Health Reform WK-EDGE CMS failed to identify, report potential violations for contracts used to establish federal marketplace
News
Monday, March 16, 2020

CMS failed to identify, report potential violations for contracts used to establish federal marketplace

By Elena Eyber, J.D.

An OIG review found that CMS did not identify and report potential Antideficiency Act violations for 12 contracts used to establish federal marketplace under the Patient Protection and Affordable Care Act.

The HHS Office of Inspector General (OIG) reviewed 74 contracts that CMS identified as having been awarded for the development, implementation, and operation of the federal marketplace. The OIG found that for 12 contracts, CMS did not obligate and expend funds in compliance with applicable laws and requirements. The OIG recommended that CMS (1) correct the bona fide needs obligation violations totaling $164.6 million and, if CMS is unable to correct those violations, report the Antideficiency Act violations; (2) correct the bona fide needs expenditure violations totaling $22.4 million and, if CMS is unable to correct those violations, report the Antideficiency Act violations; (3) develop guidance and train Office of Financial Management personnel on the correct process to record obligations and expenditures to avoid potential Antideficiency Act violations; and (4) develop automated controls in CMS’s accounting system to ensure that contract expenditures for each program year are paid using appropriate program-year obligations (OIG Report, No. OEI-03-16-03001, February 28, 2020).

Findings. The OIG found that CMS correctly obligated and expended funds for 62 of the 74 contracts it reviewed. For the remaining 12 contracts, CMS did not obligate and expend funds in compliance with applicable laws and requirements. For example, CMS did not always obligate funds in accordance with the bona fide needs rule. Under this rule, a fiscal year appropriation may be obligated only to meet a bona fide, or legitimate, need arising in the appropriation’s period of availability. CMS did not meet this rule because it obligated the wrong fiscal year’s funds to contract modifications. In addition, CMS did not meet rules governing expenditures because it paid some contract invoices with fiscal year funds that were not available at the time the billed work was performed. CMS’s accounting system, the Healthcare Integrated General Ledger Accounting System (HIGLAS), did not ensure that expenditures were matched to obligations with an appropriate period of availability.

These errors resulted in potential, unreported Antideficiency Act obligation violations totaling $164.6 million ($155.9 million related to the federal marketplace) and expenditure violations totaling $22.4 million ($18.3 million related to the federal marketplace). In addition, for three contracts, CMS failed to record obligations totaling $2.9 million in a timely manner. Failure to record obligations in a timely manner can result in Antideficiency Act violations.

Recommendations. The OIG recommended that CMS: (1) correct the bona fide needs obligation violations totaling $164.6 million ($155.9 million related to the federal marketplace) and, if CMS is unable to correct those violations, report the Antideficiency Act violations; (2) correct the bona fide needs expenditure violations totaling $22.4 million ($18.3 million related to the federal marketplace) and, if CMS is unable to correct those violations, report the Antideficiency Act violations; (3) coordinate with HHS, in consultation with the Office of the General Counsel, to develop guidance and train Office of Financial Management personnel on the correct process to record obligations and expenditures to avoid potential Antideficiency Act violations; and (4) develop automated controls in HIGLAS to ensure that contract expenditures for each program year are paid using appropriate program-year obligations.

CMS response. CMS did not specifically concur with the OIG’s recommendations but described the actions it planned to take in response to the recommendations. CMS stated that it would examine the identified obligation and expenditure violations, make appropriate account adjustments, and report any remaining reportable Antideficiency Act violations as necessary. Further, CMS stated that it would develop additional guidance and provide training to personnel once it examined the contract obligation and expenditure violations identified by the OIG. In response to the OIG’s final recommendation, CMS stated that automated controls would be developed in HIGLAS as appropriate.

ReportsLetters: OIGReports AccessNews AgencyNews EnrollmentNews HealthInsuranceExchangeNews NewsFeed

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More

Health Reform WK-EDGE: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on health reform legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.