Federal Grants: Improvements Needed in Oversight and Accountability Processes
Published: 2011-06-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: While federal grant funding has been increasing, long-standing concerns remain about the federal government's grants management and the lack of effective oversight tools to reasonably assure that grants are used for their intended purposes and that risks of fraud, waste, and abuse are minimized. GAO has issued a range of reports raising concerns about the risks and vulnerabilities related to grants management and oversight. The Administration recognizes these concerns. It included improving grants management as a part of its initiative to eliminate waste in the U.S. government and has various efforts underway to improve grants oversight and accountability. This testimony addresses the (1) significance of federal grant funding, (2) risks and vulnerabilities in key controls in the federal grant life cycle, and (3) improvements needed to make the single audit process an effective accountability mechanism. This testimony is primarily based on prior GAO work that reviewed grant accountability and the single audit process.
section_title: What GAO Found
paragraphs: Grants Play a Significant Role in Implementing and Funding Federal Programs: The federal government's use of grants to achieve national objectives and to respond to emerging trends, such as changing demographics and changing threats to homeland security, has grown significantly in the last two decades. From fiscal years 1990 to 2010, federal grant outlays to states and local governments, increased from about $135 billion to over $600 billion--almost one-fifth of the fiscal year 2010 federal budget, according to the Office of Management and Budget (OMB). In fiscal year 2010, over 1,670 federal grant programs were offered by 23 federal grant-making departments and agencies. Risks and Vulnerabilities Exist in Key Controls in the Grant Life Cycle: Organizations that award and receive grants need effective internal control over the processes and funds involved. These controls are fundamental in assuring the proper and effective use of federal funds to achieve program goals and to ensure that funds are used for their intended purposes. Overall, our work on grant management has found weaknesses in the control systems of federal awarding agencies. We found vulnerabilities at different points in the grant life cycle: in the preaward, award, implementation, and closeout stages. Furthermore, we observed oversight issues that exist across the government. For example, in 2008 we reported that in 2006 about $1 billion remained in undisbursed funding in expired grant accounts in the largest civilian grant payment system, which was associated with thousands of grantees and over 325 different federal programs and could have been identified through improved oversight and grant tracking. In addition, federal agencies reported an estimated $125.4 billion in improper payments for fiscal year 2010. This estimate was attributable to over 70 programs spread across 20 agencies. Many of those programs reporting improper payments were federal grant programs, including Medicaid. Improvements Are Needed to Make Single Audits a More Effective Accountability Mechanism Over Grant Funding: The single audit process for organizations spending $500,000 or more in federal grant awards in a year is intended to play a key role in achieving accountability over federal grant resources. These audits report on the financial statements and internal controls over compliance with laws and grant provisions, among other things. GAO and others have identified and reported on significant concerns with the single audit process that diminish its effectiveness as an oversight accountability mechanism and concluded that improvements are needed. Through our work we found that (1) the federal oversight structure is not adequate to monitor the efficiency and effectiveness of the single audit process; (2) time frames of the single audit process do not facilitate the timely identification and correction of audit findings; and (3) single audit stakeholders have raised concerns about the complexity and relative costs and benefits of the single audit requirements, especially at smaller entities. Currently, OMB is conducting initiatives looking to improve the process, but time frames for implementing the results of ongoing studies are unclear. Through our body of work on federal grant accountability, GAO has made numerous recommendations directed at improving management and oversight. Our recommendations include a range of actions at the agency and governmentwide levels.

section_title: Letter
paragraphs: Thank you for the opportunity to be here today to discuss the issues that  surround the federal grants management process and the need to improve  grants management and oversight to help ensure accountability and  the  proper use of taxpayer dollars. While federal grant funding has been  increasing, long-standing concerns remain about the federal government’s  grants management and the lack of effective oversight tools to reasonably  assure that federal funds are used for their intended purposes and to  minimize risks of fraud, waste, and abuse. Today I will highlight a range of  reports we have issued that raise concerns about the risks and  vulnerabilities related to the grants management and oversight process  including the single audit process which is intended to be a key  accountability mechanism. The Administration also recognizes these  concerns. It included improving grants management as part of its initiative  to eliminate waste in the 2010 Financial Report of the U.S. Government  and has various efforts underway intended to improve grants oversight  and accountability.
Today, I will discuss the (1) significance of federal grant funding, (2) risks  and vulnerabilities in key controls in the federal grant life cycle, and (3)  improvements needed to make the single audit process an effective  accountability mechanism.
