
As a result, 10 of the 30 sampled health centers charged unallowable costs totaling $787,152 to
their COVID-19 supplemental grant funding and 13 health centers may not have properly
allocated costs totaling $15,056,835 to their COVID-19 supplemental grant funding. Nearly 50
percent of the $787,152 in unallowable costs were charged to the COVID-19 supplemental
grant funding for expanding capacity for COVID-19 testing.  These funds could have been used
to provide essential testing services to monitor and suppress COVID-19. In addition, improperly
allocated costs could have been used to support health centers’ activities related to the COVID­
19 public health emergency, including preventing, preparing for and responding to COVID-19.
HEALTH CENTERS CHARGED UNALLOWABLE COSTS
Ten of the thirty sampled health centers charged unallowable costs to their COVID-19
supplemental grant funding totaling $787,152. The table below summarizes the unallowable
costs we identified and the associated number of health centers.12
Table: Unallowable Costs Associated With Sampled Health Centers
Unallowable Costs
No. of Health
Centers
Amount
Costs for Testing Services Paid by HRSA COVID-19
Uninsured Program
4
$413,188
Costs Not Related to the Grants or Adequately Supported
4
18,837
Costs Not Consistent with Grant Funding Purpose
3
319,300
Duplicate Salaries Charged to Multiple Funding Sources
2
4,352
Salary Exceeded Federal Executive Level II Salary Limit
1
31,475
Total
14
$787,152
12 The total number of health centers with deficiencies exceeds 10 because 3 health centers had multiple
deficiencies.
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
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Health Centers Charged Costs for Testing Services Paid by HRSA COVID-19 Uninsured Program
Health centers may not use their COVID-19 supplemental grant funding to support costs that
are reimbursed or compensated by other Federal or State programs that provide for such
benefits, including the HRSA COVID-19 Uninsured Program (the UIP).13 Grant recipients shall
consider payments from the UIP to be payment in full for COVID-19 testing and/or testing-
related items, vaccine administration, care, or treatment.14
Four sampled health centers charged laboratory costs for processing COVID-19 tests to their
COVID-19 supplemental grant funding, submitted claims for these services to the UIP, and
received reimbursements from the UIP for these services.15 In total, the four health centers
charged laboratory costs related to COVID-19 testing totaling $413,188 to their COVID-19
supplemental grant funding and received reimbursement totaling $410,433 from the UIP for
these services.  According to HRSA, health centers should have accepted any payments from
the UIP as payment in full and should not have charged the costs to their COVID-19
supplemental grant funding, including the difference between the amount claimed to the UIP
and the amount they were reimbursed by the UIP.16, 17
Costs Not Related to the Grants or Adequately Supported
To be allowable under Federal awards, costs must be necessary and reasonable for the
performance of the Federal award and be allocable (45 CFR § 75.403(a)).  The financial
management system of each grant recipient must provide accurate, current, and complete
disclosure of the financial results of each Federal award or program.  The grant recipient’s
records must identify the source and application of funds for federally funded activities and be
supported by source documentation (45 CFR §§ 75.302(b)(2) and (3)).
13 See FY 2020 Expanding Capacity for Coronavirus Testing Supplemental Funding Guidance Reporting
Requirements for Health Centers | Bureau of Primary Health Care (hrsa.gov) and Coronavirus-Related Funding
FAQs | Bureau of Primary Health Care (hrsa.gov).
14 Terms and Conditions for Participation in the HRSA COVID-19 Claims Reimbursement to Health Care Providers
and Facilities for Testing, Treatment, and Vaccine Administration for the Uninsured Program.
15 We worked with OIG’s Division of Data Analytics (DDA) to identify claims for COVID-19 testing submitted to the
UIP by the 30 sampled health centers.  Eleven of the 30 health centers submitted claims for COVID-19 testing to
the UIP.  We matched the claims data provided by DDA for these health centers with information provided by the
health centers for laboratory costs related to COVID-19 testing charged to their COVID-19 supplemental grant
funding.
16 As a result of our audit, two of the health centers returned a total of $379,805 to the UIP.
17 Working with OIG’s DDA, we determined that 506 of the 1,357 health centers not selected for this review
submitted claims for COVID-19 testing to and received reimbursement from the UIP totaling $169,864,569. We
plan to conduct additional audit work to determine if these health centers charged COVID-19 laboratory costs to
both their COVID-19 supplemental grant funding and the UIP.
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
5

