Homeland Security First Responder Grants: Cash Management Improvement Act Exemption and Cash Advance Funding Require Additional DHS Oversight
Released: 2006-12-22T00:00:00

Letter

Background

The CMIA is critically important to the federal government’s efforts to promote accountability in the use of federal grant funds. Currently administered by Treasury’s Financial Management Service (FMS), the CMIA is the cornerstone of cash management policy for federal grants to the states. Specifically, the CMIA requires the Secretary of the Treasury, along with the states, to establish equitable funds transfer procedures so that federal financial assistance is paid to states in a timely manner and funds are not withdrawn from Treasury earlier than they are needed by the states for grant program purposes. The act requires that states pay interest to the federal government if they draw down funds in advance of need and requires the federal government to pay interest to states if federal program agencies do not make program payments in a timely manner.

According to Treasury regulations implementing the CMIA, funding techniques for federal financial assistance to the states should be efficient and minimize the exchange of interest between federal agencies and the states. Various funding techniques can be agreed to between Treasury and the states, including cash advance funding, whereby the federal program agency transfers the actual amount of federal funds to a state prior to the day the state actually pays the funds out of its own account. The limit on such cash advance funding is 3 business days prior to payout.

Before the terrorist attacks of September 11, 2001, the Department of Justice (Justice) managed several grants designed to enhance the capability of state and local first responders to handle incidents involving nuclear, biological, and chemical terrorism. Since 1999, these programs have grown dramatically. In March 2003, responsibility for these grant programs shifted to DHS, and they continued to grow. Initially, DHS provided some of these grants directly to local government entities; however, the requirements were changed so that grants were awarded first to states and then passed through to local governments and other subgrantees. Despite increased funding, many local governments—cities in particular—complained that they were not receiving the funds that they expected and could not disburse them as fast as they wanted.

In response to complaints about delays in the disbursement of first responder grants, on March 15, 2004, the Secretary of the Department of Homeland Security established the HSAC Task Force on State and Local Homeland Security Funding. The task force’s objective was to examine the homeland security grant funding process and provide recommendations to expedite the flow of homeland security funds to those responsible for preventing and responding to acts of terrorism. The task force recommended, among other things, that Congress exempt certain DHS homeland security grants for fiscal year 2005 from the CMIA in order to allow funds to be provided to state and municipal entities up to 120 days in advance of expenditure. The task force indicated that more flexibility was needed in providing grant funding to first responders because, in some instances, the 3-day time frame for receiving grant funds prior to making payments was insufficient to prevent municipal jurisdictions from having to make payments to vendors in advance of receiving the DHS grant funds. In other cases, the municipal jurisdictions required cash on hand in their municipal treasuries prior to commencing the procurement process.

Subsequent to the task force’s recommendations, Congress exempted for fiscal year 2005 certain DHS first responder grant programs from the provision of the CMIA that limits the extent to which grantees can hold federal funds prior to payout by requiring federal agencies and states to minimize the time elapsing between transfer of funds from Treasury and payment by the states. In fiscal year 2006, this exemption was made permanent. Importantly, the CMIA exemption only pertains to the requirement to minimize the time elapsing between transfer of funds from Treasury and payments for program purposes. The CMIA exemption did not exempt certain first responder grant programs from the other provisions of the CMIA which address interest payments and accountability.

To implement the CMIA exemption, DHS’s Program Guidelines and Application Kit for the Fiscal Year 2005 Homeland Security Grant Program (HSGP) and guidance for certain other homeland security first responder grants state that grantees and subgrantees will be permitted to draw down funds up to 120 days prior to expenditure or disbursement. For the majority of the grant programs, the guidance requires all federal funding to go to state grantees prior to being passed through to local government and other subgrantees, and requires both grantees and subgrantees to place funds received in an interest-bearing account. The guidance states that both grantees and subgrantees must pay interest on funding advances in accordance with federal regulations. In addition, according to the guidance, state grantees are subject to the interest requirements of the CMIA and its implementing regulations. The guidance states that interest under the CMIA will accrue from the time federal funds are credited to a state account until the time the state pays out the funds to a subgrantee or otherwise for program purposes.

