HEW Audits of Federal Grants and Contracts Administered by Institutions of Higher Education

Federal grants and contracts administered by institutions of higher education were reviewed to determine whether the audit coverage provided by the Department of Health, Education, and Welfare's (HEW) Audit Agency is sufficient to provide reasonable assurance that Federal funds are being spent for their intended purpose. The audit work was performed at the 20 institutions which received the most Federal support during 1975 and for which HEW was assigned responsibility. These 20 institutions received $1.1 billion of Federal support during fiscal year 1975. Although firm conclusions have not been reached, it was tentatively concluded that HEW's audits of Federal grants and contracts administered by colleges and universities are not as effective as they could be and cannot be relied upon to provide reasonable assurance that Federal funds are being spent for their intended purposes. HEW has not established a cycle for auditing the institutions for which it has cognizance; as a result, HEW audits of the institutions are not timely, and some institutions are not audited at all. Some of the HEW audits of funds administered by the institutions do not comply with standards prescribed by GAO for all Government audits. In some cases, HEW does not audit in sufficient depth to determine whether costs charged to Federal grants and contracts are allowable. Instead, the audits identify weaknesses in accounting systems; once an accounting system weakness is noted, HEW simply does not render an opinion on that segment of the accounting system.