Single Audits: Improvements Needed in Selected Agencies' Oversight of Federal Awards
GAO-17-159
Published: Feb 16, 2017. Publicly Released: Feb 16, 2017.
Skip to Highlights
Highlights
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
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.
Recommendations
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.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Agriculture |
Priority Rec.
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. |
U.S. Department of Agriculture's (USDA) Food and Nutrition Service (FNS) neither agreed nor disagreed with our recommendation. We issued this recommendation to USDA because FNS's policies and procedures were not adequately designed to (1) identify award recipients that should have submitted single audit reports; (2) verify that award recipients that were required to submit single audit reports did so; (3) determine whether award recipients that were required to submit single audit reports did so within the required time frames; and (4) take action to obtain single audit reports when award recipients did not submit the reports within the required time frames. In April 2022, FNS provided... us its Single Audit Standard Operating Procedure (SOP) dated April 2022 to show the corrective actions taken to date to address this recommendation. In its SOP, FNS indicated that it developed a process to ensure that audits are completed and reports are received in a timely manner. This process includes FNS Regional Offices checking on a regular basis (i.e., at least every two weeks) to identify Single Audit reports that have been uploaded and accepted into the Federal Audit Clearinghouse and to notify the Office of Internal Controls, Audits, and Investigations if issues are identified regarding receipt of required audit reports. We believe that FNS's April 2022 SOP demonstrates that FNS has designed policies and procedures that address the recommendation. Therefore, we consider this recommendation to be closed-implemented.
View More |
| Department of Agriculture |
Priority Rec.
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. |
U.S. Department of Agriculture's (USDA) Food and Nutrition Service (FNS) neither agreed nor disagreed with this recommendation. We issued this recommendation to USDA because FNS did not adequately design policies and procedures to reasonably assure that it prepared management decisions with the required content for each single audit finding and issue such management decisions within 6 months of receipt of the single audit reports, as required by the Office of Management and Budget (OMB) guidance. In April 2022, FNS provided us its Single Audit Standard Operating Procedure (SOP) dated April 2022 to show the corrective actions taken to date to address this recommendation. We reviewed FNS's...
|
| Department of Agriculture | 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. | U.S. Department of Agriculture's (USDA) Food and Nutrition Service (FNS) neither agreed nor disagreed with our recommendation. We issued this recommendation to USDA because FNS's standard operating procedures did not include a risk-based approach to identify and manage high-risk and recurring single audit findings. In April 2022, FNS provided us its Single Audit Standard Operating Procedure (SOP) dated April 2022 to show the corrective actions taken to date to address this recommendation. We reviewed FNSs SOP and found that it includes procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach. In its SOP, FNS developed specific...
|
| Department of Agriculture |
Priority Rec.
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. |
U.S. Department of Agriculture's (USDA) Rural Development (RD) concurred with our recommendation. We issued this recommendation to USDA because RD's policies and procedures were not adequately designed to (1) identify award recipients that should have submitted single audit reports; (2) verify that award recipients that were required to submit single audit reports did so; (3) determine whether award recipients that were required to submit single audit reports did so within the required time frames; and (4) take action to obtain single audit reports when award recipients did not submit the reports within the required time frames. In September 2021, RD provided us its Single Audit Standard...
|
| Department of Agriculture |
Priority Rec.
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. |
U.S. Department of Agriculture's (USDA) Rural Development (RD) concurred with our recommendation. We issued this recommendation to USDA because RD did not adequately design policies and procedures to reasonably assure that it prepared management decisions with the required content for each single audit finding and issued such management decisions within 6 months of receipt of the single audit reports, as required by the Office of Management and Budget (OMB) guidance. In September 2021, RD provided us its Single Audit Standard Operating Procedure (SOP) dated June 30, 2021 to show the corrective actions taken to date to address the recommendation. We asked RD to clarify and provide support...
|
| Department of Agriculture | 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. | U.S. Department of Agriculture's (USDA) Rural Development (RD) concurred with our recommendation. We issued this recommendation to USDA because RD's standard operating procedures did not include a risk-based approach so that state offices or program areas can identify and manage the single audit findings that could pose a greater risk to the program's objectives or increase the risk of fraud, waste, or abuse of federal funds. In September 2021, RD provided us its Single Audit Standard Operating Procedure (SOP) dated June 30, 2021 to show the corrective actions taken to date to address the recommendation. We asked RD to clarify and provide support that shows this SOP is finalized and is...
|
| Department of Health and Human Services | 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. |
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.
|
| Department of Health and Human Services |
Priority Rec.