In preparing this testimony, we relied on our body of work on federal  grants management and oversight, including the single audit process. More  detail on our scope and methodology is included in each issued product.  We conducted our work in June 2011 in accordance with all sections of  GAO’s Quality Assurance Framework that are relevant to our objectives.
The framework requires that we plan and perform the engagement to meet  our stated objectives and that we discuss any limitations in our work. We  believe that the information and data obtained, and the analysis  conducted, provide a reasonable basis for our findings and conclusions.
subsections: section_title: Grants Play a Significant Role in Implementing and Funding Federal Programs
paragraphs: The federal government’s use of grants to achieve national objectives and  respond to emerging trends, such changing demographics and changing  threats to homeland security, has grown significantly in the last two  decades. According to the Office of Management and Budget (OMB), from  fiscal years 1990 to 2010, federal outlays for grants to state and local  governments increased from $135 billion to $608 billion—almost one-fifth  of the federal budget and a 350 percent increase since fiscal year 1990 (see  fig. 1). In fiscal year 2010, OMB identified 23 federal grant–making  departments and agencies that offered over 1,670 federal grant programs.   The top three agencies in terms of grant dollars outlayed during fiscal year  2010 were the Departments of Health and Human Services (HHS),  Transportation, and Education.
The Catalog of Federal Domestic Assistance (CFDA), administered by the  General Services Administration, provides information on grant programs  within and across agencies.  Our analysis of federal assistance data from  the CFDA indicates that, as of June 17, 2011, 1,432 project grant programs  and 209 formula grant programs were listed. In addition, there were 34  grant programs that are categorized as a combination of both project and  formula grants.  The top three agencies in terms of number of grant  programs on the CDFA Web site were the Departments of HHS, Interior,  and Agriculture.  The CFDA Web site allows users to search the database  for grant programs on the basis of a range of factors, such as the awarding  federal agency or the general nature of a grant program, such as health  care or environmental quality. For example, our analysis identified 128  grant programs that address environmental quality issues.
section_title: Risks and Vulnerabilities Exist in Key Controls in the Grant Life Cycle
paragraphs: In awarding federal grants, effective oversight and internal control is of  fundamental importance in assuring the proper and effective use of federal  funds to achieve program goals. Effective internal control systems provide  reasonable assurance to taxpayers that grants are awarded properly,  recipients are eligible, and federal funds are used as intended and in  accordance with applicable laws and regulations. In authorizing grant  programs, federal laws identify the types of activities that can be funded.  OMB circulars specify how grants are to be administered and the  standards for determining allowable costs.
In addition to the legal and regulatory underpinnings, each grant program  has stated purposes that guide what the grant is intended to accomplish.  Before awarding any grants, agencies’ preaward processes should ensure  that potential recipients have the necessary capabilities to effectively  implement the program to comply with relevant laws and regulations, and  provide the necessary accountability for federal resources. Once the  agency has awarded the grants, its monitoring of grantee performance is  important to help ensure that grantees are meeting program and  accountability requirements. Following grant completion, it is important  for agencies to evaluate the goals and measures established at the  beginning of the process against actual results, and to make any needed  adjustments for future grant efforts. At all stages of the process, it is  essential that effective internal control systems are in place. The grant life  cycle is shown in figure 2.
Overall our work on grant management and oversight issues found  weaknesses in the control systems of the stages of the grant life cycle: the  preaward and award stages, implementation, and close out. We have  recommended actions to strengthen the internal control framework for  grant accountability in individual programs—including developing and  implementing formal and structured approaches to conducting grant  monitoring activities, and training grant program staff.  While agencies  have taken actions to address our recommendations in individual  programs, more work is needed across the government as well as from a  governmentwide perspective to strengthen internal controls and oversight  for federal grant funds.
subsections: section_title: Key Controls in Agencies’ Preaward and Award Processes Need Improvement
paragraphs: Our audits found that agencies awarded grants without adequately  documenting the grantee selection process. In some instances, we found  agencies did not perform preaward reviews until after the grants had been  awarded. Preaward reviews are essential to determining that recipients  possess, or have the ability to obtain, the necessary competence to plan  and carry out the program before awarding a grant, thereby reducing the  federal government’s risk that money may be wasted or projects may not  achieve intended results. For an effective preaward grant process,  agencies need effective procedures for:    assessing applicant capability to account for funds,    competing grants in a fair and effective manner for grant programs that    preparing good work plans to provide the framework for grant  accountability, and  including clear terms and conditions in award documents.
