Community Services Block Grant Program: HHS Should Improve Oversight by Focusing Monitoring and Assistance Efforts on Areas of High Risk
Released: 2006-07-11T00:00:00

Letter

Background

The CSBG program provides funds to state and local agencies to support efforts that reduce poverty, revitalize low-income communities, and lead to self-sufficiency among low-income families and individuals. CSBG dates back to the War on Poverty of the 1960s and 1970s, which established the Community Action program, under which the nationwide network of local community action agencies was developed. A key feature of Community Action was the direct involvement of low-income people in the design and administration of antipoverty activities through mandatory representation on local agency governing boards. The federal government had direct oversight of local agencies until 1981, when Congress created CSBG and designated states as the primary recipients. States subgrant funds to over 1,000 eligible local agencies that are primarily community action agencies.

In order to ensure accountability, both federal and state program offices have oversight responsibilities, including on-site monitoring of grantees and subgrantees, following-up on monitoring findings, and providing technical assistance.

Federal Role

OCS administers CSBG and is required by law to conduct on-site compliance evaluations of several states in each fiscal year, report to states on the results of these evaluations, and make recommendations for improvements. Upon receiving an evaluation report, states must submit a plan of action that addresses recommendations. In addition, OCS is required to annually report to Congress on the performance of the CSBG program, including the results of state compliance evaluations. For states to receive CSBG funding, they must submit, at least every 2 years, an application and plan to OCS stating their intention that funds will be used to, among other things, support activities to help families and individuals with the following: achieve self-sufficiency, find and retain meaningful employment, attain an adequate education, make better use of available income, obtain adequate housing, and achieve greater participation in community affairs.

The CSBG Act requires OCS to reserve 1.5 percent of annual appropriations (about $10 million in fiscal year 2005) for training and technical assistance for state and local agencies; planning, evaluation, and performance measurement; assisting states with carrying out corrective action activities; and monitoring, reporting, and data collection activities. The fiscal year 2005 Consolidated Appropriations Act conference report directed OCS to develop a 3-year strategic plan to guide its training and technical assistance efforts. OCS has provided assistance to local agencies with problems primarily through two grant programs: Special State Technical Assistance (SSTA) Grants and the Peer-to-Peer Technical Assistance and Crisis Aversion Intervention (Peer-to-Peer) Grants. OCS generally awarded Special State Technical Assistance Grants to states or state associations of community action agencies to provide support to local agencies that have problems. Since 2001, OCS has awarded the Peer- to-Peer Grant solely to Mid-Iowa Community Action (MICA), a community action agency, to offer problem assessment, interim management, and other technical assistance services to local agencies with problems.

Standards for Internal Control in the Federal Government

In addition to the federal requirements in law, OCS, like other federal agencies, is required to adhere to internal control standards established by the Office of Management and Budget and GAO in order to help ensure efficient and effective operations, reliable financial reporting, and compliance with federal laws. Internal controls help government program managers achieve desired results through effective stewardship of public resources. Such interrelated controls comprise the plans, methods, and procedures used to meet missions, goals, and objectives and, in doing so, support performance-based management and should provide reasonable assurance that an organization achieves its objectives of (1) effective and efficient operations, (2) reliable reporting, and (3) compliance with applicable laws and regulations.

The five components of internal controls are Control environment: creating a culture of accountability within an entire organization—program offices, financial services, and regional offices—by establishing a positive and supportive attitude toward the achievement of established program outcomes.

Risk assessment: identifying and analyzing relevant risks, both internal and external, that might prevent the program from achieving objectives, and developing processes that can be used to form a basis for the measuring of actual or potential effects of relevant factors and manage their risks. During such a risk assessment process, managers should consider their reliance on other parties to perform critical program operations.

Control activities: establishing and implementing oversight processes to address risk areas and help ensure that management’s directives— especially about how to mitigate and manage risks—are carried out and program objectives are met.

Information and communication: using and sharing relevant, reliable, and timely operational and financial information to determine whether the agency is meeting its performance and accountability goals.

Monitoring: tracking improvement initiatives over time and identifying additional actions needed to further improve program efficiency and effectiveness.

