Summary
A key provision of the Cash Management Improvement Act (CMIA) of 1990 (P.L. 101-453), as amended, requires the federal government and the states to minimize the time between transfer of federal funds and payments made by states for federal grant program purposes. Concerns were expressed by representatives of local government subgrantees that more flexibility was needed in the receipt of federal funding for first responders. Congress exempted certain first responder grants from this CMIA provision in the Department of Homeland Security's (DHS) fiscal years 2005 and 2006 appropriations acts. Under the exemption, grantees can receive cash advance funding and hold such funds for extended periods of time prior to payment. GAO was asked to (1) assess whether this CMIA provision, prior to its exemption in fiscal year 2005, had prevented DHS grant recipients from receiving first responder grant funds when such funds were needed; and (2) identify any key fiscal and accountability implications of the exemption.
GAO found no substantial evidence that the CMIA provision that limits the extent to which grantees can hold federal funds before making program payments, prior to its exemption for certain first responder grants in fiscal year 2005, prevented first responders from receiving DHS grant funds when such funds were needed. The vast majority of the officials of State Administrative Agencies (SAA) and national associations contacted neither cited the CMIA as a contributing factor to funding delays nor provided information that demonstrated that the CMIA prevented state grantees or local government and other subgrantees from receiving first responder grant funding when such funding was needed. Rather, the officials generally attributed delays in first responder operations to factors other than the CMIA, such as vendor delays in delivering goods and services and problems related to a lack of human resources to deal with the large influx of grant awards after the September 11, 2001, attacks. The information GAO obtained from these officials was consistent with the findings of DHS's Homeland Security Advisory Council's Task Force on State and Local Homeland Security Funding, which found that numerous factors other than the CMIA contributed to funding delays for first responders. According to DHS, as of March 2006, state grantees and local government subgrantees had used the CMIA exemption and DHS's corresponding 120-day cash advance funding provision, which DHS established to implement the CMIA exemption, only to a minimal extent. DHS's Office of Grant Operations is working with SAAs and local government entities to determine the extent to which the CMIA exemption may be used and the impact extensive use could have on DHS. According to a DHS official, extensive use of the CMIA exemption and DHS's 120-day cash advance funding provision could create management oversight difficulties for DHS. Concerns about oversight difficulties are warranted, as DHS currently lacks the policies and procedures to track and report on specific cases of cash advance funding. Such advances are not subject to Treasury's oversight through its administration of the CMIA program. While states' single audits are a tool for oversight, such audits are not designed to replace program management's oversight responsibilities, and GAO found that they may not cover all first responder grants because of the relatively small size of the grants. Importantly, case-by-case cash advance funding can be allowed by Treasury regulations implementing the CMIA and other applicable regulations. Such funding could enable DHS to focus its oversight efforts on grantees and subgrantees that have a demonstrated need for such funding. However, regardless of whether cash advance funding is available under the CMIA exemption and DHS's corresponding 120-day cash advance funding provision, or on a case-by-case basis, proper oversight is critical to ensure that interest due the federal government resulting from cash advance funding is accurately recorded and promptly paid.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Stanley J. Czerwinski
Government Accountability Office: Strategic Issues
(202) 512-6520
Recommendations for Executive Action
Recommendation: To improve oversight of cash advance funding and associated interest liabilities for homeland security first responder grants, the Secretary of the Department of Homeland Security should direct the Executive Director of the Office of Grants and Training to complete ongoing monitoring efforts involving state grantees that receive DHS first responder grant funding and use information obtained from such monitoring to identify the significant issues that have resulted in delays in the drawdown and disbursement of DHS grant funds.
Agency Affected: Department of Homeland Security
Status: In process
Comments: According to a FEMA official, FEMA/Grants & Training (G&T) indicates in internal communications that it agrees with the recommendation. FEMA G&T has an ongoing evaluation whereby it is doing financial and programmatic monitoring of DHS grantees efforts to drawdown and disburse DHS emergency preparedness funds, including any issues that could cause delays in drawdowns and disbursements. By the end of FY2006, G&T had reviewed 20 states and the study continued in FY2007. A final, baseline analysis will be completed by the end of FY2008. We are continuing to pursue the status of this analysis.
Recommendation: To improve oversight of cash advance funding and associated interest liabilities for homeland security first responder grants, the Secretary of the Department of Homeland Security should direct the Executive Director of the Office of Grants and Training to complete ongoing monitoring efforts involving state grantees that receive DHS first responder grant funding and use information obtained from such monitoring to determine the impact of the CMIA exemption on first responders in their ability to obtain and use grant funds to meet program needs.
