Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

O S  

VERSIGHT OF  TATES
S M
UBGRANTEE  ONITORING IN 

F C P
THE  OSTER  ARE  ROGRAM

Inspector General 
December 2004 
OEI-05-03-00060  Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs. This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The OIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout the department. 
Office of Evaluation and Inspections 
The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management 
and program evaluations (called inspections) that focus on issues of concern to the 
department, the Congress, and the public. The findings and recommendations contained 
in the inspections reports generate rapid, accurate, and up-to-date information on the 
efficiency, vulnerability, and effectiveness of departmental programs.  The OEI also 
oversees State Medicaid fraud control units, which investigate and prosecute fraud and 
patient abuse in the Medicaid program. 
Office of Investigations
The OIG's Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations. The OCIG imposes program exclusions and 
civil monetary penalties on health care providers and litigates those actions within the 
department. The OCIG also represents OIG in the global settlement of cases arising 
under the Civil False Claims Act, develops and monitors corporate integrity agreements, 
develops compliance program guidances, renders advisory opinions on OIG sanctions to 
the health care community, and issues fraud alerts and other industry guidance.  
 A B S T R A C T
As part of a broad Office of Inspector General effort to review the 
management of grant programs under the Department of Health and 
Human Services (HHS), this inspection assesses States monitoring of 
subgrantees in the Title IV-E foster care program, as well as Federal 
oversight of States monitoring.  This study is part of a series.  The 
companion report, States Monitoring of Subgrantees in the Foster 
Care Program:  A Description of Six States Systems 
(OEI-05-03-00061), seeks to provide descriptive information to assist 
stakeholders in addressing the problems identified in this report.   
In this inspection, we reviewed monitoring files and interviewed staff in 
six States that administer over 45 percent of the $5 billion that the 
Administration for Children and Families (ACF) awards annually for 
the foster care program.  We found that the monitoring systems used by 
three States are inadequate according to criteria we developed based on 
Federal grants management requirements.  In addition, three States do 
not communicate required information to subgrantees. 
The ACF is responsible for Federal oversight of the foster care program. 
Based on interviews with ACF staff and a review of ACF oversight 
mechanisms, we found that oversight of States systems for monitoring 
subgrantees receives minimal attention by ACF.  The ACFs only direct 
tool for overseeing States monitoring of subgrantees is the Single Audit, 
and this inspection found major concerns with its scope, quality, and 
functioning as a tool for assessing States subgrantee monitoring.  We 
recommend that ACF hold States accountable for adhering to grants 
management requirements relating to the oversight of subgrantees. 
Further, ACF should work with HHS to make the Single Audit a more 
effective tool for overseeing States monitoring of subgrantees.  
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  i    E X E C U T I V E   S U M M A R Y   
OBJECTIVES 
o 	 To assess the extent to which selected States adequately monitor 
subgrantees in the foster care program. 
o 	 To review the extent to which the Administration for Children and 
Families ensures that States adequately monitor subgrantees in 
the foster care program. 
BACKGROUND 
Each fiscal year the Administration for Children and Families (ACF) 
awards approximately $5 billion to States, which serve about 800,000 
children under the Federal Title IV-E foster care program.  Most States 
award some portion of the Federal foster care grant to subgrantees to 
provide core program services, such as child placement and residential 
care. 
States are required, according to Federal grants management 
requirements that are incorporated into 45 CFR Part 74, to:  (1) monitor 
subgrantees as necessary to ensure they comply with Federal fiscal 
and program regulations, use funds for authorized purposes, and 
achieve performance goals, and (2) communicate specific information 
about the Federal award and accompanying Federal requirements to 
subgrantees.  To assess whether States were monitoring their 
subgrantees as necessary, it was necessary to define measurable 
criteria.  We developed specific evaluation criteria which we presented 
to staff in the Office of the Assistant Secretary for Administration and 
Management (ASAM).  The ASAM staff stated that they found these 
criteria both reasonable and consistent with Federal requirements.  
Refer to the Methodology Section for a summary of our evaluation 
criteria. 
The ACF must ensure that States administer their foster care programs 
in compliance with Federal requirements.  These requirements include 
the Federal grants management requirements described above. 
We conducted site visits to six States representing over 45 percent of 
Title IV-E spending.  We reviewed documentation of States monitoring 
for 15 to 19 subgrantee files in each State and interviewed monitoring 
staff. We conducted phone interviews with ACF staff in all 10 regions 
and central office, and reviewed relevant Federal requirements, as well 
as policies and procedures for ACF oversight mechanisms. We reviewed 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  ii  EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY
relevant findings from States Single Audits for fiscal years 2001 and 
2002. 
This study is part of a broad Office of Inspector General effort to 
review the management of grant programs and awards under the 
Department of Health and Human Services (HHS). We will provide 
the results of this study to ACF, ASAM, the Assistant Secretary for 
Budget, Technology, and Finance, and to the Office of Management 
and Budgets interdepartmental task force on subgrantee monitoring. 
This study is also part of a series. The companion report, States 
Monitoring of Subgrantees in the Foster Care Program: A 
Description of Six States Systems (OEI-05-03-00061), seeks to 
provide descriptive information on our study of States monitoring 
practices to assist stakeholders in addressing the problems identified 
in this report. 
FINDINGS 
Monitoring systems in three States are inadequate according to our 
evaluation criteria. In addition, three States do not communicate 
required information. Three of the six selected States fiscal or 
program monitoring mechanisms are inadequate according to our 
evaluation criteria. Two of these three States both lack an adequate 
monitoring system and do not communicate required grants 
management information to subgrantees. A fourth State has an 
adequate monitoring system, but does not communicate required grants 
management information to subgrantees. 
Oversight of States systems for monitoring subgrantees receives 
minimal attention by ACF. We found that ACFs focus and priorities, in 
relation to State oversight, do not encompass subgrantee monitoring. 
The ACF does not routinely communicate grants management 
requirements to States. All ACF respondents report that their 
oversight of States emphasizes program administration in general, 
rather than specifically focusing on reviewing States subgrantee 
monitoring. The ACF staff in half of all regions are not aware of how 
States monitor their subgrantees. 
The only direct tool ACF uses for overseeing States monitoring of 
subgrantees is the States Single Audit, which has limited utility. The 
Single Audit does not assess States monitoring of subgrantees that 
States classify as vendors.  Four States in our study classified most or 
all of their foster care subgrantees as vendors rather than 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  iii  E X E C U T I V E   S U M M A R Y  
subrecipients, even though both provide core services, such as child 
placement and residential care.  In addition, this inspection found major 
concerns with the State Single Audits scope, quality, and functioning as 
a tool for assessing States subgrantee monitoring.   
RECOMMENDATIONS 
Without quality monitoring, States and ACF may have little assurance 
that subgrantees are providing appropriate, quality services to children 
in a fiscally responsible manner. The States and counties we reviewed 
fund more than 1,500 foster care subgrantees. Given the extent that 
States appear to be using subgrantees to carry out fundamental foster 
care services, lax monitoring can have a significant adverse impact.  
The ACF should hold States accountable for adherence to grants 
management requirements relating to the oversight of subgrantees. 
The ACF should take the following actions to ensure that States are 
held accountable for adhering to major Federal grants management 
requirements in their administration and monitoring of foster care 
subawards. 
o 	 The ACF should develop a system for routinely communicating 
grants management responsibilities to States.  
o 	 The ACF should develop specific requirements that clarify States 
responsibilities for monitoring of subgrantees.  These 
requirements should provide clear standards for States 
monitoring systems.  The ACF could adopt the criteria used for 
this study or work with ASAM to develop their own standards.   
o 	 The ACF should utilize its existing oversight mechanisms to 
ensure States have systems in place to adhere to grants 
management requirements related to their monitoring of 
subgrantees. 
The ACF should work with HHS to make the Single Audit a more 
effective tool for overseeing States monitoring of subgrantees. In 
order to help improve the Single Audit as a monitoring tool, ACF should 
support and promote intergovernmental initiatives to improve the 
Single Audit. In addition, ACF should provide clarification to States 
specifying which foster care subgrantees provide core program services 
and should thus be considered subrecipients for the Single Audit. 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  iv  E X E C U T I V E   S U M M A R Y

AGENCY COMMENTS 
In its comments on our draft reports ACF concurs with the objectives of 
our recommendations and describes its intended corrective actions, 
which are generally consistent with our suggestions. The ASAM 
supports our recommendations to ACF.   
The ACF stated it is considering taking a number of actions in response 
to our recommendations, including (1) referring to grants management 
requirements and highlighting the importance of subrecipient 
monitoring in award letters, (2) adopting a qualitative version of the 
monitoring criteria we used in this inspection as part of its field 
reviews, (3) including specific reference to subrecipient monitoring 
responsibilities in the Title IV-E Compliance Supplement to OMB 
Circular A-133, (4) potentially issuing a program instruction to State 
grantees clarifying the distinction between subrecipients and 
vendors, (5) exploring further ways to strengthen the Single Audit, 
and (6) providing technical assistance to States around their monitoring 
systems. We recognize ACFs responsiveness in taking these actions, 
but reiterate the need for developing clear standards for States 
monitoring systems and holding States accountable to these standards 
using ACFs current oversight mechanisms.  
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  v    T A  B L E   O F   C O N T E N T S  
ABSTRACT ....................................................... i 

EXECUTIVE SUMMARY ........................................ ii 

INTRODUCTION ................................................ 1 

FINDINGS ....................................................... 11 

States Monitoringof Subgrantees  . . . . . . . . . . . . . . . . . . . . . . . . . 11

