Audits of Federal Programs: Reasons for Disparities Between Costs Questioned by Auditors and Amounts Agencies Disallow

Highlights

Pursuant to a congressional request, GAO determined the reasons for disparities between the amount of contract and grant costs questioned by auditors and the amount eventually disallowed by program managers.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Department of Agriculture	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should implement policies and procedures that: (1) ensure that administrative actions and special procedures or waivers, used to allow questioned costs, are used with discretion, in compliance with the law, and not used to merely expedite the resolution of the case without considering the issues raised by auditors; (2) where reaudit is required to make determinations, consider questioned costs unresolved until the reaudit can be completed and a final determination made; (3) eliminate the use of corrective action plans to allow costs when these costs represent the auditee's liability for past deficiencies; (4) consider questioned costs as being unresolved, rather than allowing them, when related to a deficiency requiring remedial action by the auditee, pending implementation if a corrective action plan addressing the deficiency; (5) limit auditee certifications to circumstances where the auditee could not be expected to have the necessary supporting documentation; and (6) ensure that program officials, in accordance with OMB Circular A-50, document in writing their decisions to allow costs.	Closed – Implemented Please call 202/512-6100 for information.
Department of Education	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should implement policies and procedures that: (1) ensure that administrative actions and special procedures or waivers, used to allow questioned costs, are used with discretion, in compliance with the law, and not used to merely expedite the resolution of the case without considering the issues raised by auditors; (2) where reaudit is required to make determinations, consider questioned costs unresolved until the reaudit can be completed and a final determination made; (3) eliminate the use of corrective action plans to allow costs when these costs represent the auditee's liability for past deficiencies; (4) consider questioned costs as being unresolved, rather than allowing them, when related to a deficiency requiring remedial action by the auditee, pending implementation if a corrective action plan addressing the deficiency; (5) limit auditee certifications to circumstances where the auditee could not be expected to have the necessary supporting documentation; and (6) ensure that program officials, in accordance with OMB Circular A-50, document in writing their decisions to allow costs.	Closed – Implemented Please call 202/512-6100 for information.
Department of Health and Human Services	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should implement policies and procedures that: (1) ensure that administrative actions and special procedures or waivers, used to allow questioned costs, are used with discretion, in compliance with the law, and not used to merely expedite the resolution of the case without considering the issues raised by auditors; (2) where reaudit is required to make determinations, consider questioned costs unresolved until the reaudit can be completed and a final determination made; (3) eliminate the use of corrective action plans to allow costs when these costs represent the auditee's liability for past deficiencies; (4) consider questioned costs as being unresolved, rather than allowing them, when related to a deficiency requiring remedial action by the auditee, pending implementation if a corrective action plan addressing the deficiency; (5) limit auditee certifications to circumstances where the auditee could not be expected to have the necessary supporting documentation; and (6) ensure that program officials, in accordance with OMB Circular A-50, document in writing their decisions to allow costs.	Closed – Implemented Please call 202/512-6100 for information.
Department of Transportation	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should implement policies and procedures that: (1) ensure that administrative actions and special procedures or waivers, used to allow questioned costs, are used with discretion, in compliance with the law, and not used to merely expedite the resolution of the case without considering the issues raised by auditors; (2) where reaudit is required to make determinations, consider questioned costs unresolved until the reaudit can be completed and a final determination made; (3) eliminate the use of corrective action plans to allow costs when these costs represent the auditee's liability for past deficiencies; (4) consider questioned costs as being unresolved, rather than allowing them, when related to a deficiency requiring remedial action by the auditee, pending implementation if a corrective action plan addressing the deficiency; (5) limit auditee certifications to circumstances where the auditee could not be expected to have the necessary supporting documentation; and (6) ensure that program officials, in accordance with OMB Circular A-50, document in writing their decisions to allow costs.	Closed – Implemented Please call 202/512-6100 for information.
Department of Labor	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should implement policies and procedures that: (1) ensure that administrative actions and special procedures or waivers, used to allow questioned costs, are used with discretion, in compliance with the law, and not used to merely expedite the resolution of the case without considering the issues raised by auditors; (2) where reaudit is required to make determinations, consider questioned costs unresolved until the reaudit can be completed and a final determination made; (3) eliminate the use of corrective action plans to allow costs when these costs represent the auditee's liability for past deficiencies; (4) consider questioned costs as being unresolved, rather than allowing them, when related to a deficiency requiring remedial action by the auditee, pending implementation if a corrective action plan addressing the deficiency; (5) limit auditee certifications to circumstances where the auditee could not be expected to have the necessary supporting documentation; and (6) ensure that program officials, in accordance with OMB Circular A-50, document in writing their decisions to allow costs.	Closed – Implemented Please call 202/512-6100 for information.
