Report on Department of Health and Human Services, Program Support Center, Division of Payment Management's Policies and Procedures in Operation and Tests of Operating Effectiveness

EXECUTIVE SUMMARY:

The Department of Health and Human Services' (HHS) Division of Payment Management (DPM) serves as the fiscal intermediary between awarding agencies and grant or contract recipients. The DPM's Payment Management System (PMS) processes approximately $160 billion in payments to recipient organizations per year. The report presents the results of Ernst & Young's (E&Y), certified public accountants, review of DPM's policies and procedures placed in operation to fulfill this responsibility. The E&Y made the review under a HHS Office of Inspector General (OIG) contract. The OIG exercised technical oversight and quality control of the examination.

Specifically, the E&Y examination included procedures to obtain reasonable assurance about whether: (1) the description of the PMS application presents fairly, in all material respects, the aspects of HHS policies and procedures that may be relevant to a user organization's internal control structure; (2) the control structure policies and procedures included in the description were suitability designed to achieve the control objectives specified in the descriptions; and (3) such policies and procedures had been placed in operation as of November 30, 1996.

The E&Y concluded that the description of the PMS application presents fairly, in all material respects, the relevant aspects of HHS policies and procedures placed in operation as of November 30, 1996. Also, E&Y concluded that the control structure policies and procedures are suitably designed to provide reasonable assurance that the specified control objectives would be achieved. Lastly, E&Y concluded that the control policies and procedures tested were operating with sufficient effectiveness to provide reasonable, but not absolute, assurance that the control objectives specified were achieved during the period April 1, 1996 to November 30, 1996.

In our oversight of the examination, we found nothing to indicate that E&Y's work was inappropriate or that the report cannot be relied upon.

This report is intended solely for use by HHS management, its customers, and the independent auditors of its customers.

For Fiscal Year 1997 audit planning purposes, we plan to retain E&Y to perform a similar review covering Fiscal Year 1997 activity. We estimate that the results of the review will be available December 1997.

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