The award stage of grants management includes making award decisions  and committing funds. In a competitive award process, agencies can  increase assurance that recipients have the systems and resources to  efficiently and effectively use funds to meet grant goals.  Evaluation  criteria, including having sufficient resources and sound management  practices, can help an agency focus its review on factors indicative of  success and provides information about grant applicants’ ability to fulfill  grant requirements.
We found weaknesses throughout the award processes used by agencies  we reviewed. For example, in one review we found controls over the  agency’s processes had weaknesses in (1) carrying out and documenting  management’s review of grant applications,  (2) documenting the grant  award decisions, and (3) using the automated recipient data available in  the agency’s grants system. These deficiencies increased the risk that the  agency would not consistently consider all relevant information— including key management discussions during evaluation—before making  a decision to award. Lack of documentation also limited the agency’s  ability to explain the results of its award decisions, and resulted in  incomplete and inaccurate information in the agency’s grants and  recipient-application evaluations. At the time of our review, the agency’s  grant-application evaluation process and the basis for the resulting  decisions were not clearly documented.
Another agency’s decisions to award grants were based primarily on the  results of a peer review process that had weak internal controls for  ensuring that applications would be evaluated consistently. We found  weaknesses in the procedures the agency relied on to ensure that  evaluation criteria were applied consistently across reviewers and across  panels when evaluating the grant applications it received.
section_title: Weaknesses in the Implementation Stage Expose Funds to the Risk of Waste, Fraud, and Abuse
paragraphs: While federal grant-awarding agencies are responsible for continued  oversight of the federal funds they award, grantees or recipients also have  key responsibilities to administer, manage, and account for the use of  grant funds. Federal agencies are dependent on the design and  implementation of recipients’ grant management programs to ensure that  federal funds are used for their intended purposes and are appropriately  safeguarded.
Over the past several years, we have reported that agencies need to  improve oversight of grantee activities and management of federal funds.  Effective oversight procedures based on internal control standards for  monitoring the recipients’ use of awarded funds are key to ensuring that  waste, fraud, and abuse are not overlooked and that program funds are  being spent appropriately. Such procedures include (1) identifying the  nature and extent of grant recipients’ risks and managing those risks, (2)  having skilled staff to oversee recipients to ensure they are using sound  financial practices and meeting program objectives and requirements, and  (3) using and sharing information about grant recipients throughout the  organization. To ensure that grant funds are used for intended purposes,  agencies need effective processes for:    monitoring the financial management of grants,    ensuring results through performance monitoring,    using audits to provide valuable information about recipients, and    monitoring subrecipients as a critical element of grant success.
We have also reported the need for agencies to assist recipients in  improving subrecipient monitoring—the process of a recipient assessing  its subrecipients’ quality of performance over time and ensuring that the  findings of audits and other reviews are promptly resolved. It is important  that recipients identify, prioritize, and manage potential at-risk  subrecipients to ensure that grant goals are reached and resources are  used properly.   Additionally, recipients should be (1) conducting site visits  to subrecipients (early and often); (2) reviewing financial and progress  reports for accuracy, completeness, and alignment with program  objectives; and (3) and strengthening policies and procedures related to  subrecipients. GAO has found that inadequate subrecipient monitoring  often leads to the misuse, abuse, and waste of federal funds.
section_title: Grant Closeout Procedures Represent One of the Final Opportunities to Detect Unallowable Uses of Funds
paragraphs: Past audits of federal agencies by GAO and Inspectors General and annual  performance reports by at least eight federal agencies in 2006 and 2007  suggest that grant management challenges, including grant closeout  procedures, are a long-standing problem. Closeout processes can be used  for detecting problems that have occurred in areas such as recipient  financial management and program operations, accounting for any real  and personal property acquired with federal funds, making upward or  downward adjustments to the federal share of costs, and receiving refunds  that the recipient is not authorized to retain. Closeout procedures are  intended to ensure that recipients have met all financial requirements,  provided final reports, and returned any unused funds. When agencies do  not conduct closeout procedures in a timely manner, this prevents unused  funds from being used to help address the purpose of the grant and, at the  same time, increases risk that records will be lost or officials may leave or  not remember sufficient details, making it more difficult for the agency to  recoup appropriate funds.
section_title: Attention Is Needed To Address Governmentwide Issues
paragraphs: Through our work, we found that weaknesses in grant oversight and  accountability issues that span the government. Specifically, we identified  long-standing challenges in oversight of undisbursed grant award  balances, and significant levels of improper payments in grant programs.
