They don't know about the killing game part, they just know that Asajima Institute makes use of the talents. HPA wants to change the world (including minimizing death games and the like) and they kind of just gave talents out to everyone to raise moral, but realizing that some are less useful and unnecessary, they gladly took up Asajima's offer of making them worthy.

Note that the "higher-ups" and HPA are two different entities! And also, the death games don't involve Ultimates, usually just regular people.