Four sampled health centers charged costs totaling $18,837 to their COVID-19 supplemental
grant funding that were not related to the grants or adequately supported.  One of these health
centers stated that it erroneously charged computer and supplies costs that should have been
charged to its Head Start program.  Another health center charged computer costs to its
COVID-19 supplemental grant funding based on a price quote; however, the actual invoiced
amount for these costs was less than the quote.  A third health center provided two invoices for
purchasing supplies (e.g., personal protective equipment (PPE), masks, gloves, gowns);
however, the invoices did not contain adequate information.  Specifically, only the vendor's
name was included on the invoices (the invoices did not include the vendor’s address and
contact information, an invoice number, or a date).  The remaining health center drew down
funds from its COVID-19 supplemental grant funding for purchasing PPE. However, the health
center could not provide documentation to support the expenditures.18
Costs Not Consistent with Grant Funding Purpose
A cost is allocable to a particular Federal award if the goods or services involved are chargeable
or assignable to that Federal award in accordance with relative benefits received (45 CFR
§ 75.405(a)).  In addition, COVID-19 supplemental grant funding for expanding capacity for
COVID-19 testing must be used by health centers for necessary expenses to purchase,
administer, and expand capacity for testing to monitor and suppress COVID-19.19
Three sampled health centers charged salaries and other costs, totaling $319,300, to their
COVID-19 supplemental grant funding awarded for expanding capacity for COVID-19 testing,
that were not related to COVID-19 testing activities and therefore not consistent with grant
terms and conditions.  Specifically, one health center charged 100 percent of salary and fringe
benefits costs to its COVID-19 supplemental grant funding for an OB/GYN physician that did not
work directly with COVID-19 testing.20 Another health center used its grant funds to purchase a
mobile unit to increase its dental services capacity and provide services to patients in rural
areas with limited access to care. The remaining health center purchased dental supplies (e.g.,
fluoride rinse, floss, and toothpaste) with its grant funds.
18 During our audit, the health center stated that it did not have the supporting documentation and provided
documentation that it returned the funds, totaling $2,948, to HRSA.
19 Program Specific Terms in Notice of Grant Award.
20 According to the health center, the doctor did not work directly with COVID-19 testing during the grant period.
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
6

Duplicate Salaries Charged to Multiple Funding Sources
Health centers may not use COVID-19 supplemental grant funding to support costs reimbursed
or compensated by other Federal or State programs that provide for such benefits.21
Two sampled health centers charged duplicate salary costs totaling $4,352 to multiple funding
sources.  Specifically, one health center charged duplicate salary costs for one employee to two
different COVID-19 supplemental grant funding appropriations for one pay period.22 Another
health center allocated a portion of its employees’ salaries to its COVID-19 supplemental grant
funding in addition to charging 100 percent of the salaries for the same periods to its
operational grant (H80).
Salary Exceeded Federal Executive Level II Salary Limit
Grant recipient’s costs must conform to any limitations or exclusions set forth in the Federal
awards as to types or amount of cost items (45 CFR § 75.403(b)).  The amount of direct salary
that may be paid to an individual under a HRSA grant is restricted to a rate no greater than
Executive Level II of the Federal Executive Pay Scale.23, 24
One sampled health center charged salary and fringe benefit costs for the chief medical officer
to its COVID-19 supplemental grant funding that exceeded the Executive Level II salary levels
for calendar years (CYs) 2020 and 2021 by a total of $31,475.
HEALTH CENTERS MAY NOT HAVE PROPERLY ALLOCATED COSTS TO THEIR COVID-19
SUPPLEMENTAL GRANT FUNDING
Thirteen health centers in our sample may not have properly allocated salary and fringe
benefits costs, totaling $15,056,835, to their COVID-19 supplemental grant funding.
Salary and Fringe Benefits Costs Charged Based on Budget Estimates
Charges to Federal awards for salaries and wages must be based on records that accurately
reflect the work performed.  These records must support the distribution of the employee’s
salary or wages among specific activities or cost objectives if the employee works on more than
21 See Program specific terms in Notice of Grant Award, FY 2020 Expanding Capacity for Coronavirus Testing
Supplemental Funding Guidance Reporting Requirements for Health Centers | Bureau of Primary Health Care
(hrsa.gov) and Coronavirus-Related Funding FAQs | Bureau of Primary Health Care (hrsa.gov).
22 Costs were charged to funding appropriated by the CARES Act and the Paycheck Protection Program and Health
Care Enhancement Act. We disallowed the portion of salary costs that exceeded the gross wages paid to the
employee for the pay period.
23 The Executive Level II salary level is $197,300 and $199,300, for CYs 2020 and 2021, respectively.
24 Standard terms in Notice of Grant Award.
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
7