In January 2006, DHS’s Preparedness Directorate issued its Financial Management Guide. The guide is intended to be used as a financial policy reference for all fiscal year 2006 and future first responder grants. Consistent with DHS’s fiscal year 2005 guidance for the HSGP and certain other first responder programs, the guide states that grant recipients may elect to draw down funds up to 120 days prior to expenditure or disbursement and that state grantees are subject to the interest requirements of the CMIA. The guide further states that all local units of government must account for interest earned on federal grant funds and remit such interest to appropriate federal agencies.

Scope and Methodology

To assess whether the CMIA provision that limits the extent to which grantees can hold federal funds before payout, prior to its exemption for certain DHS first responder grants in fiscal year 2005, had prevented first responders from receiving DHS grant funds when such funds were needed, we interviewed key officials from 13 SAAs. These SAAs involved states from most geographic areas of the country and, when taken together, were awarded about 40 percent of DHS’s first responder grants that were subject to the CMIA exemption in fiscal year 2005. In addition, we interviewed key officials and obtained and analyzed pertinent documents from nine national associations which represent state and local governmental entities including the National Governors Association and the U.S. Conference of Mayors. We also reviewed the key report issued by the HSAC Task Force, A Report from the Task Force on State and Local Homeland Security Funding, and reports issued by DHS’s Inspector General.

To identify key fiscal and accountability implications associated with the CMIA exemption for certain DHS first responder grant programs, we reviewed the CMIA and Treasury’s implementing regulations, the CMIA exemption for certain first responder grants, DHS’s program guidance for those grants, and GAO’s prior report covering the implementation of the CMIA. In addition, we interviewed key officials and obtained and analyzed pertinent documents from DHS, Treasury, OMB, and Justice, all of which are responsible to varying degrees for administering or overseeing the implementation of the CMIA or various aspects of DHS’s first responder grant programs. We also reviewed OMB Circular No. A-133, Audits of States, Local Governments, and Non-Profit Organizations, and OMB’s 2005 and 2006 Compliance Supplements, which comprise the current key guidance used by auditors to conduct single audits covering federal grant programs. Our work was performed in accordance with generally accepted government auditing standards from August 2005 through July 2006.

In responding to a draft of our report, DHS stated that it would take the recommendations made in the draft report under advisement and would provide a detailed response to appropriate congressional committees and OMB approximately 60 days after release of the report, consistent with the reporting requirements of 31 U.S.C. Part 720. Treasury stated that it agreed with our conclusion that the requirements of the CMIA did not prevent grantees from receiving grant funds when needed. Both Treasury and OMB staff provided technical comments that have been addressed as appropriate in this report.

We Found No Substantial Evidence That the CMIA Prevented First Responders from Receiving DHS Grant Funds When Such Funds Were Needed

We found no substantial evidence that the CMIA provision that limits the extent to which grantees can hold federal funds before payout, prior to its exemption for certain first responder grants in fiscal year 2005, had prevented first responders from receiving DHS grant funds when such funds were needed. Specifically, the majority of SAAs we contacted did not cite the CMIA as a contributing factor to first responder funding delays, and the National Governors Association, U.S. Conference of Mayors, and other associations we contacted did not provide information that demonstrated that the CMIA prevented local governments and other subgrantees from receiving first responder grant funding when they needed it. In addition, according to a report prepared by the HSAC Task Force, numerous factors, only one of which was related to the CMIA, have been responsible for first responder funding delays.

Importantly, as we reported in February 2005, a major challenge in managing first responder grants is balancing two goals: minimizing the time it takes to distribute grant funds to state and local first responders, and ensuring appropriate planning and accountability for the effective use of grant funds. DHS’s approach to striking this balance has been evolving from experience, congressional action, and feedback from states and local governments. In March 2006, DHS reported that the CMIA exemption had been used only to a minimal extent and, according to a DHS official, DHS is meeting with SAAs and local governments to determine the impacts, if any, of the CMIA exemption on first responder grant funding.

