HEW Auditing Process and Accountability of Colleges and Universities for Fiscal Management of Federal Grant and Contract Research Funds

Effective October 1979, the Office of Management and Budget established principles for determining costs applicable to grants and contracts with educational institutions. Each year the Federal Government provides financial support to over 2500 institutions of higher education in the form of grants and contracts for research and development, facilities and equipment, fellowships and traineeships, and general support. Under a cross-servicing arrangement, the Department of Health, Education, and Welfare (HEW) is responsible for auditing Federal funds provided to almost all of the 2,500 institutions and for providing the results of these audits to funding agencies. GAO evaluated the results of the audits made during fiscal years 1974 through 1976 at 20 institutions that received over $3.7 billion of Federal support. Although HEW devotes a substantial portion of its auditing resources to auditing Federal funds administered by institutions of higher education, GAO concluded that some of the audits were not effective because: they were not timely; the auditors in some cases could not, because of an inadequate university accounting system, render an opinion on the allowability of costs charged to Federal grants and contracts; and characteristics of a quality audit with respect to scope of coverage, sufficiency of evidence, completeness of reporting, and supervision of staff were lacking in some instances.