one Federal award or both a Federal award and a non-Federal award.  Budget estimates (i.e.,
estimates determined before services are performed) alone do not qualify as support for
charges to Federal awards.  The grant recipient’s system of internal controls should include
processes to review after-the-fact interim charges made to a Federal award based on budget
estimates.  All necessary adjustments must be made so that the final amount charged to the
Federal award is accurate, allowable, and properly allocated (45 CFR § 75.430(i)(1)).
Twelve sampled health centers allocated salary and fringe benefits costs totaling $14,093,862
to their COVID-19 supplemental grant funding based on budget estimates that may not have
accurately reflected the work performed. Specifically, the health centers did not maintain
records, such as time-and-effort reports, to support the actual distribution of employees’ time
and the allocation of salaries or wages for each employee that worked on Federal awards. As a
result, we could not determine what portion of salary and fringe benefits costs charged by
these health centers for staff who worked less than 100 percent on COVID-19 supplemental
grant-funded activities were allocable to the grants.
Salary and Fringe Benefits Costs May Not Be Consistent with Grant Funding Purpose
A cost is allocable to a particular Federal award if the goods or services involved are chargeable
or assignable to that Federal award in accordance with relative benefits received (45 CFR
§ 75.405(a)).  In addition, COVID-19 supplemental grant funding awarded for expanding
capacity for COVID-19 testing must be used by health centers for necessary expenses to
purchase, administer, and expand capacity for testing to monitor and suppress COVID-19.25
One sampled health center allocated 100 percent of salary and fringe benefit costs totaling
$962,973 for 82 employees from various departments, including its accounting,
communications, compliance and risk, information technology, and pharmacy departments, to
its COVID-19 supplemental grant funding for expanding capacity for COVID-19 testing.
However, the health center did not maintain supporting documentation to show that these
employees worked on COVID-19 testing-related activities as required by the grant’s terms and
conditions.  As a result, we could not determine what portion of the employees’ salary and
fringe benefits costs were allocable to the health center’s COVID-19 supplemental grant
funding.
CAUSE OF UNALLOWABLE AND POTENTIALLY IMPROPERLY ALLOCATED COSTS
Although HRSA provided supplemental grant funding guidance (including guidance on allowable
uses of these funds) and monitored each award, health centers charged unallowable costs and
may not have properly allocated costs to their COVID-19 supplemental grant funding because
they did not always follow HRSA’s guidance.  Specifically, health centers did not follow HRSA’s
guidance on maintaining financial management systems and internal controls that would
25 Program Specific Terms in Notice of Grant Award.
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
8

