Single Audit
Survey of CFO Act Agencies Gao ID: GAO-02-376 March 15, 2002The federal government awards $300 billion to state and local governments and nonprofit groups each year. The Single Audit Act promotes sound financial management, including effective internal controls, over these federal awards. Before the act, government relied on audits of individual grants to determine if the money was spent properly. The act replaced these grant audits with a single audit--one audit of an entity as a whole. GAO surveyed the 24 federal agencies subject to the Chief Financial Officers (CFO) Act and found that they have developed processes and assigned responsibilities to meet the requirements of the Single Audit Act. Agencies reported that they are using single audits to monitor compliance with administrative and programs requirements and to determine the adequacy of recipients' internal controls. One or more offices at 22 of the 24 agencies used single audits to monitor compliance with administrative and program requirements in the Circular A-133 Compliance Statement and to monitor recipients' compliance with internal controls. Eleven agencies reported that they routinely use the Federal Audit Clearinghouse database to identify recipients that incurred questionable costs or programs that have significant findings, to identify recipients with recurring findings, or to study subrecipient findings. Individuals at four agencies were unaware of the database or how to use it. Agencies that do not use the database rely on the Federal Audit Clearinghouse to send them the single audit report, which they review for information on their programs.
GAO-02-376, Single Audit: Survey of CFO Act Agencies
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United States General Accounting Office:
GAO:
Report to the Subcommittee on Government Efficiency, Financial
Management and Intergovernmental Relations, Committee on Government
Reform, House of Representatives:
March 2002:
Single Audit:
Survey of CFO Act Agencies:
GA0-02-376:
Contents:
Letter:
Results in Brief:
Objectives, Scope, and Methodology:
Background:
Single Audit Processes in Place but Use of Results Varies
Significantly among Agencies:
Appendixes:
Appendix I: Agencies Subject to the Chief Financial Officers Act:
Appendix II: Briefing on Results of Survey on CFO Act Agency Use of
Single Audits:
Appendix III: OMB Circular A-133 Compliance Supplement Requirements:
Abbreviations:
CFO: chief financial officer:
CFO Act: Chief Financial Officers Act:
FAC: Federal Audit Clearinghouse:
IG: inspector general:
OIG: Office of Inspector General:
OMB: Office of Management and Budget:
QCR: quality control reviews:
[End of section]
United States General Accounting Office:
Washington, D.C. 20548:
March 15, 2002:
The Honorable Stephen Horn:
Chairman:
Subcommittee on Government Efficiency, Financial Management and
Intergovernmental Relations:
Committee on Government Reform:
House of Representatives:
The auditing of more than $300 billion a year in federal awards
administered by state and local governments and nonprofit
organizations is a critical element in the federal government's
ability to ensure that these federal funds are properly used. The
Single Audit Act, as amended, is intended to promote sound financial
management, including effective internal controls over these federal
awards. Before passage of the act, the federal government relied on
audits of individual grants to help gain assurance that state and
local governments and nonprofit organizations were properly spending
federal awards. The concept of the single audit was created to replace
these grant audits with one audit of an entity as a whole. Rather than
a detailed review of individual grants or programs, often times by
multiple audit organizations where there was more than one federal
funding source, the single audit is an organizationwide audit that
focuses on accounting and administrative controls.
Single audits, as implemented by Office of Management and Budget (OMB)
Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations, provide a tool that federal agencies can use to
identify meaningful information on entities' financial status, their
management of federal funds, and areas that need further audit or
investigative work. Each year, about 30,000 single audits are
conducted, and several thousand of them identify weaknesses in award
recipients' financial management and internal control systems relating
to these federally funded programs.
On February 19, 2002, we briefed you on the results of the initial
phase of the work done in response to your request for information on
how federal agencies use single audit results. As agreed with your
office, this report summarizes the matters discussed during that
briefing. To assess how agencies are using the results of single
audits, we conducted a survey of the 24 agencies subject to the Chief
Financial Officers (CFO) Act. (See appendix I for a list of the CFO
Act agencies.) The objectives of the survey were to capture
information on federal agency:
* single audit processes and responsibilities,
* use of single audits, and,
* use of the Federal Audit Clearinghouse (FAC) database.
The briefing materials we used are included as appendix II to this
letter. Work is underway on the remaining segment of your request
dealing with what several agencies are doing to assure that recipients
of federal awards have corrected problems identified by single audits.
Results in Brief:
Our survey results indicated that the CFO Act agencies have generally
developed processes and assigned responsibilities to meet their
requirements under the Single Audit Act, as amended. Agencies reported
that they are using single audits to monitor compliance with
administrative and program requirements and the adequacy of
recipients' internal controls and for other purposes. Further,
although federal agencies identified many uses of single audits, they
reported that they are not routinely using the FAC database.
According to our survey of officials in chief financial officer,
inspector general (IG), and program offices at the 24 CFO Act
agencies, agency program offices are primarily responsible for
ensuring the application of the provisions set forth in OMB Circular A-
133. These provisions include providing recipients of federal awards
with information on the award, advising recipients of the requirement
to obtain a single audit, and addressing issues that require
corrective action and audit follow-up. CFO and IG offices are involved
in providing information to auditors performing single audits and in
addressing issues that require corrective action. In addition, Offices
of Inspector General (OIG) perform quality control reviews of selected
single audits to ensure that the audit work performed complies with
auditing standards.
