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

    Priority recommendation

    Comments: The Secretary for the Department of Agriculture (Agriculture) responded in its statement of action letter dated October 4, 2017, as it relates to our recommendation for Agriculture's Food and Nutrition Service (FNS). The statement of action stated that (1) FNS conducted audit management training in all seven FNS regional offices by July 2017; (2) FNS will conduct an examination of the current agency audit manual that is used by all FNS National office and Regional office staff who have responsibility for working on audits; (3) FNS will update the audit manual as needed to ensure all award recipients required to submit single audit reports do so in accordance with the Office of Management and Budget guidance; and (4) FMS will revise and re-issue the audit manual within one year of this statement of action letter. We will assess these efforts once completed.

    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

    Priority recommendation

    Comments: The Secretary for the Department of Agriculture (Agriculture) responded in its statement of action letter dated October 4, 2017, as it relates to Agriculture's Food and Nutrition Service (FNS). The statement of action stated that (1) FNS conducted audit management training in all seven FNS regional offices by July 2017; (2) FNS will conduct an examination of the current agency audit manual that is used by all FNS National office and Regional office staff who have responsibility for working on audits; (3) FNS will update the audit manual as needed to ensure that management decisions contain the required elements and are issued timely in accordance with the Office of Management and Budget guidance; and (4) FNS will revise and re-issue the audit manual within one year of this statement of action letter. We will assess these efforts once completed.

    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 Secretary for the Department of Agriculture (Agriculture) responded in its statement of action letter dated October 4, 2017, as it relates to Agriculture's Food and Nutrition Service (FNS). The statement of action stated that (1) FNS conducted audit management training in all seven FNS regional offices by July 2017; (2) FNS will conduct an examination of the current agency audit manual that is used by all FNS National office and Regional office staff who have responsibility for working on audits; (3) in consultation with the seven FNS regional offices that are responsible for the resolution of single audit findings, if feasible, FNS will incorporate general guidance for managing high-risk and recurring single audit findings into the agency audit manual; and (4) FNS will revise and re-issue the audit manual within one year of this statement of action letter. We will assess these efforts once completed.

    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

    Priority recommendation

    Comments: The Secretary for the Department of Agriculture (Agriculture) responded in its statement of action letter dated October 4, 2017, as it relates to Agriculture's Rural Development (RD). The statement of action stated that (1) RD agrees that its procedures for processing and resolving single audit findings and corrective actions need improvement; (2) RD will discuss with the Departmental Office of the Chief Financial Officer how the processing and resolution of Single Audits should be addressed for Agriculture; (3) RD will seek Departmental guidance on policy and procedures so that all agencies under Agriculture follow the same basic process, and (4) RD will meet with each program area and develop new policies and procedures for identifying all entities that should submit a single audit report in accordance with the Office of Management and Budget guidance. We will assess these efforts once completed.

    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

    Priority recommendation

    Comments: The Secretary for the Department of Agriculture (Agriculture) responded in its statement of action letter dated October 4, 2017, as it relates to Agriculture's Rural Development (RD). The statement of action stated that (1) RD agrees that its procedures for processing and resolving single audit findings and corrective actions need improvement; (2) RD will discuss with the Departmental Office of the Chief Financial Officer how the processing and resolution of Single Audits should be addressed for Agriculture; (3) RD will seek Departmental guidance on policy and procedures so that all agencies under Agriculture follow the same basic process, and (4) RD will meet with each program area and will advise policies and procedures assure that all management decisions contain the required elements and are issued timely in accordance with current Office of Management and Budget guidance. We will assess these efforts once completed.

    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: The Secretary for the Department of Agriculture (Agriculture) responded in its statement of action letter dated October 4, 2017, as it relates to Agriculture's Rural Development (RD). The statement of action stated that (1) RD agrees that its procedures for processing and resolving single audit findings and corrective actions need improvement; (2) RD will discuss with the Departmental Office of the Chief Financial Officer how the processing and resolution of Single Audits should be addressed for Agriculture; (3) RD will seek Departmental guidance on policy and procedures so that all agencies under Agriculture follow the same basic process, and (4) RD will meet with each program area and develop new policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk based approach. We will assess these efforts once completed.

    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: Closed - Implemented

    Comments: The Department of Health and Human Services (HHS) concurred with our recommendation to the Assistant Secretary for Financial Resources (ASFR). We reviewed ASFR's policies and procedures which show that ASFR has established a process to identify grantees that are delinquent in the report submission and to notify the appropriate HHS agencies obligated to resolve the delinquency. ASFR stated that it has performed this process for fiscal years 2014 through 2016 and is continuing the delinquent audit review process for fiscal year 2017 and the future.

