Improved Standards Needed for Managing and Reporting Income Generated Under Federal Assistance Programs

Highlights

GAO reviewed federal agencies' and grantees' policies and practices for managing and reporting income generated under federally assisted programs.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Office of Management and Budget	The Director, OMB, should revise Circulars A-102 and A-110 to expand the definition of program income and the financial reporting requirements to ensure that all income generated under federally assisted projects, including interest and sales proceeds, is accounted for and reported by assistance recipients.	Closed – Implemented OMB expanded the definition of program income, but not as broad as recommended. Financial reporting forms were also expanded considerably, but again, not as broad as recommended. Given that OMB has acted on the bulk of this recommendation, GAO should not pursue the few remaining issues.
Office of Management and Budget	The Director, OMB, should revise Circulars A-102 and A-110 to establish standards for the disposition of interest earned on: (1) program income; (2) funds not pending disbursement because of completed projects, audit exceptions, or contract settlements; and (3) sales proceeds.	Closed – Implemented OMB established clear standards, such as interest earned on program income, but not as clear on the other two situations. OMB maintains that the standards do cover the other two situations. Given the OMB word on this, GAO should not pursue further at this time.
Office of Management and Budget	The Director, OMB, should revise Circulars A-102 and A-110 to establish standards addressing the timing and allowability of program income expenditures and the classification of income derived from products of the land such as oil, gas, minerals, gravel, and standing timber.	Closed – Implemented Federal agencies' rules adequately address this recommendation.
Office of Management and Budget	The Director, OMB, should revise Circulars A-102 and A-110 to expand the description of the deductive option to note that its objective of reduced costs to the government will not be achieved unless total grantee expenditures are limited to the budgeted amount approved in the grant award.	Closed – Implemented Federal agencies' rules adequately address this recommendation.
Office of Management and Budget	The Director, OMB, should revise Circulars A-102 and A-110 to incorporate in the standards a statement that federal agencies should specify in their regulations which program income option is to be used by grantees when grant agreements fail to specify an option.	Closed – Implemented Federal agencies' rules adequately address this recommendation.
Office of Management and Budget	The Director, OMB, should revise Circulars A-102 and A-110 to clarify in the instructions for Standard Forms 270 and 272, that all income retained by grantees is to be subtracted on their requests for drawdowns.	Closed – Implemented OMB did not revise the forms, but included new rules that have the effect GAO desired.

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Topics

Auditing and Financial Management

Accounting proceduresFederal aid programsFederal grantsFunds managementGrant monitoringGrants to local governmentsGrants to statesIncome statisticsRevenue sharingFederal agencies