A review of the survey results indicated that one or more offices at
22 of the agencies used single audits as a tool to monitor compliance
with administrative and program requirements addressed in the Circular
A-133 Compliance Supplement and to monitor the adequacy of recipients'
compliance with internal controls. Agencies indicated that they also
used single audit reports:
* as a source of leads for additional audits,
* as a pre-award check to determine how the recipient managed previous
awards,
* to select recipients for program site visits,
* as support for closeout of the award,
* to hold agency program offices accountable for administrative and
program compliance,
* to support the agency's financial statements, and,
* as a source of program information for the agency's performance plan
or annual accountability report.
Further, 11 or fewer of the CFO Act agencies reported that they
routinely use the FAC database to identify recipients that incurred
questioned costs or programs that have significant findings, to
identify recipients with recurring findings, or to study subrecipient
findings. Additionally, in discussions with agency personnel, we
learned that individuals at 4 agencies were unaware of the FAC
database and how it could be used. Those agencies that do not use the
database rely on the FAC to send them the single audit reports and
agency personnel then review the reports for information relating to
their programs.
Objectives, Scope, and Methodology:
To assess how agencies are using the results of single audits, we
conducted a survey of the 24 agencies subject to the CFO Act. We
pretested our survey with one federal agency, solicited comments from
OMB, and modified the survey based on the comments we received. The
survey included two sections. The first section captured background
information on agency federal awards programs, the single audit
process from an agencywide perspective, and the offices within the
agency that are responsible for fulfilling the task of implementing
the various single audit responsibilities defined under OMB Circular A-
133. The second part of the survey captured information on how agency
CFO, IG, and program offices use the results of single audits in each
agency's largest grant program. We distributed the surveys to the
agencies for completion. We then performed follow-up interviews with
representatives from CFO, IG, and program offices to obtain, discuss,
and clarify their survey responses.
Our survey results reflect the information provided by and the
opinions of the agency officials who participated in our survey. We
did not independently verify the responses to our questions. We
received responses from all of the CFO Act agencies. One of the 24
agencies returned but did not complete the survey because it does not
have grant-making authority, and, therefore, has no experience with
single audits. As a result, our survey results are based on responses
from 23 agencies. We conducted our work from July 2001 through
December 2001, in accordance with generally accepted government
auditing standards. We discussed a draft of this report with
representatives from OMB and have incorporated their comments and
views where appropriate.
Background:
According to OMB, federal awards for fiscal year 2001 totaled about
$325 billion of the $1.8 trillion federal budget. The Departments of
Agriculture, Education, Health and Human Services, Housing and Urban
Development, and Transportation were responsible for managing about 86
percent of the federal awards in fiscal year 2001. The Single Audit
Act, as amended, established the concept of the single audit to
replace multiple grant audits with one audit of the recipient as a
whole. As such, a single audit is an organizationwide audit that
focuses on the recipient's internal controls and compliance with laws
and regulations governing federal awards and should be viewed as a
tool that raises relevant or pertinent questions rather than as a
document that answers all questions. Federal awards include grants,
loans, loan guarantees, property, cooperative agreements, interest
subsidies, insurance, food commodities, and direct appropriations and
federal cost reimbursement contracts.
The objectives of the Single Audit Act, as amended, are to:
* promote sound financial management, including effective internal
controls, with respect to federal awards administered by nonfederal
entities;
* establish uniform requirements for audits of federal awards
administered by nonfederal entities;
* promote the efficient and effective use of audit resources;
* reduce burdens on state and local governments, Indian tribes, and
nonprofit organizations; and;
* ensure that federal departments and agencies, to the maximum extent
practicable, rely upon and use audit work done pursuant to the act.
Recipients of federal awards who expend $300,000 or more in a year are
required to comply with the Single Audit Act's requirements. In
general, they must (1) maintain internal control over federal
programs, (2) comply with laws, regulations, and the provisions of
contracts or grant agreements, (3) prepare appropriate financial
statements, including the Schedule of Expenditures of Federal Awards,
(4) ensure that the required audits are properly performed and
submitted when due, and (5) follow up and take corrective actions on
audit findings.
OMB Circular A-133 establishes policies for federal agency use in
implementing the Single Audit Act, as amended, and provides an
administrative foundation for consistent and uniform audit
requirements for nonfederal entities that administer federal awards.
It details federal responsibilities with respect to informing grantees
of their responsibilities under the act. A significant part of OMB
Circular A-133 is the Compliance Supplement. This document serves as a
source of information to aid auditors in understanding federal program
objectives, procedures, and compliance requirements relevant to the
audit, and it identifies audit objectives and suggested procedures for
auditors' use in determining compliance with the requirements. For
example, it includes guidance on audit procedures applicable to 14
areas including allowable activities, allowable costs, cash
management, eligibility, and reporting. (Appendix III lists and
briefly describes the 14 areas.)
Organizations that must comply with the Single Audit Act, as amended,
are required to submit a reporting package to the FAC. The FAC serves
as the central collection point, repository, and distribution center
for single audit reports. Its primary functions are to:
* receive the SF-SAC Form”a data collection form that contains summary
information on the auditor, auditee and its federal programs, and
audit results”and the audit report from the auditee,
* archive copies of the SF-SAC Form and audit report,
* forward a copy of the audit report to each federal awarding agency
that has provided direct funding to the auditee when the report
identifies a finding relating to that agency's awards, and,
* maintain an electronic database that is accessible through the
Internet.
