United States Government Accountability Office

GAO Report to the Committee on Homeland 

Security and Governmental Affairs, 

U.S. Senate 

HOMELAND 

SECURITY FIRST 

RESPONDER 

GRANTS 

Cash Management 

Improvement Act 

Exemption and Cash 

Advance Funding 

Require Additional 

DHS Oversight 

December 2006 

 

GAO-07-68 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

December 2006

HOMELAND SECURITY FIRST 

RESPONDER GRANTS 

Cash Management Improvement Act 

Exemption and Cash Advance Funding 

Require Additional DHS Oversight 

Highlights of GAO-07-68, a report to the 

Committee on Homeland Security and 

Governmental Affairs, U.S. Senate 

A key provision of the Cash

Management Improvement Act 

(CMIA) of 1990 (P.L. 101-453), as

amended, requires the federal

government and the states to

minimize the time between transfer

of federal funds and payments 

made by states for federal grant

program purposes. Concerns were

expressed by representatives of

local government subgrantees that

more flexibility was needed in the

receipt of federal funding for first

responders. Congress exempted 

certain first responder grants from

this CMIA provision in the

Department of Homeland

Security’s (DHS) fiscal years 2005

and 2006 appropriations acts. 

Under the exemption, grantees can 

receive cash advance funding and 

hold such funds for extended 

periods of time prior to payment.

GAO was asked to (1) assess 

whether this CMIA provision, prior 

to its exemption in fiscal year 2005, 

had prevented DHS grant recipients

from receiving first responder grant 

funds when such funds were 

needed; and (2) identify any key 

fiscal and accountability

implications of the exemption. 

GAO found no substantial evidence that the CMIA provision that limits the 

extent to which grantees can hold federal funds before making program 

payments, prior to its exemption for certain first responder grants in fiscal 

year 2005, prevented first responders from receiving DHS grant funds when 

such funds were needed. The vast majority of the officials of State 

Administrative Agencies (SAA) and national associations contacted neither 

cited the CMIA as a contributing factor to funding delays nor provided 

information that demonstrated that the CMIA prevented state grantees or 

local government and other subgrantees from receiving first responder grant 

funding when such funding was needed. Rather, the officials generally 

attributed delays in first responder operations to factors other than the 

CMIA, such as vendor delays in delivering goods and services and problems 

related to a lack of human resources to deal with the large influx of grant 

awards after the September 11, 2001, attacks. The information GAO 

obtained from these officials was consistent with the findings of DHS’s 

Homeland Security Advisory Council’s Task Force on State and Local 

Homeland Security Funding, which found that numerous factors other than 

the CMIA contributed to funding delays for first responders. 

 

According to DHS, as of March 2006, state grantees and local government 

subgrantees had used the CMIA exemption and DHS’s corresponding 120-

day cash advance funding provision, which DHS established to implement 

the CMIA exemption, only to a minimal extent. DHS’s Office of Grant 

Operations is working with SAAs and local government entities to determine 

the extent to which the CMIA exemption may be used and the impact 

extensive use could have on DHS. According to a DHS official, extensive use 

of the CMIA exemption and DHS’s 120-day cash advance funding provision 

could create management oversight difficulties for DHS. 

Concerns about oversight difficulties are warranted, as DHS currently lacks

the policies and procedures to track and report on specific cases of cash 

advance funding. Such advances are not subject to Treasury’s oversight 

through its administration of the CMIA program. While states’ single audits 

can be a tool for oversight, such audits are not designed to replace program 

management’s oversight responsibilities, and GAO found that they may not 

cover all first responder grants because of the relatively small size of the 

grants. Importantly, case-by-case cash advance funding can be allowed by 

Treasury regulations implementing the CMIA and other applicable 

regulations. Such funding could enable DHS to focus its oversight efforts on 

grantees and subgrantees that have a demonstrated need for such funding. 

However, regardless of whether cash advance funding is available under the 

CMIA exemption and DHS’s corresponding 120-day cash advance funding 

provision or on a case-by-case basis, proper oversight is critical to ensure 

that interest due the federal government resulting from cash advance 

funding is accurately recorded and promptly paid. 

What GAO Recommends

GAO makes 7 recommendations to

improve DHS’s oversight of cash 

advance funding for first responder

grants and associated interest

liabilities. DHS stated that it will 

take the recommendations under

advisement. Treasury and Office of

Management and Budget (OMB) 

staff provided technical comments 

GAO addressed as appropriate. 

www.gao.gov/cgi-bin/getrpt?GAO-07-68.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Stanley 

Czerwinski at (202) 512-6806 or 

czerwinskis@gao.gov. 
Contents 

Letter 1

Results in Brief 2 

Background 6

Scope and Methodology 10 

We Found No Substantial Evidence That the CMIA Prevented First 

Responders from Receiving DHS Grant Funds When Such Funds 

Were Needed 11 

Proper Oversight of Cash Advance Funding and Related Interest 

Liabilities Is Critical for Accountability 16 

Conclusions 21

Recommendations for Executive Action 22 

Agency Comments and Our Evaluation 23 

Appendix I GAO Contacts and Staff Acknowledgments 25 

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Page i GAO-07-68 CMIA Exemption for Certain DHS Grants
United States Government Accountability Office

Washington, DC 20548 

December 22, 2006 

The Honorable Susan M. Collins 

Chairman 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

The Honorable Joseph I. Lieberman 

Ranking Minority Member 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

In the years immediately following the attacks of September 11, 2001, the 

federal government emphasized quickly disbursing federal grant funds to 

“first responders”1

 at the state and local levels to enhance their ability to 

quickly address threats to our national security. Initially, certain grants for 

first responders were made directly to local government entities, 

bypassing the states’ traditional pass-through role, which includes certain

oversight functions designed to promote accountability in grants 

management. However, more recently, the Department of Homeland 

Security (DHS) has awarded first responder grants to states to help 

improve coordination among states, local governmental entities, and 

nonprofit entities in planning, managing, and accounting for limited first 

responder grant funding. 

The Cash Management Improvement Act (CMIA) of 1990 (P.L. 101-453), as 

amended, is intended to ensure greater efficiency, effectiveness, and 

equity in the exchange of funds between the federal government and the 

states. The CMIA requires, among other things, that federal agencies and 

the states minimize the time that elapses between transfers of funds to the 

states and payments for federal grant program purposes. In addition, the 

CMIA requires that the federal government pay interest to the states when 

it fails to disburse federal funds to them in a timely manner, and that the 

states pay interest to the federal government when they fail to timely 

spend federal funds. 

 1

First responders are public safety personnel working in law enforcement, emergency 

medical services, emergency management, fire services, public works, government 

administration, health care, and public health. They are responsible for preventing and 

responding to acts of terrorism. 

