Department of Health and Human Services 


OFFICE OF 

INSPECTOR GENERAL 

OVERSIGHT OF STATES’ 


SUBGRANTEE MONITORING IN 


THE FOSTER CARE PROGRAM


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 Investiga ions t

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. 
∆ ABSTRACT 


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 ACF’s 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. 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 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 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM ii 
EXECUTIVE SUMMARY

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 Budget’s 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 ACF’s 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 

O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM iii 
EXECUTIVE SUMMARY 

“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 Audit’s 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. 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM iv 
EXECUTIVE SUMMARY

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 ACF’s 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 ACF’s current oversight mechanisms. 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 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’ Monitoring of Subgrantees ......................... 11

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

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

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

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

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

B : State Practices for Communicating Grants Information .... 30

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

D : Agency Comments .................................. 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” 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 1 
INTRODUCTION 

(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, Ohio’s 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 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 2 
INTRODUCTION 

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 auditor’s 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 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 3 
INTRODUCTION 

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. 

ACF’s 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 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 4 
INTRODUCTION

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 ACF’s Administration of the Foster Care Program 

In addition to understanding grants management and subgrantee 

monitoring, it is important to have an understanding of ACF’s broader 

oversight of the foster care program. 

As part of ACF’s 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 

O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 5 
INTRODUCTION 

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 Administration’s 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. 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 6 
INTRODUCTION 

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 countyadministered 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. 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 7 
INTRODUCTION 

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 subgrantees—States 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 

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)] 

--“manage and monitor each project, program, 

subaward, function or activity supported by the 

award.” 

[45 CFR § 74.51(a)] 

States must have at least: 

--one fiscal monitoring mechanism, and 

--one program monitoring mechanism

 Each mechanism must be used to collect 

 and review information on subgrantees, 

 and must include follow up on identified 

 problems. 

Communication of Required Information 

States must provide subgrantees with the “best 

information available to describe the Federal 

award.” 

[OMB Circular A-133, §__.400(d)(1)] 

States must at least inform subgrantees that the 

grant includes Federal funds. 

States must advise subgrantees of requirements 

imposed on them by Federal laws and 

regulations. 

[OMB Circular A-133, §__.400(d)(2)] 

States must inform subgrantees of Federal 

grants management requirements. 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 8 
INTRODUCTION

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 ACF’s major oversight mechanisms, including protocols for the 

O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 9 
INTRODUCTION 

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 

Standar s for Inspecti d ons issued by the President’s Council on Integrity 

and Efficiency. 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 10 
∆ FINDINGS 


Monitoring systems in three States are 

inadequate according to our evaluation criteria. 

In addition, three States do not communicate 

required information. 

Monitoring systems in three of the six 

selected States are inadequate 

according to criteria we developed based 

on grants management requirements. 

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 

Requirement 

State 

A 

State 

B 

State 

C 

State 

D 

State 

E 

State 

F 

Fiscal Monitoring _ _ Yes Yes Yes Yes 

Program Monitoring Yes Yes _ Yes Yes Yes 

Communicating Required 

Information _ Yes _ _ Yes Yes 

In Adherence with 

Criteria _ _ _ _ Yes Yes 

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 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 11 
FINDINGS FINDINGS 

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 

A 

State 

B 

State 

C 

State 

D 

State 

E 

State 

F 

Mechanism design is 

appropriate Yes Yes Yes Yes Yes Yes 

Mechanism is functioning Yes Yes _ Yes Yes Yes 

At Least One Program 

Monitoring Mechanism in 

Adherence with Criteria 

Yes Yes _ Yes Yes Yes 

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 

O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 12 
FINDINGS 

criteria. State A’s use of an audit to monitor subgrantees is inadequate 

because of flaws in the mechanism’s design, as well as because the audit 

does not function as designed. State B’s audit mechanism is 

appropriately designed, but is not used as designed. (See Table C.) 

TABLE C 

Adherence with Fiscal Monitoring Criteria 

State 

A 

State 

B 

State 

C 

State 

D 

State 

E 

State 

F 

Mechanism design is 

appropriate _ Yes Yes Yes Yes Yes 

Mechanism is functioning _ _ Yes Yes Yes Yes 

At Least One Fiscal 

Monitoring Mechanism in 

Adherence with Criteria 

_ _ Yes Yes Yes Yes 

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 A’s 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 B’s 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 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 13 
FINDING S 

19 subgrantee files included documentation of audits. Since only 

58 percent of selected subgrantees had documented audits, State B’s 

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 

A 

State 

B 

State 

C 

State 

D 

State 

E 

State 

F 

Inform subgrantees that the 

grant includes Federal funds _ Yes _ _ Yes Yes 

Communicate Federal 

requirements related to 

monitoring 

_ Yes _ Yes Yes Yes 

In Adherence _ Yes _ _ Yes Yes 

 OEI-05-03-00060 

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 

OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 14 
FINDINGS FINDINGS 

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. 