ACF Oversight  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

RECOMMENDATIONS .......................................... 20 

AGENCY COMMENTS .......................................... 24 

APPENDIXES ................................................... 27 

A :  Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27

B :  StatePractices for Communicating Grants Information  . . . .  30

C :  Evaluation Criteria  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  33

D :  AgencyComments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35

ACKNOWLEDGMENTS .......................................... 41 

END NOTES ..................................................... 42
   I N T R O D U C  T I O N
OBJECTIVES 
o 	 To assess the extent to which selected States adequately monitor 
subgrantees in the foster care program. 
o 	 To review the extent to which the Administration for Children and 
Families ensures that States adequately monitor subgrantees in 
the foster care program. 
BACKGROUND 
The Administration for Children and Families (ACF) administers the 
foster care program which is authorized under Title IV-E of the Social 
Security Act and which awards nearly $5 billion, each fiscal year, in 
entitlement grants to States who serve about 800,000 children under 
Title IV-E annually.1  Most States subaward some portion of their Title 
IV-E funds to subgrantees to carry out core program activities such as 
child placement and residential care. For the purposes of this report, 
we use subgrantee as a generic term to mean an entity that receives 
Federal funds to provide core foster care services through an agreement 
with a State.2 
Recent Federal Interest in Subgrantee Monitoring 
In 2001, the Secretary of the Department of Health and Human 
Services (HHS) created an initiative to improve the management of 
HHS grant programs. The Assistant Secretary for Administration and 
Management (ASAM) is taking a lead role in this effort.  The Office of 
Inspector General (OIG) has also undertaken a broad effort to review 
the control, effectiveness, and value of HHS grant programs. 
Federal stakeholders, including the Office of Management and Budget 
(OMB) and Congress, have expressed concern that States are not 
adequately monitoring their subgrantees, and that this may reflect a 
lack of Federal agency oversight.  Based on this concern, OMB created 
an interdepartmental Task Force on Subrecipient Monitoring in 2002.3 
This task force is reviewing regulations and policies to identify whether 
Federal guidance and oversight of subgrantee monitoring is adequate.  
Congress has also shown its concern by requesting reviews of 
subgrantee monitoring in other HHS programs.4 
This inspection provides an assessment of States monitoring systems. 
A companion report, States Monitoring of Subgrantees in the Foster 
Care Program:  A Description of Six States Systems  
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  1  I N T R O D U C T I O N  
(OEI-05-03-00061), seeks to provide descriptive information to ACF and 
States on how selected States monitor their subgrantees. We hope this 
descriptive information will assist stakeholders in addressing the 
problems identified in this report. 
Increased Use of Subgrantees in the Foster Care Program 
According to a 2001 study, nearly all States use subgrantees to provide 
core foster care services to at least some of their foster children.5 
Foster care services provided by subgrantees include child placement 
services, such as recruiting and training foster families, placing children 
with specific families, and arranging services for these children while in 
their placements.  Subgrantees may also provide services related to 
residential care, using professional staff to care for foster children in 
group homes, residential institutions or schools, mental health, or other 
specialty treatment facilities, and emergency shelters. 
The increasing privatization of foster care services has led to concerns 
about the accountability of subgrantees within the foster care program.  
Recent State audits in one State have substantiated the need for 
concern, and demonstrated the significant consequences of poor 
monitoring.  In 2000, Ohios State Auditor found that more than $9 
million in foster care funds had been misspent by private agencies on 
housing and automobile leases, private jet fuel, and other unallowable 
purchases. These audits uncovered lax control over Federal foster care 
money, a lack of financial and program monitoring, abuse of public 
funds, and the compromised care of some children.6 
Without adequate oversight of foster care subgrantees, the safety and 
welfare of thousands of children a year are potentially jeopardized and 
millions of dollars in annual Federal funds are vulnerable to abuse.  
Grants Management Overview 
During our review period, responsibilities for States grant 
administration of Federal foster care funds were delineated by two sets 
of Federal requirements:   
o 	 the Uniform Administrative Requirements for Awards and 
Subawards (45 CFR Part 74),7 and 
o 	 the Single Audit Act (implemented by OMB Circular A-133). 
Specifically, 45 CFR Part 74 contains grants management regulations 
and incorporates OMB Circular A-133 by reference.  Together, both 
documents set forth the major HHS grants management requirements, 
including a subset of requirements that are specifically related to the 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  2  I N T R O D U C T I O N  
administration of subawards.  This subset provides both general 
directives for States monitoring of subgrantees fiscal and program 
performance, as well as some specific requirements.  Recently, HHS 
redesignated Title IV-E State grants to be subject to 45 CFR Part 92, 
which also incorporates OMB Circular A-133 by reference and is 
otherwise similar to 45 CFR Part 74. 
States Monitoring of Subgrantees  
According to OMB Circular A-133, States must monitor subgrantees 
program and fiscal performance and communicate specific information 
to subgrantees as part of administering the subaward.   
Monitoring Subgrantees Program and Fiscal Performance.  Federal grants 
management requirements8 generally require States to:  
o 	 Ensure that subgrantees are complying with program 
requirements and achieving performance goals. 
o 	 Ensure subgrantees are complying with fiscal requirements, such 
as having appropriate fiscal controls in place, and are using 
awards for authorized purposes. 
These requirements do not further specify how States should monitor 
subgrantees.  States can ensure that subgrantees are meeting these 
requirements through a variety of mechanisms, including progress 
reports, site visits, financial reports, independent (third party) financial 
audits, and/or internal (State-conducted) financial audits.   
Under OMB Circular A-133, certain subgrantees must have a specific 
type of independent audit, called a Single Audit.  Single Audits include 
a traditional financial audit of subgrantees basic financial statements, 
as well as an auditors report on subgrantees internal controls and an 
opinion on subgrantees compliance with requirements of major Federal 
programs.  
Subgrantees exempt from the Single Audit include:  all for-profit 
subgrantees, non-profit subgrantees expending less than $500,000 in 
total Federal awards, and vendors.  States use Federal requirements 
delineated in OMB Circular A-133, __.210 to determine whether 
subgrantees are subrecipients and thus subject to a Single Audit, or 
vendors and not subject to a Single Audit.   
These requirements characterize subrecipients as subgrantees who 
carry out the program:  they may determine eligibility, make 
programmatic decisions, have their performance judged against the 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  3  I N T R O D U C T I O N  
program objectives, and must comply with program requirements. 
Vendors are characterized as subgrantees who provide goods and 
services that are ancillary to the operation of the program:  they provide 
goods and services within normal business hours to many different 
purchasers, operate in a competitive environment, and are not subject 
to program compliance requirements.  The requirements direct States to 
use their judgment in making this determination.  Some States have 
defined foster care subgrantees as subrecipients, and other States 
defined subgrantees providing the same core services as vendors.  As 
mentioned earlier, this report will use subgrantee as a generic term 
that does not indicate whether the State actually considers the entity to 
be a subrecipient or vendor. 
Administering the Subaward. Federal grants management requirements 
also direct States to take other actions to manage their subawards.  For 
instance, States are required to: 
o  Inform subgrantees that the subaward includes Federal funds. 
o  Communicate relevant Federal requirements to subgrantees.9 
Subgrantees must receive this information at the time of the award so 
they are aware of Federal requirements as they carry out program 
activities. States may use award documents, such as contracts, to 
communicate this required information to subgrantees. 
ACFs Oversight of States Monitoring of Subgrantees 
Just as States must ensure that subgrantees comply with regulations, 
ACF must ensure that States administer their foster care programs in 
compliance with Federal requirements.  These requirements include the 
grants management requirements described above. 
The ACF is responsible for overseeing States compliance with Federal 
requirements set out in their Title IV-E State plan.  As part of their 
State plan, States submit materials demonstrating that State policies 
reflect compliance with specific Federal requirements.  These 
requirements include HHS grants management regulations, contained 
in 45 CFR Part 74, which sets forth the requirements for States 
monitoring of subgrantees mentioned above.  As a condition of receiving 
Federal Title IV-E funds, States must agree to administer their 
program . . . in accordance with the provisions of this State plan, Title 
IV-E of the Act, and all applicable Federal regulations . . . .10 The ACF 
determines whether to approve submitted State plan materials, and 
retains the authority to determine . . . that a previously approved plan 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  4  II NN TT RR OO DD UU CC TT II OO NN
no longer meets the requirements for approval . . . .11 Finally, ACF is 
responsible for ensuring States compliance with the State plan. The 
Social Security Act authorizes ACF to establish a review to determine 
whether State programs are in substantial conformity with these 
provisions.12 
In addition to ensuring that States are in compliance with their State 
plan, ACF is required to review State Single Audit findings it receives 
that relate to the Title IV-E program.13  As part of States Single Audit, 
auditors employ various procedures to assess whether States comply 
with Federal grants management requirements in their oversight of 
subgrantees. The OMB Circular A-133 provides auditors with guidance 
and suggested audit procedures for making this assessment; however, 
auditors have discretion about the specific methods to employ. Auditors 
must report any findings of non-compliance, and Federal agencies must 
ensure that States take corrective action on these findings.14 
The ACFs Administration of the Foster Care Program 
In addition to understanding grants management and subgrantee 
monitoring, it is important to have an understanding of ACFs broader 
oversight of the foster care program. 
As part of ACFs overall administration of the foster care program, ACF 
has several mechanisms to ensure that States are in compliance with 
applicable laws and regulations. Since 2001, ACF has used the Child 
and Family Services Review (CFSR) as the primary review to ensure 
compliance with States Title IV-E State plan. The CFSR is designed to 
assess certain aspects of States systemic functioning and to assess 
States programmatic outcomes in relation to child safety, permanency, 
and well-being. 
To oversee the financial aspects of States foster care administration, 