Page 1 GAO-07-68 CMIA Exemption for Certain DHS Grants
Concerns were expressed by certain representatives of local governments 

that additional actions needed to be taken to provide more flexibility in 

making grant funds available to first responders. In fiscal years 2005 and

2006, Congress exempted certain DHS grant programs from the CMIA 

requirement to minimize the time elapsing between transfers of funds by 

the federal government and payments by the states. Thus, the CMIA 

exemption allows state grantees to draw down and hold federal grant 

funds for extended periods of time prior to payout for first responder 

purposes.2

 Importantly, such grantees are not exempt from the interest 

and accountability requirements of the CMIA. 

In view of the actions that have been taken by the federal government to 

provide federal funding for first responders when such funding is needed, 

you noted that there may be trade-offs between rapid disbursements of 

federal grant funds and ensuring that such funds are spent in a manner 

that is accountable and effective. Recognizing that we had previously 

reported on such trade-offs and improvements needed for management of

first responder grant programs3

 and had ongoing work on streamlining 

overall federal grant management,4

 you asked us to review the CMIA 

exemption for certain DHS first responder grants. Based on discussions 

with committee staff, we agreed to (1) assess whether the CMIA provision 

that limits the extent to which grantees can hold federal funds before 

payout, prior to its exemption for certain first responder grants in fiscal 

year 2005, prevented first responders from receiving DHS grant funds 

when such funds were needed; and (2) identify any key fiscal and 

accountability implications of the exemption of certain first responder 

grant programs from this CMIA provision. 

We found no substantial evidence that the CMIA provision that limits the 

extent to which grantees can hold federal funds before payout, prior to its 

exemption for certain first responder grants in fiscal year 2005, prevented

first responders from receiving DHS grant funds when such funds were 

Results in Brief 

 2

 Payout means to debit the state’s bank account in order to make a payment for federal 

grant program purposes. 

3

GAO, Homeland Security: Management of First Responder Grant Programs Has 

Improved, but Challenges Remain, GAO-05-121 (Washington, D.C.: Feb. 2, 2005). 

4

Subsequent to your request, we issued the following report. GAO, Grants Management: 

Grantees’ Concerns with Efforts to Streamline and Simplify Processes,

GAO-06-566 (Washington, D.C.: July 28, 2006). 

Page 2 GAO-07-68 CMIA Exemption for Certain DHS Grants
needed. The vast majority of the officials of State Administrative Agencies 

(SAA)5

 and national associations we contacted neither cited the CMIA as a 

contributing factor to funding delays nor provided information that 

demonstrated that the CMIA prevented state grantees or local government 

and other subgrantees from receiving first responder grant funding when 

such funding was needed.6

 Rather, the officials generally attributed delays 

in first responder operations to factors other than the CMIA, such as 

vendor delays in delivering goods and services and problems related to a 

lack of human resources to deal with the large influx of grant awards after 

the September 11, 2001, terrorist attacks. The information we obtained 

from these officials was consistent with the findings of DHS’s Homeland 

Security Advisory Council’s (HSAC) Task Force on State and Local 

Homeland Security Funding,7

 which found that numerous factors other 

than the CMIA had contributed to delays in funding for first responders. 

According to DHS, as of March 2006, state grantees and local government 

subgrantees had used the CMIA exemption and DHS’s corresponding 120-

day cash advance funding provision, which DHS established to implement 

the CMIA exemption, only to a minimal extent.8

 As part of its continuing 

efforts to strike a balance between minimizing the time it takes to 

distribute grant funds to state and local first responders and ensuring 

appropriate planning and accountability for the effective use of grant 

funds, DHS’s Office of Grant Operations (OGO) is working with SAAs and 

local government entities to determine the extent to which the CMIA 

exemption may be used and the impact extensive use could have on DHS. 

According to a DHS official, extensive use of the CMIA exemption and 

 5

The SAAs are responsible for administering first responder grants and obligating funds to

local government and other subgrantees.

6

Examples of other subgrantees are defined urban areas for Urban Areas Security Initiative 

(UASI) grants and Metropolitan Medical Response System (MMRS) jurisdictions for MMRS 

grants. In addition, first responder grant funding can include nongovernmental 

organizations, such as commercial trucking companies for Trucking Security grants, and 

passenger transportation services companies for Intercity Bus Security grants. 

7

DHS, Homeland Security Advisory Council, A Report from the Task Force on State and

Local Homeland Security Funding (Washington, D.C.: June 2004). The HSAC Task Force

was comprised of several governors, mayors, county officials, tribal leaders, and other

elected and appointed officials from throughout the country brought together to examine

the funding process and provide recommendations to expedite the flow of homeland

security funds. 

8

DHS, Congressional Report on the Status of Grant Expenditures, Part I, Office for

Domestic Preparedness, FY 99-02, A Report to the Committees on Appropriations of the 

United States Senate and House of Representatives, (March 2006). 

Page 3 GAO-07-68 CMIA Exemption for Certain DHS Grants
DHS’s 120-day cash advance funding provision could create management 

oversight difficulties for DHS. 

Concerns about oversight difficulties associated with potential extensive 

use of the CMIA exemption and DHS’s 120-day cash advance funding 

provision are warranted as the large number of state grantees and local

government and other subgrantees that are eligible for cash advance

funding under these provisions, combined with the differing interest 

requirements for states, local governments, and nonprofit organizations, 

create potential oversight challenges for DHS. According to DHS officials, 

DHS does not have policies and procedures to track and report on specific 

cases of cash advance funding to state grantees, including associated 

interest liabilities. In addition, DHS would not be able to readily determine 

the extent to which state grantees advance funds to local government and 

other subgrantees and the interest liabilities that should accrue to the 

subgrantees as a result of such advances. Moreover, specific cases of cash 

advance funding for first responder grants are not subject to oversight by 

the Department of the Treasury (Treasury) as part of its overall 

management of the CMIA. Although states’ single audits can be a tool for 

oversight, such audits are not designed to replace program management’s

oversight responsibilities, and we found that they may not cover all first 

responder grants because of the relatively small size of the grants. 9

In view of the fact that DHS is determining the extent to which the CMIA 

exemption will likely be used to fund first responder grants, it is important 

to emphasize that cash advance funding on a case-by-case basis can be 

allowed for the DHS first responder grants at issue by Treasury regulations 

implementing the CMIA and other applicable regulations. Providing cash 

advance funding on a case-by-case basis could enable DHS to focus its 

oversight efforts on those specific state grantees and local government and 

other subgrantees that demonstrate a need for such funding. Importantly, 

regardless of whether cash advance funding is made available under the 

CMIA exemption and DHS’s 120-day cash advance funding provision, or on 

a case-by-case basis, it is critical for DHS to provide proper oversight of 

 9

All nonfederal entities that expend $500,000 or more of federal awards in a year are

required to obtain an annual audit in accordance with the Single Audit Act Amendments of 

1996, 31 U.S.C. Chapter 75. Guidance for such an audit is contained in the Office of 

Management and Budget’s (OMB) Circular No. A-133, Audits of States, Local Governments

and Non-Profit Organizations, and OMB’s Circular No. A-133 Compliance Supplements. 