State Role

The CSBG Act requires each state to designate a lead agency to administer CSBG funds and to provide oversight of local agencies that receive funds. States are required to award at least 90 percent of their federal block grant allotments to eligible local agencies, but are allowed to determine how CSBG funds are distributed among local agencies. States may use up to $55,000 or 5 percent of their CSBG allotment, whichever is higher, for administrative costs. States may use remaining funds for the provision of training and technical assistance, coordination and communication activities, payments to ensure they target funds to areas with the greatest need, support for innovative programs and activities conducted by local organizations, or other activities consistent with the purposes of the CSBG Act. In addition, state and local agencies that expend $500,000 or more ($300,000 or more prior to 2004) in total federal awards are required under the Single Audit Act to undergo an audit annually and submit a report to the Federal Audit Clearinghouse. Furthermore, individual federal funding sources may also be reviewed annually under the Single Audit, depending on the size of these expenditures.

The CSBG Act requires states to monitor local agencies to determine whether they meet performance goals, administrative standards and financial management and other state requirements. States are required to perform this monitoring through a full on-site review of each local agency at least once during each 3-year period and to conduct follow-up reviews, including prompt return visits, to local agencies that fail to meet the goals, standards, and requirements established by the state. OMB has issued Single Audit compliance review guidance for CSBG that explicitly mentions that when auditors review state programs, they should determine whether states are visiting each local agency once every 3 years to assess if states comply with the law. States must also offer training and technical assistance to failing local agencies.

Local agencies are required to submit a community action plan to states that contains a community needs assessment, a description of the service delivery system for services provided by or coordinated with CSBG funds, a description of how they will partner with other local agencies to address gaps in services they provide, a description of how funds will be coordinated with other public and private resources, and a description of how funds will be used to support innovative community and neighborhood-based initiatives.

The CSBG Act requires both state and local agencies to participate in a performance measurement system. Results Oriented Management and Accountability (ROMA) is the OCS-sponsored performance management system that states and local agencies use to measure their performance in achieving their CSBG goals. State agencies report annually on ROMA using the CSBG Information System survey, which the National Association for State Community Services Programs (NASCSP) administers.

CSBG Network Resources

In fiscal year 2004, the network of local CSBG agencies received almost $9.7 billion from all sources. About $7 billion of these funds came from federal sources, including about $600 million from CSBG. Other federal programs funding the CSBG network included Head Start, LIHEAP, CDBG, Child Care and Development Fund, Temporary Assistance for Needy Families, and the Social Services Block Grant (see fig. 1). HHS’s Administration for Children and Families contributed 90 percent of the $4.4 billion in funds provided to local agencies through HHS.

HHS received about $637 million in CSBG funding for fiscal year 2005 and about $630 million for fiscal year 2006.

OCS Lacks Internal Controls and a Risk Management Framework Needed to Carry Out Effective Monitoring Efforts

In its efforts to oversee states, OCS did not fully comply with federal laws related to monitoring states and internal control standards and lacked a process to assess state CSBG management risks. OCS visited nine states in fiscal years 2003 through 2005. However, as mentioned in our letter to the Assistant Secretary for Children and Families, OCS lacked the policies, procedures, and other internal controls to ensure effective monitoring efforts. As a result, states and Congress are not receiving required information on monitoring findings, and states may not have made improvements to how they administer CSBG funds. We recommended that the OCS director establish formal written policies and procedures to improve OCS’s monitoring and related reporting, and OCS officials have made plans to address each of the recommendations included in the letter. We also found that OCS did not systematically use or collect available information that would allow it to assess states’ CSBG management risks. Officials told us that they considered a variety of risk-related factors when selecting sites for monitoring visits, including reports from state and local officials about financial management problems and staff turnover, but they did not have a systematic approach to assess risk or target monitoring toward states with the greatest needs.

OCS Lacked Policies and Procedures to Help Ensure Effective Monitoring of States but Plans Improvements

OCS lacked policies, procedures, and internal controls to help ensure effective on-site monitoring of state CSBG programs but has made plans to address these issues. OCS officials told us they visited nine states since 2003: Delaware, Louisiana, Maryland, and North Carolina in 2003; Alabama and Montana in 2004; and Kentucky, New Jersey, and Washington in 2005. During these visits, OCS officials told us they used a monitoring tool to assess the administrative and financial operations of state programs. However, OCS sent monitoring teams that lacked required financial expertise to conduct evaluations of states and did not issue final reports to states as required by law. Consequently, the visited states may have been unaware of potential OCS findings and, therefore, may not have developed corrective action plans if needed. Furthermore, OCS officials also told us that they lost documentation for the state visits conducted in fiscal years 2003 and 2004, leaving them unable to report to states they visited or perform appropriate follow-up procedures. OCS officials did not include information on their monitoring visits in their most recent CSBG report to Congress, released in December 2005, as statutorily required. In addition, OCS has not issued reports to Congress annually, as required by law.