ensure that only allowable, allocable, and documented costs were charged to their COVID-19
supplemental grant funding.
Health centers did not always charge costs that were consistent with grant terms and maintain
sufficient documentation to support how they allocated costs to Federal awards, including their
COVID-19 supplemental grant funding. Further, some health centers stated that there was a
lack of communication between their billing and accounting departments that led to the
charging of some testing services to both the COVID-19 supplemental grant funding and the
UIP.  Some health centers also stated that they thought that they could charge their COVID-19
supplemental grant funding the difference between what they billed the UIP and what the UIP
reimbursed them. In addition, the health centers charged salary and fringe benefits costs based
on budget estimates and did not have processes to review interim charges and make necessary
adjustments (e.g., reconciling charges based on budget estimates to records that support the
actual distribution of employees’ time) to ensure amounts charged to the awards were
accurate for each employee who worked on Federal awards.
RECOMMENDATIONS
We recommend that the Health Resources and Services Administration:
• require the 10 health centers identified in our report as having charged unallowable
COVID-19 supplemental grant funding costs to refund $787,152 (less any amounts
health centers voluntarily refunded as a result of our audit) to the Federal Government;
• work with the 13 health centers identified in our report that may not have properly
allocated COVID-19 supplemental grant funding costs to determine what portion of the
$15,056,835 is allocable to their COVID-19 supplemental grant funding and require the
health centers to refund the improperly allocated funds to the Federal Government; and
• assist the 17 health centers identified in our report as having charged unallowable costs
or potentially improperly allocated costs to implement HRSA’s guidance for developing
and maintaining financial management systems and internal controls that ensure that
only allowable, allocable, and documented costs are charged to their HRSA
supplemental grant funding.
HEALTH RESOURCES AND SERVICES ADMINISTRATION COMMENTS
In written comments on our draft report, HRSA partially concurred with our recommendations
and described actions it plans to take to address them. HRSA stated that Congress provided
COVID-19 supplemental grant funding and allowed flexibility for health centers to respond to
the unique needs in their communities. HRSA also stated that it is concerned that OIG may be
conflating reporting and documentation issues associated with critical health care activities that
occurred at the peak of the pandemic with broader compliance issues. In addition, HRSA stated
that it is committed to reviewing health centers’ documentation and following up on those
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
9

claims that can be substantiated, and will work with the identified health centers to resolve any
issues.
Regarding our first recommendation, HRSA stated that it is concerned that OIG’s methodology
does not fully consider the COVID-19 supplemental grant funding flexibilities Congress provided
for health centers to respond to community needs.  However, HRSA stated that it will work with
the 10 health centers identified in our report as having charged unallowable COVID-19
supplemental grant funding costs to determine the amount of unallowable costs charged to
their grants and will require that such amounts be refunded to the Federal Government.
Regarding our second recommendation, HRSA stated that it is concerned about the lack of
evidence to support the scale of the associated finding and noted that OIG has not confirmed
that the 13 health centers did not properly allocate COVID-19 supplemental grant funding
costs. However, HRSA stated that it will work with the 13 health centers to determine if they
improperly allocated costs, and if so, the amount of improperly allocated costs charged to their
grants and will require that such amounts be refunded to the Federal Government.
Regarding our third recommendation, HRSA stated that it is committed to assist any health
centers that it confirms have charged unallowable costs or potentially improperly allocated
costs, to implement HRSA guidance to develop and maintain proper financial management
systems and internal controls.
HRSA also provided separate technical comments on our draft report, which we addressed as
appropriate.  HRSA’s comments, excluding its technical comments, are included as Appendix B.
OFFICE OF INSPECTOR GENERAL RESPONSE
After reviewing HRSA’s comments, we maintain that our findings and recommendations are
valid and acknowledge HRSA’s efforts to ensure appropriate use and oversight of COVID-19
supplemental grant funding. Regarding HRSA’s concern that OIG may be conflating reporting
and documentation issues associated with critical health care activities that occurred at the
peak of the pandemic with broader compliance issues, we note that our analysis of costs
associated with the COVID-19 supplemental grant funding and our related audit findings are
grounded in Federal regulations and HRSA’s grant terms and conditions, which we cite
throughout our report. In addition, our audit protocol allowed health centers sufficient time
(with extensions, if requested) to provide information to demonstrate compliance with Federal
requirements for using COVID-19 supplemental grant funds.
Regarding HRSA’s concern that our methodology did not fully consider the flexibilities Congress
provided for health centers to respond to community needs, we note that we considered the
requirements in Federal regulations (45 CFR part 75) and the flexibilities provided for the
COVID-19 supplemental grant funding listed in the terms and conditions in grant award notices.
Our determinations of unallowable costs charged to health centers’ COVID-19 supplemental
grant funding were based on (1) our review of health centers’ supporting documentation
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
10

