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HHS to Implement New Protocols in Response to Whistleblower Allegations of Improper Spending

Disclosure of Wrongdoing
OSC alerted the President that whistleblower allegations of unauthorized spending practices by HHS prompted a number of corrective actions to ensure proper stewardship of federal funds.

​The U.S. Office of Special Counsel (OSC) today alerted the President and Congress that whistleblower allegations of unauthorized spending practices by the U.S. Department of Health and Human Services (HHS) have prompted the HHS Office of Inspector General (OIG) to recommend a number of corrective actions to ensure proper stewardship of federal funds.

The audit by HHS OIG found that the National Institutes of Health (NIH), National, Heart, Lung, and Blood Institute (NHLBI) in Bethesda, Maryland failed to comply with federal requirements in utilizing “Other Transaction" (OT) agreements, rather than more traditional award processes, from October 1, 2016, through September 30, 2019, when NHLBI awarded $84.3 million in federal funds for 29 OTs.

OTs are procurement instruments enabling flexible business arrangements to quickly acquire research and development to support technology advancement. OTs are considered higher risk because they are generally exempt from the laws and regulations that govern federal contracts. As such, OTs should only be used if no other instrument can satisfy the agency's objective, the agency provides documentary proof of its analysis, and the OT is administered in a way that guarantees federal funds are being managed responsibly.    

The audit found that the NHLBI did not adequately document its justification for using OTs and could not always justify whether the incurred costs were allowable. Moreover, the OIG found that the agency's use of OTs may not have complied with federal requirements for obligating annual appropriations. In response to the findings, the OIG recommended that NHLBI take steps to strengthen its internal controls for OTs by updating its policies and procedures to ensure compliance with federal funding requirements. NIH agreed to update its policies and procedures by November 15, 2021.

Despite accepting the OIG's recommendations, HHS concluded that the whistleblower's allegations were all unsubstantiated, which contradicts the OIG's findings. In his letter to the President, Special Counsel Henry J. Kerner found HHS's report to be unreasonable since the conclusions do not align with the OIG's findings.

“I thank the whistleblower for bringing these serious allegations to our attention and applaud the willingness of HHS to update its policies and procedures to strengthen internal spending controls," said Special Counsel Kerner. “However, the results of the OIG's audit clearly support a determination that three of the four referred allegations were, at a minimum, partially substantiated. HHS's refusal to acknowledge as much shows that HHS has failed to take full responsibility for the wrongdoing that was uncovered."