Agency Affected: Department of Homeland Security
Status: In process
Comments: DHS agrees with the recommendation and is working to implement it. Through its previously mentioned monitoring effort, FEMA/G&T studied the impact of the Cash Management Improvement Act (CMIA) exemption and 120-day period on DHS grantee drawdowns and withdrawals. The preliminary findings are that CMAI and the 120-day period did not impact grantee funding and that states generally do not like to invoke the exemption because they wish to retain an accountability role over federal grant funding. We are continuing to pursue this matter with FEMA to determine whether this recommendation has been implemented.
Recommendation: To improve oversight of cash advance funding and associated interest liabilities for homeland security first responder grants, the Secretary of the Department of Homeland Security should direct the Executive Director of the Office of Grants and Training to complete ongoing monitoring efforts involving state grantees that receive DHS first responder grant funding and use information obtained from such monitoring to assess the impact the CMIA exemption and DHS's 120-day cash advance funding provision could have on DHS's ability to provide adequate oversight if state grantees and local government subgrantees were to use them extensively.
Agency Affected: Department of Homeland Security
Status: Implemented
Comments: DHS agrees with the recommendation and has completed action on it. The Office of Grants and Training (G&T) did an impact assessment of the CMIA exemption during FY2005 and a final assessment is to be completed by FY2008. At this point, it appears grantees will not use the exemption due to (1)interest owed DHS not being exempted and (2) state reluctance to allow localities to spend federal grant dollars without adequate oversight. If the trend in "CMIA exemption reluctance" is reversed, however, more G&T resources will be needed. No further action will be taken on this recommendation.
Recommendation: To improve oversight of cash advance funding and associated interest liabilities for homeland security first responder grants, the Secretary of the Department of Homeland Security should direct the Executive Director of the Office of Grants and Training to complete ongoing monitoring efforts involving state grantees that receive DHS first responder grant funding and use information obtained from such monitoring to determine whether case-by-case cash advance funding provides a reasonable alternative to the CMIA exemption and DHS's 120-day cash advance funding provision.
Agency Affected: Department of Homeland Security
Status: In process
Comments: DHS agrees with the recommendation and is working to implement it. Regarding whether case-by-case funding would provide a reasonable alternative to the Cash Management Improvement Act (CMIA) exemption and 120-day provision, Grants and Training's (G&T) monitoring and evaluation effort shows that while states do not want grantees and subgrantees to use the CMIA exemption, some smaller localities could benefit from case-by-case application of the exemption. FEMA/G&T is working with states to provide other alternatives to the use of the exemption. The study continues through the end of FY2008 when it will be completed. We are continuing to pursue the status of this analysis with FEMA.
Recommendation: To improve oversight of cash advance funding and associated interest liabilities for homeland security first responder grants, the Secretary of the Department of Homeland Security should direct the Executive Director of the Office of Grants and Training to complete ongoing monitoring efforts involving state grantees that receive DHS first responder grant funding and use information obtained from such monitoring to, based on the results of the monitoring efforts, take appropriate actions, which could include making either legislative or operational recommendations, to improve first responders' ability to receive and use DHS grant funds when needed and DHS's oversight of such funds.
Agency Affected: Department of Homeland Security
Status: In process
Comments: DHS agrees with the recommendation, but states that the GAO report should have contained more specific information about the type of legislation changes required. Grants and Training (G&T) plans to continue its monitoring and evaluation efforts through 2008. We are continuing to pursue the status of FEMA's monitoring and evaluation efforts.
Recommendation: The Secretary of the Department of Homeland Security should direct the Executive Director of the Office of Grants and Training to develop policies and procedures to handle requests for cash advance funding, including the ability for DHS to track specific cases of cash advance funding to state grantees and the related interest liabilities.
Agency Affected: Department of Homeland Security
Status: In process
Comments: DHS agrees with the recommendation. FEMA Grants and Training (G&T) will continue to monitor grantee grant funding needs and work with state agencies to help implement alternatives to the CMIA exemption and 120-day provision. By FY2008, the baseline study will be completed. At that time, G&T plans to provide assistance to states and localities to help them better comply with CMIA requirements. We are continuing to pursue the status of this study with FEMA.
Recommendation: The Secretary of the Department of Homeland Security should direct the Executive Director of the Office of Grants and Training to develop policies and procedures to work with the SAA for any state that requests and receives cash advance funding to ensure that adequate policies and procedures are in place at the state grantee level to provide proper oversight of advances made to subgrantees, including the accurate recording of interest accruals on the advances and prompt payment of such interest to the federal government.
Agency Affected: Department of Homeland Security
Status: In process
Comments: DHS agrees and will implement the recommendation. Grants and Training (G&T) will implement a system to track the use of the Cash Management Improvement Act (CMIA) exemption and accrued interest liabilities, including implementing an enhanced oversight of subgrantees. We are continuing to pursue this matter with FEMA to determine whether recommendation has been implemented.
