FMCSA’s primary mission is to reduce crashes, injuries, and fatalities involving large trucks and buses. In order to meet this mission FMCSA, among other things, establishes commercial motor carrier regulations, educates motor carriers, drivers, and the public, and partners with stakeholders such as state governments on efforts to reduce motor carrier crashes. FMCSA uses 52 division offices—one in each state as well as Washington, D.C. and Puerto Rico—and four regional service centers to help carry out its efforts. In order to undertake these activities, FMCSA received appropriations of approximately $550 million for fiscal year 2011 and obligated about $300 million of that for grant awards. FMCSA manages 10 grant programs that span a range of areas and provides funding to states, localities, and others to improve commercial motor vehicle safety (see table 1). Nine of the 10 grant programs are discretionary—that is, FMCSA decides, through a competitive process based on a review of the merits of applications, which applicants to award funds. FMCSA considers its MCSAP Basic and Incentive program, which accounts for over one-half of FMCSA’s grant funding, to be a formula grant program as FMCSA awards funds through a predetermined formula set by FMCSA based on, among other factors, a state’s population and highway miles. FMCSA currently manages its grants using the Office of Management and Budget’s (OMB) five phases of grants management (see fig. 1). The first three phases are most relevant to awarding grant funds, the focus of this report. These five phases broadly outline all steps that an agency needs to undertake in awarding and managing grants, including planning the grant program, soliciting and reviewing applications, awarding funds, overseeing grant recipients, and closing out grants. For example, management of grant application reviews and the award process includes creating a grant announcement, accepting and reviewing applications, making funding decisions, and obligating those funds to selected grant recipients. Generally speaking, grants management staff in FMCSA headquarters are responsible for managing the first three phases of grants. Once FMCSA awards grants to states, staff in FMCSA’s 52 division offices, headed by Division Administrators, generally assume responsibility of managing the grants, including oversight of the grantee and grant closeout. The four regional service centers also provide grants management support and oversight to each of the division offices. FMCSA has a small number of grant awards that are provided to national organizations, and these grants are managed entirely by FMCSA staff in headquarters. Internal controls are mechanisms that help an organization, such as a federal agency, provide reasonable assurance that it is meeting its objectives, that operations are effective and efficient, and that the agency is in compliance with all applicable laws and regulations. We have issued standards for internal control in the federal government, and these standards provide an overall framework for establishing and maintaining internal controls and identifying and addressing major performance and management challenges, as well as areas at greatest risk of fraud, waste, abuse, and mismanagement. Effective internal controls, which include the plans, methods and procedures to meet agency goals and objectives, can assist in managing change to cope with shifting environments and evolving demands and priorities. As a result, internal controls play a significant role in helping managers achieve agency goals. We have previously reported that there are five standards for internal control (see table 2) that define the minimum level of quality acceptable for internal control in government and can be applied to all aspects of an agency’s operations. The standards are: (1) establishing a control environment, in which an agency creates an environment that sets a positive and supportive attitude toward internal controls such as management’s commitment to competence and setting an ethical tone within the agency; (2) conducting risk assessment, in which an agency assesses both internal and external risks associated with achievement of agency objectives; (3) engaging in control activities, which helps management ensure that its directives, such as policies and procedures, are carried out; (4) disseminating information and communications to management and others; and (5) monitoring performance over time and ensuring that audit findings are addressed and promptly resolved. In the context of grants management, internal controls are the mechanisms that help an agency ensure that its grant programs are effectively and efficiently managed and that its grant awards comply with laws and regulations. FMCSA’s Internal Control Senior Assessment Team oversees FMCSA’s internal controls program, which includes, among other actions, annual internal control evaluations conducted by an external auditor to test the effectiveness of internal controls. The evaluations test a number of internal control areas at FMCSA, including grants management. In conducting the internal control evaluations, the external auditor uses an Internal Control Evaluation Tool to assess the effectiveness of internal control activities—which it