We reported on OCS’s monitoring challenges to the Assistant Secretary for Children and Families on February 7, 2006, and made recommendations for improving these conditions (for a copy of this letter, see app. II). Specifically, we recommended that the OCS director establish formal written policies and procedures to (1) ensure that teams conducting monitoring visits include staff with requisite skills, (2) ensure the timely completion of monitoring reports to states, (3) maintain and retain documentation of monitoring visits, and (4) ensure the timely issuance of annual reports to Congress. In response to this letter, OCS officials said that they plan to address each of our recommendations by hiring additional monitoring staff with expertise in financial oversight, training all staff on requirements that states must meet prior to visits, establishing a triennial monitoring schedule for visiting states, developing new guidelines for reporting to states and maintaining monitoring documents, and issuing timely reports to Congress, among other efforts. See appendix III for more details on HHS’s response to our letter.

OCS Did Not Use or Collect Available Information Needed to Assess States’ Risk of Mismanaging Their CSBG Programs

OCS did not systematically use or collect key information that would allow it to assess states’ CSBG management risks and target its limited monitoring resources toward states with the greatest risks. OCS officials told us that they used a risk-based approach to select states to visit, but we found the selection process to be ad hoc and often unexplained. OCS officials explained that they used information received from state and local officials on state CSBG management concerns to decide in which states to conduct compliance evaluation visits. For example, upon learning that local agencies in Louisiana were concerned that they had not received all the funds allotted to them, OCS decided to conduct an evaluation of that state. OCS officials also mentioned that when selecting states to visit, they considered such risk factors as staff turnover and having limited information about the state in general. However, OCS officials could not provide an explanation for why they visited six of the nine states that had undergone evaluations since 2003 and had no formal, written criteria for determining which states to visit.

Each state provides annual program performance information to OCS, but OCS does not systematically use this information to assess states’ risks of not meeting program objectives. Specifically, states annually provide OCS with information about the number of people receiving services and the types of services local agencies provided and categorize this information according to designated program goals, which can provide OCS with data on whether state and local agencies are performing as expected. OCS also did not systematically use information on the amount of CSBG funds states have expended. OCS officials said they reviewed state Single Audit reports when CSBG was included, but we found state CSBG programs generally fell below thresholds to receive an annual required audit.

OCS does not systematically collect other key information that would allow federal officials to assess risk related to states’ oversight efforts and therefore cannot determine whether states are fulfilling their requirement to visit local agencies. For example, although OCS required states to certify that they will conduct statutorily required on-site visits of local agencies in their CSBG applications, it did not require states to submit documentation, such as reports on their monitoring findings, to verify that they had conducted these visits. OCS officials told us that they relied on state Single Audit reports to learn which states did not comply with monitoring requirements. However, we found these audits rarely, if ever, review state CSBG programs. OCS officials told us that they were not aware of how rarely CSBG is reviewed through the Single Audit.

OCS also does not systematically collect information on the local agencies that experience management problems or on the extent to which identified problems are being resolved. The federal CSBG director told us that as a result, OCS may not be fully aware of the extent to which states had local agencies facing challenges with managing CSBG. OCS is aware of some local agencies with problems but has not established regular methods for collecting this information. OCS officials told us that it is the states’ responsibility to identify and address problems in local agencies. In our review of Single Audit data, we found that financial management problems were common, with about 30 percent of local agencies reporting findings in 2002 and 2003. However, less than 10 percent of all local agencies reported more severe findings that could result in undetected financial reporting error and fraud, that are material weaknesses, in either year (see app. IV for Single Audit data).

Frequency of State On-Site Monitoring Varied, but Selected States Performed Other Oversight Activities

All five states we visited conducted on-site monitoring of local agencies with varying frequency and performed additional oversight efforts, such as reviewing financial and programmatic reports from local agencies. The state programs that we visited had different views on what they must do to meet federal requirements to monitor local agencies at least once during each 3-year period, and OCS had not issued guidance clarifying the time frames states should use when conducting on-site visits. Specifically, officials in two states conducted the on-site visits at least once between 2003 and 2005, but officials in the other three states visited their local agencies less frequently. While states varied in their frequency of monitoring visits, all five states offices visited local agencies with identified problems more often. Capacity to conduct on-site monitoring varied among the five state offices, particularly in the areas of administrative and financial monitoring resources. Officials in all five states that we visited reviewed local agency reports as an additional oversight effort and provided required training and technical assistance to local agencies. In addition, some state offices coordinated with other federal programs that fund local activities to gain further insight into local agencies’ management practices.