In our June 1994 report, Single Audit: Refinements Can Improve
Usefulness (GAO/AIMD-94-133), nearly two-thirds of the program
managers we interviewed said that a database of single audit
information would be a significant help in comparing information about
entities operating their programs. Eighty percent of the managers said
they would like to use the database to identify all entities operating
their programs that had serious internal control or noncompliance
problems disclosed in single audit reports.
The Single Audit Act Amendments of 1996 led to the establishment of an
automated database of single audit information”the FAC database. OMB
Circular A-133 requires all entities that must submit single audit
reports to the FAC to prepare and submit a data collection form (SF-
SAC Form) with the audit report. The FAC uses this form as the source
of the information for its automated, Internet-accessible[Footnote 1]
database of information contained in single audit reports. The
database contains about 4 years of information on over 30,000 annual
single audit reports. The various data query options available provide
potential users, including program managers, auditors, and other
interested parties, with significant amounts of readily available
information on grant recipient financial management and internal
control systems and on compliance with federal laws and regulations.
Single Audit Processes in Place but Use of Results Varies
Significantly among Agencies:
Our survey results indicated that the CFO Act agencies have generally
developed processes and assigned responsibilities to meet their
requirements under the Single Audit Act, as amended. The CFO, IG, and
program offices perform these activities either individually or in
coordination with each other. Federal agencies indicated that they use
single audit results for many purposes. The most common reported use
was as a tool to monitor auditee compliance with administrative and
program requirements and to monitor the adequacy of internal controls.
Although agencies have identified many uses for the single audit
results, our survey results show that they are generally not using the
FAC automated database to obtain summary information on the audit
results or the entities that are receiving funds under their programs.
Rather, they reported developing their own systems or methods to
obtain information from the reports.
Single Audit Processes and Awarding Agency Responsibilities:
According to our survey results, agency program offices are primarily
responsible for ensuring the application of the provisions set forth
in OMB Circular A-133. For example, in completing the survey, program
office officials indicated that they (1) ensure that award recipients
are given information that describes the federal award, (2) advise
recipients of other applicable award requirements, (3) advise
recipients of the requirement to obtain a single audit when they
expend $300,000 or more in federal awards in a year, (4) ensure that
single audits are completed and the reports are received in a timely
manner, and (5) follow up on issues identified in the reports that
require corrective action. Specifically,
* 20 agency program offices responded that they ensure recipients are
given the information necessary to describe the federal award and
advise recipients of other applicable award information,
* 19 responded that they advise recipients of the requirements to
obtain a single audit when they expend $300,000 or more in federal
awards in a year,
* 19 responded that they follow up on issues that are identified in
the reports that require corrective action,
* 17 responded that they provide information to auditors about the
federal program, and,
* 10 responded that they ensure that single audits are completed and
the reports are received in a timely manner.
Additionally, at some agencies more than one office responded that
they are responsible for the application of the provisions of OMB
Circular A-133.
The FAC distributes single audit reports to each federal awarding
agency that has provided direct funding and for which the report
identifies an audit finding related to an award managed by that
agency. Based on our survey, receipt of single audit reports from the
FAC and distribution of the reports to the applicable agency office is
predominately the responsibility of the OIG. Our results show that 18
OIGs responded that they receive the single audit reports directly
from the FAC and that they distribute them to applicable agency
offices.
Audits provide important information on recipient performance and are
a critical control that agencies can use to help ensure that entities
that receive federal funds use those funds in accordance with program
rules and regulations. Agency OIGs play a key role in this area by
performing quality control reviews (QCR) to ensure that the audit work
performed complies with auditing standards. Our survey results show
that 10 of the CFO Act agency OIGs performed 109 QCRs during fiscal
year 2001, although this total may be overstated since OIGs
occasionally perform joint QCRs and our survey did not capture
information on the number of times this occurred. Although the number
of QCRs performed is small compared to the approximately 30,000 single
audits performed annually, several OIGs conducting QCRs have
identified problems with the audit work performed. For example, 7 OIGs
noted problems with the internal control and/or compliance testing
performed by the auditors, and 3 OIGs reported problems relating to
auditor compliance with generally accepted government auditing
standards.
Audit follow-up is an integral part of good management and is a shared
responsibility of agency management officials and auditors. Corrective
action taken by the recipient on audit findings and recommendations is
essential to improving the effectiveness and efficiency of government
operations. In addition, federal agencies need to ensure that
recipients take timely and effective corrective action. OMB Circular A-
133 notes that audit follow-up is the responsibility of the federal
awarding agency. The Circular requires agencies to issue a management
decision on audit findings within 6 months after receipt of the
recipient's audit report and to ensure that the recipient takes
appropriate and timely corrective action.
Analysis of our survey results indicates that both the IG and program
offices have a role in the audit follow-up process. For example, 15 IG
and 9 program offices responded that they are responsible for
reviewing reports to verify that the report contains agency program-
specific information. When single audit reports do not have enough
information, both IG and program offices indicated that they follow up
with either the recipient or the auditor. Thirteen IG and 14 program
offices stated that they follow up with the recipient, and 13 IG and
10 program offices stated they follow up with the auditor.