ACF employs the Title IV-E Eligibility Review and reviews States 
quarterly financial reports to ensure that States requests for Federal 
funds are appropriate. Finally, as previously mentioned, ACF is 
required to review all findings from State-level Single Audits related to 
States administration of the foster care program. In addition to 
assessing States subgrantee monitoring, Single Audit findings may 
relate to several other areas, including such things as States financial 
controls, allowable activities and costs, and eligibility. 
Related Work by the Office of Inspector General 
The OIG has reviewed subgrantee monitoring in several HHS programs 
as part of an OIG effort to examine grants management in HHS 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  5  I N T R O D U C T I O N  
programs.  In response to a request by the Senate Finance Committee, 
OIG has recently issued a series of reports examining the Health 
Resources and Services Administrations oversight of Ryan White CARE 
Act funds. In addition, OIG issued 15 audit reports in 2003 on State 
and city monitoring of subgrantees receiving Public Health 
Preparedness and Response to Bioterrorism funds, citing that some 
States and major cities lacked appropriate monitoring mechanisms.15 
SCOPE 
This inspection focused solely on how States monitor subgrantees 
providing residential care or child placement services to Title IV-E 
eligible children.  It did not examine States monitoring of subgrantees 
that provide only training, adoption, or independent living services 
under the Title IV-E program. 
States monitoring of subgrantees was evaluated based on the design 
and functioning of their monitoring systems.  We assessed only whether 
or not States monitoring systems met our criteria, and not the extent to 
which they deviate from the criteria.  Further, States were not 
evaluated on the quality of their monitoring mechanisms, nor were they 
evaluated on their subgrantees fiscal and programmatic performance. 
METHODOLOGY 
Assessment of States Monitoring 
We examined six States subgrantee monitoring through a review of 
States subgrantee files and onsite interviews with staff.  We compared 
States monitoring systems to criteria we developed, based on Federal 
grants management requirements.  
Our States included Texas, Michigan, Massachusetts, North Carolina, 
Pennsylvania, and California.  Overall, the 6 States comprise over 
45 percent of the Federal fiscal year (FY) 2002 Title IV-E funds and are 
located in 6 of the 10 ACF regions.  In four of the States, the foster care 
program was directly administered by the State. In two of the States, 
the program was jointly administered by the State and the counties. In 
these States, we selected the two counties serving the largest number of 
Title IV-E children for our review.  In each State, subgrantees provide a 
portion of foster care services, and are used extensively in some cases: 
one selected county provides 85 percent of foster care services through 
subgrantees.  The States and counties we reviewed fund more than 
1,500 foster care subgrantees. 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  6  I N T R O D U C T I O N  
Staff Interviews. To understand the complexities of State and county 
monitoring systems, we conducted onsite interviews with staff members 
responsible for monitoring subgrantees.  Typically, this included 
interviews with fiscal, program, and licensing staff.  In county-
administered States, we interviewed State and county staff responsible 
for monitoring county subgrantees. We also requested documentation of 
any policies, protocols, and guidance related to subgrantee monitoring. 
Subgrantee File Review. After gaining an understanding of how States 
and counties intended to monitor their subgrantees, we reviewed 
selected subgrantee files to verify whether monitoring systems were 
functioning as described.  To verify that State and county monitoring 
systems were functioning as reported, we selected and reviewed files for 
15 to 19 subgrantees in each State from State FY 2003.  In county-run 
States, we selected eight subgrantees from each county.  To represent 
the various types of subgrantees, we selected both low and high volume 
child placement subgrantees, as well as both low and high volume 
residential care subgrantees in each State.  Overall, we reviewed files 
for 98 subgrantees.  For a full discussion of the methodology, please see 
Appendix A. 
Evaluation Criteria.  Federal grants management requirements provide 
that States must Monitor the activities of subrecipients as necessary to 
ensure that Federal awards are used for authorized purposes in 
compliance with laws, regulations, and the provisions of contracts or 
grant agreements and that performance goals are achieved.16  The 
HHS has issued no further guidance or delineation on what kind or 
level of monitoring is considered necessary.  Thus, to assess whether 
States were monitoring their subgrantees as necessary, it was 
essential that we define measurable evaluation criteria.  In order to 
accomplish this, we consulted grants management guidance from other 
agencies, industry guidance, and grants management reports from 
various Federal agencies.  
We developed these evaluation criteria as a set of minimum standards, 
which would be specific enough to be measurable, yet general enough to 
allow for variation in how States execute their monitoring of 
subgrantees.   
Our criteria set forth the following framework:  States must have at 
least one fiscal monitoring mechanism and one program monitoring 
mechanism in place.  Each of these monitoring mechanisms must 
incorporate three components.  First, they must collect information. 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  7  I N T R O D U C T I O N  
Second, there must be a means to review the information collected. 
Finally, there must be a system to follow up on identified problems.17 
In addition to assessing States monitoring systems, we also examined 
their adherence to other grants management requirements. These 
requirements provide that States must communicate basic information 
to their subgranteesStates must at least identify that the funds are 
Federal and must inform subgrantees of applicable grants management 
requirements.  Appendix B details the specific grants management 
requirements we examined related to communicating grants 
management information.  See the box below for a summary of our 
evaluation criteria. 
FEDERAL REQUIREMENT  EVALUATION CRITERIA 
Program and Fiscal Monitoring 
States must: 
--monitor the activities of subrecipients as 
States must have at least: 
necessary to ensure that Federal awards are 
used for authorized purposes in compliance with 
--one fiscal monitoring mechanism, and 
laws, regulations, and the provisions of contracts 
or grant agreements and that performance goals 
--one program monitoring mechanism
are achieved. 
[OMB Circular A-133, __.400(d)(3)] 
  Each mechanism must be used to collect  
  and review information on subgrantees,  
--manage and monitor each project, program, 
  and must include follow up on identified 
subaward, function or activity supported by the 
  problems. 
award. 
[45 CFR  74.51(a)] 
Communication of Required Information 
States must provide subgrantees with the best 
information available to describe the Federal  States must at least inform subgrantees that the 
award.  grant includes Federal funds. 
[OMB Circular A-133, __.400(d)(1)] 
States must advise subgrantees of requirements 
imposed on them by Federal laws and  States must inform subgrantees of Federal 
regulations.    grants management requirements. 
[OMB Circular A-133, __.400(d)(2)] 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  8  II NN TT RR OO DD UU CC TT II OO NN
Each program and fiscal monitoring mechanism was held to the 
following standards: 
o 	 Mechanism design is appropriate: The mechanism must be 
designed to monitor all subgrantees. 
o 	 Mechanism is functioning: Use of the mechanism must be 
documented for 75 percent of the files reviewed. While we would 
expect the monitoring to be documented in all files, we wanted to 
allow for a small amount of error in States documentation of their 
monitoring. 
In States where subgrantees are considered to be subrecipients and 
thus required to have a Single Audit, we reviewed States systems in 
relation to specific OMB Circular A-133 requirements. Namely, we 
assessed whether States followed up on all Single Audit findings within 
the required 6-month period. 
We presented our draft criteria to ASAM staff who found these criteria 
to be reasonable and consistent with Federal requirements.18  Appendix 
C contains a further discussion of the development of our evaluation 
criteria. 
In a third report, Protocol for Assessing States Monitoring of 
Subgrantees, (OEI-05-03-00062) we provide more detailed information 
about how we applied our criteria, including the methodology and data 
collection protocols we used. 
Assessing States Monitoring Overall 
Overall, States must meet each element of our evaluation criteria in 
order to be considered as having adequate monitoring mechanisms and 
communication strategies. In States where the foster care system is 
administered by counties, both selected counties must meet each 
element of our criteria for the State to be considered in accordance with 
our criteria overall. We evaluated States in this manner because, as 
primary recipients of Federal foster care funds, States are the entities 
ultimately responsible to ensure that counties have appropriate systems 
for monitoring their subgrantees. 
Review of ACF Oversight 
To understand how ACF ensures that States monitor their foster care 
subgrantees, we collected and reviewed information from a variety of 
sources. We conducted phone and in-person interviews with ACF fiscal 
and program staff in the central office and in all 10 ACF regions. We 
reviewed ACFs major oversight mechanisms, including protocols for the 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  9  I N T R O D U C T I O N  
CFSR, Title IV-E Eligibility Review, Title IV-E State plan, and the 
quarterly financial reports. Finally, we analyzed all Single Audit 
findings from any of the 50 States related to subgrantee monitoring 
under the Title IV-E program for FYs 2001 and 2002.    
This inspection was conducted in accordance with the Quality 
Standards for Inspections issued by the Presidents Council on Integrity 
and Efficiency. 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  10  
 F I N D I N G S
Monitoring systems in three States are  Monitoring systems in three of the six 
inadequate according to our evaluation criteria.   selected States are inadequate 
according to criteria we developed based 
In addition, three States do not communicate 
on grants management requirements. 
required information. 
Specifically, these States lack adequate 
fiscal or program monitoring mechanisms.  Two of these three States 
lack adequate monitoring systems and do not communicate required 
grants management information. 
A fourth State does not communicate required grants management 
information to subgrantees. (See Table A.) 
TABLE A 
States' Adherence with Criteria Based on Federal Grants 
Management Requirements 
State  State  State  State  State  State 
Requirement  A  B  C  D  E  F 
Fiscal Monitoring  _  _  Yes  Yes  Yes  Yes 
Program Monitoring  Yes  Yes  _  Yes  Yes  Yes 
Communicating Required 
_  Yes  _  _  Yes  Yes 
Information 
In Adherence with 
_ _   _  _ Y es Ye s  
Criteria 
Source:  OEI State Site Visit Data 
Three States program or fiscal monitoring systems are inadequate 
according to our evaluation criteria. 
As mentioned above, three States lack an adequate monitoring system, 
either because they do not have an adequate program monitoring 
mechanism or because they lack an adequate fiscal monitoring 
mechanism. 
One State does not have an adequate program monitoring mechanism 
according to our evaluation criteria.  Five of the six selected States have at 
least one program monitoring mechanism that meets our criteria.  All 
five of these States use comprehensive licensing site visits to monitor 
their subgrantees.  In addition, two of these five States conduct at least 