Most SAAs Contacted Did Not Cite the CMIA as a Delaying Factor

Of the 13 SAAs we contacted to determine whether the CMIA had prevented first responders from receiving DHS grant funds when such funds were needed, officials from six of these agencies told us that their state agency had experienced delays in getting first responder funds to subgrantees; however, most characterized the delays as not serious. Only one state agency official attributed the delays directly to the CMIA. According to that official, under the funding technique for the CMIA that was agreed to between the state and Treasury for fiscal year 2004, the state was to be reimbursed by the federal government for eligible grant- related expenditures. However, certain smaller subgrantees, such as volunteer fire departments, did not have the financial resources to purchase specialized equipment with their own funds and then wait for reimbursement from the state. The official stated that, contrary to the agreement with Treasury, the state began advancing federal funds to the subgrantees to enable them to purchase the equipment.

Generally, however, the SAA officials were more apt to tie delays in operations related to first responders to factors other than the CMIA. For example, officials of six of the SAAs noted that delays in the use of the funds have been due directly to certain local governments not having the manpower to deal with the large influx of grant funding that was experienced in the wake of the terrorist attacks. In addition, officials of six of the SAAs stated that state and local requirements related to purchase authorizations caused delays in getting goods and services delivered to first responders in a timely manner, and officials of six of the SAAs cited vendor problems as causing such delays.

National Associations Contacted Did Not Provide Evidence Supporting a Need for the CMIA Exemption

None of the officials from the nine national associations representing state and local governments we contacted provided information that demonstrated that the CMIA prevented first responders from receiving DHS grant funds when such funds were needed. For example, an official from the National Governors Association stated that the association did not take a position on whether the CMIA impacted funding for first responders. Rather, he stated that funding delays are often caused by local procurement procedures and acquisition approval requirements of local government subgrantees. The official cited one case where a local government could not spend first responder funds for a major purchase until the city council voted and approved the purchase. He emphasized that such local approval requirements and processes can take several months. The official also stated that funding delays have resulted from local government subgrantees being unaware of DHS’s requirement that all equipment be included on DHS’s approved equipment listings prior to acquisition.

In addition, according to an official from the U.S. Conference of Mayors, which was a leading proponent of the CMIA exemption for first responder grants, delays in first responder grant funding have resulted primarily from the many, sometimes conflicting, state and local requirements that local government subgrantees have to meet to receive grant funds. The official stated that the conference supported an exemption from the CMIA for first responder grants and that this support was driven primarily by an expectation that relaxing the requirements for funds transfers between the federal government and the states would lead to overall improvements in addressing local first responder needs. However, the official said that the conference does not have evidence that the requirements of the CMIA have created specific funding delays for first responders, or that the CMIA exemption has improved grant funding for first responders.

HSAC Task Force Reports That Numerous Factors Have Contributed to First Responder Funding Delays

In June 2004, the HSAC Task Force issued its report on state and local homeland security funding. According to the report, there is no single issue or level of government that has been responsible for delays in first responder funding. The report stated that the reimbursement requirement of the CMIA is problematic for many, particularly cash-strapped municipalities; however, the report does not address how the CMIA exemption will mitigate such problems at this level as the CMIA applies only to funds transfers to the states.

Moreover, the report discusses numerous factors other than the CMIA that contribute significantly to funding delays. Specifically, according to the report, the need for state, county, municipal, and tribal entities to rapidly procure and deploy homeland security-related equipment can conflict with state and municipal buying regulations that encourage a deliberate process of acquisition of budgeted necessities at the lowest possible price. Furthermore, many state and local governments lack the purchasing power to obtain the goods and services in a timely fashion. In addition, the report stated that the lack of national standards guiding the distribution, tracking, and oversight of homeland security-related grant funds contributed to delays in disbursement. The report also emphasized that state and local governments are often overwhelmed and understaffed to deal with the complex grant system and have not put the necessary infrastructure in place to deal with the increased workload associated with first responder grant funding. Finally, the report cited unavoidable equipment backlogs and vendor delays as causing delays in first responder grant funding.