subsections: section_title: Oversight of Undisbursed Balances in Federal Grant Programs
paragraphs: We have found that undisbursed balances for expired grant accounts can  be significant and that agencies needed to improve how they track and  report on these funds. For example, in August 2008, we reported that  during calendar year 2006 about $1 billion in undisbursed funding  remained in expired grant accounts in the largest civilian grant payment  system.  The expired but still open grant accounts found were associated  with thousands of recipients and over 325 different federal programs. This  figure illustrates the potential financial benefits to be gained by improving  oversight of undisbursed grant funding, and we are currently starting  follow-up work in this area. The existence of undisbursed grant balances  in expired grant accounts may hinder the achievement of program  objectives, limit deobligating funding for other uses, and expose the  funding to improper spending or accounting.
Taken together, dozens of past audit reports we reviewed from multiple  agencies suggested that undisbursed balances in expired grant accounts  were a long-standing challenge and that these grants shared common  grants management problems. The audits generally attributed the  problems to inadequacies in the awarding agencies’ grant management  processes, including closeouts as a low management priority, inconsistent  closeout procedures, poorly timed communications with grantees, or  insufficient compliance or enforcement. Yet when agencies made  concerted efforts to address the problem, Inspectors General and auditors  reported that those agencies were able to improve the timeliness of grant  closeouts and decrease the amount of undisbursed funding in expired  grant accounts. The approaches taken by the agencies administering the  grants generally focused on elevating timely grant closeouts to a higher  agency management priority and on improving overall closeout  processing.
Better tracking of grant accounts maintained in all federal payment  systems could identify the expired grants with undisbursed balances and  make funds available for other assistance projects or facilitate the return  of these funds to the Treasury. We recommended in August 2008 that the  Director of OMB instruct executive departments and independent agencies  to annually track the amount of undisbursed grant funding remaining in  expired grant accounts and report on the status and resolution of such  funding in their annual performance plans and Performance and  Accountability Reports. As of April 2011, OMB had not issued  governmentwide guidance regarding undisbursed balances in expired  grant accounts.
section_title: Many Grant Programs Have Significant Levels of Improper Payments
paragraphs: Federal agencies reported improper payments of an estimated $125.4  billion in fiscal year 2010. This $125.4 billion estimate comes from over 70  programs spread among 20 federal agencies. Many of those programs  reporting improper payments were federal grant programs. A majority of  the $125.4 billion of reported improper payments is accounted for by 10  programs. The 10 programs account for about $118 billion, or 94 percent,  of the total estimated improper payments reported for fiscal year 2010.  Five of those top 10 programs were grant programs, and included  improper payment estimates for Medicaid ($22.5 billion), Unemployment  Insurance ($17.5 billion), Supplemental nutrition assistance programs  ($2.2 billion), the National school lunch program ($1.5 billion), and Pell  Grants ($1 billion).
Recently, in July 2010, the Improper Payments Elimination and Recovery  Act (IPERA) was enacted to enhance reporting and reduction of  improper payments. In addition to amending the Improper Payments  Information Act’s improper payment estimation requirements, IPERA  establishes additional requirements related to federal agency management  accountability, recovery auditing, and compliance and noncompliance  determinations and reporting. In addition, the Administration is taking a  number of actions in the area of improper payments.
Establishing effective accountability measures to prevent and reduce  improper payments in grant programs becomes an even higher priority in  today’s fiscal environment. In this regard, identifying and analyzing causes  of improper payments will be key to developing effective corrective  actions and accountability measures in order to reduce and prevent  improper payments in grant programs.
section_title: Improvements Are Needed to Make Single Audits a More Effective Accountability Mechanism over Federal Grant Funding
paragraphs: OMB has indicated that single audits play a key role in the achievement of  its accountability over federal grant funding. The Single Audit Act, as  amended, was enacted to promote, among other things, sound financial  management, including effective internal controls, with respect to federal  grant awards administered by nonfederal entities. We and others have  identified and reported on significant concerns with the Single Audit  process that diminish its effectiveness as an oversight accountability  mechanism and concluded that improvements are needed. Accordingly,  we have made several recommendations for improving the Single Audit  process. In March 2009, we made recommendations to OMB for improving  federal oversight and the single audit process. In April 2009, we started  work on American Recovery and Reinvestment Act  of 2009 (Recovery  Act) programs relating to single audits and issued the first of nine reports  related to oversight and accountability mechanisms for Recovery Act  funds.  We made additional recommendations for improving single  audits during the course of that work. A summary of our findings and  recommendations follows.
