[Comments on Whether Federal Funds Granted to States Can Be Commingled with Other Funds]

B-222191: Oct 23, 1986

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GAO commented on: (1) whether federal funds awarded to states for subgranting to counties and school districts can be commingled with other funds; (2) the possibility that school districts may be borrowing federal funds to cover shortages in other school district operations due to commingling; and (3) whether subgrantees can invest the funds and earn interest on them. GAO concluded that: (1) states are not required to deposit grant money in separate bank accounts as long as they can account for all of the funds; (2) states are responsible for ensuring that funds are properly and efficiently administered to subgrantees for the purposes intended; and (3) states are not required to pay the federal government for interest they earn on fund advances because they rarely have funds pending disbursement long enough to earn a significant amount of interest.