DHS Working to Determine Impact of the CMIA Exemption

In February 2005, we reported that DHS’s approach to striking a balance between, on one hand, minimizing the time it takes to distribute grant funds to state and local first responders, and on the other hand, ensuring that appropriate planning and accountability for the effective use of grant funds has been evolving from experience, congressional action, and feedback from states and local governments. We emphasized that, as DHS continues to administer its first responder grant programs, it will be important DHS to listen and respond fully to the concerns of states, local governments, and other interested parties to ensure that there is adequate collaboration and guidance for moving forward. In March 2006, DHS reported that grantees and subgrantees have used the CMIA exemption and DHS’s 120-day cash advance funding provision only to a minimal extent. According to a DHS official, DHS’s new OGO, which began operations in October 2005, is in the process of meeting with SAAs and local governments to discuss the CMIA exemption and cash advance funding. OGO has conducted several regional financial management training conferences with SAAs and local representatives and has attended other similar forums that bring these same stakeholders together. In addition, OGO’s Monitoring Program Plan for fiscal year 2006 includes at least 20 states and territories, and OGO plans to include the remaining states and territories in the near future.

According to the DHS official, through its discussions and monitoring efforts, OGO intends to determine whether the CMIA exemption actually poses a problem or conversely creates an opportunity for first responders in their ability to obtain and use grant funds when needed. In addition, OGO is seeking to identify the significant issues behind the drawdown and disbursement, or lack of such, of DHS grant funds. These issues may involve legislative, procurement, programmatic, timeliness, and jurisdictional concerns. Finally, OGO is attempting to assess the impact the CMIA exemption could have on DHS if states were to use it extensively. According to the official, if grantees and subgrantees began using the CMIA exemption and DHS’s 120-day cash advance funding provision, it would present oversight difficulties for DHS.

Proper Oversight of Cash Advance Funding and Related Interest Liabilities Is Critical for Accountability

DHS’s OGO’s concern about the potential use of the CMIA exemption and DHS’s 120-day cash advance funding provision and the oversight difficulties extensive use of these provisions could entail is warranted. Specifically, the large number of state grantees and local government and other subgrantees that are eligible for cash advance funding resulting from the CMIA exemption and DHS’s 120-day cash advance funding provision, combined with the differing interest requirements for states, local governments, and nonprofit organizations, could create potential oversight challenges for DHS. Currently, DHS does not have policies and procedures to meet the oversight challenges of tracking cash advance funding and associated interest liabilities for first responder grants. Moreover, Treasury, in its administration of the CMIA, does not receive information pertaining to specific advances for such grants. While state single audits can be an important oversight tool for cash advance funding, they are not designed to replace program management’s oversight responsibilities. Further, those audits may not cover all first responder grants because of the grants’ relatively small dollar amounts, and single audit guidance does not include all grants for which DHS’s 120-day cash advance funding applies.

In addition, it is important to emphasize that cash advance funding, which is available on a case-by-case basis for first responder grants independent of the CMIA exemption and DHS’s 120-day cash advance funding provision, would allow DHS to focus its oversight efforts on specific grantees and subgrantees that can demonstrate a need for such funding. Regardless of whether cash advance funding for first responder grants is made available under the CMIA exemption and DHS’s 120-day cash advance funding provision or on a case-by-case basis, it is critical for DHS to provide proper oversight of cash advance funding to help ensure that associated interest liabilities due to the federal government are accurately recorded by grantees and subgrantees and promptly paid.