Frequency of On-site Visits Varied

The frequency of on-site visits to local agencies varied among the five states we visited, ranging from 1 to 5 years between site visits. State CSBG offices in Illinois and Texas conducted visits to each local agency between 2003 and 2005. Specifically, officials in these two states visited at least half of their agencies each year. In contrast, Pennsylvania, Missouri, and Washington officials monitored their local agencies less frequently, with Missouri allowing up to 5 years to pass between monitoring visits to some local agencies. Washington and Pennsylvania officials had visited nearly all of their local agencies from 2003 through 2005, leaving less than 10 percent unmonitored during this period. Conversely, the Missouri state CSBG office visited 4 of 19 local agencies from 2003 to 2005, leaving nearly 80 percent of agencies unmonitored since 2001 or 2002. While states varied in their frequency of monitoring visits, officials in all five states told us they visited local agencies with identified problems more often. Illinois, Texas, and Washington assessed local agencies’ management risks to prioritize which local agencies they visited more frequently during a monitoring cycle. Table 1 below shows how many local agencies these states monitored with on-site CSBG reviews from 2003 through 2005.

Although the CSBG Act states that local agencies should be visited at least once during each 3-year period, the state officials we visited have different views on what is necessary to meet this requirement, and OCS has not issued guidance to states to clarify how the law should be interpreted. During the fiscal year 2004 Single Audit, Pennsylvania state auditors, using OMB guidance stating that reviews of local agencies must be conducted once every 3 years, found the state CSBG program to be out of compliance with federal requirements. However, the Missouri CSBG program manager stated that even though 15 local agencies have not been visited between 2003 and 2005, according to the state’s interpretation of the CSBG law, the CSBG office will meet monitoring requirements because all local agencies will be visited within the two 3-year periods of 2001 to 2003 and 2004 to 2006. For example, the Missouri officials visited five agencies in 2001, during the first 3-year period, and plan to visit these agencies again in 2006, during the second 3-year period.

States’ Capacity to Conduct On-site Monitoring Varied

Administrative and financial monitoring resources varied in the five states we visited. Specifically, administrative funding ranged from less than 1 percent ($135,380) of CSBG funds in Missouri to 4 percent ($1.2 million) in Texas. The Missouri program manager told us that the state CSBG office used less than 1 percent for administration because state hiring restrictions prevented the CSBG program from hiring full-time CSBG staff. In addition, state officials in Missouri, Pennsylvania, and Washington told us that staff shortages prevented them from visiting local agencies more frequently. The number of staff available, funding for administration, and other related information are shown in table 2.

State programs generally developed and made use of written monitoring guides, but they varied in their ability to assess local agencies’ financial operations. The five state programs we visited all had written guides for monitoring visits that covered such areas as financial controls, governance, personnel, performance outcomes, and previous monitoring findings. However, state auditors in Washington told us that the CSBG office could not provide evidence that the guides were consistently used during monitoring visits because available documentation showed that the guides were often incomplete after a visit. Illinois, Texas, and Washington offices regularly used accountants to support their reviews of local agencies’ financial operations as part of the on-site monitoring visits. Conversely, Missouri and Pennsylvania officials told us they did not regularly involve accountants in their monitoring efforts but had taken steps to improve the guides they used to review local agencies’ finances. Specifically, the Missouri CSBG office, in consultation with MICA, made changes to its monitoring guide and provided financial training to its staff. The state CSBG office in Pennsylvania, with input from state budget staff, revised the financial aspects of its monitoring guide.

States Made Efforts to Provide Additional Oversight of Local Agencies

The states that we visited provided oversight in addition to on-site monitoring through such activities as reviewing reports, coordinating with other federal and state programs, and providing formal training and technical assistance. All five state programs collected regular financial and performance reports and reviewed local expenditure reports. In addition, officials in the five states told us that they reviewed reports of the annual Single Audits for local agencies when they included findings related to the CSBG program. For example, a state audit manager in Washington reviewed the audits and regularly notified the CSBG program office when local agency findings were identified, and state CSBG program staff followed up with local agency officials and worked to ensure that the findings were addressed. States also required all local agencies to submit performance data. State officials told us that local agencies established their own performance goals, and the state offices reviewed these goals and sometimes modified them in consultation with local agencies. Additionally, all state CSBG offices reviewed local community action plans.

Illinois, Texas, and Washington officials used information from these additional oversight activities to conduct risk assessments and select local agencies for more frequent on-site monitoring visits. In conducting these risk assessments, the state programs considered such factors as the amount of funds received from the state, the time since the last monitoring visit, and any identified concerns about an agency’s competency, integrity, or proficiency. State officials told us that they directed local agencies to use preventive training and technical assistance to address any issues raised by risk assessments.