Program offices, on the other hand, are responsible for evaluating the
corrective action plans filed by recipients to determine whether they
address the audit findings. Sixteen program offices responded that
they are responsible for evaluating the corrective action plans to
determine whether the issues are valid and what corrective action is
necessary. Furthermore, the program offices at 10 agencies stated that
they rely on subsequent audits to determine whether corrective actions
have been taken.
Agency Uses of Single Audits:
At 22 of the agencies, officials in at least one of the CFO, IG,
and/or program offices responded that they use single audits as a tool
to monitor compliance with administrative and program requirements
addressed in the OMB Circular A-133 Compliance Supplement and to
monitor the adequacy of internal controls. Six agencies reported that
the CFO, IG, and program offices all perform this function. Six
agencies reported that some combination of CFO, IG, and program
offices perform this function. Ten agencies reported that one office
performs the function, and that office varies across the 10 agencies.
The next most frequent uses reported were for identifying leads for
additional audits (18 agencies) and as a preaward check for determining
how recipients managed previous awards (14 agencies). Further, they
reported that the single audit reports are used in preaward checks to
identify findings that may affect the program area of operations and
identify questioned or unallowable costs incurred by the recipient.
The agencies reported that these checks may affect future awards.
Additionally, the survey results indicated that between 6 and 12
agencies use single audit results:
* to identify leads for program office site visits (12 agencies),
* as support for closeout of the award (12 agencies),
* to hold agency program offices accountable for administrative and
program compliance (12 agencies),
* to support the agency's financial statements (10 agencies), and,
* as a source of program information for the agency's performance plan
or annual accountability report (6 agencies).
As can be seen, agencies report using single audits for a number of
purposes. However, between 1 and 8 agencies indicated that, for
several reasons, they did not use the reports for some or all of these
purposes. When asked why they did not use single audit reports,
several agencies noted that their programs were too small to be
covered in the scope of an audit performed under the Single Audit Act.
For example, the Single Audit Act requires auditors to use combined
expenditure and risk-based criteria to determine which programs to
include in the scope of a single audit. Since the expenditure portion
of the criteria identifies awards with large-dollar expenditures,
agencies whose programs do not meet this criteria are less likely to
have their programs audited during a single audit. Additionally,
agencies said the single audit reports did not provide relevant
information for specific purposes such as support for the agency
financial statements or holding federal program offices accountable
for administrative and program compliance. Other reasons provided for
not using single audit reports include limited staff resources and
competing priorities.
Federal Audit Clearinghouse Database Usage:
Our survey results indicate that 11 agencies routinely use the FAC
database and that usage is distributed among the CFO, IG, and program
offices. For example, the 11 agencies indicated that they use the
database to identify recipients that have incurred questioned costs,
have made improper payments, or both. In addition, 8 agencies noted
that they use the database to determine whether large-dollar or
complex programs have significant findings such as adverse opinions on
recipient compliance with program laws and regulations. Survey
respondents also indicated that they use the FAC database to perform
other tasks, such as:
* tracking the status of audit-finding resolution,
* determining whether the recipient has filed its single audit report,
* a source for audit leads,
* identifying trends between recipients, and,
* verifying the accuracy of the Schedule of Expenditures of Federal
Awards.
Those agencies that do not use the database reported that they rely on
the FAC to send them the single audit reports and that they review the
hard copy reports to obtain information on the agency's programs
instead of the database.
In discussions with personnel at 4 agencies, we learned that they were
unfamiliar with the FAC database and how it could be used. These
officials did express interest in using the database and inquired
about the availability of training.
We are sending copies of this report to the ranking minority member,
Subcommittee on Government Efficiency, Financial Management and
Intergovernmental Relations, House Committee on Government Reform; the
chairman and ranking minority member, Senate Committee on
Appropriations; the chairman and ranking minority member, House
Committee on Appropriations; the chairman and ranking minority member,
Senate Committee on Governmental Affairs; the chairman and ranking
minority member, House Committee on Government Reform; the chairman
and ranking minority member, Senate Budget Committee; and the chairman
and ranking minority member, House Budget Committee. We are also
sending copies of this report to the director of the Office of
Management and Budget and the agency CFOs and IGs. Copies of this
report will be made available to others upon request. This report will
also be available on GAO's home page [hyperlink, http://www.gao.gov].
Please call me at (213) 830-1065 or Tom Broderick, Assistant Director,
at (202) 512-8705 if you or your staff have any questions about the
information in this report. Key contributors to this report were Cary
Chappell, Mary Ellen Chervenic, Valerie Freeman, Stuart Kaufman, and
Gloria Hernandez-Saunders.
