Grant Auditing:

A Maze of Inconsistency, Gaps, and Duplication That Needs Overhauling

FGMSD-79-37: Published: Jun 15, 1979. Publicly Released: Jun 15, 1979.

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Federal grants will total about $85 billion in fiscal year (FY) 1979. The government relies on audit as the basic control to see that these funds are spent as Congress intended and to prevent unauthorized expenditures and loss of funds from fraud and abuse. The ideal in auditing grant programs is to have a single audit of a recipient that would be acceptable to all the funding organizations. Such audits would be made periodically when needed, and would ensure that the recipient is complying with the terms of the grants and that financial records and controls are adequate. Funding organizations would then be free to perform additional audits of economy and efficiency and program results.

This ideal is far from being achieved. In general, agencies audit only their own grants, and do not completely review grant recipients' financial controls or grant management practices. The auditors are unlikely to detect improper charges or transfers of funds and equipment to the grant. Moreover, the agencies do not audit many grants while repeatedly auditing other grants with minimal results. This approach costs time and money through gaps in coverage and duplication of effort. Through a review of the audit experience of 73 grant recipients during FY 1974 through 1977, it was found that 80 percent of the federal funds was not audited. Of the 73 recipients, only 56 were considered to have been audited, and 51 of these received audits which provided only partial or no insight into whether funds were properly spent. Only one recipient received a single comprehensive audit. The number of times a recipient was audited ranged from no audits to 50. The government needs to expand audit coverage of grant recipients through the use of coordinated single audits which would eliminate duplication and reduce auditing of many compliance items while providing a better look at the grantee's overall performance.

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