Three of the five state CSBG offices that we visited also coordinated oversight activities with other federal and state programs that fund local agencies. For example, the Missouri, Texas, and Washington offices performed joint monitoring visits with state LIHEAP officials, and Missouri exchanged the results of local agency monitoring visits with the regional Head Start office. Coordination with other federal and state programs that provide funds to local agencies, such as housing-related programs and Head Start, generally consisted of occasional meetings and the sharing of some information. Also, OCS and the Head Start Bureau entered into a memorandum of understanding to foster collaboration and improve oversight of local agencies. While most regional and state officials told us they were aware of the memorandum of understanding, some told us that its intent was unclear and that they needed additional guidance to implement it more usefully.

State associations of community action agencies played an important role in providing formal training and technical assistance to local agencies. CSBG officials in Illinois, Missouri, Pennsylvania, and Texas relied on state community action associations to provide technical assistance. For example, the Illinois Community Action Association received state training and technical assistance funds to provide on-line resources, peer coaching, and routine conferences on a regular basis. Missouri’s state association for community action agencies, the Missouri Association for Community Action, also received CSBG training and technical assistance funds, which it used to help local agencies improve communications and management information systems and provide additional technical assistance as needed. In addition the Missouri association provides networking opportunities for local agencies and has a full-time training expert on staff, supported by the state CSBG contract, to provide one-on-one support to local agencies. In addition to training provided by the association, the Texas CSBG staff sponsored conferences and workshops that allowed the staff members to provide training directly to local agencies. In Washington, the association and state staff sponsored discussion groups for the local agencies. Additionally, during on-site monitoring visits, state CSBG officials provided immediate informal technical assistance and follow-up with local agencies on monitoring findings when necessary.

OCS Targeted Some Training and Technical Assistance Funds to Grantees with Problems, but Information on Results Is Limited

While OCS targeted some training and technical assistance funds to local grantees with financial and programmatic management problems, the information on results of this assistance is limited. In fiscal years 2002 through 2005, OCS designated between $666,000 and $1 million of its annual $10 million training and technical assistance funds to local agencies with problems, but OCS did not have information to determine whether its training and technical assistance programs and their funding amounts were appropriate for addressing the areas of greatest needs. Specifically, the federal CSBG director explained that OCS currently allocates training and technical assistance funds based on input from some state and local agencies, but this process was not guided by a systematic assessment of state and local needs. Information on the results of OCS’s current grant programs that target local agencies with problems was limited. However, information provided by progress reports for these grants showed that some of the agencies assisted had improved.

OCS Designated $1 Million or Less of Its Annual Training and Technical Assistance Funding to Assist Local Agencies with Problems but Does Not Know if These Funds Addressed the Greatest Needs

In fiscal years 2002 through 2005, OCS designated $1 million or less of its annual $10 million training and technical assistance funds to assist local agencies with problems, but it had no way to determine whether this money was allocated in a way that addressed the greatest needs of state and local agencies. OCS divided its annual $10 million training and technical assistance funds among program support, contracts, and grants. The Deputy Director of OCS told us that program support funds paid salaries and expenses for OCS officials that manage CSBG grants, and contract funds paid for costs associated with logistics such as outreach and meeting with grantees, costs related to a management information system, and costs related to grant competitions. Training and technical assistance grants may be used for a variety of purposes, and OCS allocated these funds to support different types of activities each year. For example, OCS frequently funded activities such as supporting the implementation of ROMA, encouraging agencies to share innovative ideas, and providing program and management training opportunities for community action professionals. OCS designated between $666,000 and $1 million of annual training and technical assistance grants to assist local agencies with problems through two grant programs: Special State Technical Assistance Grants and the Peer-to-Peer Technical Assistance and Crisis Aversion Intervention Grants. These grants were commonly used to address to management, financial, and board governance problems at local agencies. Table 3 shows the allocation of CSBG funding for grants, contracts, and program support.

Despite a congressional recommendation, OCS officials told us there is no process in place to strategically allocate its approximately $10 million in training and technical assistance funds among program areas. OCS drafted a strategic plan for allocating its training and technical assistance funds— an action directed by congressional conferees in the fiscal year 2005 Consolidated Appropriations Act conference report—but did not implement the plan. The federal CSBG director told us that OCS did not implement the strategic plan because the President’s recent budget proposals did not include funding for CSBG, although Congress has continued to provide funding for the program. The federal CSBG director also told us that the draft plan focused resources on such areas as financial integrity and management, leadership enhancement, and data collection.