one additional program site visit to assess subgrantees program 
performance.  The one State, State C, that does not have an adequate 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  11  FFF III NNN DDD III NNN GGG SSS  
program monitoring mechanism, has designed an appropriate 
mechanism, but the mechanism is not functioning, as designed, for at 
least 75 percent of selected subgrantees. (See Table B.) 
TABLE B 
Adherence with Program Monitoring Criteria 
State  State  State  State  State  State 
A  B  C  D  E  F 
Mechanism design is 
Yes  Yes  Yes  Yes  Yes  Yes 
appropriate 
Mechanism is functioning  Yes  Yes  _  Yes  Yes  Yes 
At Least One Program 
Monitoring Mechanism in  Yes  Yes  _  Yes  Yes  Yes 
Adherence with Criteria 
Source: OEI State Site Visit Data 
Like the five other States, State C conducts licensing site visits in order 
to monitor the program performance of subgrantees. State C intends to 
conduct annual licensing site visits for all subgrantees, but only 7 of the 
16 selected subgrantees in the State had a licensing site visit 
documented in their files. Essentially, State C did not ensure that more 
than half the selected subgrantees were relicensed before their licenses 
expired, resulting in foster children being cared for by unlicensed 
providers. 
Monitoring staff in State C report that they are severely understaffed 
and their first priority is to respond to complaints. They report that this 
leaves inadequate resources available for the annual licensing visits. As 
a result, this State plans to reduce its monitoring to include licensing 
visits for only 10 percent of all foster care subgrantees each year. The 
State will relicense the remaining subgrantees using a desk review of 
materials submitted by subgrantees. 
Two States do not have an adequate fiscal monitoring mechanism according to 
our evaluation criteria.  Four of the six selected States have at least one 
fiscal monitoring mechanism that meets our criteria. For three of these 
States, this mechanism is an audit, and the fourth State uses a State 
review of financial information. While the other two States also employ 
audits as their fiscal monitoring tool, their systems do not meet our 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  12  F I N D I N G S  
criteria.  State As use of an audit to monitor subgrantees is inadequate 
because of flaws in the mechanisms design, as well as because the audit 
does not function as designed.  State Bs audit mechanism is 
appropriately designed, but is not used as designed.  (See Table C.) 
TABLE C 
Adherence with Fiscal Monitoring Criteria 
State  State  State  State  State  State 
A  B  C  D  E  F 
Mechanism design is 
_  Yes  Yes  Yes  Yes  Yes 
appropriate 
Mechanism is functioning  _  _  Yes  Yes  Yes  Yes 
At Least One Fiscal 
Monitoring Mechanism in  _  _  Yes  Yes  Yes  Yes 
Adherence with Criteria 
Source:  OEI State Site Visit Data 
The fiscal monitoring mechanism used in State A is not designed to 
monitor all subgrantees, and thus does not meet our criteria.  The State 
requires only a subset of subgrantees to submit audits, based on the 
type of services they provide.  For example, only 10 of our 16 selected 
subgrantees are required to submit audits.   
The reason all subgrantees are not required to submit audits is that 
State A uses two separate departments to monitor different subsets of 
foster care subgrantees. One department requires all subgrantees it 
monitors to submit an audit.  The other department does not require an 
audit, nor does this department use any other fiscal monitoring 
mechanism to monitor subgrantees management of Title IV-E funds.   
State As fiscal monitoring system is also not used as designed.  While 
all of the required audits were submitted, there was no evidence that 
staff reviewed audits for our selected subgrantees.  Further, even if the 
review took place, but was undocumented, State staff reported that the 
staff responsible for reviewing the audits have no financial training.  
These staff only review an audit to verify that it makes sense. 
State Bs use of audits is appropriately designed, but not functioning for 
at least 75 percent of the selected subgrantees, as specified by our 
criteria.  Our review of States subgrantee files found that only 11 of   
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  13  F I N D I N G
 S  
19 subgrantee files included documentation of audits.  Since only 
58 percent of selected subgrantees had documented audits, State Bs 
fiscal monitoring does not meet our criteria. 
Like State A, the division of monitoring responsibilities in State B offers 
a plausible explanation as to how this monitoring lapse occurs.  In this 
State, the audit is reviewed by the rate-setting office and not by the 
office that monitors subgrantees.  Thus, the office that could use the 
audit to monitor subgrantees does not receive or review the audit.  The 
rate-setting staff that review the audit reported that they do not see 
much relevance in the task and described their review as general.19 
Only in cases where the audit reveals basic solvency issues that may 
warrant contract termination does the rate-setting office provide 
information to the monitoring office.  
Three States do not communicate required grants management information 
to subgrantees.  
Informing subgrantees that they are subject to Federal grants 
management requirements is the first step toward ensuring that 
subgrantees are appropriately carrying out Federal program activities 
and spending Federal monies.  Subgrantees who are not aware of these 
responsibilities may inadvertently use Federal money for purposes not 
intended by the State or ACF.  They also may not understand or adhere 
to program regulations detailing the provision of services to children.  
TABLE D 
Adherence with Requirements to Communicate Grants Management 
Information to Subgrantees 
State  State  State  State  State  State 
A  B  C  D  E  F 
Inform subgrantees that the 
_  Yes  _  _  Yes  Yes 
grant includes Federal funds 
Communicate Federal 
requirements related to  _ Y  es _  Y  es Y es Y es  
monitoring 
In Adherence  _  Yes  _  _  Yes  Yes 
Source:  OEI State Site Visit Data 
Three of the six selected States do not notify subgrantees that the funds 
they receive are Federal foster care funds.  (See Table D.)  In fact, one of 
these States misidentifies the funds as Social Services Block Grant 
funds. Identifying the funds this way means that auditors conducting 
Single Audits review subgrantee compliance with Social Services Block 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  14  FFF III NNN DDD III NNN GGG SSS  
Grant regulations and not with Federal foster care regulations, limiting 
the potential usefulness of the Single Audit. 
Two States do not communicate Federal requirements to subgrantees. 
Specifically, State A does not inform subgrantees that they are subject 
to Federal grants management requirements under 45 CFR Part 74, nor 
does this State specifically inform subgrantees that they must allow 
State and Federal entities access to records and must pass down all 
Federal requirements to any of their subgrantees. State C informs 
subgrantees of some Federal requirements, but does not inform 
subgrantees that they must pass on all Federal requirements to their 
subgrantees. See Appendix B for further analysis on State practices 
related to communicating grants management information to 
subgrantees. 
OOvveerrssiigghhtt  ooff  SSttaatteess  ssyysstteemmss  ffoorr  mmoonniittoorriinngg  In reviewing ACFs oversight of States, 
ssuubbggrraanntteeeess  rreecceeiivveess  mmiinniimmaall  aatttteennttiioonn  bbyy  AACCFF..  we found that ACFs focus and
priorities do not encompass subgrantee 
monitoring. In fact, oversight of States subgrantee monitoring receives 
very minimal attention by ACF. 
The ACFs formal communications with States reflect a lack of focus on 
States subgrantee monitoring. We found no notification of grants 
management requirements in the grants award letter or in ACF policy 
manuals. The only means of communicating Federal grants 
management requirements seem to be the Title IV-E State plan. 
The Title IV-E State plan is designed to convey pertinent statutory and 
regulatory requirements to States and to ensure that States have 
policies in place that reflect compliance with these requirements. 
However, the State plan is not routinely updated, so it does not function 
as a routine mechanism for communicating requirements to States. 
Since States report high rates of turnover and loss of experienced staff, 
it is plausible that staff are not familiar with the grants management 
requirements referenced in the State plan. 
Interviews with State staff also suggest that ACF does not focus on 
States subgrantee monitoring. Monitoring staff in three of the six 
selected States report that they have no communication with ACF 
around monitoring subgrantees. Monitoring staff in two additional 
States describe very limited communication with ACF on this topic. 
Further, States report that they only speak with ACF about monitoring 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  15  F I N D I N G
 S  
of subgrantees at the States request, and even then, the conversation is 
limited to ACF answering specific questions raised by the State.  
In half of all ACF regions, the staff we interviewed were not aware of 
how States monitor their foster care subgrantees.  Further, staff in 7 of 
10 regions indicate that they only look into States monitoring of 
subgrantees if they know something is wrong. Staff in one region noted, 
only if we get individual complaints are we aware of any [monitoring] 
processes.  
Staff in three ACF regions report that they do not focus on subgrantee 
monitoring because they believe that they lack the authority to do so.  
These respondents believe they are not allowed to oversee States 
monitoring of subgrantees.  For example, staff in one region indicated 
that they . . . have no business going beyond just whether the State has 
a process [for subgrantee monitoring] . . . and . . . cannot assess 
whether they are carrying out that process.   Staff in another ACF 
region report that it is difficult to delve into States subgrantee 
monitoring without a way in by means of an identified problem.   
Staff in half of ACF regions indicate that they do not focus on 
subgrantee monitoring because it is not a priority.  Staff in one region 
report that, although they make an effort to focus on monitoring, it is 
not a priority from ACFs central office.  They believe ACF central office 
priorities are reflected in the way they fund the regions.  Staff in this 
region assert that they do not receive the resources necessary to perform 
the site visits they feel are crucial to oversee States subgrantee 
monitoring.  Staff in another region noted that States monitoring of 
subgrantees is not a burning issue for us . . . we are more concerned 
about expenditure reports.   
The only direct tool ACF uses for overseeing States subgrantee monitoring 
is the State Single Audit, which has limited utility. 
According to ACF staff, the State Single Audit is the only tool used to 
directly assess States monitoring of subgrantees. Staff in three regions 
note that a decline in resources has made the State Single Audit more 
important as they are less equipped to oversee States subgrantee 
monitoring themselves. Staff in one region noted that in the past we 
did a lot more monitoring and now we just rely on the A-133 [Single 
Audit].  In addition, staff in three regions report that they rely solely 
on the auditor conducting the next years Single Audit to follow up on 
findings related to States monitoring of subgrantees.  
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  16  F	 I N D I N G
 S  
The Single Audit has limited utility as a tool to oversee States monitoring.    
Based on interviews with ACF central office and regional staff and our 
analysis of the Single Audit and State Single Audit findings, we 
identified the following concerns about the Single Audit process as a tool 
to monitor States subgrantee monitoring: 
1. 	 The State Single Audit may not assess State monitoring of all 

