Single Audits:

Improvements Needed in Selected Agencies' Oversight of Federal Awards

GAO-17-159: Published: Feb 16, 2017. Publicly Released: Feb 16, 2017.

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What GAO Found

Federal agencies have oversight responsibilities for the funds that they award to nonfederal entities and can assign these responsibilities to their subagencies (i.e., operating units or divisions). Nonfederal entities are required to undergo a single audit if their expenditures of federal awards in a fiscal year exceed a certain threshold. A single audit is an audit of the award recipient's expenditure of federal awards and of its financial statements and can identify deficiencies in the award recipient's compliance with the provisions of laws, regulations, contracts, or grant agreements and in its financial management and internal control systems. Correcting such deficiencies can help reasonably assure the effective use of federal funds and reduce federal improper payments.

Of the five agencies in GAO's study—the Departments of Agriculture, Education, Health and Human Services (HHS), Housing and Urban Development (HUD), and Transportation—some of the agencies' subagencies that GAO reviewed did not effectively design policies and procedures to reasonably assure the timely submission of single audit reports by award recipients. The Office of Management and Budget's (OMB) guidance requires that federal awarding agencies ensure that award recipients submit single audit reports within certain time frames. This can help assure that single audit findings are timely corrected.

Most of the selected subagencies in GAO's review did not effectively design policies and procedures to reasonably assure that they issued timely management decisions containing the information required by OMB guidance. This guidance requires agencies to evaluate each award recipient's audit findings and corrective action plans and issue a management decision within 6 months of receipt of the single audit report as to the actions award recipients must take to correct each single audit finding. Such decisions may add clarity about the agency's position on the single audit finding and the corrective action.

Assessment of Selected Subagencies' Policies and Procedures for Single Audit Oversight

Assessment of Selected Subagencies' Policies and Procedures for Single Audit Oversight

Only the two selected subagencies in Education had policies and procedures for using risk-based approaches to manage high-risk and recurring single audit findings. High-risk single audit findings may be seriously detrimental to federal programs and could result in improper payments. Recurring single audit findings have persisted for more than one audit period and may need more attention or resources to correct. With over 30,000 single audit reports submitted for fiscal year 2015 and constraints in resources for conducting federal oversight, managing single audit findings using a risk-based approach can assist in identifying and prioritizing problem areas.

Why GAO Did This Study

In fiscal year 2015, federal agencies outlaid over $600 billion in federal awards to state and local governments, according to OMB. The Single Audit Act of 1984, as amended, requires that federal agencies oversee their awards to nonfederal entities. OMB Circular No. A-133 provided guidance for implementing the act during GAO's audit.

GAO was asked to examine federal agency oversight of single audits. This report examines whether selected agencies effectively designed policies and procedures to reasonably assure that (1) recipients submit timely single audit reports and (2) award recipients take action on single audit findings by issuing timely management decisions. GAO also examined whether selected agencies had policies and procedures for managing high-risk and recurring audit findings. GAO selected the five agencies with the largest dollar amounts of reported outlays for grants to state and local governments in fiscal year 2013. For each agency, GAO reviewed its two subagencies accounting for over 80 percent of outlays, reviewed written policies and procedures, and interviewed the respective officials.

What GAO Recommends

GAO is making 21 recommendations. One Agriculture subagency agreed with the recommendations and the other did not comment. HHS and Transportation concurred. HUD commented that one subagency had taken actions to address the recommendations, while the other subagency disagreed with the recommendations directed to it. GAO believes that the recommendations are valid as discussed in the report.

For more information, contact Beryl H. Davis at (202) 512-2623 or davisbh@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: The Department of Agriculture's Under Secretary for Food, Nutrition, and Consumer Services did not comment on the recommendation directed to it. GAO believes the recommendation is valid as discussed in our report.

    Recommendation: The Secretary of Agriculture should direct the Under Secretary for Food, Nutrition, and Consumer Services to design policies and procedures to reasonably assure that all award recipients required to submit single audit reports do so in accordance with OMB guidance.