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. |
The Department of Health and Human Services (HHS) concurred with our recommendation. In February 2020, HHS provided us its revised Single Audit Resolution Standard Operating Procedure (SOP) dated September 30, 2019, which includes (1) the elements required by the Office of Management and Budget's (OMB) Uniform Guidance and stating that these elements must be included in the management decision letter (MDL); (2) the requirement that MDLs must be issued within 6 months of the single audit report's acceptance into the Federal Audit Clearinghouse; (3) an optional MDL template which staff may use as a guide; and (4) HHS's new quality control process that describes the steps for HHS's...
|
| Department of Health and Human Services | 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. | The Department of Health and Human Services (HHS) concurred with this recommendation to the Assistant Secretary for Financial Resources. In fiscal year 2020, HHS provided us documentation to show that HHS has addressed the recommendation. We have reviewed HHS's Audit Resolution Standard Operating Procedure (SOP) (dated September 30, 2019) and verified that HHS revised its Audit Resolution SOP to include a risk-based approach for identifying and managing high-risk and recurring single audit findings. The Audit Resolution SOP includes steps for HHS staff to follow when conducting risk reviews of single audit findings and reports in order to focus and tailor their audit resolution...
|
| Department of Health and Human Services |
Priority Rec.
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. |
The Department of Health and Human Services (HHS) concurred with this recommendation to the Centers for Medicare and Medicaid Services (CMS). In fiscal year 2018, HHS informed us that the CMS Audit Management Division (AMD) released an audit alert to the Single Audit coordinators, which included the Single Audit General Policy Standard Operating Procedure (SOP) with an effective date of January 1, 2018. We have reviewed HHS's CMS SOP effective January 1, 2018, and verified that the SOP includes provisions for following up with entities that have delinquent audits. Per the SOP, the follow up activities include CMS (1) sending email stating the issue and requesting status to all awardee...
|
| Department of Health and Human Services |
Priority Rec.
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. |
The Department of Health and Human Services (HHS) concurred with this recommendation to the Centers for Medicare and Medicaid Services (CMS). In fiscal year 2018, HHS informed us that the CMS Audit Management Division (AMD) released an audit alert to the Single Audit coordinators, which included the Single Audit General Policy Standard Operating Procedure (SOP) with an effective date of January 1, 2018, and which also included the Management Decision Letter (MDL) template. We have reviewed HHS's CMS SOP effective January 1, 2018, and verified that the SOP requires HHS's CMS staff to send an MDL that meets the requirements found in 45 CFR 75.521 to the auditee within the 6-month...
|
| Department of Health and Human Services | 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. | The Department of Health and Human Services (HHS) concurred with this recommendation to the Centers for Medicare and Medicaid Services. In fiscal year 2020, HHS provided us documentation to show that HHS has addressed the recommendation. We have reviewed HHS's Audit Resolution Standard Operating Procedure (SOP) (dated September 30, 2019) and verified that HHS revised its Audit Resolution SOP to include a risk-based approach for identifying and managing high-risk and recurring single audit findings. The Audit Resolution SOP includes steps for HHS staff to follow when conducting risk reviews of single audit findings and reports in order to focus and tailor their audit resolution...
|
| Department of Housing and Urban Development |
Priority Rec.
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. |
The GAO recommendation was for the Department of Housing and Urban Development's (HUD) Office of Community Planning and Development (CPD) to revise policies and procedures to reasonably assure that management decisions contain the required elements and are issued timely in accordance with the Office of Management and Budget (OMB) guidance. CPD did not agree with our recommendation and, consequently, did not revise its policies and procedures, which was the intent of the GAO recommendation. Nevertheless, in fiscal year 2017, CPD provided training on writing management decisions and issued a reminder memorandum to CPD staff to comply with Single Audit requirements, including management...
|
| Department of Housing and Urban Development | 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. | The Department of Housing and Urban Development's (HUD) Office of Community Planning and Development (CPD) published new notices in February 2022; and October 2022, which incorporated the specific consideration of grantee Single Audit submissions into CPD's Risk Analysis criteria for all programs. According to CPD's Monitoring Handbook, monitoring review areas and scope should reflect a direct connection to the Risk Analysis results, with review areas identified and monitoring Exhibits selected to address high-risk factors. These actions should help HUD's CPD to recognize emerging and persistent issues related to award recipients' use of funds identified by single audit findings, which...
|
| Department of Housing and Urban Development |
Priority Rec.