The federal CSBG director also told us that OCS currently allocates training and technical assistance funds based on input from some state and local agencies, but this process was not guided by a systematic assessment of state and local needs and did not involve guidance or specifications on the actual amounts that should be awarded for activities. Specifically, OCS sought input each year from the Monitoring and Assessment Taskforce—a group made up of some state and local CSBG officials and national CSBG associations such as the National Association of State Community Service Programs (NASCSP)—to generate a list of priority activities. OCS then presented this list at national community action conferences, such as those sponsored by NASCSP or the Community Action Partnership, for additional comments. However, OCS does not track which local agencies experienced problems and what those problems were. As a result, OCS could not provide us with information on the extent to which these current efforts are addressing those needs.

Limited Data on the Results of the Assistance Showed That Some Local Agencies Had Improved

Information on the results of OCS grant programs that targeted local agencies with problems was limited. However, the available information showed that some local agencies have improved financial and programmatic management as a result of the assistance they received. Our review of all available grant applications and subsequent progress reports for SSTA and Peer-to-Peer grants identified 68 local agencies that these grants targeted for assistance between 2002 and 2005. Of these 68 agencies, 22 had no results available because the assistance was ongoing and therefore final progress reports were not yet due. We identified outcomes for 25 of the remaining 46 agencies, as shown in figure 2. Of these 25 agencies, 18 reported improvement, and the remaining 7 agencies had unresolved issues, had closed, or had undeterminable results. Results were unknown for the other 21 agencies because their grant progress reports did not include information on outcomes.

OCS officials told us that they hold grantees accountable for conducting activities under the proposed scope of training and technical assistance grants, not whether these activities result in successful outcomes for the local agencies they assist. OCS’s guidance to training and technical assistance grantees recommends that the grantees report whether activities are completed but does not include a requirement to report on outcomes. Further, HHS’s guidance on discretionary grant reporting, which covers CSBG training and technical assistance grants, does not specify what information program offices should collect on performance and outcomes. We also spoke with officials in HHS’s Office of Inspector General who mentioned that on the basis of prior reviews the office had some concerns about the administration of CSBG discretionary grants. Specifically, these officials had concerns about the completeness and accuracy of progress reports and whether grantees were meeting their goals.

Officials involved in efforts to use grants to assist agencies gave mixed reviews on the effectiveness of activities funded by these grants. State and local officials in Texas and Missouri spoke highly of their interaction with MICA to assist agencies with problems. State officials in Texas said they had used an SSTA grant to assist two local agencies and had hired MICA as the contractor to provide the assistance. Texas officials were pleased with the assistance that MICA provided and said that the state did not have the resources to provide the kind of long-term, on-site assistance that MICA offered. Missouri officials told us that all five local agencies that the state had contracted with MICA to work with had benefited from MICA’s expertise, particularly with regard to financial matters. Like Texas, the Missouri office also used SSTA grants to provide assistance to four of these agencies. In contrast, we also spoke to national, regional, and state community action association officials who said they had worked with local agencies that received assistance from MICA and had concerns about MICA’s work. Specifically, they told us that MICA was not always effective in resolving local agencies’ problems, did not use money efficiently, and had an apparent conflict of interest stemming from its practice of conducting agency assessments and offering services to correct problems those assessments identify. For example, an Ohio official who managed a local agency’s contract told us that even with 6 months of paid assistance from MICA, the local agency had closed. In response to these criticisms, a MICA official said that some problems at local agencies were too severe for them to address and that MICA tries to be transparent about its costs by issuing a detailed proposal before starting work with an agency. Additionally, the MICA official said that MICA and OCS officials had discussed the conflict of interest issue, and OCS had encouraged MICA to continue efforts to assess agencies and address their problems.

Conclusions

Under the CSBG program, federal, state, and local agencies work together to help low-income people achieve self-sufficiency. The federal government’s role is to oversee states’ efforts to ensure that local agencies properly and effectively use CSBG funds. OCS currently lacks the procedures, information, and guidance to grantees that it needs to effectively carry out its role. Specifically, OCS does not fully use the data it collects and does not collect other key information on state oversight efforts and the outcomes of training and technical assistance grants that could enhance its oversight capabilities. Additionally, OCS has not issued guidance for how often states should visit local agencies. Thus, OCS cannot determine where program risks exist or effectively target its limited resources to where they would be most useful. Consequently, OCS may have missed opportunities to monitor states facing the greatest oversight challenges and to identify common problem areas where it could target training and technical assistance.

