Summary
Federal government grant awards to state and local governments and nonprofit organizations have risen substantially from $7 billion in 1960 to $500 billion budgeted in fiscal year 2009. In constant dollars, federal grant awards rose from about $42 billion in 1960 to $500 billion in fiscal year 2009. The auditing of federal awards, including grant funds, administered by state and local governments and nonprofit organizations is intended to be a key accountability mechanism over the proper use of federal funding. The President's Council on Integrity and Efficiency (PCIE) issued its Report on National Single Audit Sampling Project in June 2007, which raised significant concerns about the quality of single audits and made recommendations aimed at improving the quality of those audits. The Single Audit Act, as amended, is intended to promote sound financial management, including effective internal controls over federal grant funds administered by state and local governments and nonprofit organizations. Congress asked GAO to conduct additional audit work and analysis to identify any further actions needed to improve federal oversight and accountability for federal grant funds. Specifically, Congress asked that we (1) determine whether the federal oversight structure is adequate to monitor the efficiency and effectiveness of the single audit process, (2) identify potential changes that can be made to the single audit process and relevant guidance to improve accountability for federal grant awards, and (3) determine the current status of actions being taken to address the recommendations made in the PCIE report.
Without a mechanism in place to monitor on an ongoing basis how the single audit process is implemented governmentwide, OMB and federal stakeholders are unable to measure the efficiency and effectiveness of this process, as well as its usefulness as an accountability tool over federal grant awards. The variations we found on how federal agencies we reviewed perform key functions of the single audit process demonstrate the need to assess whether federal agencies carry out their single audit responsibilities in an efficient and effective manner. We also believe opportunities exist to address concerns about the complexity and relative costs and benefits of audit requirements for single audits, while concurrently seeking the proper balance between risk and cost-effective accountability by (1) exploring a simplified approach for performing single audits of small entities, and (2) identifying best practices and providing guidance for achieving higher quality single audits of large entities. Office of Management and Budget (OMB), American Institute of Certified Public Accountants (AICPA), and National Association of State Boards of Accountancy (NASBA) have initiated actions to address the PCIE report recommendations. However, most of these actions are not yet completed and their impact on (1) addressing longstanding single audit quality issues, and (2) identifying needed changes to the single audit process, is yet to be determined. Overall, we believe that a centralized federal effort would be beneficial in evaluating risk, cost-benefit, and efficiency and effectiveness of the single audit process, and in making adjustments to the process as necessary.
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.
Director:
Team:
Phone:
Jeanette M. Franzel
Government Accountability Office: Financial Management and Assurance
(202) 512-9471
Recommendations for Executive Action
Recommendation: In order to monitor the risk, cost--benefit, and efficiency and effectiveness of the single audit process, OMB should designate an entity or group to (1) evaluate and comprehensively monitor the single audit process governmentwide, (2) assess the efficiency and effectiveness of how agencies carry out their single audit responsibilities, and (3) identify additional guidance and resources needed to carry out single audit requirements.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order to monitor the risk, cost--benefit, and efficiency and effectiveness of the single audit process, OMB should designate a federal workgroup such as its New and Improved Single Audit Process workgroup to evaluate the current single audit process to identify simplified alternatives for meeting the accountability objectives of the Single Audit Act for the audits of small entities, while achieving the proper balance between risk and cost-effective accountability for the smallest to the largest entities.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order to monitor the risk, cost--benefit, and efficiency and effectiveness of the single audit process, OMB should monitor the status of OMB workgroups, AICPA task forces, and NASBA referral project activities, and evaluate completed actions and their impact on addressing the PCIE report recommendations to improve single audit quality.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