Large Number of Grantees and Subgrantees and Differing Interest Requirements Create Oversight Challenges

DHS is faced with potential oversight challenges regarding cash advance funding for homeland security first responder grants resulting from the large number of state grantees and local government and other subgrantees and the fact that interest liabilities and payment responsibilities vary for states, local governments, and nonprofit organizations. Specifically, according to DHS, for fiscal years 2005 and 2006, the initial years for which the CMIA exemption and DHS’s 120-day cash advance funding provision have been in effect, DHS has awarded in total about $5.5 billion of first responder grants to the 50 states, the District of Columbia, and 5 U.S. territories. Further, DHS required a minimum of 80 percent of certain grants to be passed through by the states to numerous city, county, local government, and other subgrantees. For example, for fiscal year 2005, at least 80 percent of the funding for UASI grants was allocated to 50 urban areas, and 124 distinct jurisdictions were to receive at least 80 percent of the funding for MMRS grants. According to DHS’s guidance, 120-day cash advance funding for homeland security first responder grants was available to all eligible state grantees and local government and other subgrantees.

Further, interest liabilities associated with cash advance funding depend upon the size of the grant as well as whether the recipient is a state, local government, or nonprofit organization. Specifically, state interest liabilities and payment responsibilities are governed by Treasury’s implementing regulations for the CMIA. Under these regulations, interest liabilities for relatively large grants that meet the requirements for being classified as major programs are typically settled as part of Treasury’s annual interest exchange with the states and U.S. territories using the interest rate set forth in the regulations. The interest liabilities and payment responsibilities of local government and nonprofit organizations are governed by regulations covering these entities. In general, local government and nonprofit entities are required to make periodic interest payments to HHS’ Division of Payment Management Services.

DHS Lacks Policies and Procedures to Meet Oversight Challenges

According to DHS officials, policies and procedures do not exist to track and report on specific cases of cash advance funding to state grantees including associated interest liabilities. Moreover, the officials stated that DHS would not be able to readily determine the extent to which state grantees advance funds to local government and other subgrantees and the interest liabilities that should accrue to the subgrantees as a result of such advances.

According to DHS’s Financial Management Guide, the state grantee is responsible for all aspects of preparedness grant funding, including cash management, accounting, and financial recordkeeping by the subgrantee. DHS officials emphasized that DHS relies on the states for management and oversight of grant funds, recognizing that the states rely, in part, on the single audits of grantees and subgrantees to help ensure proper accountability over cash advance funding including associated interest liabilities.

Treasury Does Not Receive Information on Specific Cases of Cash Advance Funding and Related Interest Liabilities

Treasury’s FMS manages the CMIA program; however, its roles and responsibilities in this capacity do not include obtaining information regarding specific funding advances for homeland security first responder grants made to states or the related state interest liabilities. Under Treasury’s implementing regulations for the CMIA, states and FMS must enter into Treasury-State Agreements (TSA) that outline, by major program, the funding technique, including cash advance funding if applicable, the states will use to draw down funds from the federal government. Each year, the states and U.S. territories submit reports to FMS indicating the cumulative interest liabilities calculated for major grant programs covered under their respective TSAs. Based on input from the federal agencies and the states and territories, FMS makes a final determination on each of the state and territory interest liability claims and then calculates net interest liabilities using the interest rate defined in Treasury’s implementing regulations and conducts the annual interest exchange with the states and territories.

According to Treasury officials, the vast majority of homeland security first responder grants were not included in the TSAs for fiscal years 2005 and 2006. Generally, to be included in the TSA, a grant program should be considered a major program by meeting the dollar thresholds which are set forth in Treasury regulations. Importantly, for grants not included in the TSAs, FMS does not receive any information about the grant, including whether states received cash advance funding for the grant or whether states incurred any associated interest liabilities. Moreover, according to Treasury officials, FMS has no oversight responsibilities of cash advances and associated interest liabilities involving local government and other subgrantees, regardless of whether the specific grants are major or nonmajor. The officials emphasized that FMS relies, primarily, on state single audits to provide oversight for CMIA-related activities, including interest liabilities associated with cash advance funding.