Recommendations for Executive Action

In order to provide better oversight of state agencies, we recommend that the Assistant Secretary for Children and Families direct OCS to take the following actions: Conduct a risk-based assessment of state CSBG programs by systematically collecting and using information. This information may include programmatic and performance data, state and local Single Audit findings, information on state monitoring efforts and local agencies with problems, and monitoring results from other related federal programs that may be obtained by effectively using the memorandum of understanding with the Head Start program and other collaborative efforts.

Establish policies and procedures to help ensure that its on-site monitoring is focused on states with highest risk. Issue guidance on state responsibilities with regard to complying with the requirement to monitor local agencies at least once during each 3- year time period.

Establish reporting guidance for training and technical grants that would allow OCS to obtain information on the outcomes of grant- funded activities for local agencies. Implement a strategic plan that will focus its training and technical assistance efforts on the areas in which states face the greatest needs.

OCS should make use of risk assessments and its reviews of past training and technical assistance efforts to inform the strategic plan.

Comments from the Department of Health and Human Services on Our Evaluation

We provided a draft of this report to the Department of Health and Human Services and received written comments from the agency. In its comments, HHS officials agreed with our recommendations and, in response, have planned several changes to improve CSBG oversight. Specifically, HHS officials stated that OCS is finalizing a risk-based strategy to identify state and local agencies most in need of oversight and technical assistance based on characteristics identified in state plans, audit reports, previous monitoring and performance reports, and reports from other programs administered by local agencies that receive CSBG funds. HHS officials said that this strategy will result in OCS implementing a triennial monitoring schedule they plan to have fully operational by fiscal year 2008. HHS officials also said that by October 1, 2006, OCS will issue guidance to state CSBG lead agencies to clarify the states’ statutory obligation to monitor all local entities receiving CSBG funding within a 3- year period, as well as requirements for states to execute their monitoring programs. Additionally, HHS officials said that OCS has worked with a group of local and state CSBG officials and national CSBG associations to develop a comprehensive training and technical assistance strategic plan focused on issues such as leadership, administration, fiscal controls, and data collection and reporting. See appendix V for HHS’s comments.

As agreed with your offices, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after its issue date. At that time, we will send copies of this report to the Assistant Secretary for Children and Families, relevant congressional committees, and other interested parties. We will also make copies available to others upon request. In addition, the report will be available at no charge on GAO’s Web site at http://www.gao.gov.

Please contact me at (202) 512-7215 if you or your staff have any questions about this report. Other major contributors to this report are listed in appendix VI.

Appendix I: Objectives, Scope, and Methodology

To gain a better understanding of oversight efforts undertaken by state and federal program offices to monitor the Community Services Block Grant (CSBG) program and ensure the accountability of funds, we examined (1) the extent to which the Department of Health and Human (HHS) oversight of states efforts to monitor local agencies complied with federal laws and standards, (2) the efforts selected states have made to monitor local agencies’ compliance with fiscal requirements and performance standards, and (3) the extent to which HHS targeted federal CSBG training and technical assistance funds to efforts to assist local agencies with financial or management problems and what is known about the results of the assistance.

To address the first objective, we reviewed federal laws and standards to obtain information on the Office of Community Services’s (OCS) requirements and responsibilities for the oversight of states and interviewed federal officials about their oversight efforts. In addition, we obtained and reviewed available information on OCS monitoring policies and procedures; documentation of federal monitoring visits of states conducted during fiscal years 2003 through 2005; other information OCS collects from states, including state applications and performance data; and guidance issued by OCS to communicate program-related information, concerns, and priorities to grantees to assess OCS’s compliance with laws and standards. We also reviewed available Single Audit data for local agencies and grouped them by state to assess the percentage of local agencies with Single Audit findings at both the national and state levels reported in fiscal years 2002 and 2003, the most recent years for which information was available. The scope of this review included the District of Columbia and Puerto Rico as well as the 50 states. We assessed the reliability of Single Audit data by performing electronic and manual data testing to assess whether the data were complete and accurate. We also assessed the reliability of CSBG statistical data by interviewing officials knowledgeable about data collection and maintenance. We determined that the data were sufficiently reliable for the purposes of this report. In addition, we interviewed federal officials with Head Start, the Low-Income Home Energy Assistance Program, and the Community Development Block Grant program, which also distribute funds to local agencies, to learn whether officials from these programs shared information with CSBG officials to support oversight efforts.

To address the second objective, we reviewed federal laws and standards to obtain information on states’ CSBG oversight responsibilities and conducted site visits.

We visited five states, Illinois, Missouri, Pennsylvania, Texas, and Washington, that were selected using several criteria including grant amounts, number of local agencies, state administrative structure, and analysis of Single Audit results among local agencies. CSBG association officials recommended some of these states based on promising efforts to monitor local agencies. Table 4 provides characteristics we considered for each state.