subsections: section_title: The Federal Oversight Structure Is Not Adequate to Monitor the Efficiency and Effectiveness of the Single Audit Process
paragraphs: in June 2007, which raised significant concerns about the  quality of single audits and made recommendations aimed at improving the quality of those  audits. process does not include a designated function or entity to monitor  whether or how well federal awarding agencies are implementing single  audit requirements. Without a mechanism in place to monitor on an  ongoing basis how the single audit process is implemented  governmentwide, OMB and federal stakeholders are unable to measure the  efficiency and effectiveness of this process or its usefulness as an  accountability tool over federal grant awards. We recommended that OMB  designate an entity or group to (1) evaluate and comprehensively monitor  the single audit process governmentwide, (2) assess the efficiency and  effectiveness of how agencies carry out their single audit responsibilities,  and (3) identify additional guidance and resources needed to carry out  single audit requirements. OMB has developed workgroups which are  currently underway to review ways to improve the single audit process. In  June 2010, the Single Audit Workgroup established by OMB pursuant to  Executive Order 13520 made recommendations to OMB in four areas to  enhance and streamline the single audit process to better support the  overall effort to improve federal program accountability and reduce  improper payments. However, as discussed in a later section, the related  decisions and planning for acting on these recommendations are still in  process. The four areas of recommendations included  (1) instilling federal leadership over the single audit process to improve  program accountability and reduce improper payments;  (2) managing risks by refocusing the single audit to include those  nonfederal entities that present the greatest risk of improper payments;  (3) improving the access to information in single audit reports to enhance  federal agency follow-up of audit findings and to coordinate single audit  and improper payments analysis and results; and  (4) amending the stated purposes of the Single Audit Act of 1984, as  amended, to emphasize the importance of acting on single audit findings  as a way to reduce the risk of improper payments.
section_title: More Timely Single Audit Reporting Is Needed, Especially in Internal Control
paragraphs: Time frames of the single audit process do not facilitate the timely  identification and correction of audit findings.28 29 Under the current time  frames for identifying and correcting audit findings provided by the Single  Audit Act and OMB Circular No. A-133, it could take years to correct  significant deficiencies and material weaknesses that expose federal funds  to misuse or fraud. For example, in accordance with current requirements,  a material weakness that has been identified by the auditor for an entity  that has a June 30, 2010, fiscal year-end can possibly be reported in the  Single Audit report to be issued as late as March 31, 2011, along with the  auditee’s corrective action plan. The federal awarding agency would have  6 months or until September 30, 2011, from receipt of the Single Audit  report to communicate a written management decision to the auditee. As a  result, it may take 15 months or more since the end of the fiscal year in  which the audit finding was initially identified before an auditee’s  corrective action plan is approved by the federal agency.
Several state auditors have expressed frustration regarding single audit  findings that remain open years after they were initially identified, without  the auditee or the federal awarding agency taking action. The lack of  attention to ensuring prompt corrective action impairs the federal  government’s ability to ensure that unallowable costs have been repaid or  that internal control deficiencies have been corrected. Shortening the time  frames required for issuing management decisions by federal agencies, and  monitoring the auditee’s implementation of timely corrective actions by  the federal agency would help to ensure that appropriate audit follow-up  and resolution are achieved, and that known internal control weaknesses  are corrected.
The Single Audit Act requires that recipients submit their financial reporting packages,  including the Single Audit report, to the federal government’s audit clearinghouse 30 days  after receipt of the auditor’s report or within 9 months after the end of the period being  audited, whichever comes first. As a result, an audited entity may not receive feedback  needed to correct an identified internal control deficiency over compliance until the latter  part of the subsequent fiscal year.
GAO, Recovery Act: Opportunities To Improve Management And Strengthen  Accountability Over States’ And Localities’ Uses Of Funds, GAO-10-999 (Washington, D.C.  Sept. 20, 2010). spent as effectively as possible to meet program objectives. We also  reported that the Single Audit reporting deadline is too late to provide  audit results in time for the audited entity to take action on internal  control deficiencies noted in Recovery Act programs.