    Agency Affected: Department of Agriculture

  2. Status: Open

    Comments: The Department of Agriculture's Under Secretary for Food, Nutrition, and Consumer Services did not comment on the recommendation directed to it. GAO believes the recommendation is valid as discussed in our report.

    Recommendation: The Secretary of Agriculture should direct the Under Secretary for Food, Nutrition, and Consumer Services to revise policies and procedures to reasonably assure that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

    Agency Affected: Department of Agriculture

  3. Status: Open

    Comments: The Department of Agriculture's Under Secretary for Food, Nutrition, and Consumer Services did not comment on the recommendation directed to it. GAO believes the recommendation is valid as discussed in our report.

    Recommendation: The Secretary of Agriculture should direct the Under Secretary for Food, Nutrition, and Consumer Services to design and implement policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

    Agency Affected: Department of Agriculture

  4. Status: Open

    Comments: Rural Development (RD), a subagency within USDA, concurred with this recommendation. An RD official stated that it will work with USDA's Office of the Chief Financial Officer (OCFO) and the program areas to develop policies and procedures to ensure that its award recipients are in compliance with OMB guidance. RD stated that it will meet with each program area and discuss how single audits are processed and resolved. RD plans to develop policies and procedures for identifying all award recipients that should file single audit reports; determining if all required single audit reports are filed, received, and processed each year; and assuring that transmittal letters and management decisions contain the required elements and are issued timely in accordance with current OMB guidance. RD also stated that it will develop new policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

    Recommendation: The Secretary of Agriculture should direct the Under Secretary for Rural Development to design policies and procedures to reasonably assure that all award recipients required to submit single audit reports do so in accordance with OMB guidance.

    Agency Affected: Department of Agriculture

  5. Status: Open

    Comments: Rural Development (RD), a subagency within USDA, concurred with this recommendation. An RD official stated that it will work with USDA's Office of the Chief Financial Officer (OCFO) and the program areas to develop policies and procedures to ensure that its award recipients are in compliance with OMB guidance. RD stated that it will meet with each program area and discuss how single audits are processed and resolved. RD plans to develop policies and procedures for identifying all award recipients that should file single audit reports; determining if all required single audit reports are filed, received, and processed each year; and assuring that transmittal letters and management decisions contain the required elements and are issued timely in accordance with current OMB guidance. RD also stated that it will develop new policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

    Recommendation: The Secretary of Agriculture should direct the Under Secretary for Rural Development to revise policies and procedures to reasonably assure that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

    Agency Affected: Department of Agriculture

  6. Status: Open

    Comments: Rural Development (RD), a subagency within USDA, concurred with this recommendation. An RD official stated that it will work with USDA's Office of Chief Financial Officer (OCFO) and the program areas to develop policies and procedures to ensure that its award recipients are in compliance with OMB guidance. RD stated that it will meet with each program area and discuss how single audits are processed and resolved. RD plans to develop policies and procedures for identifying all award recipients that should file single audit reports; determining if all required single audit reports are filed, received, and processed each year; and assuring that transmittal letters and management decisions contain the required elements and are issued timely in accordance with current OMB guidance. RD also stated that it will develop new policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

    Recommendation: The Secretary of Agriculture should direct the Under Secretary for Rural Development to design and implement policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

    Agency Affected: Department of Agriculture

  7. Status: Open

    Comments: HHS concurred with this recommendation to the Assistant Secretary for Financial Resources (ASFR). HHS stated that it is committed to ensuring that grantees submit single audits in a timely and complete manner and that its subagencies utilize the findings to ensure proper management of its grantees. HHS stated that ASFR is taking over the single audit assignment and tracking function from the OIG and that this realignment will allow HHS to better meet the requirements of the Uniform Guidance. HHS stated that ASFR had issued several policies and procedures related to the grantees' timely submission of single audits. HHS stated that it would continue to evaluate its policies and procedures to ensure compliance with regulations, particularly as ASFR takes over the single audit findings assignment and tracking function from the OIG.