Sincerely yours,
Signed by:
Sally E. Thompson:
Director, Financial Management and Assurance:
[End of section]
Appendix I: Agencies Subject to the Chief Financial Officers Act:
Department of Agriculture:
Department of Commerce:
Department of Defense:
Department of Education:
Department of Energy:
Department of Health and Human Services:
Department of Housing and Urban Development:
Department of the Interior:
Department of Justice:
Department of Labor:
Department of State:
Department of Transportation:
Department of the Treasury:
Department of Veterans Affairs:
Agency for International Development:
Environmental Protection Agency:
Federal Emergency Management Agency:
General Services Administration:
National Aeronautics and Space Administration:
National Science Foundation:
Nuclear Regulatory Commission:
Office of Personnel Management:
Small Business Administration:
Social Security Administration:
[End of Appendix I]
Appendix II: Briefing on Results of Survey on CFO Act Agency Use of
Single Audits:
Results of Survey on CFO Act Agency Use of Single Audits:
Briefing for Committee Staff:
Subcommittee on Government Efficiency, Financial Management and
Intergovernmental Relations Committee on Government Reform:
House of Representatives:
Briefing Section I: Overview:
Recipients of Federal Awards:
According to Office of Management and Budget (OMB) figures, federal
awards for fiscal year 2001 totaled $325 billion of the $1.8 trillion
budget. This assistance includes grants, loans, loan guarantees,
property, cooperative agreements, interest subsidies, insurance, food
commodities, and direct appropriations and federal cost reimbursement
contracts.[Footnote 2]
Figure: Recipients of Federal Awards (Fiscal Year 2001):
[Refer to PDF for image: pie-chart]
States: 78%;
Local governments: 8%;
Universities: 7%;
Nonprofit organizations: 4%;
For profit entities: 1%;
Tribes: 1%;
Other: 1%.
Total: $325 Billion.
[End of figure]
Fiscal Year 2001 Grants by Agency to State and Local Governments:
According to OMB figures, the Department of Health and Human Services
is responsible for managing 54 percent of the $325 billion in federal
awards provided during fiscal year 2001. The Departments of
Transportation, Housing and Urban Development, Education, and
Agriculture are responsible for managing an additional 32 percent of
federal awards.
FY 2001 Grants by Agency to State and Local Governments:
Department of Health and Human Services: $174.7 billion;
Department of Transportation: $34.3 billion;
Department of Housing and Urban Development: $26.2 billion;
Department of Education: $23.5 billion;
Department of Agriculture: $20.4 billion;
Department of Labor: $8.7 billion;
Department of Justice: $6.4 billion;
Environmental Protection Agency: $3.6 billion;
Department of the Interior: $2.2 billion;
Federal Emergency Management Agency: $2.1 billion;
Department of Commerce: $0.7 billion;
Department of the Treasury: $0.5 billion;
Department of Veterans Affairs: $0.4 billion.
Top Ten Programs for Fiscal Year 2001:
According to OMB figures, the Department of Health and Human Services
managed 5 of the top 10 federal awards programs in fiscal year 2001.
These programs are:
* Medicaid,
* Temporary Assistance for Needy Families,
* Head Start,
* Foster Care, and,
* Child Support Enforcement.
Top Ten Programs, FY 2001:
Medicaid: $116 billion;
Highway Planning and Construction: $28 billion;
Temporary Assistance for Needy Families: $19 billion;
Title I - Education: $8 billion;
National School Lunch Program: $6 billion;
Work Force Investment Act: $5 billion;
Head Start: $5 billion;
Special Education - States: $5 billion;
Foster Care: $4 billion;
Child Support Enforcement: $4 billion;
Total: $200 billion.
Briefing Section II: Single Audit Processes and Awarding Agency
Responsibilities:
Organizations Performing Selected A-133 Responsibilities:
According to our survey results, agency program offices are primarily
responsible for ensuring the application of the provisions set forth
in OMB Circular A-133, Audits of States, Local Governments, and Non-
Profit Organizations. For example, 20 agency program offices responded
that they ensure that recipients are given the information necessary
to describe the federal award and advise recipients of other
applicable award information. Nineteen responded that they advise
recipients of the requirement to obtain a single audit when they
expend $300,000 or more in federal awards in a year, 19 responded that
they follow up on issues that are identified in the reports that
require corrective action, 17 responded that they provide information
to auditors about the federal program, and 10 responded that they
ensure that single audits are completed and that the reports are
received in a timely manner. Additionally, at some agencies more than
one office responded that they are responsible for the application of
the provisions of OMB Circular A-133. For example, the chief financial
officer (CFO) and inspector general (IG) offices are involved in
providing information to auditors performing single audits and in
addressing issues that require corrective action.
While the majority of agencies hold program offices responsible for
such tasks, 3 agencies established a separate function within the
CFO's office to ensure proper oversight of federal awards. While these
agencies award relatively small amounts of federal money, they felt it
was important to maintain proper oversight.
Agencies responded that the primary way they promote compliance with
OMB Circular A-133 is by mandating it in regulations, agency policy
directives, or guidance on grants administration, and by including it
in the grant award document.
Table: Organizations Performing Selected A-133 Responsibilities:
Responsibility: Provide recipients the information necessary to
describe the federal award;
CFO: 4;
OIG: 0;
Program: 20;
Not performed: 1.
Responsibility: Advise recipients of other applicable award
requirements and provide information as requested;
CFO: 4;
OIG: 3;
Program: 20;
Not performed: 0.
Responsibility: Advise recipients of the requirement to obtain a
single audit when they expend $300,000 or more in federal awards in a
year;
CFO: 4;
OIG: 0;
Program: 19;
Not performed: 2.
Responsibility: Address issues that are identified in single audit
reports that require corrective action;
CFO: 6;
OIG: 12;
Program: 19;
Not performed: 0.
