Auditing and Financial Management:
Responses to Posthearing Questions Related to Improving Single Audit Quality
GAO-08-318R, Dec 7, 2007
- Accessible Text:
On October 25, 2007, GAO testified before a congressional subcommittee at a hearing entitled, "Single Audits: Are They Helping to Safeguard Federal Funds?" At the hearing, we provided (1) GAO's perspective on the history and importance of the Single Audit Act, as amended (Single Audit Act), and the principles behind the act, (2) our preliminary analysis of the recommendations made by the President's Council on Integrity and Efficiency (PCIE) for improving audit quality, and (3) additional factors to consider for improving the quality of single audits.
Given the increase in federal grant awards in recent years and the many different federal entities involved in overseeing the single audit process, two aspects of the single audit framework warrant further analysis to determine whether changes are needed to improve single audit quality and overall accountability for the use of federal grant funds: (1) the roles and responsibilities of the various parties in the federal oversight structure for single audits, and (2) the current risk-based approach to conducting single audits. In reponse to Congress's question about audit quality problems cited in the President's Council on Integrity and Efficiency's study, GAO feels that the current design of the single audit is not intended to provide sufficient information for assessing and reporting on improper payments. There is currently no direct link between the assessment of susceptibility to improper payments and the level and scope of work performed in a single audit. For instance, the current risk-based approach for determining major programs to audit for compliance under the single audit focuses heavily on programs with the largest dollar amounts in a grantee's portfolio. Thus, programs identified as susceptible to improper payments at the federal level may not be audited for compliance under a single audit, depending on the portfolio of a grantee's federal grants. Consequently, the current design of the single audit process and the related results are generally insufficient to identify improper payments and systematically estimate the extent of improper payments for susceptible programs. GAO feels that since the Office of Management and Budget (OMB) would ultimately be responsible for putting a training requirement in place, it should also be responsible for resolving any related implementation issues involved, with input from key stakeholders. Because of OMB's statutory responsibilities related to single audits, we believe that OMB should be the party responsible for tracking the status of implementing the PCIE recommendations. However, OMB could delegate that responsibility to another federal agency or to the PCIE. As mentioned in our testimony, we believe that a number of issues need to be resolved before specific actions are taken to implement some of the recommendations. Also, as discussed in our response to question 1, a separate effort taking into account the overall framework for single audits may be warranted. In our testimony, we also highlighted two other critical factors that need to be considered when determining actions to improve audit quality: (1) audit quality problems associated with the size of audit, and (2) the distribution of size in the universe of single audits. GAO could monitor the results of any changes in this area as part of our expanded review of the single audit process. The Single Audit Act requires that audits be done in accordance with generally accepted government auditing standards (GAGAS). In our role as standards setter, we will continue our regular activities to promote high-quality auditing under GAGAS. GAO recently issued a modernized version of GAGAS. Also, GAO's Comptroller General chairs the National Intergovernmental Audit Forum that monitors the standards setting bodies, and advances the audit standards within the government and the audit profession. Through these processes, we have had, and continue to have, extensive interaction with the audit community, including state and local government auditors, and CPA firms of all sizes across the country.