    Recommendation: The Secretary of Health and Human Services should direct the Assistant Secretary for Financial Resources to design policies and procedures to reasonably assure that all award recipients required to submit single audit reports do so in accordance with OMB guidance.

    Agency Affected: Department of Health and Human Services

  8. Status: Open

    Comments: HHS concurred with this recommendations to the Assistant Secretary for Financial Resources (ASFR). HHS stated that it is committed to ensuring that grantees submit single audits in a timely and complete manner and that its subagencies utilize the findings to ensure proper management of its grantees. HHS stated that ASFR is taking over the single audit assignment and tracking function from the OIG and that this realignment will allow HHS to better meet the requirements of the Uniform Guidance. HHS stated that ASFR had issued several policies and procedures related to the grantees' timely submission of single audits. HHS stated that it would continue to evaluate its policies and procedures to ensure compliance with regulations, particularly as ASFR takes over the single audit findings assignment and tracking function from the OIG.

    Recommendation: The Secretary of Health and Human Services should direct the Assistant Secretary for Financial Resources to revise policies and procedures to reasonably assure that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

    Agency Affected: Department of Health and Human Services

  9. Status: Open

    Comments: HHS concurred with this recommendations to the Assistant Secretary for Financial Resources (ASFR). HHS stated that it is committed to ensuring that grantees submit single audits in a timely and complete manner and that its subagencies utilize the findings to ensure proper management of its grantees. HHS stated that ASFR is taking over the single audit assignment and tracking function from the OIG and that this realignment will allow HHS to better meet the requirements of the Uniform Guidance. HHS stated that it would continue to evaluate its policies and procedures to ensure compliance with regulations, particularly as ASFR takes over the single audit findings assignment and tracking function from the OIG. In addition, HHS stated that ASFR will work to develop policies and procedures that utilize a risk-based approach for high-risk and recurring single audit findings.

    Recommendation: The Secretary of Health and Human Services should direct the Assistant Secretary for Financial Resources to design and implement policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

    Agency Affected: Department of Health and Human Services

  10. Status: Open

    Comments: HHS concurred with this recommendation to CMS. HHS stated that it is working to incorporate the Grants Policy Manual into CMS's policies and procedures for actions related to the timely submission of single audit reports and for reasonably assuring that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator of the Centers for Medicare and Medicaid Services to revise its policies and procedures to take action to obtain single audit reports when award recipients did not submit reports within the required time frames.

    Agency Affected: Department of Health and Human Services

  11. Status: Open

    Comments: HHS concurred with this recommendation to CMS. HHS stated that it is working to incorporate the Grants Policy Manual into CMS's policies and procedures for actions related to the timely submission of single audit reports and for reasonably assuring that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator of the Centers for Medicare and Medicaid Services to revise its policies and procedures to reasonably assure that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

    Agency Affected: Department of Health and Human Services

  12. Status: Open

    Comments: HHS concurred with this recommendation to CMS. HHS stated that CMS plans to update the 1982 Health Care Financing Administration Audit Resolution Manual and will work collaboratively with HHS to develop policies and procedures that utilize a risk-based approach for high-risk and recurring single audit findings.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator of the Centers for Medicare and Medicaid Services to design and implement policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

    Agency Affected: Department of Health and Human Services

  13. Status: Open

    Comments: HUD's Office of Community Planning and Development (CPD) disagreed with this recommendation. CPD stated that it was not a prudent investment of resources to implement recommendations based upon a review of single audits under OMB Circular No. A-133, which was superseded by the Uniform Guidance. However, the Uniform Guidance, Section 200.521, Management Decisions, carried forward the requirements in OMB Circular No. A-133 for management decisions relating to the content requirements and the time frames for issuing management decisions. Therefore, we continue to believe that actions to revise CPD's policies and procedures related to management decisions are warranted and will help CPD comply with the Uniform Guidance.