types of subgrantees. 

2. 	 The State Single Audit may miss problems with States 

monitoring of subgrantees. 

3. 	 Single Audit findings regarding subgrantee monitoring may not be 
helpful in identifying and resolving problems. 
4. 	 Single Audit findings regarding subgrantee monitoring are limited 
in scope. 
5. 	 Auditors skills and knowledge of the foster care program vary. 
The State Single Audit may not assess States monitoring of all foster 
care subgrantees, depending on whether subgrantees themselves are 
considered subrecipients by the State, and thus subject to a Single 
Audit.  States use Federal Office of Management and Budget guidelines 
to determine whether subgrantees should be classified as 
subrecipients and thus subject to a Single Audit, or vendors and not 
subject to a Single Audit.  Auditors are expected to review States 
monitoring of subrecipients, but are not expected to review States 
monitoring of vendors, even though some vendors perform the same 
functions as subrecipients.  Auditors may choose to review a States 
vendor monitoring;20 however, ACF would have no way of knowing 
whether a lack of findings indicates that vendors were assessed and 
found to have no compliance problems, or just not assessed. This is 
especially worrisome because four of our six selected States consider 
most or all of their subgrantees to be vendors. 
During our interviews, ACF staff raised concerns that States Single 
Audits may be missing problems with States monitoring of subgrantees. 
Staff in at least four ACF regions either know of a specific monitoring 
problem that the audit had missed, or believe that it would miss 
problems with States monitoring of subgrantees.  As staff in one region 
stated, . . . when [the auditors] write up the findings, all they have to 
say is we found no compliance problems . . . .  I cant feel confident that 
this is a good Federal fiscal oversight tool.  In these instances, ACF 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  17  FF II NN DD II NN GG
 SS  
staff does not know whether the audit report truly reflects a lack of 
findings, or whether it actually missed a problem. 
In fact, at least one State that was not selected for our study exemplifies 
this vulnerability: this State had major problems related to subgrantee 
monitoring that the State Single Audit process missed. The State 
Single Audit for Ohio did not identify subgrantee monitoring problems, 
although serious problems were identified through other mechanisms. 
In 2000, special audits conducted by Ohios Auditor of State discovered 
that more than $9 million in foster care funds had been misspent by 
subgrantees that counties treated as vendors. It is possible that these 
problems were not caught because the Single Audit does not typically 
review how States monitor their vendors.21 
Even when the State Single Audit report does contain subgrantee 
monitoring findings, they are often limited in scope. Nearly half of the 
subgrantee monitoring findings we reviewed do not provide any 
systemic information about the quality of States monitoring systems. 
Out of all 50 States Single Audits over a 2-year period, we found 
11 audits with a subgrantee monitoring finding related to the Title IV-E 
program. Only 4 of these 11 audits included findings containing 
substantive information. Of the remaining seven audits, five contained 
findings that related solely to the timeliness of the audit process. In 
these cases, the State was cited for not ensuring that either the 
subgrantee audit reports or the States own management decisions were 
completed within the required timeframe. While practical, this type of 
information would not tell ACF much about how well States monitor 
subgrantees. 
According to ACF staff, State Single Audit findings may not be helpful. 
Findings may provide some indication as to what a problem is, but 
without more detail, such as the auditors workpapers, ACF staff do not 
know where to begin an investigation. Staff in at least one region 
expressed an interest in talking with the auditor to clarify information 
in the audit but had been unsuccessful in locating the auditor. 
Staff in eight regions raise a final concern about the utility of the State 
Single Audit related to the auditors skills or knowledge of the foster 
care program. Regional staff note that the auditor may lack experience 
with and understanding of Federal programs, and therefore, have 
difficulty assessing them. In particular, staff in some regions note that, 
although some States in their region consistently have State Single 
Audit findings every year, other States have few or none. Regional staff 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  18  FFF III NNN DDD III NNN GGG
 SSS  
believe this variety may be due to differences in the abilities of the 
auditors, not due to differences in States actual grant administration. 
Staff in most ACF regions believe they have tools, like the Child and Family 
Services Review and Title IV-E Eligibility Review, that could indirectly reveal 
issues with States monitoring of subgrantees. 
Staff in ACF central office and regional offices indicate that their 
oversight of States focuses on States administration of the foster care 
program, not on States monitoring of subgrantees. However, ACF staff 
believe that the CFSR, the Title IV-E Review, or the quarterly financial 
report review could indirectly uncover problems with States subgrantee 
monitoring. Staff in at least five ACF regions believe that problems 
with States monitoring of subgrantees have or would come up as a 
result of these reviews. These respondents claim that, in looking at 
programmatic and fiscal outcomes during the CFSR and Title IV-E 
Review, they are indirectly assessing subgrantee performance. They 
believe poor performance on these reviews could expose a problem with 
States monitoring of subgrantees. 
However, when we questioned regional staff, they were unable to 
provide specific examples of how systemic problems with States 
subgrantee monitoring were uncovered through these mechanisms. 
Instead, staff in some regions offered examples of ACF identifying 
problems with individual subgrantees as the result of one of these 
reviews. However, uncovering issues with a particular subgrantee is 
not the same as uncovering a systemic problem regarding the controls 
that States have in place to assure subgrantee performance. If there is 
a systemic problem, discovering and solving the problem for one 
subgrantee would not impact the children served by other subgrantees 
throughout the State who may also be performing poorly under the 
States lax oversight. 
Given that, as ACF staff point out, getting information about how 
States monitor foster care subgrantees is not the purpose of the CFSR 
or the Title IV-E Review, it seems unlikely that problems of this nature 
would be discovered. While a States poor performance on child-specific 
outcomes could lead a reviewer to question the States overall oversight 
of foster care subgrantees, it would be up to the discretion of the 
reviewer to pursue such an angle. Further, an indirect system of 
monitoring, by definition, does not provide a systemic means of 
assessment. The best ACF could expect would be to come across such 
information in the course of conducting these reviews. 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  19    R E C O M M E N  D A T  I O N S  
RECOMMENDATIONS 
The ACFs oversight of States subgrantee monitoring does not appear to 
be sufficient to ensure States are meeting even the minimal criteria by 
which we assessed them.  In fact, we found that monitoring systems in 
three of the six States selected for review are inadequate according to 
criteria we developed based on grants management requirements, and 
three States do not communicate required grants management 
information to subgrantees.  We also found that oversight of States 
systems for monitoring subgrantees receives minimal attention by ACF. 
We recommend that ACF bolster its oversight of States subgrantee 
monitoring, relying on more than the Single Audit to ensure that States 
adhere to grants management requirements.  Without quality 
monitoring, States and ACF may have little assurance that subgrantees 
are providing appropriate, quality services to children in a fiscally 
responsible manner.  Given the extent that States appear to be using 
subgrantees to carry out crucial foster care services, lax monitoring can 
have a significant impact.   
The ACF should hold States accountable for adherence to grants 
management requirements relating to the oversight of subgrantees.   
We outline three steps ACF should take to hold States accountable with 
these grants management requirements. 
1. The ACF should develop a system for routinely communicating grants 
management responsibilities to States. We found that ACF does not 
routinely communicate grants management requirements to States. 
We suggest that ACF utilize its existing communication mechanisms 
with States to routinely communicate grants management 
requirements.  The ACF could issue periodic reminders through 
program instructions or other communications with States, such as 
the grant award letter.  Routinely communicating subgrantee 
monitoring requirements would emphasize to States the importance 
of monitoring, as well as remind States to consider these 
requirements as they write contracts and grant agreements with 
subgrantees each year. 
2. The ACF should develop specific requirements that clarify States 
responsibilities for monitoring of subgrantees.  Since the Federal grants 
management requirements relating to subgrantee monitoring are 
general, we suggest that ACF clarify States responsibilities by 
developing specific requirements for State monitoring systems.  These 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  20  RR EE CC OO MM MM EE NN DD AA TT II OO NN SS  
specific requirements should provide clear standards for States 
monitoring systems. The ACF could adopt the criteria used for this 
study, or work with ASAM to develop their own standards. Providing 
States with specific, measurable standards that reflect ACFs 
expectations for States subgrantee monitoring would emphasize the 
importance of quality monitoring systems and would allow ACF to 
better assess States accountability in relation to grants management 
requirements. 
3. The ACF should utilize its existing oversight mechanisms to ensure States 
adhere to grants management requirements. Currently, ACF appears to 
