Implementation of Grants Policies Needs Better Oversight
GAO-14-635: Published: Jul 21, 2014. Publicly Released: Jul 21, 2014.
What GAO Found
The Department of State (State) has established policies and guidance that provide a supportive environment for managing grants and cooperative agreements (grants). In addition, State provides its grants officials mandatory training on these policies and guidance, and routinely identifies and shares best practices. State's policies are based on federal regulations, reflect internal control standards, and cover topics such as risk assessment and monitoring procedures. State's policies also delineate specific internal control activities that grants officials are required to both implement and document in the grant files as a way of promoting accountability (see fig.).
Key Internal Control Activities Required through a Grant's Life Cycle
GAO found that inconsistent implementation of policies and guidance weakens State's assurance that grant funds are used as intended.
- Inadequate risk analysis . In most of the files GAO reviewed, grants officials did not fully identify, assess, and mitigate risks, as required. For example, officials conducted a risk identification process for 45 of the 61 grants that GAO reviewed. While grants officials identified risk in 28 of those 45 grants, they mitigated risks in only 11.
- Poor documentation . Grants officials generally did not adhere to State policies and procedures relating to documenting internal control activities. For example, 32 of the 61 files reviewed did not contain the required monitoring plan. Considerable turnover among grants officials makes documenting internal control activities particularly important. State's periodic management reviews of selected bureaus' and overseas missions' grant operations have also found that key documentation was frequently missing or incomplete and made recommendations to address the problem. However, State has not consistently followed up to ensure the implementation of these recommendations, as internal control standards require.
State does not have processes for ensuring compliance with risk analysis and documentation requirements. Without the proper implementation of its internal control policies for grants management, State cannot be certain that its oversight is adequate or that it is using its limited oversight resources effectively.
Why GAO Did This Study
Grants are key tools that State uses to conduct foreign assistance. In fiscal year 2012, State obligated over $1.6 billion worldwide for around 14,000 grants to individuals and organizations for a variety of purposes, such as fostering cultural exchange and facilitating refugee resettlement. However, recent GAO and Inspectors General reports have identified challenges with State's management of these funds. This report examines (1) the policies and guidance that State has established to administer and oversee grants, and (2) the extent to which the implementation of those policies and guidance provides reasonable assurance that funds are being used as intended. GAO analyzed State's policies and guidance, and interviewed cognizant grants officials at 14 bureaus headquartered in Washington, D.C., and three overseas missions (Afghanistan, Cambodia, and Turkey). GAO also conducted file reviews for a sample of 61 grants totaling approximately $172 million. Selection criteria included total dollar value of grants in a country, geographic diversity, and balance among bureaus.
What GAO Recommends
GAO recommends that the Secretary of State develop processes for ensuring that (1) bureaus and missions conduct appropriate risk assessments and (2) grants officials complete required documentation. GAO also recommends that the Secretary of State (3) follow up systematically on recommendations from State's internal reviews of its grants management. State concurred with GAO's recommendations.
For more information, contact David Gootnick at (202) 512-3149 or GootnickD@gao.gov.
Recommendations for Executive Action
Comments: The Department of State (State) concurred with our recommendation. After the report was issued, in a letter dated September 25, 2014, State said it planned to address the recommendation by revising its policies, improving communication, and offering updated or new training. As of June 2015, State said it has updated its policies, including those on risk assessment, and has begun conducting workshops and webinars on the new policies. As of July 2016, State said that it had issued new required training on this topic; GAO plans to collect additional information on these changes.
Recommendation: To help ensure that State's grants officials fully implement grants management policies and internal controls that are in place, and that grant funds are used as intended, the Secretary of State should develop processes to help ensure that bureaus and missions conduct appropriate risk assessments.
Agency Affected: Department of State
Comments: The Department of State (State) concurred with our recommendation. After the report was issued, in a letter dated September 25, 2014, State said it planned to address the recommendation by improving communication, offering updated or new training, developing new file management systems, creating new forms for systematically inspecting grant files, and expanding the independent review of grant files. As of June 2015, State said it had created some new file systems and changed some of its audit requirements. State also plans to complete development of new courses emphasizing documentation requirements in the autumn of 2015. As of July 2016, State reported having implemented a new electronic file review system; GAO plans to collect additional information on the use of this new system.
Recommendation: To help ensure that State's grants officials fully implement grants management policies and internal controls that are in place, and that grant funds are used as intended, the Secretary of State should develop processes to help ensure that grants officials complete required documentation for all grants. Such a process could include systematic inspections of grant files, with the results shared among the Office of the Procurement Executive, the appropriate bureaus and missions, and the grants officials themselves, so as to promote accountability.
Agency Affected: Department of State
Comments: The Department of State (State) concurred with our recommendation. After the report was issued, in a letter dated September 25, 2014, State reported several steps it plans to take to address this recommendation. As of June 2015, State said it had followed up with three posts on recommendations from previous reviews, and it had deployed a new system to track the status of recommendations from its internal reviews. In addition, State reported that it had created a new electronic internal control checklist for conducting systematic inspection of files. These initial efforts to follow up on selected recommendations indicate progress. As of July 2016, GAO is working with State to obtain additional information regarding the extent to which follow-up has been conducted in a systematic manner.
Recommendation: In addition, the Secretary of State should follow up systematically on recommendations from State's internal reviews of its grants management.
Agency Affected: Department of State