GAO and IGs find agency grant tracking is unreliable

By Mary Mosquera

| November 1, 2007

Agencies using a one-size-fits-all audit approach have been unable to accurately track how grantees spend federal funds.That is the conclusion of the Government Accountability Office and the Presidents Council on Integrity and Efficiency after they reviewed samples of agency audits.The PCIE is comprised of the inspectors general of several major federal agencies.The PCIE report presents compelling evidence that a serious problem with single audit quality continues to exist, said Jeanette Franzel, GAOs director of financial

Agencies using a one-size-fits-all audit approach have been unable to accurately track how grantees spend federal funds.That is the conclusion of the Government Accountability Office and the President’s Council on Integrity and Efficiency after they reviewed samples of agency audits.The PCIE is comprised of the inspectors general of several major federal agencies.“The PCIE report presents compelling evidence that a serious problem with single audit quality continues to exist,” said Jeanette Franzel, GAO’s director of financial management and assurance.GAO is concerned that the grantees do not perform audits according to professional standards, and the resulting audits could mislead those who rely on those audit reports, Franzel said during an Oct. 25 hearing of the Senate Homeland Security and Governmental Affairs Committee’s Federal Financial Management, Government Information, Federal Services and International Security Subcommittee.Audits play a critical role in how agencies account for taxpayers’ money used for federal financial assistance. A single audit is the primary method that federal agencies use for overseeing $450 billion in grant awards to nonfederal entities each year, said Daniel Werfel, the Office of Management and Budget’s acting controller.OMB and PCIE have taken steps to make the federal grant awards more accountable, including developing a statistically based study of audit quality, known as the National Single Audit Sampling Project, to determine where to target their efforts.In the audit study, which it conducted in June, the PCIE found that 49 percent of the agency audits it reviewed were acceptable. The other 51 percent were of limited reliability or unacceptable. Size was one factor in audit quality, GAO reported. Of the large audits, which represented $50 million or more in federal award expenditures, 63.5 percent were acceptable compared with 48.2 percent of smaller audit award expenditures of $500,000 to $50 million, which fell short.The PCIE found that many of the grantees’ audits had major reporting errors, said Hugh Monaghan, director of the National Single Audit Sampling Project in the Education Department’s Office of Inspector General.The PCIE recommended updating single audit standards and guidance, establishing minimum requirements for training and enhancing disciplinary processes for unacceptable audits to improve audit quality, he said.GAO said it supported PCIE’s recommendations to improve agencies’ single audits, but it added that more must be done. Size could be considered in future actions, Franzel said. OMB should also evaluate the framework for the single audit, determine if simplified alternatives could be more effective for smaller audits and decide whether existing federal oversight processes for single audits are adequate, she said.

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