lack an adequate oversight mechanism to ensure that States adhere 
to grants management requirements. The ACF should refine existing 
oversight processes to ensure that States are held accountable with 
Federal requirements in their administration of subawards and 
monitoring of subgrantees. 
To ensure that States have adequate systems for monitoring 
subgrantees, ACF could use the CFSR or provide independent auditors 
with specific instructions when completing States Single Audits. The 
ACF could use either of these mechanisms to assess both the design of 
States monitoring systems, as well as test whether States systems are 
functioning appropriately. Specifically, ACF could require States to 
submit a description of their fiscal and programmatic monitoring 
mechanisms as part of their CFSR, including a description of the 
frequency, methods, content, and purpose of the monitoring 
mechanisms and whether mechanisms apply to all subgrantees or only 
a subset of subgrantees. Staff could then include a review of a sample of 
State subgrantee monitoring files while onsite for the CFSR to test 
whether monitoring is functioning appropriately. 
The ACF could also recommend revisions to OMBs Title IV-E 
compliance supplement to the Single Audit, as well as provide specific 
instructions for auditors to use as part of the Single Audit review of 
States subrecipient monitoring. The ACF could provide OMB with 
proposed revisions to the Title IV-E compliance supplement that include 
special tests and provisions for auditors to follow when assessing States 
subgrantee monitoring. Additionally, ACF could develop additional 
information for auditors to use when reviewing States Title IV-E 
programs, including any specific standards ACF develops outlining 
States responsibilities for monitoring foster care subgrantees, 
information about ACFs programmatic concerns, and suggestions for 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  21  RR EE CC OO MM MM EE NN DD AA TT II OO NN SS  
auditing procedures. The ACF could propose including a reference to 
this additional information in the Title IV-E compliance supplement. 
Providing auditors with these additional directions would help ensure 
that auditors review States monitoring according to ACF expectations. 
To ensure that States are communicating required grants management 
information to subgrantees, ACF could revise the current Title IV-E 
State plan template. By revising the State plan template, ACF could 
require that each State submit documentation, such as standard 
contracts or subaward agreements, to explicitly demonstrate adherence 
to grants management requirements. Once ACF has approved States 
revised Title IV-E State plan, States would only need to resubmit 
documentation if they significantly change their contract or subaward 
agreement provisions. In county-run States, ACF could request States 
standard contract or award agreement with their counties, which should 
include the requirement that counties communicate Federal grants 
management information to their foster care subgrantees. 
The ACF should work with HHS to make the State Single Audit a more 
effective tool for overseeing States monitoring of subgrantees. 
As part of ACFs overall efforts to oversee States monitoring of foster 
care subgrantees, ACF should strive to enhance the effectiveness of the 
State Single Audit. Currently, the State Single Audit is the only direct 
tool ACF uses to assess States subgrantee monitoring systems. 
However, this inspection found major concerns with the scope, quality, 
and functioning of the Single Audits assessment of States monitoring of 
subgrantees. While we do not recommend that ACF continue to rely 
solely on the Single Audit for its subgrantee monitoring, we do recognize 
that ACF will continue to utilize the Single Audit as a monitoring tool. 
In order to help improve the Single Audit as a monitoring tool, ACF 
should support and promote ongoing intergovernmental initiatives to 
improve the Single Audit. The OMB has established a task force on 
subgrantee monitoring. As part of its overall review of subgrantee 
monitoring, it plans to assess the regulations related to subgrantee 
monitoring for clarity and specificity. There is also an 
intergovernmental Quality Control Review Initiative. This initiative is 
intended to evaluate the quality of Single Audit work. Given that the 
outcomes of these efforts will be of great benefit to ACF, the agency 
should strive to support and highlight these efforts in order to ensure 
that it has the resources necessary to accomplish its missions and are 
viewed as priority initiatives. 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  22  R E C O M M E N D A T I O N S  
Further, ACF should clarify the specific types of subgrantees receiving 
Title IV-E funds that should be considered subrecipients and be subject 
to Federal Single Audit requirements under OMB Circular A-133.  The 
ACFs clarification to States should not rely on restating the Single 
Audit characteristics of subrecipients and vendors, but rather should 
specifically delineate the types of services that would render a foster 
care subgrantee a subrecipient for the purposes of the Single Audit.  For 
instance, ACF could specify that subgrantees using Federal funds to 
provide professional residential care and child placement services are 
carrying out the public purposes of the foster care program, and, 
therefore, qualify as subrecipients.  However, entities that provide goods 
or services ancillary to the operation of the foster care program, such as 
temporary staffing companies or administrative supply companies, 
would not be considered subrecipients.   
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  23    A G E N C Y   C O M M E N T S
AGENCY COMMENTS 
In its comments on our draft reports ACF concurs with the objectives of 
our recommendations and describes its intended corrective actions, 
which are generally consistent with our suggestions. The ASAM 
supports our recommendations to ACF.  The complete text of both 
agencies comments can be found in Appendix D. 
In response to our recommendation that ACF should hold States 
accountable for adherence to grants management requirements relating 
to the oversight of subgrantees, ACF outlined its actions in relation to 
the three steps we suggested to implement this recommendation.  In 
response to the first step we suggested, ACF committed to routinely 
communicating grants management responsibilities to States.  The ACF 
intends to do this by attaching a list of terms and conditions that will 
include applicable administrative rules and program regulations to 
initial Foster Care awards. Further, ACF will refer to these terms and 
conditions and include a statement highlighting the importance of 
subrecipient monitoring in award letters.  We agree with this course of 
action, and support ACF in its efforts to emphasize the importance of 
quality subgrantee monitoring systems to States. 
In response to the second step we suggested, that ACF clarify States 
responsibilities for subgrantee monitoring, ACF supported the goal of 
promoting quality monitoring and ensuring better accountability for 
program performance.  However, ACF questioned whether establishing 
a monitoring standard for States was the best course of action, given the 
current Federal preference for supporting States flexibility in 
structuring their management systems.  Instead, ACF is considering 
several steps, including affirming subgrantee monitoring as an agency 
priority and providing technical assistance to States around their 
monitoring systems.  We agree that States need flexibility to design 
monitoring systems that are appropriate to their use of subgrantees.  
However, we believe that establishing standards for States monitoring 
systems is necessary to effectively hold States accountable, and can 
function as a structure within which States can have flexibility to 
design monitoring systems appropriate to their situations.  
Our study criteria set up such a structure, which ACF could adapt.  For 
example, ACF could require that States conduct at least one type of 
programmatic monitoring and one type of fiscal monitoring for all 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  24  A G E N C Y   C O M M E N T S  
subgrantees that are receiving more than a base amount of funding and 
are providing core programmatic services. By providing States with 
criteria that set minimum expectations for States subgrantee 
monitoring, ACF could preserve States flexibility in designing the type 
and extent of their monitoring mechanisms, yet maintain ACFs ability 
to assess whether States subgrantee monitoring systems are 
acceptable. 
In fact, ACF indicates that it is considering adopting a qualitative 
version of the monitoring criteria used in this inspection as part of its 
field reviews.  In addition, ACF indicates that it would provide some 
version of its qualitative subgrantee monitoring standards to States.  
We strongly support this course of action, which would meet the intent 
of our recommendation. We also support ACF in taking additional 
steps, such as providing technical assistance as States develop and 
bolster their subgrantee monitoring systems, thus facilitating quality 
subgrantee monitoring above and beyond a minimum standard. 
In response to our final suggestion that ACF utilize its existing 
oversight mechanisms to ensure States adhere to grants management 
requirements, ACF is considering including specific reference to 
subrecipient monitoring responsibilities in the Title IV-E Compliance 
Supplement to the OMB Circular A-133 Single Audit. The ACF also 
indicates earlier in its comments that it is considering assessing State 
subgrantee monitoring as part of its field reviews, depending on 
resources. We strongly encourage ACF to take both of these actions. 
In addition, ACF indicates that it will consider whether to issue a 
program instruction to State grantees clarifying the distinction between 
subrecipients and vendors, similar to the May 9, 2002 memorandum 
ACF sent to ACF grants officers.  We support this action, but strongly 
encourage ACF to be explicit in its instructions to States around 
designating foster care subgrantees as subrecipients, and not merely 
restate the OMB Circular A-133 definitions as the May 9, 2002 
memorandum does.  We also refer ACF to ASAMs comments to this 
report. The ASAM provides some clarification on this issue, instructing 
ACF to direct States to treat subgrantees providing basic services that 