(including invoices and proof of payment) for their grant expenditures, (2) inquiries with health
center personnel regarding the use of COVID-19 supplemental grant funding, and (3)
discussions with HRSA program staff regarding the allowability of certain expenditures.26 In
addition, we note that some health centers stated that as a result of our audit, they have
returned the identified misspent funds to the Federal Government.
Regarding HRSA’s comments concerning the lack of evidence to support the scale of the finding
associated with our second recommendation, we obtained sufficient evidence from the health
centers to support the finding.27 Specifically, the associated health centers did not comply with
Federal and grant requirements for maintaining records to support the actual distribution of
employees’ time and the allocation of salaries or wages for each employee that worked on
Federal awards.  Therefore, we could not determine what portion of salary and fringe benefits
costs charged by the 13 health centers were allocable to their COVID-19 supplemental grant
funding.
26 For certain costs that we determined to be unallowable, we obtained clarification from HRSA program staff that,
based on program requirements, the costs were unallowable (e.g., costs charged to the grants that were
reimbursed by the UIP and the purchase of a mobile unit not used for COVID-19 testing-related activities). For
other costs, health center personnel confirmed that either the costs were not related to COVID-19 or supporting
documentation was not available; or Federal regulations or grant terms were clear that these costs were not
allowable (e.g., duplicate salaries charged to multiple funding sources and executive salaries above certain
thresholds).
27 Information obtained from the health centers included payroll, time and attendance records, and other
documentation indicating employees’ time spent working on COVID-19 supplemental grant-funded activities, if
available.
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
11

APPENDIX A: AUDIT SCOPE AND METHODOLOGY
SCOPE
Our audit covered COVID-19 supplemental grant funding totaling $70,305,389 awarded during
FY 2020 to 30 selected health centers located within the 500 counties with the highest
cumulative number of COVID-19 cases as of December 31, 2020.28 These funds could be spent
during the period January 20, 2020, through April 30, 2022. We reviewed a judgmental sample
of 30 health centers based on their geographic location, financial risk level, and grant award
amounts.29
We limited our review of HRSA’s and the sampled health centers’ internal controls to those
applicable to our objective. We did not assess the overall internal control structure of HRSA or
the health centers.
We established reasonable assurance of the authenticity and accuracy of the COVID-19
supplemental grant funding data provided by HRSA from its Electronic Handbook system by
reconciling the COVID-19 supplemental grant funding data to the Notices of Grant Award for
COVID-19 supplemental grant funding for 14 judgmentally selected health centers (separate
from the sample selection for review) and by reviewing the Notices of Grant Award for the
health centers in our sample.  We also verified the location of the 14 health centers using
publicly available information.  However, we did not assess the completeness of the file.
We conducted our audit work with HRSA and the health centers from May 2021 through
February 2023.
METHODOLOGY
To accomplish our objective, we:
• reviewed applicable Federal laws, regulations, and guidance;
• met with HRSA officials to gain an understanding of the COVID-19 supplemental grant
funding requirements and HRSA’s oversight activities;
• obtained from HRSA 3 lists of health centers that received COVID-19 supplemental grant
funding during FY 2020 (1 list for each funding appropriation) totaling $1,999,118,325
for 1,387 health centers nationwide;
28 We obtained the COVID-19 case data by county from the USAFacts.org website in January 2021.
29 The health centers’ financial risk levels were determined by HRSA’s Division of Financial Integrity.  HRSA
considered 6 of the 30 selected health centers to be at high or moderate risk levels at the time of award or as of
March 31, 2021.
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
12