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. |
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....
|
| Department of Housing and Urban Development | 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. | The Department of Housing and Urban Development's (HUD) Office of Public and Indian Housing (PIH) neither agreed nor disagreed with this recommendation. In May 2018, PIH stated that it had implemented a Risk Based Approach Tool designed to identify and manage high-risk and recurring single audit findings. The tool was intended to track and focus on audit findings reported as material weaknesses or significant deficiencies and was designed to determine the resources needed and available to assist in mitigating the audit findings. However, in March 2019, PIH informed us that in late 2018, it was working toward repositioning goals, priorities and identification of key risk indicators...
|
| Department of Transportation |
Priority Rec.
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. |
The Department of Transportation (DOT) concurred with this recommendation. In fiscal year 2019, DOT's Federal Highway Administration (FHWA) provided us support to show that FHWA had revised its policies and procedures document for Single Audit compliance (i.e., Financial Integrity Review & Evaluation Toolkit, Chapter 25), updated its Single Audit management decision letter (MDL) template and example, and updated its monitoring activities using its Single Audit Tracking site. We have reviewed and verified that FHWA's policies and procedures document and MDL template contain the required management decision elements, such as a statement indicating whether FHWA agrees with the single audit...
|
| Department of Transportation | 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. | The Department of Transportation (DOT) concurred with this recommendation. In fiscal year 2019, DOT's Federal Highway Administration (FHWA) provided us support to show that FHWA revised its policies and procedures document for Single Audit compliance (i.e., Financial Integrity Review & Evaluation Toolkit, Chapter 25) in response to the recommendation. We have reviewed and verified that DOT's FHWA uses a risk based approach by designating single audit findings as either "priority 1" or "priority 2." In general, DOT's Office of Inspector General categorizes single audit findings with questioned costs or those findings that are on single audit reports where FHWA is the cognizant or...
|
| Department of Transportation |
Priority Rec.
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. |
The Department of Transportation (DOT) concurred with this recommendation. During our meeting with DOT's Federal Transit Administration (FTA) in November 2019, FTA officials indicated that FTA has a master agreement (dated October 1, 2018) which lays out the grant requirements for federal award recipients to follow, including undergoing an annual "Single Audit". As part of its master agreement, FTA requires federal award recipients to certify on an annual basis that they are following the government grant requirements, including performing the required financial and compliance audits in accordance with the Single Audit Act Amendments of 1996 and 2 C.F.R. Part 200, Subpart f, "Audit...
|
| Department of Transportation |
Priority Rec.
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. |
The Department of Transportation (DOT) concurred with this recommendation. In fiscal year 2019, DOT's Federal Transit Administration (FTA) developed its management decision template, tracking system, and Single Audit Management Standard Operating Procedures (SOP) to ensure management decisions contain the required elements and are issued timely. We have reviewed FTA's Single Audit Management Standard Operating Procedures (SOP) and verified that it includes management decisions procedures, including the management decision template, and procedures for FTA's tracking system and verified that the SOP was disseminated to staff in April 2019. We believe DOT's FTA has sufficient policies and...
|
| Department of Transportation | 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. | The Department of Transportation (DOT) concurred with this recommendation. In fiscal year 2019, DOT's Federal Transit Administration (FTA) developed a process for identifying and managing recurring single audit findings using a risk-based approach. In FTA's response memo (dated September 10, 2019), FTA stated that it conducts an annual oversight needs assessment of approximately 600 federal award recipients each year. According to FTA, this assessment examines nine high-risk areas and covers an evaluation of potential risks related to Single Audit findings, including whether a federal award recipient has (1) repeat and/or past due Single Audit findings, (2) a pattern of unsatisfactory...
|
Full Report
GAO Contacts
Public Inquiries
Topics
Audit oversightAudit reportsAwardsAuditing proceduresFinancial managementInternal auditsInternal controlsRegulatory agenciesReporting requirementsFederal awardsPolicies and proceduresSingle audits