Page 4 GAO-07-68 CMIA Exemption for Certain DHS Grants
such funding, including associated interest liabilities due to the federal

government which should be accurately recorded and promptly paid.10

To improve the oversight of cash advance funding and associated interest

liabilities for homeland security first responder grants, we make seven 

recommendations to the Secretary of the Department of Homeland 

Security. Specifically, we recommend that the Secretary direct the 

Executive Director of the Office of Grants and Training to complete 

ongoing monitoring efforts involving state grantees that receive DHS first 

responder grant funding and use information obtained from such 

monitoring to identify significant issues that have resulted in delays 

associated with first responders’ ability to receive and use DHS grant 

funds when such funds were needed and assess the impact of the CMIA 

exemption on first responders’ use of grant funds as well as the potential

impact on DHS’s ability to provide adequate oversight of such funds. In 

addition, these efforts should be used to determine whether case-by-case 

cash advance funding provides a reasonable alternative to the CMIA 

exemption and DHS’s 120-day cash advance funding. We further 

recommend that, based on the results of its monitoring efforts, DHS take 

appropriate action to improve first responders’ ability to receive and use 

DHS grant funds when needed and DHS’s oversight of such funds. Also, to 

help ensure adequate oversight of cash advance funding and associated 

interest liabilities for first responder grants, we recommend that DHS 

(1) develop policies and procedures to handle requests for cash advance 

funding, including the ability for DHS to track specific cases of cash 

advance funding to state grantees and the related interest liabilities; and 

(2) develop policies and procedures to work with the SAA for any state 

that requests and receives cash advance funding to ensure that adequate 

policies and procedures are in place at the state grantee level to provide 

proper oversight of advances made to subgrantees. 

As discussed in the “Agency Comments and Our Evaluation” section at the 

end of this report, we provided a draft of this report to DHS, Treasury, and 

OMB for comment. DHS stated that it would take the recommendations 

made in the draft report under advisement and would provide a detailed

response to appropriate congressional committees and OMB 

approximately 60 days after release of the report, consistent with the 

 1031 U.S.C. § 6503(c)(2) provides that amounts received by the federal government as 

payment of such interest shall be deposited in the Treasury and credited as miscellaneous

receipts. 

Page 5 GAO-07-68 CMIA Exemption for Certain DHS Grants
reporting requirements of 31 U.S.C. Part 720. Treasury stated that it agreed

with our conclusion that the requirements of the CMIA did not prevent 

grantees from receiving grant funds when needed, and provided technical 

comments that have been addressed as appropriate in the report. OMB 

staff provided a technical comment that we addressed in the report. 

The CMIA is critically important to the federal government’s efforts to 

promote accountability in the use of federal grant funds. Currently 

administered by Treasury’s Financial Management Service (FMS), the 

CMIA is the cornerstone of cash management policy for federal grants to 

the states. Specifically, the CMIA requires the Secretary of the Treasury, 

along with the states, to establish equitable funds transfer procedures so 

that federal financial assistance is paid to states in a timely manner and 

funds are not withdrawn from Treasury earlier than they are needed by the 

states for grant program purposes. The act requires that states pay interest

to the federal government if they draw down funds in advance of need and 

requires the federal government to pay interest to states if federal program 

agencies do not make program payments in a timely manner.

Background 

According to Treasury regulations implementing the CMIA,11 funding 

techniques for federal financial assistance to the states should be efficient 

and minimize the exchange of interest between federal agencies and the 

states. Various funding techniques can be agreed to between Treasury and 

the states, including cash advance funding, whereby the federal program 

agency transfers the actual amount of federal funds to a state prior to the 

 1131 C.F.R. Part 205, Rules and Procedures for Efficient Federal-State Funds Transfers. 

Page 6 GAO-07-68 CMIA Exemption for Certain DHS Grants
day the state actually pays the funds out of its own account.

12 The limit on 

such cash advance funding is 3 business days prior to payout.

13

Before the terrorist attacks of September 11, 2001, the Department of 

Justice (Justice) managed several grants designed to enhance the 

capability of state and local first responders to handle incidents involving 

nuclear, biological, and chemical terrorism. Since 1999, these programs 

have grown dramatically. In March 2003, responsibility for these grant 

programs shifted to DHS, and they continued to grow. Initially, DHS 

provided some of these grants directly to local government entities; 

however, the requirements were changed so that grants were awarded first 

to states and then passed through to local governments and other 

subgrantees. Despite increased funding, many local governments—cities 

in particular—complained that they were not receiving the funds that they 

expected and could not disburse them as fast as they wanted.

14

In response to complaints about delays in the disbursement of first 

responder grants, on March 15, 2004, the Secretary of the Department of 

Homeland Security established the HSAC Task Force on State and Local

Homeland Security Funding. The task force’s objective was to examine the 

homeland security grant funding process and provide recommendations to 

expedite the flow of homeland security funds to those responsible for 

preventing and responding to acts of terrorism. The task force 

recommended, among other things, that Congress exempt certain DHS 

homeland security grants for fiscal year 2005 from the CMIA in order to 

 12Treasury’s implementing regulations for CMIA state that Treasury and a state may 

negotiate the use of mutually agreed-upon funding techniques. In addition to cash advance

funding, techniques cited in the regulations include: zero balance accounting, which means

that a federal program agency transfers the actual amount of federal funds to a state that 

are paid out by the state each day; projected clearance, which means that a federal 

program agency transfers to a state the projected amount of funds that the state pays out 

each day determined by applying a clearance pattern to the total amount the state will 

disburse; and reimbursable funding, which means that a federal program agency transfers

federal funds to a state after the state has already paid out the funds for federal assistance 

program purposes. 

13The 3-business-day limit is not applicable to certain grant programs that fall below 

Treasury’s established financial thresholds for major programs. Rather, for such programs,

federal agencies and the states are required to minimize the time elapsing between transfer 

of funds from the federal government and payout by the states. 

14According to DHS, as of March 2006, about $7 billion of the $12 billion in first responder 

grants awarded during fiscal years 2002 to 2005 (or about 58 percent) had been drawn 

down. 

Page 7 GAO-07-68 CMIA Exemption for Certain DHS Grants
allow funds to be provided to state and municipal entities up to 120 days in

advance of expenditure. The task force indicated that more flexibility was 

needed in providing grant funding to first responders because, in some 

instances, the 3-day time frame for receiving grant funds prior to making 

payments was insufficient to prevent municipal jurisdictions from having 

to make payments to vendors in advance of receiving the DHS grant funds. 

In other cases, the municipal jurisdictions required cash on hand in their 

municipal treasuries prior to commencing the procurement process. 

Subsequent to the task force’s recommendations, Congress exempted for 

fiscal year 2005 certain DHS first responder grant programs from the 

provision of the CMIA that limits the extent to which grantees can hold 

federal funds prior to payout by requiring federal agencies and states to 

minimize the time elapsing between transfer of funds from Treasury and 

payment by the states.15 In fiscal year 2006, this exemption was made 

permanent.16 Importantly, the CMIA exemption only pertains to the 

requirement to minimize the time elapsing between transfer of funds from 

Treasury and payments for program purposes. The CMIA exemption did 

not exempt certain first responder grant programs from the other 

provisions of the CMIA which address interest payments and

accountability. 