does by interviewing key staff and testing controls to determine their effectiveness—and assigns an effectiveness rating to each control activity reviewed, and determines the relative significance of internal control deficiencies identified during the evaluations. Although past reviews found internal control deficiencies related to grants management—including inadequate grants management oversight—the external auditor did not make an overall determination of FMCSA’s internal controls over grants management. In response to findings made in each review, the Internal Control Senior Assessment Team, in conjunction with subject matter staff at FMCSA, develops corrective action plans that include information on planned actions and time frames for addressing the finding. Once all actions have been implemented by FMCSA and then tested by the auditor, the auditor can close the corrective action plans. SAFETEA-LU authorized funding for all of FMCSA’s grant programs and established funding restrictions for the CVISN program. In May 2010, DOT and FMCSA determined that FMCSA might have violated statutory requirements in obligating CVISN awards. After FMCSA’s Chief Financial Officer and Office of the Chief Counsel staff noticed irregularities with CVISN awards, including potential statutory violations, in spring 2010, DOT established an analysis team supported by Deloitte Consulting LLP (Deloitte), to review the CVISN program and determine the extent of the problem. Using the results of Deloitte’s review and its own follow-up assessment, FMCSA found widespread problems with CVISN grant awards, and DOT concluded that it violated the Antideficiency Act—which prohibits federal agencies from incurring an obligation that exceeds their available appropriation or contract authority amounts—and SAFETEA- LU. FMCSA found that many awards exceeded statutory caps and that, in some cases, FMCSA awarded total CVISN funds in excess of the annual contract authority available. Specifically, FMCSA found that it committed 47 statutory violations between fiscal years 2006 and 2010 totaling about $23 million. In response, FMCSA temporarily shut down the CVISN program in May 2010 to determine the problems and to prevent exacerbating any problems. According to FMCSA officials, the agency reopened the CVISN program in June 2011 and plans to award fiscal year 2012 CVISN grants. FMCSA awarded $17 million in grants in fiscal year 2011 to states that the agency determined had not previously received an improper CVISN grant award. In May 2011, we reported on a number of internal control weaknesses that contributed to CVISN award violations including: problems with grants management policies and procedures, such as an erroneous internal policy FMCSA issued that provided incorrect guidance regarding the extent to which states were available to receive certain CVISN funds, as well as a lack of written policies and procedures; a failure to track CVISN grants awarded by the Federal Highway Administration, which managed CVISN before FMCSA, statutory cap violations for CVISN awards; insufficient FMCSA oversight over the CVISN program, including the lack of legal review by FMCSA’s Office of the Chief Counsel to ensure that all awards complied with relevant laws; and a lack of training provided to FMCSA staff on how to manage the CVISN program. We did not make any recommendations at that time, pending completion of this broader review of FMCSA’s grant awards. The Federal Highway Administration also administered the MCSAP Basic and Incentive and High Priority, PRISM, and the Commercial Drivers License Program Improvement grant programs prior to FMCSA. Grants management is a key function at NHTSA and EPA—two agencies that, similarly to FMCSA, devote approximately one-half of their budgets to grants. EPA manages its grants through a single centralized office, while NHTSA manages its grants through two different offices—one for formula grants and one for discretionary grants. EPA’s mission is to protect human health and the environment, and it devotes about half of its budget to provide formula and discretionary grants to support this mission. These grant programs support a variety of efforts, including those that further the health of people and the environment. EPA’s Office of Grants and Debarment (OGD) provides centralized grants management support, which includes general oversight of award competitions for discretionary grants and the development of uniform grants management policies and procedures for all of EPA’s grant programs. Each of EPA’s 10 regional offices also has a grants management office that provides its region with grants management support. NHTSA’s primary mission, similar to FMCSA’s, is to save lives, prevent injuries, and reduce the costs of motor vehicle traffic and crashes. NHTSA uses its grant programs, totaling about $744 million in fiscal year 2010, to help support that mission. NHTSA manages its formula grants through the Regional Operations and Program Delivery Office and discretionary grants through its Procurement Office, and has distinct grant award processes for each. In both cases, however, centralized staff provide administrative support and direction to programmatic grants management staff working on individual NHTSA grant programs.