National Health Laboratory Service Did Not Always Manage President's Emergency Plan for AIDS Relief Funds or Meet Program Goals in Accordance With Award Requirements

Through its Global HIV/AIDS Program, CDC implemented the President's Emergency Plan for AIDS Relief (PEPFAR), working with ministries of health and other in-country partners to combat HIV/AIDS by strengthening health systems and building sustainable HIV/AIDS programs in more than 75 countries. Through a 5-year cooperative agreement, CDC awarded PEPFAR funds totaling $12.9 million to National Health Laboratory Service (NHLS) for the budget period September 30, 2009, through September 29, 2010.

NHLS did not always manage PEPFAR funds or meet program goals in accordance with award requirements. With respect to financial management, specifically financial transaction testing, $600,000 of the $736,000 was allowable, but $134,000 was unallowable and $2,000 was potentially unallowable. Additionally, NHLS used $50,000 of PEPFAR funds to pay for additional unallowable catering expenses, did not accurately report PEPFAR expenditures for this cooperative agreement on its financial status report (FSR) submitted to CDC, and did not submit its annual financial audit as required by Federal regulations.

Our program management review showed that, of the 30 accomplishments sampled from the annual progress report, 2 items were not supported by documentation and 3 items were only partially supported.

We recommended that NHLS (1) refund to CDC $134,000 of unallowable expenditures, (2) work with CDC to resolve whether $2,000 of value-added tax was an allowable expenditure under the cooperative agreement, (3) refund to CDC an additional $50,000 of unallowable catering expenses, (4) develop and implement policies and procedures for ensuring that PEPFAR funds are not used for unallowable expenditures and properly tracking all grant fixed assets, (5) use the exchange rate in effect at the time it prepares the FSR, (6) develop and implement policies and procedures to account for award adjustments and expenses in the general ledger and reconcile progress report information to supporting documentation, and (7) submit annual audit reports in a timely manner to the applicable United States agency. NHLS generally disagreed with our first and third recommendations and generally agreed with our remaining recommendations.