In reviewing ACF’s oversight of States, 

we found that ACF’s focus and

Oversight of States’ systems for monitoring Oversight of States’ systems for monitoring 

subgrantees receives minimal attention by ACF. subgrantees receives minimal attention by ACF. 

priorities do not encompass subgrantee 

monitoring. In fact, oversight of State’s subgrantee monitoring receives 

very minimal attention by ACF. 

The ACF’s 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 

O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 15 
FINDING S 

of subgrantees at the State’s 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 ACF’s 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 year’s Single Audit to follow up on 

findings related to States’ monitoring of subgrantees. 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 16 
F INDING 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 State’s 

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 can’t feel confident that 

this is a good Federal fiscal oversight tool.” In these instances, ACF 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 17 
FINDING S 

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 Ohio’s 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 State’s 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 auditor’s 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 auditor’s 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 

O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 18 
FINDING S 

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 

State’s 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 State’s poor performance on child-specific 

outcomes could lead a reviewer to question the State’s 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. 

O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 19 
∆ R E C O M M E N D A T I O N S 

RECOMMENDATIONS 

The ACF’s 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 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 20 
RECOMMENDATIONS RECOMMENDATIONS 

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 ACF’s 

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 OMB’s 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 ACF’s programmatic concerns, and suggestions for 

O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 21 
RECOMMENDATIONS RECOMMENDATIONS 

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 ACF’s 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 Audit’s 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. 

O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 22 
RECOMMENDATIONS 

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 

ACF’s 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. 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 23 
∆ AGENCY COMMENTS 

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 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 24 
AGENCY COMMENTS 

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 ACF’s 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 ASAM’s 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.” 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 25 
AGENCY COMMENTS 

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 auditor’s 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. 

 O E I - 0 5 - 0 3 - 0 0 0 6 0 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 26 
∆ APPENDIX ~ A 

METHODOLOGY 

To assess States’ monitoring of subgrantees we conducted site visits in 

six States. To assess ACF’s 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 Stateadministered 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 VII’s 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, highOEI-05-03-00060 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 27 
APP ENDIX~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 IVE 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 D’s program that is Stateadministered. 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 State’s 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 State’s 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 S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 28 
APPENDIX~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 ACF’s processes for overseeing 

States’ subgrantee monitoring systems. We asked specifically about 

ACF’s 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 S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 29 
∆ APPENDIX ~ 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 subgrantee’s 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 S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 30 
APPENDIX~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 

A 

State 

B 

State 

C 

State 

D 

State 

E 

State 

F 

At least imply that 

45 CFR Part 74 applies _ Yes Yes Yes Yes Yes 

At least imply that OMB Circular 

A-133 applies N/A Yes N/A Yes Yes N/A 

Specify that State & Federal 

officials have access to records _ Yes Yes Yes Yes Yes 

Specify that subgrantees must 

pass down requirements to subsubgrantees 

_ Yes _ Yes Yes Yes 

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 ACF’s 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 S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 31 
APPENDIX~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 S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 32 
∆ APPENDIX ~ 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 S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 33 
APPENDIX~C 

Broad Monitoring Requirements 

achieved.” 

o 

o 

o fiscal information 

o 

o 

o 

o 

o 

Federal Regulatory and Policy 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 

 [OMB Circular A-133, §__.400(d)(3)] 

We anticipate measuring the broad monitoring requirements using the 

following, more specific, criteria: 

contract or award allows for monitoring 

communication to subgrantee describes monitoring 

 -- collect (possible mechanisms: fiscal reports, site visits, audit) 

 -- review

 -- follow up 

performance information

 -- collect (possible mechanisms: progress reports, site visits, audit) 

 -- review

 -- follow up 

Specific Monitoring Requirements 

Ensure specific OMB Circular A-133 audit requirements are met. 

Federal requirements for monitoring are communicated. 

Federal awards are identified to subgrantees. 

Require sufficient access to records to perform monitoring functions. 

OEI-05-03-00060 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 34 
∆ APPENDIX ~ D 

AGENCY COMMENTS 

OEI-05-03-00060 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 35 
AGENCY COMMENTS

OEI-05-03-00060 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 36 
AGENCY COMMENTS

OEI-05-03-00060 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 37 
AGENCY COMMENTS

OEI-05-03-00060 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 38 
AGENCY COMMENTS

OEI-05-03-00060 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 39 
AGENCY COMMENTS

OEI-05-03-00060 OVERSIGHT OF S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 40 
∆ ACKNOWLEDGMENTS 


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, Te ade am Le r 

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 S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 41 
∆ END NOTES 


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 HRSA’s 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 S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 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 State’s 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 Stateadministered 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 S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 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 State’s 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 Secretary’s 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 S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 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 vendor’s 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 State’s 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 S UBGRANTEE MONITORING IN THE F OSTER CARE P ROGRAM 45