Subsequent to the task force’s recommendations, Congress exempted for  fiscal year 2005 certain DHS first responder grant programs from the  provision of the CMIA that limits the extent to which grantees can hold  federal funds prior to payout by requiring federal agencies and states to  minimize the time elapsing between transfer of funds from Treasury and  payment by the states. We Found No Substantial Evidence That the CMIA Prevented First Responders from Receiving DHS Grant Funds When Such Funds Were Needed

We found no substantial evidence that the CMIA provision that limits the  extent to which grantees can hold federal funds before payout, prior to its  exemption for certain first responder grants in fiscal year 2005, had  prevented first responders from receiving DHS grant funds when such  funds were needed. Specifically, the majority of SAAs we contacted did  not cite the CMIA as a contributing factor to first responder funding  delays, and the National Governors Association, U.S. Conference of  Mayors, and other associations we contacted did not provide information  that demonstrated that the CMIA prevented local governments and other  subgrantees from receiving first responder grant funding when they  needed it. In March 2006, DHS reported that the CMIA exemption had  been used only to a minimal extent and, according to a DHS official, DHS  is meeting with SAAs and local governments to determine the impacts, if  any, of the CMIA exemption on first responder grant funding. Generally, however, the SAA officials were more apt to tie delays in  operations related to first responders to factors other than the CMIA. Moreover, the report discusses numerous factors other than the CMIA that  contribute significantly to funding delays. Furthermore, many state and local governments lack the purchasing  power to obtain the goods and services in a timely fashion. While state single audits  can be an important oversight tool for cash advance funding, they are not  designed to replace program management’s oversight responsibilities. Regardless of whether cash advance funding for first responder grants is  made available under the CMIA exemption and DHS’s 120-day cash  advance funding provision or on a case-by-case basis, it is critical for DHS  to provide proper oversight of cash advance funding to help ensure that  associated interest liabilities due to the federal government are accurately  recorded by grantees and subgrantees and promptly paid. According to Treasury officials, the vast majority of homeland security  first responder grants were not included in the TSAs for fiscal years 2005  and 2006. However, such audits are not designed to replace  program management’s oversight responsibilities and may not cover all  first responder grants due to the grants’ relatively small dollar amounts. This is important because DHS  lacks the policies and procedures necessary to provide adequate oversight  of cash advance funding, regardless of whether the cash advance funding  is made widely available under the CMIA exemption and DHS’s  corresponding 120-day cash advance funding provision, or on a case-by- case basis as allowed under Treasury regulations implementing the CMIA. Specifically, we recommend that the Secretary of the  Department of Homeland Security 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;    determine the impact of the CMIA exemption on first responders in their  ability to obtain and use grant funds to meet program needs;    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;    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; and    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.
Why GAO Did This Study

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.

What GAO Found

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.