In response to several of our recommendations, in October 2009 OMB  implemented the Single Audit Internal Control project to encourage earlier  reporting and timely correction of internal control deficiencies identified  in single audits that included Recovery Act programs. Although we found  that the project met its original objectives of (1) achieving more than 10  volunteer states participating in the project, (2) having the participating  auditors issue interim internal control reports for the selected programs at  least 3 months earlier, and (3) having auditee management issue corrective  action plans to resolve internal control deficiencies at least 2 months  earlier than required by OMB Circular No. A-133, the coverage of the  project was limited, with 16 of the 50 states participating. Furthermore,  because most of the federal awarding agencies did not issue their  management decisions in a timely manner, grant recipients were delayed  in implementing corrective action plans.
We also identified concerns regarding the need for OMB to issue its annual  single audit guidance in a more timely manner. While OMB has committed  to issuing its guidance in a timely manner, it has yet to achieve its target  for issuance of its guidance. Specifically for 2009, OMB issued the  guidance, Circular No. A-133 Compliance Supplement, in two stages, the  initial one in May 2009 and an addendum in August 2009, after the single  audits for entities with a June 30, 2009, fiscal year end were already under  way. An OMB official told us the delays in issuing the 2009 compliance  supplement were due to incorporating more specific guidance for  Recovery Act programs. For most of the largest nonfederal entities that  are subject to the single audit, the fiscal year ends on June 30 and thus the  timing of OMB’s issuance of the audit guidance has been close to and even  after the fiscal year end close. Most of the auditors told us that they  needed the information as early as February or at least by April to  effectively plan their work for a June 30 year end audit. Some of these  auditors stated that the OMB guidance was issued too late, causing  inefficiencies and disruptions in the planning of audit procedures. For  2010, OMB officials told us that they planned to issue the 2010 Compliance  Supplement in late May 2010. However, the guidance was not issued until  July 29, 2010. We recommended that OMB issue the guidance by March  31st of each year. In January 2011, OMB officials reported that the  production of the 2011 Compliance Supplement was on schedule for  issuance by March 31, 2011; however, OMB issued the 2011 Compliance  Supplement on June 1, 2011.  The late guidance impacts the auditors’  ability to deliver timely results in what is already a lengthy process.
section_title: Need to Focus on High- Risk Activities, Programs, and Recipients While Potentially Streamlining, Simplifying, or Reducing Focus on Areas of Low Risk
paragraphs: Single audit stakeholders have raised concerns about the complexity and  relative costs and benefits of the audit requirements for single audits,  especially at the smaller entities. Specifically, auditors of single audits  are subject to similar audit requirements and the same guidance in OMB  Circular No. A-133 and the Compliance Supplement when they are auditing  an entity that has expended $500,000 of federal awards as they are when  auditing one that expended $50 million or more. We found that there are  opportunities to evaluate the audit procedures being applied and  determine whether there is a proper balance between risk and cost- effective accountability from the largest to the smallest of audited entities.  Single audits of small entities could be simplified while still meeting the  accountability objectives of the Single Audit Act. For audits of large  entities, opportunities could be explored to identify best practices and  provide guidance for achieving higher-quality single audits. Our analysis  shows significant disparities in the number of audits of small entities  versus the number of audits of large entities and their respective coverage  of federal award expenditures. The current one-size-fits-all approach to  single audits, combined with the fact that less than 3 percent of audits  cover about 85 percent of federal award expenditures subject to a single  audit, presents a convincing case for reexamining the overall approach for  performing single audits. Because action had not been taken to address  concerns about complexity and the need for streamlining, we further  recommended during our Recovery Act work that OMB evaluate options  for providing relief related to audit requirements for low-risk programs to  balance new audit responsibilities associated with the Recovery Act.
section_title: OMB Has Implemented Some Recommendations but More Work Is Needed
paragraphs: OMB has taken initiative and is conducting studies to improve the Single  Audit process but time frames for implementing the results of these  studies are unclear. OMB officials have created a workgroup that  combines two previous workgroups: the Executive Order 13520 –  Reducing Improper Payments Section 4 (b) Single Audit  Recommendations Workgroup (Single Audit Workgroup), and the Circular  No. A-87 - Cost Principles for State, Local, and Indian Tribal Governments  Workgroup (Circular No. A-87 Workgroup).