Responsibility: Provide information to auditors on agency programs as
requested;
CFO: 7;
OIG: 11;
Program: 17;
Not performed: 0.
Responsibility: Ensure single audits are completed and reports are
received in a timely manner;
CFO: 6;
OIG: 6;
Program: 10;
Not performed: 6.
Note: Rows do not add across to total agencies because we received
responses from multiple offices within an agency.
[End of table]
Organizations Performing Selected A-133 Responsibilities:
OMB Circular A-133 requires the Federal Audit Clearinghouse (FAC) to
distribute single audit reports to the federal agencies. The FAC
distributes reports to each federal agency that provides federal
awards and for which the report identifies an audit finding related to
an award managed by that agency. Based upon our survey, receipt of
single audit reports from the FAC and distribution of the reports
within the agency are predominately Office of Inspector General (OIG)
responsibilities. Our results show that 18 OIGs receive the single
audit reports directly from the FAC and distribute them to applicable
agency offices.
Under OMB Circular A-133, federal award recipients are assigned either
a cognizant agency for audit or an oversight agency for audit,
depending on the amount of federal awards they expend.[Footnote 3] The
agency that provides the predominant amount of direct funding to a
recipient is responsible for carrying out the functions of the
cognizant or oversight agency, unless OMB makes a specific cognizant
agency for audit assignment. The cognizant agency for audit is
required to conduct quality control reviews (QCR) of selected audits
made by nonfederal auditors.
Table: Organizations Performing Selected A-133 Responsibilities:
Responsibility: Receive single audit reports from the FAC;
CFO: 6;
OIG: 18;
Program: 5;
Not performed: 1.
Responsibility: Distribute single audit reports to the applicable
agency office;
CFO: 4;
OIG: 18;
Program: 6;
Not performed: 1.
Responsibility: Obtain or conduct QCRs of selected audits made by
nonfederal auditors, and provide the results, when appropriate, to
other interested organizations;
CFO: [Empty];
OIG: 10;
Program: [Empty];
Not performed: 13.
Note: Rows do not add across to total agencies because we received
responses from multiple offices within an agency.
[End of table]
Single Audit Follow-up Process:
Analysis of our survey results indicates that both the IG and program
offices are responsible for the audit follow-up process. For example,
15 IG and 9 program offices responded that they are responsible for
reviewing reports to verify that the report contains agency program-
specific information. When single audit reports do not have enough
information, both IG and program offices follow up with either the
recipients or the auditor. Thirteen IG and 14 program offices stated
they follow up with the recipient, and 13 IG and 10 program offices
stated that they follow up with the auditor.
Program offices, on the other hand, are responsible for evaluating the
corrective action plans filed by recipients to determine whether they
address the audit findings. As shown on the accompanying slide, 16
program offices responded that they are responsible for evaluating the
corrective action plans to determine their validity. Furthermore, the
program offices at 10 agencies stated that they rely on subsequent
audits to determine if corrective actions have been taken.
To facilitate follow-up procedures, automated or manual audit tracking
systems are necessary. The results of our interviews show that most
agencies use a tracking system to track single audit findings.
Table: Single Audit Follow-up Process:
Steps in the Single Audit Follow-up Process: Which offices, if any,
review reports to verify that the report contains information about a
specific agency program?
CFO: 5;
OIG: 15;
Program office: 9;
Not performed: 2.
Steps in the Single Audit Follow-up Process: Which offices, if any,
seek additional information from the audited recipient when reports do
not have enough information?
CFO: 5;
OIG: 13;
Program office: 14;
Not performed: 2.
Steps in the Single Audit Follow-up Process: Which offices, if any,
seek additional information from the auditor when reports do not have
enough information?
CFO: 5;
OIG: 13;
Program office: 10;
Not performed: 2.
Steps in the Single Audit Follow-up Process: Which offices, if any,
evaluate the issues and the corrective action plan prepared by the
recipient to determine whether the issues are valid and what
corrective action is necessary?
CFO: 5;
OIG: 9;
Program office: 16;
Not performed: 1.
Steps in the Single Audit Follow-up Process: Which offices, if any,
reconcile with the list of audit reports sent to appropriate offices
to assure that follow-up was completed?
CFO: 7;
OIG: 10;
Program office: 6;
Not performed: 7.
Steps in the Single Audit Follow-up Process: Which offices, if any,
rely on the auditor performing the subsequent audit to determine
whether issues requiring corrective action have been corrected?
CFO: 5;
OIG: 9;
Program office: 10;
Not performed: 4.
Note: Rows do not add across to total agencies because we received
responses from multiple offices within an agency.
[End of table]
Briefing Section III: How Agencies Use Single Audits:
Agency Uses of Single Audits:
Review of the surveys indicated that one or more offices at 22
agencies use single audits as a tool to monitor compliance with
administrative and program requirements and to monitor the adequacy of
recipients' compliance with internal controls. Five agencies reported
that the CFO, IG, and program offices all perform these functions. Six
agencies reported that some combination of CFO, IG, and program
offices perform them and 11 agencies reported that one office performs
this function.
Our results also indicate that many agency personnel read all single
audit reports they receive to identify noncompliance with program
requirements or inadequacy of internal controls.