• identified 500 counties with the highest number of COVID-19 cases in CY 2020 where at
least 1 health center received COVID-19 supplemental grant funding;30
• selected a judgmental sample of 30 health centers, located within the 500 counties, for
audit based on the health centers’ geographic location, financial risk level, and grant
award amounts;
• for each of the 30 sampled health centers, interviewed the financial and program
officials, and reviewed the COVID-19 supplemental grant funding budget information,
grant award notices, financial and performance reports, accounting, personnel, and
other records, to determine whether the health center:
o used the awarded supplemental grant funding to prepare for, prevent, and
respond to COVID-19, including maintaining or increasing its capacity and
staffing level;
o purchased, administered, and expanded capacity for testing to monitor and
suppress COVID-19;
o complied with grant reporting requirements; and
o charged allowable costs for all awarded COVID-19 supplemental grant funding;
• worked with OIG’s Division of Data Analytics to identify claims for COVID-19 testing
submitted to the UIP by the 30 sampled health centers and the 1,357 health centers not
selected for this review; and
• summarized the results of our audit and discussed the results with HRSA officials.
We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives.  We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
30 There were 1,008 health centers in these 500 counties that received COVID-19 supplemental grant funds totaling
$1,576,611,997 during FY 2020.
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
13

OF HEALTH & HUMAN SERVICES
TO:
Amy J. Frontz
Deputy Jnspector General for Audit Services
FROM:
Carole Johnsor&
Administrator --C
DATE:
March 29, 2023
Health Resources and Services
Administration
Rockville, MD 20857
SUBJECT: Office of Inspector General Draft Report: "Seventeen o,f Thirty Selected Health
Centers Did Not u~e or May Not Have Used Their HRSA COVID-19 Supplemental
Grant Funding in Accordance With Federal Requirements"
(A-02-21-02005)
Attached is the Health Resources and Services Administration's (HRSA) response to the Office
of fnspector General draft report A-02-21-02005. ff you have any questions, please
contact Sandy Seaton in HRSA' s Office of Federal Assistance Management at (301) 443-2432.
APPENDIX B: HEALTH RESOURCES AND SERVICES ADMINISTRATION COMMENTS
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
14

Resources and Services Administration's Comments on the OIG Draft Report­
"Seventeen of Thirty Selected Health Centers Did Not Use or May Not Have Used Their
HRSA COVID-19 Supplemental Grant Funding in Accordance With Federal
Requirements, A-02-21-02005"
General Comments
The Health Resources and Services Administration (HRSA) appreciates the opportunity to
review and comment on the Office of the Inspector General's draft report. HRSA is committed
to strong financial oversight and program management of grant awards.
HRSA supports nearly 1,400 health centers and approximately l00 Health Center Program look­
alike organizations, collectively operating more than 14,000 service delivery sites in
communities across the country. Health centers serve more than 30 million people and deliver
primary health care to the nation's underserved individuals and families, including one in three
people living in poverty and one in five rural residents.
Health centers played a vital role during the COVID-19 pandemic and have led efforts to ensure
equitable access to COVID-19 tests, vaccines, and treatments. For example, as of March 2023,
health centers have administered over 23.2 million COVID-19 vaccinations, of which nearly 70
percent were among racial and ethnic minority patients. 1
The onset of the pandemic was a novel challenge for health centers. Circumstances demanded,
and the federal government called for quick action to implement supplemental health center
funding to mitigate the further spread of the virus. Furthern10re, Congress provided COVID-19
supplemental funding in such a way as to allow flexibility for health centers to respond to the
unique needs in their communities.
Given the public health emergency, HRSA took swift action to both allocate supplemental
funding and ensure appropriate use and oversight of these important resources. In addition to
issuing program guidance and providing webinar sessions for all COVID-19 supplemental award
recipients to explain award objectives, requirements, and allowable costs, HRSA initiated a
webinar series on financial management fundamentals in November 2022 for specific health
centers. These sessions were presented in partnership with HRSA's Office of Federal Assistance
Management and covered record-keeping, tracking and documenting time and effort and the
federal award draw-down process. Health centers received detailed guidance on achieving and
maintaining compliance with federal fiscal requirements and counsel on award implementation
and reporting requirements.
HRSA will continue to build upon its commitment to train and educate health centers on
methods to improve and streamline financial management systems and internal controls. HRSA
will offer ongoing support for health centers regarding federal grants management and financial
management requirements and expects to offer financial management training for all health
centers in Summer 2023. HRSA will continue to use technical assistance resources to ensure
1 https ://data. hrsa.gov/topics/hea lth-ce nters/covid-vaccination
1
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
15