are clearly core to the success of the program as subrecipients.  Further, 
ASAM finds that in cases where there is clear doubt as to the 
subrecipient/vendor treatment, the State should be directed to treat as a 
subrecipient.   
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  25  A G E N C Y   C O M M E N T S  
Finally, in responding to our recommendation that ACF work with HHS 
to make the State Single Audit a more effective tool for overseeing 
States monitoring of subgrantees, ACF indicates that it had proposed 
several modifications to OMB regarding the auditors process. 
Specifically, ACF proposed that auditors should describe and comment 
on States systems for making subrecipient/vendor determinations, as 
well as on States systems for monitoring subrecipients.  In addition, 
ACF indicated its intention to explore future possibilities for 
strengthening the Single Audit.  We enthusiastically support these 
proposals for improving the Single Audit, and will look to ACF to 
continue to exhibit such grants management leadership in conjunction 
with the department. 
  OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  26    A P P E N D I X   ~   A
METHODOLOGY 
To assess States monitoring of subgrantees we conducted site visits in 
six States. To assess ACFs oversight of States monitoring, we 
interviewed staff in all 10 ACF regional offices and central office. 
State Selection   
We selected the six study States based on the following factors:  
(1) maximizing coverage of Title IV-E funds; (2) representing both State-
administered and county-administered States; (3) maximizing coverage 
of ACF regions; and (4) avoiding States participating in Child and 
Family Services Reviews or in the OIG region VIIs case study of eight 
States foster care programs.   
In our final selection of States, we reviewed four State-administered 
systems and two county-administered systems. Overall, the six States 
comprise over 45 percent of the Federal FY 2002 Title IV-E funds and 
are located in 6 of the 10 ACF regions.  The States and counties we 
reviewed have more than 1,500 foster care subgrantees during States 
FY 2003. 
Subgrantee Selection 
Due to the intensity of our case file review, we limited the number of 
subgrantee files selected.  We estimated that we could complete between 
15 to 20 case file reviews in each State.  We used the following 
procedure to ensure that our selection of subgrantees included 
representation of both child placement agencies and residential 
facilities, and included subgrantees that served a high volume of Title 
IV-E children, as well as those that served a low volume of Title IV-E 
children.  Our pre-inspection research indicated that States monitoring 
practices might vary between these different types of subgrantees. 
From each State and county selected, we requested a list of all foster 
care subgrantees providing child placement or residential care to Title 
IV-E children in State FY 2003. To select subgrantees, we stratified 
each subgrantee list, first by type of subgrantee (i.e., child placement 
agencies and residential facilities) and then by the number of Title IV-E 
children served.  To stratify by number of children served, we calculated 
the average number of children served, and then designated 
subgrantees as low or high volume, according to where they fell in 
relation to the average.  We then randomly selected subgrantees from 
each of the four groups: low-volume child placement agencies, high-
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  27  A P P
 E N D I X ~ A  
volume child placement agencies, low-volume residential facilities, and 
high-volume residential facilities.   
In each State we randomly selected 16 foster care subgrantees. In 
county-run States, we randomly selected eight subgrantee files in each 
of the two selected counties.  In State D, one subgrantee did not fit our 
sampling criteria and was discarded in our analysis.  In State B, a few 
selected subgrantees had more than 1 contract with the State, bringing 
the total number of files reviewed up to 19.  (See Table E.) 
TABLE E 
Sample and Universe of Subgrantees Serving Title IV 
E Eligible Children During States' Fiscal Year 2003 
State/County  Sample  Universe 
State A  16  472 
State B  19  132 
State C, County 1  8  224 
State C, County 2  8 68    
State D  15  172 
State E, County 1  8  132 
State E, County 2  8 49    
State F  16  263 
Total Subgrantees  98  1,512 
Although State D is primarily State-administered, a portion of the 
foster care program is privately administered.  For the purposes of this 
study, we focused only on the portion of State Ds program that is State-
administered. State D contracts with subgrantees through a central 
office and through local offices and regional offices.  Our file review 
included subgrantees hired by all three types of entities.  The majority 
of subgrantees were selected from the States central office, as this 
entity has significantly more subgrantees than any of the regional or 
area offices. 
Subgrantee File Review 
After collecting data on the States design of its subgrantee monitoring 
system through document review and staff interviews, we reviewed 
States subgrantee files, comparing monitoring documentation to our 
criteria to verify that the system was functioning according to its 
design. For our file review, we used a structured data collection 
instrument to examine State and county contracts with subgrantees, as 
well as to examine other evidence of monitoring, such as site visit 
reports, audit reports, financial reports, and licensing reports.   
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  28  A P P E N D I X ~ A  
If States were unable to provide us with the necessary documentation of 
their monitoring activities onsite, we allowed them additional time to 
locate and send us the documentation.  In cases where documents were 
unavailable, States were not given credit for carrying out monitoring for 
these particular subgrantees. 
It was not our intention to identify the exact proportion of subgrantees 
actually receiving monitoring in each State.  Rather, we sought to 
identify whether States monitoring systems were functioning by 
verifying that selected subgrantees were monitored as the State 
described.   
Review of ACF Oversight 
Our interviews with ACF focused on ACFs processes for overseeing 
States subgrantee monitoring systems. We asked specifically about 
ACFs review of State Single Audit findings related to States 
subgrantee monitoring, and about other major review mechanisms that 
might be used to obtain information about States subgrantee 
monitoring.  We conducted one regional interview in person and all 
other ACF interviews via telephone. 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  29  
 A P P E N D I X   ~   B
STATE PRACTICES FOR COMMUNICATING GRANTS 
MANAGEMENT INFORMATION 
The OMB Circular A-133 and 45 CFR Part 74 outline the Federal 
requirements pertaining to the grants management information that 
States must communicate to subgrantees.  States were considered to 
meet the expectations set out in these requirements if they had 
communicated required grants management information to at least    
75 percent of the subgrantees we reviewed.  This appendix includes the 
complete results of our review, and information about State practices 
above and beyond our minimal criteria.   
Identifying that grants include Federal foster care funds 
The OMB Circular A-133, __.400(d)(1) requires that States identify 
Federal awards by providing the best information available to describe 
the Federal award, including such award characteristics as the CFDA 
title and number, award name and number, award year, . . . and name 
of Federal agency.  To meet our criteria, States only had to imply that 
a subgrantees award included Federal funds.  As described in our 
findings, only three States met these criteria. 
We also examined whether States identified ACF as the Federal agency, 
and whether States identified the Catalog for Federal Domestic 
Assistance (CFDA) number of the award.  The CFDA provides 
information about grants, including a listing of applicable Federal 
regulations. We found that only one county provides its subgrantees 
with the CFDA number.  None of the selected States or counties 
referred to ACF in their communication with subgrantees. 
Communicating Federal grants management requirements 
To meet our criteria for communicating grants management 
requirements, each State had to meet each of the four sub-criteria as 
detailed in this section. As described in our findings, four States met all 
four sub-criteria.  (See Table F.) 
States must communicate applicable Federal requirements to 
subgrantees, including the following major grants management 
requirements: 
o 	 the Uniform Administrative Requirements for Awards and 
Subawards (45 CFR Part 74), and 
o 	 the Single Audit Act (implemented by OMB Circular A-133). 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  30  A P P E N D I X ~ B  
To meet our criteria, States only had to imply that these major Federal 
requirements applied.  In some States, subgrantees are considered to be 
vendors, and are not subject to OMB Circular A-133.  Five States met 
these minimum criteria.  
TABLE F 
Adherence with Requirements to Communicate Federal Grants 
Management Requirements 
State  State  State  State  State  State 
A  B  C  D  E  F 
At least imply that 
_  Yes  Yes  Yes  Yes  Yes 
45 CFR Part 74 applies 
At least imply that OMB Circular 
N/A  Yes  N/A  Yes  Yes  N/A 
A-133 applies 
Specify that State & Federal 
_  Yes  Yes  Yes  Yes  Yes 
officials have access to records 
Specify that subgrantees must 
pass down requirements to sub  _ Y  es _  Y  es Y es Y es  
subgrantees 
In Adherence  _  Yes  _  Yes  Yes  Yes 
Source:  OEI State Site Visit Data 
We also examined whether States cited or explained Federal grants 
management requirements 45 CFR Part 74 and OMB Circular A-133. 
We found that two States and two counties cite 45 CFR Part 74 but do 
not explain it.  We also found that of the three States that require 
Single Audits for some or all subgrantees, all three at least cited the 
OMB Circular A-133. Two of these States explained Single Audit 
requirements more extensively in a manual for auditors and 
subgrantees.   
Further, we assessed whether States informed subgrantees of Federal 
requirements pertaining to ACFs and States ability to monitor, 
including: 
o 	 the requirement to permit government officials access to 