Table: Uses of Single Audits by Agency Offices:
As a tool to monitor compliance with administrative and program
requirements addressed in the OMB Circular A-133 Compliance Supplement:
Agencies: 22;
CFO: 9;
OIG: 13;
Program: 14.
As a tool to monitor the adequacy of recipients' compliance with
internal controls:
Agencies: 22;
CFO: 9;
OIG: 12;
Program: 14.
Note: Rows do not add across to total agencies because we received
responses from multiple offices within an agency.
[End of table]
Single-audit-report leads for follow-on work can come from a review of
the entity's financial statements or the auditor's findings. Further,
while single audit report findings are supposed to be corrected by the
entities, some findings may indicate problems that need further
investigation to be fully understood and effectively resolved. Thus,
information from single audit reports may indicate the possible need
for follow-on audits or additional review and analysis by program
officials or both.
Eighteen agencies responded that they use single audits as a source of
leads for additional audits. Fourteen agencies said they use single
audits as a preaward check to determine how the recipient managed
previous awards. These agencies responded that single audit reports
are used in preaward checks to identify:
* findings that may affect the program area of operations,
* questioned or unallowable costs incurred by the recipient, and,
* findings that may affect future awards.
Program officials at 12 agencies responded that single audits are used
as a source of leads to select recipients for program site visits.
Twelve agencies said they used single audit reports as support for
award closeout.
Agency Uses of Single Audits:
As a source of leads for additional audits: 18 agencies;
As a preaward check to determine how the recipient managed previous
awards: 14 agencies;
As a source of leads to select recipients for program site visits: 12
agencies;
As support for closeout of the award: 12 agencies.
Survey results indicate that 12 of the 24 CFO agencies use single
audit results to hold agency program offices accountable for
administrative and program compliance. Ten agencies responded that
they use single audit reports to support the agency's financial
statements. Six agencies responded that they used the results of
single audits as a source of program information for the agency's
performance plan or annual accountability report.
Agency Uses of Single Audits:
To hold agency program offices accountable for administrative and
program compliance: 12 agencies;
To support the agency's financial statements: 10 agencies;
As a source of program information for the agency's performance plan
or annual accountability report: 6 agencies.
Why Agencies Do Not Use Single Audit Reports:
As indicated in the preceding slides, agencies use single audits for a
number of purposes. However, between 1 and 8 agencies indicated that,
for several reasons, they did not use the reports for these purposes.
When asked why they did not use single audit reports for a particular
purpose, between 4 and 8 agencies noted that their programs were too
small to be covered by the Single Audit Act. For example, the Single
Audit Act requires auditors to use combined expenditure and risk-based
criteria to determine which programs to include in the scope of a
single audit. Since the expenditure portion of the criteria identifies
awards with large-dollar expenditures, agencies whose programs do not
meet this criteria are less likely to have their programs audited
during a single audit. Additionally, between 2 and 8 agencies said
that the single audit reports did not provide relevant information for
specific uses. Other reasons provided for not using single audit
reports included limited staff resources (2 to 5 agencies), and
competing priorities (1 to 3 agencies).
Table: Why Agencies Do Not Use Single Audit Reports:
Uses: to support the agency's financial statements;
Agency programs are too small to be covered by the Single Audit Act: 6;
Audit reports do not provide relevant information: 7;
Limited staff resources: 4;
Competing priorities: 2;
Uses: as a source of program information for the agency's performance
plan or annual accountability report;
Agency programs are too small to be covered by the Single Audit Act: 7;
Audit reports do not provide relevant information: 5;
Limited staff resources: 3;
Competing priorities: 3.
Uses: to hold federal program offices accountable for administrative
and program compliance;
Agency programs are too small to be covered by the Single Audit Act: 8;
Audit reports do not provide relevant information: 8;
Limited staff resources: 5;
Competing priorities: 3.
Uses: as a preaward check to determine how the recipient managed
previous awards;
Agency programs are too small to be covered by the Single Audit Act: 6;
Audit reports do not provide relevant information: 2;
Limited staff resources: 2;
Competing priorities: 1.
Uses: as a source for additional audits;
Agency programs are too small to be covered by the Single Audit Act: 5;
Audit reports do not provide relevant information: 4;
Limited staff resources: 5;
Competing priorities: 3.
Uses: as a source of leads to select recipients for program site
visits;
Agency programs are too small to be covered by the Single Audit Act: 5;
Audit reports do not provide relevant information: 4;
Limited staff resources: 3;
Competing priorities: 2.
Uses: as support for closeout of the award;
Agency programs are too small to be covered by the Single Audit Act: 4;
Audit reports do not provide relevant information: 3;
Limited staff resources: 2;
Competing priorities: 2.
[End of table]
Briefing Section IV: Use of Federal Audit Clearinghouse Database:
Uses of Federal Audit Clearinghouse Database:
Our survey results indicate that 11 agencies routinely use the FAC
database and that usage is distributed among the CFO, IG, and program
offices. For example, 11 agencies indicated that they use the database
to identify recipients that have incurred questioned costs, have made
improper payments, or both. In addition, 8 agencies noted that they
use the database to determine whether large-dollar or complex programs
have significant findings such as adverse opinions on recipient
compliance with program laws and regulations. Survey respondents also
indicated that they use the FAC database to perform other tasks, such
as:
* tracking the status of audit-finding resolution,
* determining whether the recipient has filed its single audit report,
* a source for audit leads,
* identifying trends between recipients, and,
* verifying the accuracy of the Schedule of Expenditures of Federal
Awards.