To implement the CMIA exemption, DHS’s Program Guidelines and 

Application Kit for the Fiscal Year 2005 Homeland Security Grant 

Program (HSGP) and guidance for certain other homeland security first 

responder grants state that grantees and subgrantees will be permitted to 

 15Section 521 of DHS’s Appropriations Act for fiscal year 2005 (P.L. 108-334) exempted the 

State Homeland Security Program (SHSP), the Law Enforcement Terrorism Prevention 

Program (LETPP), UASI, the Rail and Transit Security Program, the Port Security Program, 

the Intercity Bus Security Program, and the Trucking Security Program from Section 

6503(a) of Title 31, United States Code, which requires federal agencies and states to 

minimize the time between transfer of funds from Treasury and payout by the states. 

16Section 517 of DHS’s Appropriations Act for fiscal year 2006 (P.L. 109-90) permanently 

exempts from Section 6503 (a) of Title 31, United States Code, the programs that were

exempted in fiscal year 2005 and adds the Buffer Zone Protection Program (BZPP) to the

CMIA exemption. 

Page 8 GAO-07-68 CMIA Exemption for Certain DHS Grants
draw down funds up to 120 days prior to expenditure or disbursement.17

For the majority of the grant programs, the guidance requires all federal 

funding to go to state grantees prior to being passed through to local 

government and other subgrantees, and requires both grantees and 

subgrantees to place funds received in an interest-bearing account. The 

guidance states that both grantees and subgrantees must pay interest on 

funding advances in accordance with federal regulations.18 In addition, 

according to the guidance, state grantees are subject to the interest 

requirements of the CMIA and its implementing regulations. The guidance

states that interest under the CMIA will accrue from the time federal funds 

are credited to a state account until the time the state pays out the funds 

to a subgrantee or otherwise for program purposes. 

In January 2006, DHS’s Preparedness Directorate issued its Financial 

Management Guide.

19 The guide is intended to be used as a financial 

policy reference for all fiscal year 2006 and future first responder grants. 

Consistent with DHS’s fiscal year 2005 guidance for the HSGP and certain

other first responder programs, the guide states that grant recipients may 

elect to draw down funds up to 120 days prior to expenditure or 

disbursement and that state grantees are subject to the interest 

requirements of the CMIA. The guide further states that all local units of 

 17For fiscal year 2005, DHS consolidated various homeland security first responder grants 

into a single application package called the Homeland Security Grant Program, which

included SHSP, UASI, and LETPP, as well as the Emergency Management Performance

Grants (EMPG), MMRS, and the Citizen Corps Program (CCP). Separate application 

packages were established for other first responder grant programs which allowed 

drawdown of funds up to 120 days prior to expenditure or disbursement, including the

BZPP, the Port Security Grant Program, and the Intercity Bus Security Program. 

18The regulations cited in the guidance are 28 C.F.R. Part 66, Uniform Administrative 

Requirements for Grants and Cooperative Agreements to State and Local Governments; 

and 28 C.F.R. Part 70, Uniform Administrative Requirements for Grants and Agreements

(Including Subawards) with Institutions of Higher Education, Hospitals, and Other 

Non-Profit Organizations. These regulations state that grantees and subgrantees are 

required to promptly remit interest earned on advances to the federal government. 

19DHS, Preparedness Directorate, Office of Grants and Training, Office of Grant Operations, 

Financial Management Guide, (January 2006). 

Page 9 GAO-07-68 CMIA Exemption for Certain DHS Grants
government must account for interest earned on federal grant funds and 

remit such interest to appropriate federal agencies.20

To assess whether the CMIA provision that limits the extent to which 

grantees can hold federal funds before payout, prior to its exemption for 

certain DHS first responder grants in fiscal year 2005, had prevented first 

responders from receiving DHS grant funds when such funds were needed, 

we interviewed key officials from 13 SAAs.21 These SAAs involved states 

from most geographic areas of the country and, when taken together, were

awarded about 40 percent of DHS’s first responder grants that were 

subject to the CMIA exemption in fiscal year 2005. In addition, we 

interviewed key officials and obtained and analyzed pertinent documents 

from nine national associations which represent state and local 

governmental entities including the National Governors Association and

the U.S. Conference of Mayors.22 We also reviewed the key report issued 

by the HSAC Task Force, A Report from the Task Force on State and 

Local Homeland Security Funding, and reports issued by DHS’s Inspector

General. 

Scope and 

Methodology 

To identify key fiscal and accountability implications associated with the 

CMIA exemption for certain DHS first responder grant programs, we 

reviewed the CMIA and Treasury’s implementing regulations, the CMIA 

exemption for certain first responder grants, DHS’s program guidance for 

those grants, and GAO’s prior report covering the implementation of the 

CMIA. In addition, we interviewed key officials and obtained and analyzed 

pertinent documents from DHS, Treasury, OMB, and Justice, all of which 

are responsible to varying degrees for administering or overseeing the 

implementation of the CMIA or various aspects of DHS’s first responder 

grant programs. We also reviewed OMB Circular No. A-133, Audits of

 20Local units of government include cities, towns, counties, and special districts created by 

state law. For grants made through the Office of Grants and Training, interest earned must 

be remitted to the Department of Health and Human Services’ (HHS) Division of Payment

Management Services. For Assistance to Firefighters Grants, interest earned should be 

remitted to the Federal Emergency Management Agency—Accounting Services Division. 

21We contacted the SAAs in California, Colorado, Illinois, Indiana, Maine, Missouri, New 

Jersey, Pennsylvania, Rhode Island, Texas, Vermont, Virginia, and Washington. 

22We also contacted the National Association of County Officials; the National Association 

of Development Organizations; the National Association of Regional Councils; the National 

Association of State Auditors, Comptrollers, and Treasurers; the National Emergency 

Managers Association; the National League of Cities; and the Urban Institute.

Page 10 GAO-07-68 CMIA Exemption for Certain DHS Grants
States, Local Governments, and Non-Profit Organizations, and OMB’s 

2005 and 2006 Compliance Supplements, which comprise the current key 

guidance used by auditors to conduct single audits covering federal grant

programs. Our work was performed in accordance with generally 

accepted government auditing standards from August 2005 through July 

2006. 

In responding to a draft of our report, DHS stated that it would take the 

recommendations made in the draft report under advisement and would 

provide a detailed response to appropriate congressional committees and 

OMB approximately 60 days after release of the report, consistent with the 

reporting requirements of 31 U.S.C. Part 720. Treasury stated that it agreed

with our conclusion that the requirements of the CMIA did not prevent 

grantees from receiving grant funds when needed. Both Treasury and OMB 

staff provided technical comments that have been addressed as 

appropriate in this report. 

