The Single Audit Act mandates that federal agencies  assume oversight responsibility for the funds that they award to  nonfederal entities. The reporting package is to  include (1) the award recipient’s financial statements and schedule of  expenditures of federal awards; (2) a summary schedule of prior audit findings, including the status of all single audit findings included in the  prior audit’s schedule of findings and questioned costs for federal  awards; (3) the auditor’s report (including an opinion on the award  recipient’s financial statements and schedule of expenditures of federal  awards, reports on internal control and compliance with laws, regulations,  and provisions of contracts or grant agreements, and a schedule of  findings and questioned costs); and (4) a corrective action plan. A-133 requires  that federal awarding agencies ensure that award recipients complete  and submit single audit reports within the required time frames. Most of the Selected Subagencies Did Not Effectively Design Policies and Procedures to Reasonably Assure Timely Issuance of Written Management Decisions with the Required Content

The selected subagencies in Agriculture, HHS, HUD, and Transportation  did not effectively design policies and procedures to reasonably assure  that management decisions were prepared with the required content and  issued within 6 months of receipt of the single audit report for each single  audit finding, as required by OMB Circular No. To  reasonably ensure that award recipients take action to correct single audit  findings, management decisions are to describe the corrective actions  that federal agencies consider necessary based on their evaluation of the  single audit findings and the award recipient’s plan to correct the single  audit findings, according to OMB Circular No. Identifying  and categorizing certain single audit findings as high risk—that is, those  that if they are not corrected in a timely manner, may be seriously  detrimental to federal programs—can assist federal agencies in  understanding emerging and persistent issues related to award recipients’  use of funds and allow federal agencies to prioritize their resources to  help ensure that the award recipients timely address these findings. Recurring single audit findings are also of concern because  they indicate deficiencies that have persisted and may need more  resources or attention from the agency to address them. Given the numbers of single  audit reports and single audit findings as well as constraints in federal  resources for conducting oversight of single audits, identifying and  managing high-risk and recurring single audit findings using a risk-based  approach can assist in identifying problem areas and addressing  priorities. Of the five agencies in our audit, only  one agency’s (Education) two selected subagencies had effectively  designed policies and procedures in the three areas addressed in our  audit. Revise its policies and procedures to reasonably assure that  management decisions contain the required elements and are issued  timely in accordance with OMB guidance. The e-mail did not address our recommendations to the other  subagency, FNS. PIH indicated that it had taken actions that  addressed our recommendations, while CPD disagreed with the two  recommendations directed to it. Appendix I: Objectives, Scope, and Methodology

Our objectives were to determine the extent to which selected federal  agencies (1) effectively designed policies and procedures for reasonably  assuring that award recipients submit single audit reports in a timely  manner, (2) effectively designed policies and procedures for reviewing  award recipients’ plans to correct single audit report findings and issuing  written management decisions on those plans, and (3) had policies and  procedures for managing high-risk and recurring single audit findings  through a risk-based approach. Because grant awards proportionally represent one of the largest  amounts of federal awards, we used grant data from the Office of  Management and Budget’s (OMB) Outlays for Grants to State and Local  Governments in fiscal year 2013 to select the agencies and subagencies  for our audit. These five agencies—the Departments  of Agriculture (Agriculture), Education (Education), Housing and Urban  Development (HUD), Transportation (Transportation), and Health and  Human Services (HHS)—collectively accounted for 93 percent of total  reported outlays for federal grants to state and local governments in fiscal  year 2013.
Why GAO Did This Study

In fiscal year 2015, federal agencies outlaid over $600 billion in federal awards to state and local governments, according to OMB. The Single Audit Act of 1984, as amended, requires that federal agencies oversee their awards to nonfederal entities. OMB Circular No. A-133 provided guidance for implementing the act during GAO's audit.
GAO was asked to examine federal agency oversight of single audits. This report examines whether selected agencies effectively designed policies and procedures to reasonably assure that (1) recipients submit timely single audit reports and (2) award recipients take action on single audit findings by issuing timely management decisions. GAO also examined whether selected agencies had policies and procedures for managing high-risk and recurring audit findings. GAO selected the five agencies with the largest dollar amounts of reported outlays for grants to state and local governments in fiscal year 2013. For each agency, GAO reviewed its two subagencies accounting for over 80 percent of outlays, reviewed written policies and procedures, and interviewed the respective officials.

What GAO Found

Federal agencies have oversight responsibilities for the funds that they award to nonfederal entities and can assign these responsibilities to their subagencies (i.e., operating units or divisions). Nonfederal entities are required to undergo a single audit if their expenditures of federal awards in a fiscal year exceed a certain threshold. A single audit is an audit of the award recipient's expenditure of federal awards and of its financial statements and can identify deficiencies in the award recipient's compliance with the provisions of laws, regulations, contracts, or grant agreements and in its financial management and internal control systems. Correcting such deficiencies can help reasonably assure the effective use of federal funds and reduce federal improper payments.
Of the five agencies in GAO's study—the Departments of Agriculture, Education, Health and Human Services (HHS), Housing and Urban Development (HUD), and Transportation—some of the agencies' subagencies that GAO reviewed did not effectively design policies and procedures to reasonably assure the timely submission of single audit reports by award recipients. The Office of Management and Budget's (OMB) guidance requires that federal awarding agencies ensure that award recipients submit single audit reports within certain time frames. This can help assure that single audit findings are timely corrected.
Most of the selected subagencies in GAO's review did not effectively design policies and procedures to reasonably assure that they issued timely management decisions containing the information required by OMB guidance. This guidance requires agencies to evaluate each award recipient's audit findings and corrective action plans and issue a management decision within 6 months of receipt of the single audit report as to the actions award recipients must take to correct each single audit finding. Such decisions may add clarity about the agency's position on the single audit finding and the corrective action.
Only the two selected subagencies in Education had policies and procedures for using risk-based approaches to manage high-risk and recurring single audit findings. High-risk single audit findings may be seriously detrimental to federal programs and could result in improper payments. Recurring single audit findings have persisted for more than one audit period and may need more attention or resources to correct. With over 30,000 single audit reports submitted for fiscal year 2015 and constraints in resources for conducting federal oversight, managing single audit findings using a risk-based approach can assist in identifying and prioritizing problem areas.

What GAO Recommends

GAO is making 21 recommendations. One Agriculture subagency agreed with the recommendations and the other did not comment. HHS and Transportation concurred. HUD commented that one subagency had taken actions to address the recommendations, while the other subagency disagreed with the recommendations directed to it. GAO believes that the recommendations are valid as discussed in the report.