Single Audits Are a Limited Tool for Oversight of First Responder Grants

In our January 1996 report on the implementation of the CMIA, we concluded that FMS’s plans to emphasize the use of results of single audits as a means of overseeing state activities and enforcing the CMIA requirements should improve the act’s effectiveness and help alleviate any concerns about administrative burden. Similarly, single audits, if performed adequately, can be a tool to enhance DHS’s oversight of first responder grant funding including cash advance funding and associated interest liabilities. However, such audits are not designed to replace program management’s oversight responsibilities and may not cover all first responder grants due to the grants’ relatively small dollar amounts.

For single audits, auditors use OMB’s Circular No. A-133 Compliance Supplement, which provides an invaluable tool to both federal agencies and the auditors in establishing the important provisions of federal grant programs. The supplement enables federal agencies to effectively communicate items that they believe are important to understanding the legislative intent, as well as promoting successful program management. As such, the supplement requires constant review and update.

DHS is responsible for working with OMB to ensure that audit guidance contained in the supplement that is applicable to its programs is complete and updated. For fiscal year 2005, the supplement included guidance covering DHS’s 120-day cash advance funding provision; however, the only programs cited were SHSP and LETPP, even though the CMIA exemption and the 120-day cash advance funding provision applied to numerous other homeland security first responder grants. OMB’s most recent compliance supplement, dated March 2006, expanded the guidance for the 120-day cash advance funding provision to include HSGP grants awarded for fiscal years 2005 and 2006. However, the supplement still does not include all of the programs for which the CMIA exemption and the 120-day cash advance funding provision apply. Specifically, the supplement does not include, among others, the Port Security Program, the Rail and Transit Security Program, the Intercity Bus Security Program, or the Trucking Security Program.

According to an OMB representative, certain first responder grant programs were not included in the compliance supplements because they were not, at the time, considered major programs. However, DHS officials stated that DHS recognizes the importance of alerting auditors to the CMIA exemption and the 120-day cash advance funding provision for all of its first responder grants. As such, these officials stated that DHS intends to notify OMB that the 120-day cash advance funding provision used to implement the CMIA exemption applies to all grant programs administered by DHS’s Office of Grants and Training so that such information can be included in OMB’s 2007 Compliance Supplement.

It is important to note that even with comprehensive guidance for auditors, single audits are at best only a tool for program management oversight of grant funding. Such audits are not intended to replace program management’s overall responsibility for establishing and maintaining internal control to achieve the objectives of effective and efficient grant operations, reliable grant reporting, and compliance with applicable laws and regulations. Further, single audits may not always cover all homeland security first responder grants received by the audited entity, as only the larger and inherently riskier programs are typically subject to review as part of the overall audit.

Cash Advance Funding Can Be Allowed on a Case- by-Case Basis for Certain First Responder Grants

Treasury’s regulations implementing the CMIA are intended to provide Treasury and states flexibility and latitude in funding grant programs. Specifically, according to Treasury, the CMIA requires states to time their drawdown of federal funds in a way that minimizes the time between receipt of the funds and payments for federal program purposes. For cash advance funding, this is defined by regulation as not more than 3 business days prior to the date of disbursement of the funds. However, according to Treasury officials, if it can be demonstrated that there is a program need for funds more than 3 days, or even 120 days, in advance of payment, a funding arrangement that allows for such cash advance funding would not be inconsistent with the CMIA and its implementing regulations. In other words, the CMIA does not prohibit such flexibility to be provided on a program by program, or case-by-case, basis.

Moreover, cash advance funding arrangements made by a state can be extended to the state’s subgrantees. Specifically, under the Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments, grantees must monitor cash drawdowns by their subgrantees to assure that they conform substantially to the same standards of timing and amount as apply to advances to the grantees. As such, cash advance funding arrangements made by the states for specific programs that have a demonstrated need for cash advance funding in excess of the 3-day rule, can apply to local government subgrantees on an as-needed, or case-by-case, basis as determined by the state. Therefore, under Treasury regulations implementing the CMIA and other applicable regulations, cash advance funding for homeland security first responder grants can be allowed on a case-by-case basis independent of the CMIA exemption and DHS’s 120-day cash advance funding provision.

