The Single Audit Act is intended to, among other things, promote sound financial management, including effective internal controls, with respect to federal awards administered by nonfederal entities; promote the efficient and effective use of audit resources; and ensure that federal departments and agencies, to the maximum extent practicable, rely upon and use single audit work. The Single Audit Act requires state and local governments and nonprofit organizations that expend $300,000 or more in federal awards in a fiscal year to have either a single audit or program-specific audit conducted. Federal awards include grants, loans, loan guarantees, property, cooperative agreements, interest subsidies, insurance, food commodities, and direct appropriations and federal cost reimbursement contracts. The Single Audit Act also requires recipients to forward an audit reporting package to the FAC for archival purposes and for distribution to each federal agency responsible for programs for which the audit report identifies a finding. The reporting package includes (1) the recipient’s financial statements and schedule of expenditures of federal awards, (2) a summary schedule of prior audit findings, including the status of all audit findings included in the prior audit’s schedule of findings and questioned costs for federal awards, (3) the auditor’s opinion on the recipient’s financial statements and schedule of expenditures of federal awards, reports on internal control and compliance with laws, regulations, and provisions of contracts or grant agreements, and (4) a schedule of findings and questioned costs. Single audits are a key control for the oversight and monitoring of recipient use of federal awards. Federal agency actions to ensure that award recipients address audit findings contained in single audit reports are a critical element in the federal government’s ability to efficiently and effectively administer federal awards. These findings can include internal control weaknesses; material noncompliance with the provisions of laws, regulations, or grant agreements; and fraud affecting a federal award. The President’s Management Agenda, Fiscal Year 2002, identifies the need to reduce improper payments as a significant element of the Administration’s initiative to improve financial performance throughout the government. Single audits can have an impact on the government’s efforts to address improper payments since many of the programs experiencing improper payments are audited as part of the over 30,000 single audits conducted annually. For example, recent estimates by the departments of Agriculture and HUD identified about $976 million and $2 billion in improper payments in food stamps and housing subsidy programs, respectively. These programs are often audited as part of a single audit. Our objectives were to determine what program managers for six large programs, two each at Education, HUD, and Transportation, do to (1) ensure that federal award recipients correct the current year and recurring findings identified in single audit reports and (2) summarize and communicate single audit results and actions taken to correct audit findings to agency management for its use in evaluating agency oversight and monitoring of recipient performance and in identifying programwide and recipient-specific problem areas needing management attention. We selected these agencies because they are three of the four federal agencies that provide the largest amount of federal awards to state and local governments and nonprofit organizations. OMB documents show that, in fiscal year 2001, these agencies made grants totaling $84 billion to state and local governments. We did not include the Department of Health and Human Services, the agency with the largest amount of federal awards, in this review because of our current work to evaluate the Centers for Medicare and Medicaid Services’ (CMS) efforts to monitor its financial oversight to help ensure the propriety of Medicaid expenditures. That work included the review of single audit reports for fiscal year 1999 and found that the correction of audit findings and monitoring of CMS and its regional offices were limited and audit resolution activities were inconsistently performed across regions. To assess how program managers ensure that federal award recipients corrected problems discussed in single audit reports, we reviewed the Single Audit Act, OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the Comptroller General’s Standards for Internal Control in the Federal Government to identify agency responsibilities for correcting single audit findings. This review identified the following three areas of responsibility, which represent the criteria we used in making our assessment. Obtain single audit reports and distribute them to agency officials responsible for reviewing the report findings and taking actions on those findings. Issue written management decisions on audit findings within 6 months of the receipt of the audit report to notify recipients of actions the federal agency considers necessary to correct the audit findings. Follow up with award recipients to ensure that corrective actions occurred. The FAC single audit database was established as a result of the Single Audit Act Amendments of 1996 and contains summary information on the auditor, the recipient and its federal programs, and the audit results. We did not independently test the reliability of the database. However, at OMB’s request, the Office of the Inspector General (OIG) at the Department of Commerce reviewed the database to assist OMB, the Census Bureau, and other users in assessing the accuracy of the fiscal year 1998 audit report information in the database. We