    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

    Priority recommendation

    Comments: The Department of Health and Human Services (HHS) concurred with this recommendation to the Assistant Secretary for Financial Resources (ASFR). HHS stated that it will enhance the Grants Policy Administration Manual (issued on December 31, 2015) to provide additional details regarding the elements to be included in the management decisions letters. ASFR stated that it will use its established Single Audit Resolution Workgroup, comprised of representatives from the HHS agencies who are responsible for single audit resolution activities, to continually evaluate and strengthen its relevant policies and procedures. We will assess these efforts once completed.

    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: The Department of Health and Human Services (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. We will assess these efforts once completed.

    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

    Priority recommendation

    Comments: The Department of Health and Human Services (HHS) concurred with this recommendation to the Centers for Medicare and Medicaid Services (CMS). HHS stated that CMS has developed a Standard Operating Procedure (SOP) based on the Grants Policy Administration Manual (GPAM) issued December 31, 2015. The SOP is currently under review and will be implemented after approval and signature by CMS leadership. The SOP includes provisions for following up with entities that have delinquent audits. We will assess these efforts once completed.

    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

    Priority recommendation

    Comments: The Department of Health and Human Services (HHS) concurred with this recommendation to the Centers for Medicare and Medicaid Services (CMS). HHS stated that it has developed a Standard Operating Procedure (SOP) based on the Grants Policy Administration Manual (GPAM) issued on December 31, 2015, and the draft Management Decision Letter (MDL) HHS guidelines document. In April 2017, HHS informed us that the SOP is under review and will be implemented after approval and signature by CMS leadership. The SOP includes management decision letter elements and the timely issuance of MDLs. We will assess these efforts once completed.

    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: The Department of Health and Human Services (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. We will assess these efforts once completed.

    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

    Priority recommendation

    Comments: The Department of Housing and Urban Development's (HUD) Office of Community Planning and Development (CPD) disagreed with this recommendation, but we maintain that revisions to CPD's policies and procedures are warranted to help CPD comply with the Office of Management and Budget (OMB) guidance. CPD officials stated that it provided training on writing management decisions to all CPD field offices in March 2017 and plans to issue a reminder memorandum on management decisions to field offices. We will assess these efforts once completed.

    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: In April 2017, the Department of Housing and Urban Development's (HUD) Office of Community Planning and Development (CPD) stated that it planned to produce appropriate policies and procedures for risk rating single audit findings by the end of fiscal year 2017. We will assess these efforts once completed.

    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: Closed - Implemented

    Priority recommendation

    Comments: The Department of Housing and Urban Development's (HUD) Office of Public and Indian Housing (PIH) updated its Independent Public Accountant Audit Findings Review Standard (dated September 2017), which PIH developed to establish requirements for management decision letter issuance and closure of findings. We reviewed this standard and verified that it contains the required elements in accordance with the Office of Management and Budget guidance relating to management decisions. In addition, we verified that PIH has updated this standard to require periodic reviews of audit findings tracking sheets to ensure staff are complying with the standard and are issuing management decisions timely. Therefore, we believe PIH's actions addresses 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: The Department of Housing and Urban Development's (HUD) Office of Public and Indian Housing met with GAO on July 10, 2017, to discuss the status of this recommendation. The HUD officials at this meeting said the current language in their Independent Public Accountant (IPA) auditing standards addresses the GAO recommendation. However, we explained to the HUD officials at the meeting that the current language is insufficient to close the recommendation as it does not show evidence that HUD has designed or implemented policies and procedures for how HUD is identifying and managing high-risks. The HUD officials stated that they will give this recommendation more consideration and revise the standards and provide GAO with additional support to show what HUD has done to address this recommendation. We will assess these efforts once completed.

    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

    Priority recommendation

    Comments: The Department of Transportation (DOT) agreed with this recommendation. DOT stated that it will, no later than February 16, 2018, instruct the Federal Highway Administration to design, revise, and implement procedures to comply with federal grant and financial management requirements by September 30, 2019. We will assess these efforts once completed.

    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: The Department of Transportation (DOT) agreed with this recommendation. DOT stated that it will, no later than December 31, 2017, instruct the Federal Highway Administration to design, revise, and implement procedures to comply with federal grant and financial management requirements by September 30, 2019. We will assess these efforts once completed.

    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

    Priority recommendation

    Comments: The Department of Transportation (DOT) agreed with this recommendation. DOT stated that it will, no later than February 16, 2018, instruct the Federal Transit Administration to design, revise, and implement procedures to comply with federal grant and financial management requirements by September 30, 2019. We will assess these efforts once completed. We will assess these efforts once completed.

    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

    Priority recommendation

    Comments: The Department of Transportation (DOT) agreed with our recommendations. DOT stated that it will, no later than February 16, 2018, instruct the Federal Transit Administration to design, revise, and implement procedures to comply with federal grant and financial management requirements by September 30, 2019. We will assess these efforts once completed.

    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: The Department of Transportation (DOT) agreed with this recommendation. DOT stated that it will, no later than December 31, 2017, instruct the Federal Transit Administration to design, revise, and implement procedures to comply with federal grant and financial management requirements by September 30, 2019. We will assess these efforts once completed.

    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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