Reasons for the Disparity Between Costs Questioned by Auditors and Amounts Agencies Disallow

GAO testified on certain aspects of the audit resolution process. Congress is being told that auditors have questioned billions of dollars in costs incurred by grantees and contractors; however, by the time the audit resolution process is completed, only a small fraction of those questioned costs are disallowed by agencies and returned to the government. Reasons for this disparity include the audit resolution process, the reversal of decisions to disallow costs, auditor errors, and the way questioned costs are reported to Congress. GAO questioned program officials' decisions to allow costs when they: (1) did not hold the auditee accountable for deficiencies; (2) did not address the auditor's issues; and (3) were not supported by appropriate justification as required by Office of Management and Budget guidance. Other questionable procedures used by program officials to allow costs include the basing of decisions on inadequate documentation from auditees, accepting auditee certifications that costs incurred were proper in place of documentation, and not justifying in writing why they disagreed with auditors. Problems with the way questioned costs are reported to Congress include a lack of consistency among the reports submitted by the inspectors general and the fact that disallowed costs sometimes are portrayed as savings to the government, even though they do not always result in a return of funds.