reviewed the OIG’s sampling methodology, monitored the audit scope and the progress of the review, and discussed the results with OMB and OIG officials. We concluded that the database for calendar year 1999 was reliable and adequate for our sampling purposes. At each agency, we identified two large award programs and queried the FAC single audit database for calendar year 1999 single audit reports to determine the 10 grantees receiving the largest amount of funding for each program. The programs identified for review were Title I and Pell Grants at Education, the Community Development Block Grant (CDBG) entitlement and Section 8 Tenant-Based (Section 8) programs at HUD, and Capital Investment and Formula Grants (CIFG) and Highway Planning and Construction Grants (HPCG) at Transportation. For each grantee identified above, we queried the FAC single audit database to identify audit findings in the programs selected. The query identified 246 audit findings. We interviewed agency officials and reviewed agency guidance to determine their procedures for ensuring that audit findings are communicated to appropriate officials and/or offices for action and assessment of recipients’ corrective actions. We also provided each agency with a list of the audit reports and findings selected for review. For each finding, we requested documentation including written management decisions and evidence of agency follow up with recipients on the corrective actions taken and the appropriateness of those actions. We interviewed agency officials and reviewed the management decisions and documentation provided on agency follow up on recipient corrective actions. Reporting single audit results and recipient actions to correct audit findings to agency management provides management with valuable information for use in assessing program risks and identifying areas needing action. To determine whether and how the three selected agencies summarized and communicated the single audit results and actions to correct audit findings to agency management, we interviewed officials at the three agencies to determine the reports generated to inform agency officials of the single audit results. We conducted our review from October 2001 through March 2002 in accordance with generally accepted government auditing standards. Education, HUD, and Transportation had procedures in place that established responsibility for obtaining, distributing, and reviewing single audit findings and for communicating that information to appropriate officials for action. However, although required by OMB Circular A-133, agencies often did not issue written management decisions or have documentary evidence of their evaluations of and conclusions on recipient actions to correct the audit findings. If federal agencies are going to take action on single audit findings, they must first obtain the single audit reports or other documentation containing single audit findings relating to their programs and distribute this information to appropriate offices for action. The three agencies in our review had procedures for obtaining single audit reports and for distributing audit finding information to appropriate agency offices. At Education, different offices receive and distribute single audit reports or audit findings. For example, the Office of the Chief Financial Officer’s (OCFO) audit resolution coordinator receives copies of single audit reports with Title I program findings from the FAC and distributes audit finding information to the Office of Elementary and Secondary Education (OESE). OESE is responsible for the overall administration of the Title I program and resolving the audit findings and following up on corrective actions. The Office of Student Financial Assistance (OSFA) administers the Pell Grant program. OSFA receives copies of the single audit reports with Pell Grant findings directly from the FAC and distributes copies of the reports to the appropriate Pell Grant program offices for action. Although the FAC provides copies of single audit reports containing HUD program audit findings to the OCFO, officials responsible for the CDBG and Section 8 programs stated that their offices did not use those reports to identify single audit reports with findings. Rather, they obtained copies of single audit reports and/or audit finding information relating to their programs from other sources, including the award recipients and a HUD database developed by its Real Estate Assessment Center (REAC). OCFO officials noted that the office considers these procedures more efficient than having OCFO personnel review each single audit report, identify audit findings, and distribute those findings to the appropriate HUD offices. To identify CDBG findings, the Office of Community Planning and Development (CPD) tasks its 42 field offices with identifying award recipients whose single audit reports contained CDBG-related audit findings. An August 2000 CPD memorandum instructed field offices to query the FAC single audit database to identify single audit reports containing audit findings related to the CDBG program and to obtain copies of these single audit reports directly from the federal award recipients. To perform this task, the field offices use award documents and other agency reports to identify award recipients for which they have oversight responsibility. They then query the FAC single audit database to identify those recipients whose single audit reports contain findings and obtain copies of those reports directly from the recipients. For the Office of Public and Indian Housing (PIH), program managers located in 43 PIH field offices generally obtain audit finding information for the Section 8 program from HUD’s REAC database.