Quality Testing of Audits of Grantees' Records--How It Is Done by Selected Federal Agencies and What Improvements Are Needed

Federal grantmaking agencies are responsible for seeing that grant funds are spent for authorized purposes. Audits of grantees' records are one of the principal methods of carrying out this responsibility. Federal agencies that rely on audits by State and local auditors and independent accountants are responsible for seeing that the audits are performed in accordance with applicable standards and audit guidelines provided by the agency. It is important that the agencies examine the audit work because the audits are one of the principal bases the agencies have to see that grantees have properly handled their Federal funds. The quality assurance programs were reviewed for the following three agencies: the Department of Health, Education, and Welfare (HEW); the Department of Commerce; and the Community Services Administration.

In general, it was noted that the audit examinations did not identify low quality work. For instance, in 12 audits that had been through the agencies' review process, it was found that 8 lacked one or more attributes necessary for a quality job. The three agencies relied principally on a desk review to detect weaknesses in audit work, and the agencies did not review records of the grantees in order to check the accuracy of some of the audit work by independent accountants. Since the review by GAO disclosed errors not detected by the agencies, it was concluded that the examinations by the agencies were too superficial. It was felt by the agencies that a shortage of Federal audit staff contributed significantly to their problems in conducting quality testing.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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