We found no substantial evidence that the CMIA provision that limits the 

extent to which grantees can hold federal funds before payout, prior to its 

exemption for certain first responder grants in fiscal year 2005, had 

prevented first responders from receiving DHS grant funds when such 

funds were needed. Specifically, the majority of SAAs we contacted did

not cite the CMIA as a contributing factor to first responder funding 

delays, and the National Governors Association, U.S. Conference of 

Mayors, and other associations we contacted did not provide information 

that demonstrated that the CMIA prevented local governments and other 

subgrantees from receiving first responder grant funding when they 

needed it. In addition, according to a report prepared by the HSAC Task 

Force, numerous factors, only one of which was related to the CMIA, have 

been responsible for first responder funding delays. 

We Found No 

Substantial Evidence 

That the CMIA 

Prevented First 

Responders from 

Receiving DHS Grant 

Funds When Such 

Funds Were Needed 

Importantly, as we reported in February 2005, a major challenge in 

managing first responder grants is balancing two goals: minimizing the 

time it takes to distribute grant funds to state and local first responders, 

and ensuring appropriate planning and accountability for the effective use 

of grant funds. DHS’s approach to striking this balance has been evolving 

from experience, congressional action, and feedback from states and local

governments.23 In March 2006, DHS reported that the CMIA exemption had 

 23GAO-05-121. 

Page 11 GAO-07-68 CMIA Exemption for Certain DHS Grants
been used only to a minimal extent and, according to a DHS official, DHS 

is meeting with SAAs and local governments to determine the impacts, if 

any, of the CMIA exemption on first responder grant funding.

Most SAAs Contacted Did 

Not Cite the CMIA as a 

Delaying Factor 

Of the 13 SAAs we contacted to determine whether the CMIA had 

prevented first responders from receiving DHS grant funds when such 

funds were needed, officials from six of these agencies told us that their 

state agency had experienced delays in getting first responder funds to 

subgrantees; however, most characterized the delays as not serious. Only 

one state agency official attributed the delays directly to the CMIA. 

According to that official, under the funding technique for the CMIA that 

was agreed to between the state and Treasury for fiscal year 2004, the 

state was to be reimbursed by the federal government for eligible grantrelated expenditures. However, certain smaller subgrantees, such as 

volunteer fire departments, did not have the financial resources to 

purchase specialized equipment with their own funds and then wait for 

reimbursement from the state. The official stated that, contrary to the 

agreement with Treasury, the state began advancing federal funds to the 

subgrantees to enable them to purchase the equipment.24

Generally, however, the SAA officials were more apt to tie delays in 

operations related to first responders to factors other than the CMIA. For 

example, officials of six of the SAAs noted that delays in the use of the 

funds have been due directly to certain local governments not having the 

manpower to deal with the large influx of grant funding that was 

experienced in the wake of the terrorist attacks. In addition, officials of six 

of the SAAs stated that state and local requirements related to purchase 

authorizations caused delays in getting goods and services delivered to

first responders in a timely manner, and officials of six of the SAAs cited 

vendor problems as causing such delays. 

 24Importantly, these state advances were discovered during the state’s single audit for fiscal 

year 2004. According to the state’s single audit report for state fiscal year 2004, the state did 

not have adequate internal controls to ensure compliance with CMIA requirements for 

drawing down cash for federal programs. The audit report cited internal control 

weaknesses related to the state’s Web-based cash management system; instances in which 

funds were being drawn down inappropriately; and various inconsistencies in the data used 

to compile interest liabilities for major programs. 

Page 12 GAO-07-68 CMIA Exemption for Certain DHS Grants
None of the officials from the nine national associations representing state 

and local governments we contacted provided information that 

demonstrated that the CMIA prevented first responders from receiving

DHS grant funds when such funds were needed. For example, an official 

from the National Governors Association stated that the association did 

not take a position on whether the CMIA impacted funding for first 

responders. Rather, he stated that funding delays are often caused by local 

procurement procedures and acquisition approval requirements of local 

government subgrantees. The official cited one case where a local 

government could not spend first responder funds for a major purchase 

until the city council voted and approved the purchase. He emphasized 

that such local approval requirements and processes can take several 

months. The official also stated that funding delays have resulted from 

local government subgrantees being unaware of DHS’s requirement that all 

equipment be included on DHS’s approved equipment listings prior to 

acquisition.25

National Associations 

Contacted Did Not Provide 

Evidence Supporting a 

Need for the CMIA 

Exemption 

In addition, according to an official from the U.S. Conference of Mayors, 

which was a leading proponent of the CMIA exemption for first responder 

grants, delays in first responder grant funding have resulted primarily from

the many, sometimes conflicting, state and local requirements that local

government subgrantees have to meet to receive grant funds. The official

stated that the conference supported an exemption from the CMIA for first 

responder grants and that this support was driven primarily by an 

expectation that relaxing the requirements for funds transfers between the 

federal government and the states would lead to overall improvements in 

addressing local first responder needs. However, the official said that the 

conference does not have evidence that the requirements of the CMIA 

 25The HSGPs for fiscal years 2005 and 2006 authorized expenditures for planning, 

organizational activities, equipment acquisition, training, exercises, and management and 

administration. For each program contained in the HSGP, an approved Web-based 

equipment listing was included. 

Page 13 GAO-07-68 CMIA Exemption for Certain DHS Grants
have created specific funding delays for first responders, or that the CMIA 

exemption has improved grant funding for first responders.26

HSAC Task Force Reports 

That Numerous Factors 

Have Contributed to First 

Responder Funding Delays 

In June 2004, the HSAC Task Force issued its report on state and local

homeland security funding. According to the report, there is no single 

issue or level of government that has been responsible for delays in first 

responder funding. The report stated that the reimbursement requirement 

of the CMIA is problematic for many, particularly cash-strapped 

municipalities; however, the report does not address how the CMIA 

exemption will mitigate such problems at this level as the CMIA applies 

only to funds transfers to the states.

Moreover, the report discusses numerous factors other than the CMIA that 

contribute significantly to funding delays. Specifically, according to the 

report, the need for state, county, municipal, and tribal entities to rapidly 

procure and deploy homeland security-related equipment can conflict with

state and municipal buying regulations that encourage a deliberate process 

of acquisition of budgeted necessities at the lowest possible price. 

Furthermore, many state and local governments lack the purchasing 

power to obtain the goods and services in a timely fashion. In addition, the 

report stated that the lack of national standards guiding the distribution, 

tracking, and oversight of homeland security-related grant funds 

contributed to delays in disbursement. The report also emphasized that 

state and local governments are often overwhelmed and understaffed to 

deal with the complex grant system and have not put the necessary 

infrastructure in place to deal with the increased workload associated 

with first responder grant funding. Finally, the report cited unavoidable

equipment backlogs and vendor delays as causing delays in first responder 

grant funding. 

 26We asked the conference official to provide information it used to support the CMIA 

exemption. The official provided reports of surveys completed by certain of its members 

covering first responder grant funding problems, including funding delays. In reviewing the 

reports, we noted that the primary concern expressed by the members on the surveys was

that states’ pass-through processes and procedures caused delays in the receipt and

utilization of federal funds for first responders. The reports of the surveys did not cite the

transfer of funds from the federal government to the states under CMIA as a delaying 

factor. 

