Need To Strengthen Audit Oversight on Existing and Future Block Grant Programs

AFMD-82-25: Published: Nov 13, 1981. Publicly Released: Nov 27, 1981.

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GAO reviewed the title XX social services grant program to assess the quality and effectiveness of the States' financial management control systems in providing adequate accountability over Federal funds. The grant management and administrative controls in four States with title XX awards were reviewed for fiscal year 1979. GAO believes that the results of the review will assist the Senate Subcommittee on Intergovernmental Relations in its current deliberations on proposed legislation designed to strengthen audit oversight on existing and future block grant programs.

The States' financial management and internal controls have been largely ineffective in protecting against fraud, waste, and abuse and in providing proper accountability over Federal funds. About $13 million of the improper and unjustified costs were claimed in about 12 percent of the total contracts reviewed. GAO analysis of the problems revealed that they are not isolated instances or peculiar to any one State. Almost half of the contracts reviewed in each of the four States contained problems of a financial nature. Furthermore, many of the problems were found to exist in previous or subsequent contract years and appeared to be the normal way of doing business in these States. Additionally, some of the conditions not only violated Federal regulations, but also violated the States' own policies and procedures. Most of the improper grant practices and unauthorized or questionable costs could have been avoided through more effective State oversight and audit activities. However, weaknesses in the financial management control systems of these States allowed the abuses to go undetected. Specifically, the GAO review disclosed that some States failed to audit or otherwise oversee the financial activities of all or most of their title XX contractors. Most of the unauthorized or questioned costs occurred in States where audits were generally not being performed. Finally, where States did not conduct audits, they generally failed to meet the GAO yellow book criteria for acceptable financial and compliance auditing.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: A legislative proposal is unlikely in the Senate. GAO will suggest to the House Government Operations committee that the recommendation be incorporated in H.R. 769, a bill to provide uniform financial management and audit standards for Federal assistance programs.

    Matter: The Subcommittee on Intergovernmental Relations, Senate Committee on Governmental Affairs should give consideration to expanding the audit and oversight provisions contained in the cross-cutting legislation to include all block grants under the Omnibus Budget Reconciliation Act.

  2. Status: Closed - Not Implemented

    Comments: Consideration is unlikely in the Senate. GAO will suggest to the House Committee on Government Operations that the recommendation be incorporated into H.R. 769, a bill to provide uniform financial management and audit standards for Federal assistance programs.

    Matter: The Subcommittee on Intergovernmental Relations, Senate Committee on Governmental Affairs should give consideration to making the GAO yellow book standards for financial and compliance audits mandatory for State, local, and independent public accountant audits of block grant programs by deleting the phrase "insofar as is practicable."

  3. Status: Closed - Not Implemented

    Comments: Consideration is unlikely in the Senate. GAO will suggest to the House Committee on Government Operations that the recommendation be incorporated into H.R. 769, a bill to provide uniform financial management and audit standards for Federal assistance programs.

    Matter: The Subcommittee on Intergovernmental Relations, Senate Committee on Governmental Affairs should give consideration to requiring the establishment of an audit quality review process at the Federal level to ensure that the audit organizations, reports, and the audit work itself meet the GAO yellow book standards.

  4. Status: Closed - Not Implemented

    Comments: Consideration is unlikely in the Senate. GAO will suggest to the House Committee on Government Operations that the recommendation be incorporated into H.R. 769, a bill to provide uniform financial management and audit standards for Federal assistance programs.

    Matter: The Subcommittee on Intergovernmental Relations, Senate Committee on Governmental Affairs should give consideration to including subrecipients under the audit requirements of the proposed amendments to the cross-cutting legislation and clarifying the definition of subrecipients to include purchase-of-service contractors.

 

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