The Single Audit Workgroup comprises representatives from the federal  audit community; federal agency management officials involved in  overseeing the single audit process and programs subject to that process;  representatives from the state audit community; and staff from OMB. OMB  officials tasked the Single Audit Workgroup with developing  recommendations for improving the effectiveness of single audits of  nonfederal entities that expend federal funds to help identify and reduce  improper payments. In June 2010, the Single Audit Workgroup developed  recommendations, some of which are targeted towards providing relief to  auditors who audit recipients and grants under the requirements of the  Single Audit Act. OMB officials stated that the recommendations warrant  further study and that the workgroup is continuing its work on the  recommendations. OMB officials also stated that the Circular No. A-87  Workgroup has also made recommendations that could impact single  audits and that the two workgroups have been collaborating to ensure that  the recommendations related to single audit improvements are compatible  and could improve the single audit process. The combined workgroups  plan to issue a report to OMB by August 29, 2011. We will continue to  monitor OMB’s progress to achieve this objective.
section_title: Conclusions
paragraphs: With the growth of federal grant funding over the past two decades, the  increasing role of grants in achieving national objectives, and constrained  resources available to meet diverse needs, attention to improving grants  management and oversight can help ensure that resources are targeted to  the intended recipients and are used effectively. Because many national  objectives are now being carried out through state, local, and  nongovernmental organizations, enhancing accountability and oversight at  all levels is equally important, and these efforts should be mindful of the  scarce oversight and accountability resources and shared responsibilities  as improvements are made. Also, the long-standing problems that impeded  the effectiveness of the single audit process as a key accountability  mechanism for ensuring that federal grant funds are spent appropriately  need to be addressed. Looking across the federal grants management and  oversight processes, there is great potential for streamlining and  simplifying while at the same time, improving accountability for how our  federal dollars are spent by addressing the issues and weaknesses we have  identified. We have been working with OMB to identify specific actions  that could help streamline administrative processes and provide more  flexibility for states in the audit and cost allocation process. We stand  ready to assist the Subcommittee as it focuses attention on addressing  these important issues, and to work constructively with OMB and the  agencies.
Mr. Chairman, this concludes my statement. I will be happy to answer any  questions you or the Subcommittee Members may have.
section_title: Related GAO Products
paragraphs: Grants.Gov: Additional Action Needed To Address Persistent Governance  And Funding Challenges. GAO-11-478. Washington, D.C.: May 6, 2011.
Recovery Act: Energy Efficiency and Conservation Block Grant  Recipients Face Challenges Meeting Legislative and Program Goals and  Requirements. GAO-11-379. Washington, D.C.: April 7, 2011.
Opportunities to Reduce Potential Duplication in Government  Programs, Save Tax Dollars, and Enhance Revenue. GAO-11-318SP.  Washington, D.C.: March 1, 2011.
Recovery Act: Department of Justice Could Better Assess Justice  Assistance Grant Program Impact. GAO-11-87. Washington, D.C.: October  15, 2010.
Iraq and Afghanistan: DOD, State, And USAID Face Continued  Challenges In Tracking Contracts, Assistance Instruments, And  Associated Personnel. GAO-11-1. Washington, D.C.: October 1, 2010.
Recovery Act: Opportunities to Improve Management and Strengthen  Accountability over States’ and Localities’ Uses of Funds. GAO-10-999.  Washington, D.C.: September 20, 2010.
University Research: Policies for the Reimbursement of Indirect Costs  Need to Be Updated. GAO-10-937. Washington, D.C.: September 8, 2010.
Hurricane Recovery: Federal Government Provided a Range of  Assistance to Nonprofits following Hurricanes Katrina and Rita.  GAO-10-800. Washington, D.C.: July 30, 2010.
Oversight of DOJ Funds for Recreational Activities. GAO-10-661R.  Washington, D.C.: June 18, 2010.
U.S. Insular Areas: Interior’s Management and Oversight of Insular  Area Grants. GAO-10-917T. Washington, D.C.: July 15, 2010.
Legal Services Corporation: Improvements Needed in Controls over  Grant Awards and Grantee Program Effectiveness. GAO-10-540.  Washington, D.C.: June 11, 2010.
Low-Income and Minority Serving Institutions: Sustained Attention  Needed to Improve Education’s Oversight of Grant Programs.  GAO-10-659T. Washington, D.C.: May 27, 2010.
Runaway and Homeless Youth Grants: Improvements Needed in the  Grant Award Process. GAO-10-335. Washington, D.C.: May 10, 2010.
Contingency Contracting: Improvements Needed in Management of  Contractors Supporting Contract and Grant Administration in Iraq and  Afghanistan. GAO-10-357. Washington, D.C.: April 12, 2010.