    Recommendation: The Secretary of Housing and Urban Development should direct the Principal Deputy Assistant Secretary for the Office of Community Planning and Development to revise policies and procedures to reasonably assure that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

    Agency Affected: Department of Housing and Urban Development

  14. Status: Open

    Comments: HUD's Office of Community Planning and Development (CPD) disagreed with this recommendation. CPD stated that neither OMB Circular No. A-133 nor the Uniform Guidance makes reference to high-risk or recurring single audit findings. However, leading risk management practices include that an organization develop, implement, and continuously improve a process for managing risk and integrate it into the organization's overall governance, strategy, policies, planning, management, and reporting processes. Further, in July 2016, OMB released OMB Circular No. A-123, Management's Responsibility for Enterprise Risk Management and Internal Control, which requires federal agencies to consider risk management in their operations.

    Recommendation: The Secretary of Housing and Urban Development should direct the Principal Deputy Assistant Secretary for the Office of Community Planning and Development to design and implement policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

    Agency Affected: Department of Housing and Urban Development

  15. Status: Open

    Comments: HUD agreed with this recommendation. The Office of Public and Indian Housing stated that it is in the process of revising its policies and procedures for reviewing and taking action on single audit report findings for public housing agencies and will include procedures to address this recommendation.

    Recommendation: The Secretary of Housing and Urban Development should direct the Principal Deputy Assistant Secretary for the Office of Public and Indian Housing to revise policies to reasonably assure that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

    Agency Affected: Department of Housing and Urban Development

  16. Status: Open

    Comments: HUD agreed with this recommendation. The Office of Public and Indian Housing stated that it is in the process of revising its policies and procedures for reviewing and taking action on single audit report findings for public housing agencies and will include procedures to address this recommendation.

    Recommendation: The Secretary of Housing and Urban Development should direct the Principal Deputy Assistant Secretary for the Office of Public and Indian Housing to design and implement policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

    Agency Affected: Department of Housing and Urban Development

  17. Status: Open

    Comments: Transportation agreed with this recommendation. Transportation stated that it will revise, design, and implement policies and procedures to reasonably assure that all required award recipients submit single audit reports and management decisions contain required elements and are issued timely, in accordance with OMB guidance.

    Recommendation: The Secretary of Transportation should direct the Administrator of the Federal Highway Administration to revise policies and procedures to reasonably assure that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

    Agency Affected: Department of Transportation

  18. Status: Open

    Comments: Transportation agreed with this recommendation. Transportation indicated that it will revise, design, and implement policies and procedures to identify and manage recurring single audit findings using a risk-based approach.

    Recommendation: The Secretary of Transportation should direct the Administrator of the Federal Highway Administration to design and implement policies and procedures for identifying and managing recurring single audit findings using a risk-based approach.

    Agency Affected: Department of Transportation

  19. Status: Open

    Comments: Transportation agreed with this recommendation. Transportation stated that it will revise, design, and implement policies and procedures to reasonably assure that all required award recipients submit single audit reports timely and in accordance with OMB guidance.

    Recommendation: The Secretary of Transportation should direct the Administrator of the Federal Transit Administration to design policies and procedures to reasonably assure that all award recipients required to submit single audit reports do so in accordance with OMB guidance.

    Agency Affected: Department of Transportation

  20. Status: Open

    Comments: Transportation agreed with our recommendations. Transportation stated that it will revise, design, and implement policies and procedures to reasonably assure that all required award recipients submit single audit reports and management decisions contain required elements, are issued timely and in accordance with OMB guidance.

    Recommendation: The Secretary of Transportation should direct the Administrator of the Federal Transit Administration to revise policies and procedures to reasonably assure that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

    Agency Affected: Department of Transportation

  21. Status: Open

    Comments: Transportation agreed with this recommendation. Transportation stated that it will revise, design, and implement policies and procedures to identify and manage recurring single audit findings using a risk-based approach.

    Recommendation: The Secretary of Transportation should direct the Administrator of the Federal Transit Administration to design and implement policies and procedures for identifying and managing recurring single audit findings using a risk-based approach.

    Agency Affected: Department of Transportation

 

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