During our state site visits, we interviewed and collected information from state and local officials in Illinois, Missouri, Pennsylvania, Texas, and Washington about state oversight efforts from fiscal year 2003 through fiscal year 2005. Specifically, we interviewed state program officials and reviewed related documentation including state guidance and directives to local agencies, application instructions, state on-site monitoring schedules, on-site monitoring guides, sample contracts, and reporting forms for local agencies. We also visited three local agencies in each state and interviewed staff to learn more about state oversight and monitoring efforts, including application processes, fiscal and performance reporting, on-site monitoring, and training and technical assistance. In each state we visited, we reviewed program files for six local agencies, including files for the three we visited and three others, that included community action plans and applications, financial and performance reports, and state monitoring reports and follow-up correspondence. In addition, we obtained information on state audit findings related to CSBG and met with state auditors during site visits to learn more about additional state oversight of CSBG and related programs and local agencies. We also interviewed state officials in the Low-Income Home Energy Assistance Program and the Community Development Block Grant programs, as well as regional HHS officials, to learn whether any coordination occurred between the programs to support state oversight efforts. Our results on the five states that we visited are not generalizable to all state CSBG programs.

To address the third objective, we interviewed federal officials and contractors that provide training and technical assistance to obtain information on the extent to which OCS grants were targeted to assist agencies with problems and how they determined whether these efforts were effective. We obtained and reviewed training and technical assistance grant applications and progress reports for Special State Technical Assistance (SSTA) Grants and Peer-to-Peer Technical Assistance and Crisis Intervention (Peer-to-Peer) Grants for fiscal year 2002 through fiscal year 2005 to assess efforts to assist local agencies with problems and the results of these efforts. This review included applications for all 39 SSTA Grants awarded during this period, progress reports issued in 6-month intervals for the Peer-to-Peer Grant, and available final progress reports for the SSTA Grants. We were not able to obtain some SSTA Grant progress reports because the assistance was still ongoing, particularly for grants issued recently. We also interviewed a national association representative and state and local officials to learn about the results of training and technical assistance efforts.

We conducted our work from July 2005 through May 2006 in accordance with generally accepted government auditing standards.

Appendix II: Community Services Block Grant Program: HHS Needs to Improve Monitoring of State Grantees, GAO-06-373R

Appendix III: The Department of Health and Human Services’s Response to GAO-06-373R

Appendix IV: Ranking of States Based on Percentage of Local CSBG Subgrantees with Single Audit Findings

Tables 5 and 6 present Single Audit data by state for local CSBG agencies (i.e., community action agencies) for 2002 and 2003, respectively. For each state, we report (1) the number of local agencies for which Single Audit data were available, (2) the percentage of local agencies in the state that had any type of Single Audit finding, (3) the percentage of local agencies that had material weakness findings, and (4) the percentage of local agencies that had material noncompliance findings. States are ranked in decreasing order by the percentage of local agencies in the state that had any type of Single Audit finding.

Appendix V: Comments from the Department of Health & Human Services

Appendix VI: GAO Contact and Staff Acknowledgments

Staff Acknowledgments

In addition to the contact named above, Bryon Gordon (Assistant Director), Danielle Giese (Analyst-in-Charge), Janice Ceperich, Tim Hall, and Andrew Huddleston made significant contributions to this report. Curtis Groves, Matt Michaels, and Luann Moy provided assistance with research methodology and data analysis. Jim Rebbe provided legal counsel, and Jonathan McMurray and Lise Levie assisted with report development.

Related GAO Products

Community Services Block Grant Program: HHS Needs to Improve Monitoring of State Grantees. GAO-06-373R. Washington, D.C.: February 7, 2006.

Head Start: Comprehensive Approach to Identifying and Addressing Risks Could Help Prevent Grantee Financial Management Weaknesses. GAO-05-465T. Washington, D.C.: April 5, 2005.

Head Start: Comprehensive Approach to Identifying and Addressing Risks Could Help Prevent Grantee Financial Management Weaknesses. GAO-05-176. Washington, D.C: February 28, 2005.

Internal Control Management and Evaluation Tool. GAO-01-1008G. Washington, D.C.: August 2001.

Standards for Internal Control in the Federal Government. GAO/AIMD-00-21.3.1. Washington: D.C.: November 1999.

Grant Programs: Design Features Shape Flexibility, Accountability, and Performance Information. GAO/GGD-98-137. Washington, D.C.: June 22, 1998.