Page 14 GAO-07-68 CMIA Exemption for Certain DHS Grants
In February 2005, we reported that DHS’s approach to striking a balance 

between, on one hand, minimizing the time it takes to distribute grant 

funds to state and local first responders, and on the other hand, ensuring 

that appropriate planning and accountability for the effective use of grant

funds has been evolving from experience, congressional action, and 

feedback from states and local governments. We emphasized that, as DHS 

continues to administer its first responder grant programs, it will be 

important DHS to listen and respond fully to the concerns of states, local 

governments, and other interested parties to ensure that there is adequate 

collaboration and guidance for moving forward.27 In March 2006, DHS 

reported that grantees and subgrantees have used the CMIA exemption 

and DHS’s 120-day cash advance funding provision only to a minimal 

extent.28 According to a DHS official, DHS’s new OGO, which began 

operations in October 2005, is in the process of meeting with SAAs and 

local governments to discuss the CMIA exemption and cash advance

funding. OGO has conducted several regional financial management 

training conferences with SAAs and local representatives and has attended 

other similar forums that bring these same stakeholders together. In 

addition, OGO’s Monitoring Program Plan for fiscal year 2006 includes at 

least 20 states and territories, and OGO plans to include the remaining 

states and territories in the near future. 

DHS Working to Determine 

Impact of the CMIA 

Exemption 

According to the DHS official, through its discussions and monitoring 

efforts, OGO intends to determine whether the CMIA exemption actually 

poses a problem or conversely creates an opportunity for first responders 

in their ability to obtain and use grant funds when needed. In addition, 

OGO is seeking to identify the significant issues behind the drawdown and 

disbursement, or lack of such, of DHS grant funds. These issues may 

involve legislative, procurement, programmatic, timeliness, and 

jurisdictional concerns. Finally, OGO is attempting to assess the impact 

the CMIA exemption could have on DHS if states were to use it 

extensively. According to the official, if grantees and subgrantees began 

using the CMIA exemption and DHS’s 120-day cash advance funding 

provision, it would present oversight difficulties for DHS. 

 27GAO-05-121. 

28DHS, Congressional Report on the Status of Grant Expenditures, Part I, Office for

Domestic Preparedness, FY 99-02, A Report to the Committees on Appropriations of the 

United States Senate and House of Representatives, (March 2006). 

Page 15 GAO-07-68 CMIA Exemption for Certain DHS Grants
DHS’s OGO’s concern about the potential use of the CMIA exemption and 

DHS’s 120-day cash advance funding provision and the oversight 

difficulties extensive use of these provisions could entail is warranted. 

Specifically, the large number of state grantees and local government and 

other subgrantees that are eligible for cash advance funding resulting from 

the CMIA exemption and DHS’s 120-day cash advance funding provision, 

combined with the differing interest requirements for states, local 

governments, and nonprofit organizations, could create potential oversight 

challenges for DHS. Currently, DHS does not have policies and procedures 

to meet the oversight challenges of tracking cash advance funding and 

associated interest liabilities for first responder grants. Moreover, 

Treasury, in its administration of the CMIA, does not receive information 

pertaining to specific advances for such grants. While state single audits 

can be an important oversight tool for cash advance funding, they are not 

designed to replace program management’s oversight responsibilities. 

Further, those audits may not cover all first responder grants because of 

the grants’ relatively small dollar amounts, and single audit guidance does 

not include all grants for which DHS’s 120-day cash advance funding 

applies. 

In addition, it is important to emphasize that cash advance funding, which 

is available on a case-by-case basis for first responder grants independent 

of the CMIA exemption and DHS’s 120-day cash advance funding 

provision, would allow DHS to focus its oversight efforts on specific 

grantees and subgrantees that can demonstrate a need for such funding.

Regardless of whether cash advance funding for first responder grants is 

made available under the CMIA exemption and DHS’s 120-day cash 

advance funding provision or on a case-by-case basis, it is critical for DHS 

to provide proper oversight of cash advance funding to help ensure that 

associated interest liabilities due to the federal government are accurately

recorded by grantees and subgrantees and promptly paid. 

Proper Oversight of 

Cash Advance 

Funding and Related 

Interest Liabilities Is 

Critical for 

Accountability 

Large Number of Grantees 

and Subgrantees and 

Differing Interest 

Requirements Create 

Oversight Challenges 

DHS is faced with potential oversight challenges regarding cash advance

funding for homeland security first responder grants resulting from the 

large number of state grantees and local government and other 

subgrantees and the fact that interest liabilities and payment 

responsibilities vary for states, local governments, and nonprofit 

organizations. Specifically, according to DHS, for fiscal years 2005 and 

2006, the initial years for which the CMIA exemption and DHS’s 120-day 

cash advance funding provision have been in effect, DHS has awarded in 

total about $5.5 billion of first responder grants to the 50 states, the 

District of Columbia, and 5 U.S. territories. Further, DHS required a 

Page 16 GAO-07-68 CMIA Exemption for Certain DHS Grants
minimum of 80 percent of certain grants to be passed through by the states

to numerous city, county, local government, and other subgrantees. For 

example, for fiscal year 2005, at least 80 percent of the funding for UASI 

grants was allocated to 50 urban areas, and 124 distinct jurisdictions were 

to receive at least 80 percent of the funding for MMRS grants. According to 

DHS’s guidance, 120-day cash advance funding for homeland security first 

responder grants was available to all eligible state grantees and local 

government and other subgrantees.29

Further, interest liabilities associated with cash advance funding depend 

upon the size of the grant as well as whether the recipient is a state, local

government, or nonprofit organization. Specifically, state interest 

liabilities and payment responsibilities are governed by Treasury’s 

implementing regulations for the CMIA.30 Under these regulations, interest 

liabilities for relatively large grants that meet the requirements for being 

classified as major programs31 are typically settled as part of Treasury’s 

annual interest exchange with the states and U.S. territories using the 

interest rate set forth in the regulations.32 The interest liabilities and 

payment responsibilities of local government and nonprofit organizations 

are governed by regulations covering these entities.33 In general, local 

 29Eligible beneficiaries for the HSGP include any state of the United States; the District of 

Columbia; the Commonwealth of Puerto Rico; the Virgin Islands; Guam; American Samoa;

the Commonwealth of the Northern Mariana Islands; any possession of the United States; 

and local governments, which refers to any county, city, village, town, district, borough,

port authority, transit authority, intercity rail provider, commuter rail system, freight rail 

provider, water district, regional planning commission, council of government, Indian tribe 

with jurisdiction over Indian country, authorized tribal organization, Alaska Native village, 

independent authority, special district, or other political subdivision of any state. 

3031 C.F.R. Part 205.

3131 C.F.R. Part 205 sets forth the following thresholds for major federal assistance 

programs. If the state’s total amount of federal assistance for all programs is between zero

and $100 million, major programs would include any program that exceeds 0.6 percent of

the total amount of federal assistance. If the state’s total amount of federal assistance for 

all programs is over $100 million but less than or equal to $10 billion, major programs 

would include any program that exceeds 0.6 percent of the total amount of federal 

assistance. If the state’s total amount of federal assistance for all programs is over $10

billion, major programs would include any program that is at least 0.3 percent of the total 

amount of federal assistance. However, in such cases, the minimum threshold for inclusion 

as a major program is $60 million.