subgrantees records, and 

o 	 the requirement that subgrantees pass through these 

requirements to any entity that they fund. 

OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  31  A P P E N D I X ~ B  
To meet our criteria, States had to specifically communicate these 
requirements to their subgrantees. Two States did not meet these 
criteria because they did not communicate one or both of these 
requirements to selected subgrantees.   
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  32    A P P E N D I X   ~   C
EVALUATION CRITERIA DEVELOPMENT 
To develop our evaluation criteria, we reviewed the following 
requirements and guidance:  
o 	 Federal requirements, including 45 CFR Part 74, 
45 CFR Part 92, and OMB Circular A-133; 
o 	 OMB Circular A-133 compliance supplements; 
o 	 applicable HHS grants management guidance; 
o 	 subgrantee monitoring guidance produced for other HHS programs; 
o 	 guidance for other Federal departments; 
o 	 industry guidance from Management Concepts and Thompson 
Publishing Group; 
o 	 grants management reports from the Government Accountability 
Office, OIG, ASAM, and Assistant Secretary for Planning and 
Evaluation; and 
o 	 Single Audit reports containing subrecipient monitoring findings for 
States foster care programs. 
From these sources, we developed criteria for:  (1) assessing States 
adherence to the intent of the broad monitoring requirements set forth 
in 45 CFR Part 74 and OMB Circular A-133; and (2) assessing whether 
States were following specific requirements for communicating grants 
management information to subgrantees set forth in 45 CFR Part 74 
and OMB Circular A-133.  
Evaluation Criteria Presented to ASAM 
We presented our evaluation criteria to ASAM staff in its draft form (see 
chart on the next page for a description of the criteria).  The ASAM staff 
found our criteria to be both reasonable and consistent with Federal 
requirements.  Below are the draft criteria that we presented to ASAM.  
In finalizing these criteria, we primarily changed the presentation 
format for readability and clarity. The criteria in their final format are 
presented in the body of the report. We did not present ASAM with the 
methodology we used to assess adherence to the criteria. 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  33  A P P E N D I X ~ C  

Federal Regulatory and Policy Monitoring Requirements 
Broad Monitoring Requirements 
Monitor the activities of subrecipients as necessary to ensure that Federal awards 
are used for authorized purposes in compliance with laws, regulations, and the 
provisions of contracts or grant agreements and that performance goals are 
achieved.  [OMB Circular A-133, __.400(d)(3)] 
We anticipate measuring the broad monitoring requirements using the 
following, more specific, criteria: 
o  contract or award allows for monitoring 
o  communication to subgrantee describes monitoring 
o  fiscal information 
  -- collect (possible mechanisms: fiscal reports, site visits, audit) 
  -- review
  -- follow up 
o  performance information
  -- collect (possible mechanisms: progress reports, site visits, audit) 
  -- review
  -- follow up  
Specific Monitoring Requirements 
o  Ensure specific OMB Circular A-133 audit requirements are met. 
o  Federal requirements for monitoring are communicated. 
o  Federal awards are identified to subgrantees. 
o  Require sufficient access to records to perform monitoring functions. 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  34    A P P E N D I X   ~   D
AGENCY COMMENTS 
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OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  40  
 A C K N O W L E D G M E N T S
This report was prepared under the direction of William C. Moran, 
Regional Inspector General for Evaluation and Inspections in the 
Chicago regional office.  Other principal Office of Evaluation and 
Inspections staff who contributed include: 
Susan Otter, Team Leader 
Ann Maxwell, Team Leader 
Mara Siler-Price, Lead Analyst 
Anna Fleming, Program Analyst 
Laura Torres, Program Analyst 
Sara Zuiderveen, Intern 
Linda Hall, Program Specialist 
Elise Stein, Director, Public Health and Human Services Branch 
Technical Assistance  
Barbara Tedesco, Mathematical Statistician 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  41  
 E N D   N O T E S
1	 According to Administration for Children and Families (ACF) 
estimates, 810,000 children spent some time in Title IV-E foster care 
during Federal FY 2002.  There were an estimated 534,000 children in 
Title IV-E foster care on September 30, 2002.  Retrieved       
March 11, 2004 from: 
www.acf.hhs.gov/programs/cb/dis/afcars/publications/afcars.htm. 
2	 We use the term subgrantee, as opposed to terms that are commonly 
used by States but have specific technical definitions in Federal grants 
management requirements, such as contractor or subrecipient.   
3	 Task Force members include staff from:  the Office of Management and 
Budget (OMB); the Departments of Health and Human Services (HHS), 
Transportation, Agriculture, Education, Justice, Labor, and Navy; the 
Federal Emergency Management Agency; the National Science 
Foundation; and the States of Louisiana and Texas.   
4	 A 2002 Government Accountability Office (GAO) study, Welfare 
Reform: Federal Oversight of State and Local Contracting can be 
Strengthened, GAO-02-661, 2002, examined State and local agency 
monitoring of subgrantees receiving Temporary Assistance for Needy 
Families funds, and found that ACF staff were not aware of monitoring 
problems identified in States Single Audit reports.  These audit reports 
cited weaknesses in States monitoring, including inadequate fiscal and 
program monitoring of local contracting entities. 
Congress has also expressed concern that the Health Resources and 
Services Administration (HRSA) does not adequately monitor grantees 
oversight of their subgrantees.  Consequently, in 2001, the Senate 
Finance Committee requested that the Office of Inspector General 
(OIG) review HRSAs oversight of Ryan White CARE Act Title I and 
Title II grantees and grantees oversight of their subgrantees. 
5	 The National Survey of Child and Adolescent Well-Being (NSCAW) 
found that at least 90 percent of States used subgrantees to provide 
child placement and residential care that specifically includes 
treatment.  This study did not include other commonly used private 
residential facilities, such as group homes, residential schools, or 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  42  emergency shelters in their survey.  Further, there has been little 
research into the extent to which States use subgrantees:  whether 
States use subgrantees to serve a small subgroup of the States foster 
children or for the majority of foster children in the State.  The NSCAW 
reports that 70 percent of States use subgrantees statewide to provide 
residential treatment services, and an additional 26 percent use 
subgrantees in some counties.   The NSCAW local agency survey also 
found that using subgrantees to provide foster care services is more 
common in urban areas, larger counties, larger agencies, and State-
administered foster care systems.  Department of Health and Human 
Services, Administration for Children, Youth, and Families, National 
Survey of Child and Adolescent Well-Being:  State Child Welfare 
Agency Survey:  Report and National Survey of Child and Adolescent 
Well-Being: Local Child Welfare Agency Survey: Report, Washington, 
2001. 
6	 Petro Issues Montgomery County Foster Care Audit, Ohio Auditor of 
State News Release.  February 10, 2000. 
7	 There are two sets of HHS regulations that provide Uniform 
Administrative Requirements:  45 CFR Part 74, which typically applies 
to awards to non-governmental entities, and 45 CFR Part 92, which 
typically applies to awards to governmental entities.  Until very 
recently, States receiving Title IV-E funds were subject to the 
requirements under 45 CFR Part 74, which are very similar to those 
under 45 CFR Part 92.  Recently, HHS redesignated Title IV-E State 
grants to be subject to 45 CFR Part 92. 
8	 OMB Circular A-133, __.400(d) states that . . . a pass-through entity 
shall perform the following for the Federal awards it makes:     
. . . (3) Monitor the activities of subrecipients as necessary to ensure 
that Federal awards are used for authorized purposes in compliance 
with laws, regulations, and the provisions of contracts or grant 
agreements and that performance goals are achieved. 
9	 OMB Circular A-133, __.400(d)(1) and __.400(d)(2). 
10 From the template ACF provides to States for their Title IV-E State 
plan, requiring States to sign that they agree with these provisions.   
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  43  11 45 CFR 1356.20(e)(4).   
12 Title XI of the Social Security Act:  42 USC 1320a-1a. 
13 The HHS is responsible for resolving Single Audit findings related to 
HHS programs. These findings are received by HHS and assigned for 
formal resolution.  Findings relating to the Title IV-E program would 
likely be assigned to ACF, however, some findings may be assigned to 
other HHS entities, such as cross cutting findings.  
14 OMB Circular A-133, __.400(c)(5). 
15 These studies were produced as a series of reports, all of which can be 
found on the OIG Web site: www.oig.hhs.gov.  For example, one audit 
included in this series was:  Office of Inspector General, Review of New 
York States Efforts to Account For and Monitor Sub-Recipients Use of 
Public Health Preparedness and Response to Bioterrorism Program 
Funds, (A-02-03-02009), 2003. 
16 OMB Circular A-133, __.400 (d)(3). 
17 This framework originates from:  Office of Evaluation and Inspections 
Grants Oversight Framework, March 2003.  This document was 
developed by the Office of Evaluation and Inspections Grants 
Management Workgroup in response to the Secretarys initiative. 
18 Staff from the Office of the Assistant Secretary for Administration and 
Management were presented with and approved our draft criteria.  We 
did not present them with the methodology we used to operationalize 
the criteria.   
19 Historically, the annual audit was an integral part of setting the rates 
the State paid for foster care services.  However, ever since the State 
legislature decided to set State foster care rates, the rate-setting office 
has had little use for the audits.  It continues, due to historical 
precedence, to receive and track the submission of the audits. It has 
also maintained the responsibility of reviewing the audits. 
20 The extent to which auditors choose to review States monitoring of 
vendors is unknown.  OMB Circular A-133, __.210(f) includes a 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  44  provision that allows the auditor to review States interactions with 
vendors:  . . . the auditee is responsible for ensuring compliance for 
vendor transactions which are structured such that the vendor is 
responsible for program compliance or the vendor's records must be 
reviewed to determine program compliance.  Also, when these vendor 
transactions relate to a major program, the scope of the audit shall 
include determining whether these transactions are in compliance with 
laws, regulations, and the provisions of contracts or grant        
agreements . . . . 
However, the auditor needs to make several decisions in order to 
perform such a review.  The auditor must first decide if the vendor is 
responsible for program compliance.  If so, then the auditor must decide 
whether the vendors transactions are in compliance with laws, 
regulations, and the provision of contracts or agreements.  The auditor 
uses judgment about how to assess whether these transactions comply 
with laws, and whether to review the States monitoring of the vendor 
to do so. 
21 Ohio State staff stated that fiscal oversight of foster care subgrantees 
has been bolstered at the county and State levels since these audits 
were conducted. 
OEI-05-03-00060  OVERSIGHT OF SUBGRANTEE MONITORING IN THE FOSTER CARE PROGRAM  45