BCFS Health and Human Services Did Not Always Comply With Federal Requirements Related to Less-Than-Arm's-Length Leases

The Department of Health and Human Services (HHS), Office of Refugee Resettlement (ORR), manages the Unaccompanied Alien Children (UAC) program. The UAC program served between 7,000 and 8,000 children annually from fiscal year (FY) 2005 through FY 2011. In FY 2012, however, the number of children entering the program began to increase, and in FY 2015, ORR served more than 33,000 children. As the number of children increased, so did the funding for the program. Because of the rapid increase of vulnerable children entering ORR care, and the significant increases in program funding, we are conducting a series of reviews of ORR care providers across the Nation.

While BCFS HHS generally claimed only allowable expenditures, it did not comply with Federal regulations related to less-than-arm's-length leases. Of the 140 randomly selected transactions we reviewed, we determined that 138 were allowable, but 2 rental cost transactions for 1 less-than-arm's-length lease were unallowable. We also identified additional rental costs on two less-than-arm's-length leases that exceeded the amount allowable for such leases. These unallowable rental costs on three less-than-arm's-length leases totaled $658,248. According to BCFS HHS officials, they were unaware of the limitations on rental costs related to less-than-arm's-length lease agreements.

We recommended that BCFS HHS refund $658,248 to ORR for unallowable rental costs incurred under the less-than-arm's-length lease agreements and limit future rental costs to the amount that would be allowed under 45 CFR part 75.465(c).

In written comments on our draft report, BCFS HHS did not concur with our recommendation. After reviewing BCFS HHS's comments, we maintain that our recommendation is valid.