Conclusions

We found no substantial evidence that the CMIA funds transfer requirements, prior to the exemption for certain first responder grants in fiscal year 2005, prevented first responders from receiving DHS grant funds when such funds were needed. However, DHS’s current efforts to monitor state grantees should help to identify problems, if any, associated with the CMIA and the CMIA exemption, as well as other issues that impact grant administration and first responders’ ability to receive and use DHS grant funds when needed. Going forward, these efforts should also enable DHS to determine the extent to which cash advance funding for first responder grants will likely be needed. This is important because DHS lacks the policies and procedures necessary to provide adequate oversight of cash advance funding, regardless of whether the cash advance funding is made widely available under the CMIA exemption and DHS’s corresponding 120-day cash advance funding provision, or on a case-by- case basis as allowed under Treasury regulations implementing the CMIA. Such oversight is critical to ensure that interest due to the federal government associated with cash advance funding is accurately recorded and promptly paid.

Recommendations for Executive Action

We make seven recommendations to improve oversight of cash advance funding and associated interest liabilities for homeland security first responder grants. Specifically, we recommend that the Secretary of the Department of Homeland Security direct the Executive Director of the Office of Grants and Training to complete ongoing monitoring efforts involving state grantees that receive DHS first responder grant funding and use information obtained from such monitoring to identify the significant issues that have resulted in delays in the drawdown and disbursement of DHS grant funds; determine the impact of the CMIA exemption on first responders in their ability to obtain and use grant funds to meet program needs; assess the impact the CMIA exemption and DHS’s 120-day cash advance funding provision could have on DHS’s ability to provide adequate oversight if state grantees and local government subgrantees were to use them extensively; determine whether case-by-case cash advance funding provides a reasonable alternative to the CMIA exemption and DHS’s 120-day cash advance funding provision; and based on the results of the monitoring efforts, take appropriate actions, which could include making either legislative or operational recommendations, to improve first responders’ ability to receive and use DHS grant funds when needed and DHS’s oversight of such funds.

In addition, we recommend that the Secretary of the Department of Homeland Security direct the Executive Director of the Office of Grants and Training to develop policies and procedures to handle requests for cash advance funding, including the ability for DHS to track specific cases of cash advance funding to state grantees and the related interest liabilities; and develop policies and procedures to work with the SAA for any state that requests and receives cash advance funding to ensure that adequate policies and procedures are in place at the state grantee level to provide proper oversight of advances made to subgrantees, including the accurate recording of interest accruals on the advances and prompt payment of such interest to the federal government.

Agency Comments and Our Evaluation

We provided a draft of this report to DHS, Treasury, and OMB for comment. DHS stated that it would take our recommendations under advisement. DHS also noted that it will provide a detailed response to appropriate congressional committees and OMB in accordance with applicable reporting requirements.

Treasury provided technical comments that have been addressed as appropriate in this report. In providing such comments, Treasury stated that it agreed with our conclusion that the requirements of the CMIA did not prevent grantees from receiving grant funds when needed and noted that it believes the CMIA statute and regulations provide inherent flexibility to ensure that the program purposes are served while minimizing the time between the transfer of federal funds and the disbursement of funds by the state for federal grant program purposes. In addition, OMB staff provided a technical comment that has been addressed as appropriate in this report.

We are sending copies of this report to other interested congressional committees, the Secretary of the Department of Homeland Security, the Secretary of the Department of the Treasury, the Director of the Office of Management and Budget, and the Attorney General. Copies will be made available to others upon request. This report will also be available at no charge on GAO’s Web site at http://www.gao.gov.

Please contact Stanley J. Czerwinski at (202) 512-6806 or czerwinskis@gao.gov, or Gary T. Engel at (202) 512-3406 or engelg@gao.gov, if you have any questions. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix I.

Appendix I: GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments

Faisal Amin, Jeffrey W. Dawson, Carlos E. Diz, Richard H. Donaldson, Ernie Hazera, Kenneth R. Rupar, and Linda K. Sanders made key contributions to this report.