Vietnam Education Foundation: Recent Improvements Made in Internal  Controls, but Weaknesses Persist. GAO-10-442. Washington, D.C.: April 7,  2010.
Surface Transportation: Competitive Grant Programs Could Benefit  from Increased Performance Focus and Better Documentation of Key  Decisions. GAO-11-234. Washington, D.C.: March 30, 2011.
Iraq and Afghanistan: Agencies Face Challenges in Tracking Contracts,  Grants, Cooperative Agreements, and Associated Personnel.  GAO-10-509T. Washington, D.C.: March 23, 2010.
Intercity Passenger Rail: Recording Clearer Reasons for Awards  Decisions Would Improve Otherwise Good Grantmaking Practices.  GAO-11-283. Washington, D.C.: March 10, 2011.
Grant Monitoring: Department of Education Could Improve Its  Processes with Greater Focus on Assessing Risks, Acquiring Financial  Skills, and Sharing Information. GAO-10-57. Washington, D.C.:  November 19, 2009.
UN Office For Project Services: Management Reforms Proceeding but  Effectiveness Not Assessed, and USAID’s Oversight of Grants Has  Weaknesses. GAO-10-168. Washington, D.C.: November 19, 2009.
Fire Grants: FEMA Has Met Most Requirements for Awarding Fire  Grants, but Additional Actions Would Improve Its Grant Process.  GAO-10-64. Washington, D.C.: October 30, 2009.
Transit Security Grant Program: DHS Allocates Grants Based on Risk,  but Its Risk Methodology, Management Controls, and Grant Oversight  Can Be Strengthened. GAO-09-491. Washington, D.C.: June 8, 2009.
Single Audit: Opportunities Exist to Improve the Single Audit Process  and Oversight. GAO-09-307R. Washington, D.C.: March 13, 2009.
Foreign Assistance: Continued Efforts Needed to Strengthen USAID’s  Oversight of U.S. Democracy Assistance for Cuba. GAO-09-165.  Washington, D.C.: November 24, 2008.
Healthy Marriage And Responsible Fatherhood Initiative: Further  Progress Is Needed in Developing a Risk-Based Monitoring Approach to  Help HHS Improve Program Oversight. GAO-08-1002. Washington, D.C.:  September 26, 2008.
Grants Management: Attention Needed to Address Undisbursed Balances  in Expired Grant Accounts. GAO-08-432. Washington, D.C.: August 29,  2008.
Afghanistan Security: U.S. Efforts to Develop Capable Afghan Police  Forces Face Challenges and Need a Coordinated, Detailed Plan to Help  Ensure Accountability. GAO-08-883T. Washington, D.C.: June 18, 2008.
Legal Services Corporation: Improved Internal Controls Needed in  Grants Management and Oversight. GAO-08-37. Washington, D.C.:  December 28, 2007.
Responses to Posthearing Questions Related to Improving Single Audit  Quality. GAO-08-318R.  Washington, D.C.: December 7, 2007.
Single Audit Quality: Actions Needed to Address Persistent Audit  Quality Problems. GAO-08-213T. Washington, D.C.: October 25, 2007.
Economic Development: Formal Monitoring Approaches Needed to Help  Ensure Compliance with Restrictions on Funding Employer  Relocations. GAO-07-1005. Washington, D.C.: September 10, 2007.
Youthbuild Program: Analysis of Outcome Data Needed to Determine  Long-Term Benefits. GAO-07-82. Washington, D.C.: Feb. 28, 2007.
National Institutes Of Health Extramural Research Grants: Oversight of  Cost Reimbursements to Universities. GAO-07-294R. Washington, D.C.:  January 31, 2007.
Foreign Assistance: U.S. Democracy Assistance for Cuba Needs Better  Management and Oversight. GAO-07-147. Washington, D.C.: November 15,  2006.
Grants Management: Enhancing Performance Accountability Provisions  Could Lead to Better Results, GAO-06-1046. Washington, D.C.: September  29, 2006.
United Nations: Lessons Learned from Oil for Food Program Indicate  the Need to Strengthen UN Internal Controls and Oversight Activities.  GAO-06-330. Washington, D.C.: April 25, 2006.
Compacts Of Free Association: Implementation of New Funding and  Accountability Requirements Is Well Under Way, but Planning  Challenges Remain. GAO-05-633. Washington, D.C.: July 11, 2005.
American Samoa: Accountability for Key Federal Grants Needs  Improvement. GAO-05-41. Washington, D.C.: December 17, 2004.
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