Resources and Services Administration's Comments on the OIG Draft Report­
"Seventeen of Thirty Selected Health Centers Did Not Use or May Not Have Used Their
HRSA COVID-19 Supplemental Grant Funding in Accordance With Federal
Requirements, A-02-21-02005"
that health centers have the knowledge, understanding, and resources needed to develop and
maintain their financial management systems and internal controls.
With regard to this report, HRSA is concerned that the OIG may be conflating reporting and
documentation issues associated with critical health care activities occurring at the peak of the
pandemic with broader compliance issues. Nonetheless, HRSA is committed to reviewing the
documentation and following up on those claims that can be substantiated and will work with the
identified health centers to resolve any issues.
OIG RECOMMENDATION
Require the 10 health centers identified in our report as having charged unallowable COVID-19
supplemental grant funding costs to refund $787,152 (less any amounts health centers voluntarily
refunded as a result of our audit) to the Federal Government.
HRSA RESPONSE:
HRSA partially concurs with the OIG's recommendation. HRSA is concerned that OIG's
methodology does not fully consider the COVID-19 supplemental funding flexibilities Congress
provided for health centers to respond to community needs. HRSA will work with the 10 health
centers to determine the amount ofunallowable costs charged to their grants and will require that
such amounts be refunded to the Federal Government.
OIG RECOMMENDATION
Work with the 13 health centers identified in our report that may not have properly allocated
COVID-19 supplemental grant funding costs to determine what portion of the $15,056,835 is
allocable to their COVID-19 supplemental grant funding and require the health centers to refund
the improperly allocated funds to the Federal Government.
HRSA RESPONSE:
HRSA partially concurs with the OIG's recommendation. HRSA is concerned at the lack of
evidence to support the scale of the finding for this OIG recommendation and notes that the OIG
has not confirmed that these 13 health centers did not properly allocate COVID-19 supplemental
funding costs. HRSA will work with the 13 health centers to determine if these health centers
improperly allocated costs, and ifso, the amount of improperly allocated costs charged to their
grants and will require that such amounts be refunded to the federal government.
OIG RECOMMENDATION
Assist the 17 health centers identified in our report as having charged unallowable costs or
potentially improperly allocated costs to implement HRSA's guidance for developing and
maintaining financial management systems and internal controls that ensure that only allowable,
allocable, and documented costs are charged to their HRSA supplemental grant funding.
2
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
16

Resources and Services Administration's Comments on the OIG Draft Report­
"Seventeen of Thirty Selected Health Centers Did Not Use or May Not Have Used Their
HRSA COVID-19 Supplemental Grant Funding in Accordance With Federal
Requirements, A-02-21-02005"
HRSA RESPONSE:
HRSA partially concurs with the OIG's recommendation. Given the recommendation speaks to
"potentially improperly allocated costs, " HRSA is committed to assist any health centers that we
confirm have charged unallowable costs or potentially improperly allocated costs, to implement
HRSA guidance to develop and maintain proper financial management systems and internal
controls.
3
HRSA COVID-19 Supplemental Grant Funding for Health Centers (A-02-21-02005)
17

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