32The interest rate, which is provided by Treasury to each state, is the annualized rate equal

to the average equivalent yields of 13-week Treasury Bills auctioned during a state’s fiscal 

year. 

3328 C.F.R. Part 66 and 28 C.F.R. Part 70, respectively.

Page 17 GAO-07-68 CMIA Exemption for Certain DHS Grants
government and nonprofit entities are required to make periodic interest 

payments to HHS’ Division of Payment Management Services. 

According to DHS officials, policies and procedures do not exist to track 

and report on specific cases of cash advance funding to state grantees 

including associated interest liabilities. Moreover, the officials stated that 

DHS would not be able to readily determine the extent to which state 

grantees advance funds to local government and other subgrantees and 

the interest liabilities that should accrue to the subgrantees as a result of 

such advances. 

According to DHS’s Financial Management Guide, the state grantee is 

responsible for all aspects of preparedness grant funding, including cash 

management, accounting, and financial recordkeeping by the subgrantee. 

DHS officials emphasized that DHS relies on the states for management 

and oversight of grant funds, recognizing that the states rely, in part, on

the single audits of grantees and subgrantees to help ensure proper 

accountability over cash advance funding including associated interest 

liabilities. 

DHS Lacks Policies and 

Procedures to Meet 

Oversight Challenges 

Treasury Does Not Receive 

Information on Specific 

Cases of Cash Advance 

Funding and Related 

Interest Liabilities 

Treasury’s FMS manages the CMIA program; however, its roles and 

responsibilities in this capacity do not include obtaining information 

regarding specific funding advances for homeland security first responder 

grants made to states or the related state interest liabilities. Under 

Treasury’s implementing regulations for the CMIA, states and FMS must 

enter into Treasury-State Agreements (TSA) that outline, by major 

program, the funding technique, including cash advance funding if 

applicable, the states will use to draw down funds from the federal 

government. Each year, the states and U.S. territories submit reports to 

FMS indicating the cumulative interest liabilities calculated for major 

grant programs covered under their respective TSAs. Based on input from 

the federal agencies and the states and territories, FMS makes a final 

determination on each of the state and territory interest liability claims 

and then calculates net interest liabilities using the interest rate defined in 

Treasury’s implementing regulations and conducts the annual interest 

exchange with the states and territories. 

According to Treasury officials, the vast majority of homeland security 

first responder grants were not included in the TSAs for fiscal years 2005 

and 2006. Generally, to be included in the TSA, a grant program should be 

considered a major program by meeting the dollar thresholds which are 

Page 18 GAO-07-68 CMIA Exemption for Certain DHS Grants
set forth in Treasury regulations. Importantly, for grants not included in 

the TSAs, FMS does not receive any information about the grant, including

whether states received cash advance funding for the grant or whether 

states incurred any associated interest liabilities. Moreover, according to 

Treasury officials, FMS has no oversight responsibilities of cash advances 

and associated interest liabilities involving local government and other 

subgrantees, regardless of whether the specific grants are major or 

nonmajor. The officials emphasized that FMS relies, primarily, on state 

single audits to provide oversight for CMIA-related activities, including 

interest liabilities associated with cash advance funding. 

Single Audits Are a Limited 

Tool for Oversight of First 

Responder Grants 

In our January 1996 report on the implementation of the CMIA, we 

concluded that FMS’s plans to emphasize the use of results of single audits

as a means of overseeing state activities and enforcing the CMIA 

requirements should improve the act’s effectiveness and help alleviate any 

concerns about administrative burden.34 Similarly, single audits, if 

performed adequately, can be a tool to enhance DHS’s oversight of first 

responder grant funding including cash advance funding and associated 

interest liabilities. However, such audits are not designed to replace 

program management’s oversight responsibilities and may not cover all 

first responder grants due to the grants’ relatively small dollar amounts. 

For single audits, auditors use OMB’s Circular No. A-133 Compliance 

Supplement, which provides an invaluable tool to both federal agencies 

and the auditors in establishing the important provisions of federal grant

programs. The supplement enables federal agencies to effectively 

communicate items that they believe are important to understanding the 

legislative intent, as well as promoting successful program management. 

As such, the supplement requires constant review and update.

DHS is responsible for working with OMB to ensure that audit guidance

contained in the supplement that is applicable to its programs is complete 

and updated. For fiscal year 2005, the supplement included guidance 

covering DHS’s 120-day cash advance funding provision; however, the only 

programs cited were SHSP and LETPP, even though the CMIA exemption 

and the 120-day cash advance funding provision applied to numerous 

other homeland security first responder grants. OMB’s most recent 

 34GAO, Financial Management: Implementation of the Cash Management Improvement 

Act, GAO/AIMD-96-4 (Washington, D.C.: January 1996). 

Page 19 GAO-07-68 CMIA Exemption for Certain DHS Grants
compliance supplement, dated March 2006, expanded the guidance for the 

120-day cash advance funding provision to include HSGP grants awarded 

for fiscal years 2005 and 2006. However, the supplement still does not 

include all of the programs for which the CMIA exemption and the 120-day 

cash advance funding provision apply. Specifically, the supplement does 

not include, among others, the Port Security Program, the Rail and Transit

Security Program, the Intercity Bus Security Program, or the Trucking 

Security Program. 

According to an OMB representative, certain first responder grant 

programs were not included in the compliance supplements because they 

were not, at the time, considered major programs. However, DHS officials 

stated that DHS recognizes the importance of alerting auditors to the 

CMIA exemption and the 120-day cash advance funding provision for all of 

its first responder grants. As such, these officials stated that DHS intends 

to notify OMB that the 120-day cash advance funding provision used to 

implement the CMIA exemption applies to all grant programs administered 

by DHS’s Office of Grants and Training so that such information can be

included in OMB’s 2007 Compliance Supplement. 

It is important to note that even with comprehensive guidance for 

auditors, single audits are at best only a tool for program management 

oversight of grant funding. Such audits are not intended to replace 

program management’s overall responsibility for establishing and 

maintaining internal control to achieve the objectives of effective and 

efficient grant operations, reliable grant reporting, and compliance with 

applicable laws and regulations. Further, single audits may not always 

cover all homeland security first responder grants received by the audited 

entity, as only the larger and inherently riskier programs are typically

subject to review as part of the overall audit.35

 35OMB Circular No. A-133, Audits of States, Local Governments, and Non-Profit 

Organizations, which sets forth the uniform standards to be used for the audit of such

entities that expend federal awards, requires auditors to use a risk-based approach in

selecting which grants to include in the audit. A key criterion for selection is the dollar 

amount expended by the auditee for the grant relative to all of the auditee’s grant 

expenditures. Auditors are required to audit at least 50 percent of total federal awards 

expended. However, if the auditee meets the criteria for a low-risk auditee, the auditor is 

only required to audit federal awards expended that, in the aggregate, encompass at least 

25 percent of total federal awards expended. 