Those agencies that do not use the database rely on the FAC to send
them the single audit reports and review the reports to obtain
information on the agency's programs instead of using the database to
obtain such information.
In discussions with agency personnel at four agencies, we learned that
they were unfamiliar with the FAC and how it could be used. These
officials did express interest in using the database and inquired
about the availability of training.
Table: Uses of Federal Audit Clearinghouse Database:
Uses: to determine whether multiple agency programs have similar audit
issues called "finding categories";
Agencies: 6;
CFO: 3;
OIG: 5;
Program: 2.
Uses: to identify recipients that have incurred questioned costs, made
improper payments, or both;
Agencies: 11;
CFO: 4;
OIG: 6;
Program: 5.
Uses: to determine how many recipients have recurring findings;
Agencies: 6;
CFO: 3;
OIG: 2;
Program: 3.
Uses: to determine whether large-dollar or complex programs have
significant findings such as adverse opinions on recipient compliance
with program laws and regulations;
Agencies: 8;
CFO: 3;
OIG: 3;
Program: 4.
Uses: to study the findings of subrecipients (A subrecipient is a
nonfederal entity that expends federal awards received from a pass-
through entity to carry out federal programs);
Agencies: 6;
CFO: 2;
OIG: 4;
Program: 3.
Note: Rows do not add across to total agencies because we received
responses from multiple offices within an agency.
[End of table]
[End of Appendix II]
Appendix III: OMB Circular A-133 Compliance Supplement Requirements:
Presented below are the 14 types of compliance requirements that the
auditor shall consider in every audit conducted under OMB Circular A-
133.
Compliance requirement: Activities allowed or unallowed;
Description: Activities allowed or unallowed are unique to each
federal program and are found in the laws and regulations and the
provisions of the contract or grant agreements pertaining to the
program.
Compliance requirement: Allowable costs/cost principles:
Description: OMB Circulars A-87, Cost Principles for State, Local and
Indian Tribal Governments; A-21, Cost Principles for Educational
Institutions; and A-122, Cost Principles for Non-Profit Organizations
prescribe the cost accounting policies associated with the
administration of federal awards managed by states, local governments,
Indian tribal governments, educational institutions, and nonprofit
organizations.
Compliance requirement: Cash management:
Description: Requires that recipients follow procedures to minimize
the time elapsing between the transfer of funds from the U.S. Treasury
and payment by the recipient.
Compliance requirement: Davis-Bacon Act:
Description: Requires that all laborers and mechanics employed to work
on construction projects over $2,000 financed by federal assistance
funds be paid prevailing wage rates.
Compliance requirement: Eligibility:
Description: The specific requirements for eligibility are unique to
each federal program and are found in the laws and regulations and the
provisions of the contract or grant agreements pertaining to the
program.
Compliance requirement: Equipment and real property management:
Description: Requires real property acquired by nonfederal entities
with federal award funds be used for the originally authorized purpose
and may not be disposed of without prior consent of the awarding
agency.
Compliance requirement: Matching, level of effort, earmarking:
Description: The specific requirements for matching, level of effort,
and earmarking are unique to each federal program and are found in the
laws and regulations and the provisions of the contract or grant
agreements pertaining to the program.
Compliance requirement: Period of availability of federal funds:
Description: Where applicable, federal awards may specify a time
period during which the nonfederal entity may use the federal funds. A
nonfederal entity may charge to the award only costs resulting from
obligations incurred during the funding period and any preaward costs
authorized by the awarding agency.
Compliance requirement: Procurement and suspension and debarment:
Description: Nonfederal entities are prohibited from contracting with
or making subawards to parties that are suspended or debarred from
contracting with the federal government.
Compliance requirement: Program income:
Description: Requires that program income be deducted from program
outlays unless otherwise specified in agency regulations or the terms
and conditions of the award.
Compliance requirement: Real property acquisition and relocation
assistance:
Description: Requires that the provisions specified in the Uniform
Relocation Assistance and Real Property Acquisition Policies Act of
1970, as amended, are adhered to when persons are displaced from their
homes, businesses, or farms by federally assisted programs.
Compliance requirement: Reporting:
Description: Requires that each recipient report program outlays and
program income on a cash or accrual basis, as prescribed by the
awarding agency.
Compliance requirement: Subrecipient monitoring:
Description: Requires that pass-through entities monitor
subrecipients. Monitoring activities may include reviewing reports
submitted by subrecipients, performing site visits, reviewing the
subrecipients single audit results, and evaluating audit findings and
the corrective action plan.
Compliance requirement: Special tests and provisions:
Description: Special tests and provisions are unique to each federal
program and are found in the laws and regulations and the provisions
of the contract or grant agreements pertaining to the program.
[End of Appendix III]
Footnotes:
[1] The Web address for the FAC database is [hyperlink,
http://harvester.census.gov/sac].
[2] The Single Audit Act Amendments of 1996 added federal cost
reimbursement contracts and added the term federal awards to reflect
the inclusion of nonprofit organizations, which often receive much of
their funding through cost reimbursement contracts for research and
development activities.
[3] Recipients that expend more than $25 million a year in federal
awards shall have a cognizant agency for audit.
[End of section]
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