Environmental Protection Agency	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should implement policies and procedures that: (1) ensure that administrative actions and special procedures or waivers, used to allow questioned costs, are used with discretion, in compliance with the law, and not used to merely expedite the resolution of the case without considering the issues raised by auditors; (2) where reaudit is required to make determinations, consider questioned costs unresolved until the reaudit can be completed and a final determination made; (3) eliminate the use of corrective action plans to allow costs when these costs represent the auditee's liability for past deficiencies; (4) consider questioned costs as being unresolved, rather than allowing them, when related to a deficiency requiring remedial action by the auditee, pending implementation if a corrective action plan addressing the deficiency; (5) limit auditee certifications to circumstances where the auditee could not be expected to have the necessary supporting documentation; and (6) ensure that program officials, in accordance with OMB Circular A-50, document in writing their decisions to allow costs.	Closed – Implemented Please call 202/512-6100 for information.
Heads of Federal Agencies	The head of each federal department and agency with an internal audit organization or inspector general should review that agency's audit resolution procedures and, where the aforementioned deficiencies exist, implement policies and procedures to correct them.	Closed – Implemented Please call 202/512-6100 for information.
Office of Management and Budget	The Director, OMB, should ensure that these recommendations are incorporated into OMB Circular A-50.	Closed – Not Implemented OMB believes that Circular A-50 currently requires agencies to do what GAO recommended; therefore, OMB does not believe that A-50 needs to be revised.
Department of Agriculture	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should ensure that disagreements between program officials and auditors over the resolution of questioned costs are considered by the audit followup official, as required by OMB, before a final decision is made on the case.	Closed – Implemented Please call 202/512-6100 for information.
Department of Education	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should ensure that disagreements between program officials and auditors over the resolution of questioned costs are considered by the audit followup official, as required by OMB, before a final decision is made on the case.	Closed – Implemented Please call 202/512-6100 for information.
Department of Health and Human Services	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should ensure that disagreements between program officials and auditors over the resolution of questioned costs are considered by the audit followup official, as required by OMB, before a final decision is made on the case.	Closed – Implemented Please call 202/512-6100 for information.
Department of Transportation	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should ensure that disagreements between program officials and auditors over the resolution of questioned costs are considered by the audit followup official, as required by OMB, before a final decision is made on the case.	Closed – Implemented Please call 202/512-6100 for information.
Department of Labor	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should ensure that disagreements between program officials and auditors over the resolution of questioned costs are considered by the audit followup official, as required by OMB, before a final decision is made on the case.	Closed – Implemented Please call 202/512-6100 for information.
Environmental Protection Agency	The Secretaries of Agriculture, Education, Health and Human Services, Labor, and Transportation, and the Administrator, EPA, should ensure that disagreements between program officials and auditors over the resolution of questioned costs are considered by the audit followup official, as required by OMB, before a final decision is made on the case.	Closed – Implemented Please call 202/512-6100 for information.
Heads of Federal Agencies	The head of each federal department and agency with an internal audit organization or inspector general should determine whether a similar problem exists in that agency, and if it does, should take the same corrective action.	Closed – Implemented Please call 202/512-6100 for information.
Statutory Inspectors General	Inspectors general and heads of internal audit organizations should: (1) ensure that the requirements in the Comptroller General's audit resolution standard for following up on findings and recommendations are met; and (2) ensure compliance with OMB Circular A-50 requirements for reviewing program officials' responses to audit reports and reporting disagreements to the audit follow-up official.	Closed – Implemented Please call 202/512-6100 for information.
Office of Management and Budget	The Director, OMB, should revise the definition of audit resolution in OMB Circular A-50 to conform with the Comptroller General's standard.	Closed – Not Implemented OMB does not agree since its definition of resolution, according to OMB, is in agreement with the definition of resolution as contained in P.L. 96-304.
Office of Management and Budget	In order to provide Congress with more complete and uniform audit resolution data, the Director, OMB, should revise OMB Circular A-50 to: (1) establish standard definitions of questioned cost and savings for reporting purposes; and (2) assign responsibility to agency audit followup officials for providing Inspectors General with the results of collection action taken on audit-related debt.	Closed – Not Implemented OMB believes that Circular A-50 currently requires agencies to do what GAO recommended; therefore, OMB does not believe that A-50 needs to be revised.
Statutory Inspectors General	In accordance with standard OMB definitions, Inspectors General should: (1) report all information requested by the Senate Committee on Appropriations contained in their report on the Supplemental Appropriations and Rescission Act of 1980; and (2) clearly state that reported disallowed cost is subject to reduction.	Closed – Implemented Please call 202/512-6100 for information.

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