Page 20 GAO-07-68 CMIA Exemption for Certain DHS Grants
Treasury’s regulations implementing the CMIA are intended to provide 

Treasury and states flexibility and latitude in funding grant programs. 

Specifically, according to Treasury, the CMIA requires states to time their 

drawdown of federal funds in a way that minimizes the time between 

receipt of the funds and payments for federal program purposes. For cash 

advance funding, this is defined by regulation as not more than 3 business 

days prior to the date of disbursement of the funds. However, according to

Treasury officials, if it can be demonstrated that there is a program need 

for funds more than 3 days, or even 120 days, in advance of payment, a 

funding arrangement that allows for such cash advance funding would not 

be inconsistent with the CMIA and its implementing regulations. In other 

words, the CMIA does not prohibit such flexibility to be provided on a 

program by program, or case-by-case, basis. 

Moreover, cash advance funding arrangements made by a state can be 

extended to the state’s subgrantees. Specifically, under the Uniform

Administrative Requirements for Grants and Cooperative Agreements to 

State and Local Governments, grantees must monitor cash drawdowns by

their subgrantees to assure that they conform substantially to the same 

standards of timing and amount as apply to advances to the grantees.36 As 

such, cash advance funding arrangements made by the states for specific 

programs that have a demonstrated need for cash advance funding in 

excess of the 3-day rule, can apply to local government subgrantees on an

as-needed, or case-by-case, basis as determined by the state. Therefore, 

under Treasury regulations implementing the CMIA and other applicable

regulations, cash advance funding for homeland security first responder 

grants can be allowed on a case-by-case basis independent of the CMIA 

exemption and DHS’s 120-day cash advance funding provision. 

We found no substantial evidence that the CMIA funds transfer 

requirements, prior to the exemption for certain first responder grants in 

fiscal year 2005, prevented first responders from receiving DHS grant 

funds when such funds were needed. However, DHS’s current efforts to 

monitor state grantees should help to identify problems, if any, associated 

with the CMIA and the CMIA exemption, as well as other issues that 

impact grant administration and first responders’ ability to receive and use 

DHS grant funds when needed. Going forward, these efforts should also 

enable DHS to determine the extent to which cash advance funding for 

Cash Advance Funding 

Can Be Allowed on a Caseby-Case Basis for Certain 

First Responder Grants 

Conclusions 

 3628 C.F.R. § 66.20(b)(7). 

Page 21 GAO-07-68 CMIA Exemption for Certain DHS Grants
first responder grants will likely be needed. This is important because DHS 

lacks the policies and procedures necessary to provide adequate oversight 

of cash advance funding, regardless of whether the cash advance funding

is made widely available under the CMIA exemption and DHS’s 

corresponding 120-day cash advance funding provision, or on a case-bycase basis as allowed under Treasury regulations implementing the CMIA. 

Such oversight is critical to ensure that interest due to the federal 

government associated with cash advance funding is accurately recorded

and promptly paid. 

We make seven recommendations to improve oversight of cash advance

funding and associated interest liabilities for homeland security first 

responder grants. Specifically, we recommend that the Secretary of the 

Department of Homeland Security direct the Executive Director of the 

Office of Grants and Training to complete ongoing monitoring efforts 

involving state grantees that receive DHS first responder grant funding and 

use information obtained from such monitoring to 

Recommendations for 

Executive Action 

• identify the significant issues that have resulted in delays in the drawdown 

and disbursement of DHS grant funds; 

• determine the impact of the CMIA exemption on first responders in their 

ability to obtain and use grant funds to meet program needs; 

• assess the impact the CMIA exemption and DHS’s 120-day cash advance

funding provision could have on DHS’s ability to provide adequate 

oversight if state grantees and local government subgrantees were to use 

them extensively; 

• determine whether case-by-case cash advance funding provides a 

reasonable alternative to the CMIA exemption and DHS’s 120-day cash 

advance funding provision; and 

• based on the results of the monitoring efforts, take appropriate actions, 

which could include making either legislative or operational 

recommendations, to improve first responders’ ability to receive and use 

DHS grant funds when needed and DHS’s oversight of such funds. 

In addition, we recommend that the Secretary of the Department of 

Homeland Security direct the Executive Director of the Office of Grants 

and Training to 

• develop policies and procedures to handle requests for cash advance

funding, including the ability for DHS to track specific cases of cash 

advance funding to state grantees and the related interest liabilities; and 

Page 22 GAO-07-68 CMIA Exemption for Certain DHS Grants
• develop policies and procedures to work with the SAA for any state that

requests and receives cash advance funding to ensure that adequate 

policies and procedures are in place at the state grantee level to provide 

proper oversight of advances made to subgrantees, including the accurate

recording of interest accruals on the advances and prompt payment of 

such interest to the federal government. 

We provided a draft of this report to DHS, Treasury, and OMB for 

comment. DHS stated that it would take our recommendations under 

advisement. DHS also noted that it will provide a detailed response to 

appropriate congressional committees and OMB in accordance with 

applicable reporting requirements. 

Treasury provided technical comments that have been addressed as 

appropriate in this report. In providing such comments, Treasury stated 

that it agreed with our conclusion that the requirements of the CMIA did 

not prevent grantees from receiving grant funds when needed and noted

that it believes the CMIA statute and regulations provide inherent 

flexibility to ensure that the program purposes are served while 

minimizing the time between the transfer of federal funds and the 

disbursement of funds by the state for federal grant program purposes. In 

addition, OMB staff provided a technical comment that has been 

addressed as appropriate in this report. 

We are sending copies of this report to other interested congressional 

committees, the Secretary of the Department of Homeland Security, the 

Secretary of the Department of the Treasury, the Director of the Office of 

Management and Budget, and the Attorney General. Copies will be made 

available to others upon request. This report will also be available at no 

charge on GAO’s Web site at http://www.gao.gov. 

Agency Comments 

and Our Evaluation 

Page 23 GAO-07-68 CMIA Exemption for Certain DHS Grants
Please contact Stanley J. Czerwinski at (202) 512-6806 or 

czerwinskis@gao.gov, or Gary T. Engel at (202) 512-3406 or 

engelg@gao.gov, if you have any questions. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. Key contributors to this report are listed in appendix I.

Stanley J. Czerwinski 

Director 

Strategic Issues 

Gary T. Engel 

Director 

Financial Management and Assurance 

Page 24 GAO-07-68 CMIA Exemption for Certain DHS Grants
Appendix I: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts Stanley J. Czerwinski at (202) 512-6806 or czerwinskis@gao.gov

Gary T. Engel at (202) 512-3406 or engelg@gao.gov

Faisal Amin, Jeffrey W. Dawson, Carlos E. Diz, Richard H. Donaldson, 

Ernie Hazera, Kenneth R. Rupar, and Linda K. Sanders made key 

contributions to this report. 

Staff 

Acknowledgments 

(450422) Page 25 GAO-07-68 CMIA Exemption for Certain DHS Grants
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