Grants Blog

Posts Tagged ‘GAO’

December Update: It is now final. In mid-December, GAO released the final version of the Yellow Book. Click on the link below to access the standards, as well as a summary of the major changes.

GAO just released a new version of the Yellow Book that “contains the intended content for the final 2011 Revision of Government Auditing Standards. GAO plans to formally issue the 2011 Revision Government Auditing Standards later this year after the AICPA has completed its clarity revisions.”

In the 2011 revision, GAO is establishing a “conceptual framework” for making independence determinations based on each situation’s unique facts and circumstances. Auditors would identify potential risks to independence, evaluate the significance of those threats, and apply safeguards to eliminate the risks if necessary. Rather than issuing a specific list of prohibited activities, GAO offers examples of threats to independence, for example an audit organization having undue dependence on income from a particular entity or a member of the audit team entering into employment negotiations with an audited entity.

 The independence section also identifies specific nonaudit services that would impair auditor independence in the government environment. These include, for example, preparing accounting records or financial statements.

 Grants management officials may also find the new Yellow Book’s appendix helpful not only in preparing for or conducting an aduit, but also in improving overall organizational operations. As part of their responsibilities, auditors review the organization’s internal controls. In the Yellow Book, GAO provides more than a dozen indicators of internal control problems that can serve as an alert for grants management officials. GAO also offers examples of activities that could indicate fraud or abuse in government-funded programs and activities.

The Yellow Book is only available online at www.gao.gov/yellowbook.

Yesterday, a House subcommittee held hearings on “Improving Oversight and Accountability in Federal Grant Programs.” Officials from OMB, GAO, federal agencies, and the private sector all testified. And while (in my opinion) there was not a lot of new information or new ideas, the fact that Congress is now paying more attention to grants management is a fairly significant development.

So here is a link to the subcommittee’s website, where you can find testimony and watch a recorded version of the hearing.

I’m curious to see what action Congress, agencies, or the administration actually take. What do you think? Will we see concrete steps toward improved effectiveness and use of single audits? Will there be changes in the preaward process? Will regulations be amended? Take a look at the testimony and let me know what you think.

GAO has released the 2010 draft revisions to Government Auditing Standards (the Yellow Book). Comments on the proposed changes are due Nov. 22, 2010.

The revisions consolidate many of the current Yellow Book chapters, and amend language and requirements to align with AICPA standards. But one of the most significant changes is a shift in the Yellow Book approach to auditor independence. Rather than establishing a specific list of “do’s” and “don’ts”, GAO is proposing a “conceptual framework” for making independence determinations based on each situation’s unique facts and circumstances.

Auditors would identify potential risks to independence, evaluate the significance of those threats, and apply safeguards to eliminate the risks if necessary. The independence section also identifies six specific nonaudit services that would impair auditor independence in the government environment.

The draft Yellow Book is only available in online PDF format. Click here to view the draft and for instructions on submitting comments.

Well, it’s been a while since I posted to this blog, so this one will make up for the lack of frequency in the amount of volume.

I attended the Association of Government Accountants Professional Development Conference earlier this week and want to share a summary of some of the sessions I attended. My notes are fairly basic and lack some context, so if you need more info, please feel free to contact me directly (lhayes@managementconcepts.com), or post to the blog.

Here we go…

Grants Management Line of Business

Danny Werfel, Controller of OMB’s Office of Federal Financial Management, discussed the agency’s view of lines of business. While he was specifically speaking about financial management systems, the overall principles he discussed also may be applicable to the Grants Management Line of Business (GMLoB). OMB still believes in the concept, but has learned that the model of forcing agencies to move to a complete service center doesn’t work. Instead they are looking to focus more on “shared services.” For example, an agency may  share a vendor invoicing service with other agencies but would not have to migrate their entire financial system to a common source.

 Federal Grants Reporting

The implementation of the Federal Funding Accountability and Transparency Act’s subrecipient reporting requirements in October means a lot of things need to be changed, such as grant terms and conditions, according to Werfel. He said OMB is working on these changes, but gave no details on exactly what actions will be taken or when.

 He also specifically noted one of the most significant and pervasive Recovery Act reporting problems: subsequent reports from the same recipient on the same project often don’t get “linked.” For instance, a change in identifying information, such as a correction to a DUNS number or grant number, means reports are not connected to one another. Anyone looking at a particular entity or project might assume a recipient just stopped reporting on the project, and that another project was started. Werfel emphasized that federal agencies, recipients, and pass-through entities need to be aware of this.

 Recovery Act A-133 Pilot Demonstration Project

OMB plans a second A-133 Recovery Act pilot project that will be announced later this month (July). It will include more states, and probably different programs this time, according to John Fisher, of the HHS Office of Inspector General, and a lead in the implementation of the first pilot project. The second pilot is also likely to focus more on audit resolution. The Recovery Act requires federal entities to make management decisions on the findings that were reported in the pilot project within 3 months (March 31, 2010). But a significant number of the findings still had not been resolved as of July 8, he commented. (It’s important to note that slow and incomplete audit resolution by federal agencies came up in almost every grants session, and several presenters, including Danny Werfel, said OMB and Congress will be taking a close look at this issue.)

 On a side note, Gil Tran was supposed to make this presentation but was not at the conference because he was still working on the A-133 Compliance Supplement, which was supposed to be out “this week,” meaning July 15 or16. One interesting tidbit: Gil has to get sign-off from 19 different federal officials before he can release the supplement.

 Reducing Improper Payments

Werfel said one of the most promising and interesting ideas they are looking at to reduce improper payments is revising A-87 (2 CFR Part 225. the state and local cost principles) to allow states to recapture more indirect costs. This incentive would reward states that reduce improper payments by allowing them to keep more for administrative expenses and offset the costs of program administration. OMB is seriously looking at how A-133 audits can be used more effectively in preventing, rather than simply detecting, improper payments. This could mean anything from speeding up the audit timeline to focusing more on larger entities or larger grant programs. However, he gave no specifics on A-133 revisions.

 Werfel also told attendees that in the fall, OMB plans to launch a grant program to support innovative streamlining and grants management partnership projects. The goal is to promote efficiency while improving program services and is based on ideas submitted to Partner4Solutions.gov.

 Yellow Book Update

The Government Accountability Office is drafting a revised Yellow Book and expects that draft to be ready for public comment in late July or early August, with the final revision complete by February or March 2011. But those are moving targets because GAO is attempting to align the Yellow Book with AICPA standards, which are still in the process of being revised.

 Most of the changes that auditors will see are technical in nature or align Yellow Book requirements with other standards. But one area that will change is the standard for auditor independence. Marcia Buchanan, Assistant Director for Auditing Standards at GAO, said Chapter 3, on auditor independence, will be restructured. There will be a conceptual framework that will serve as a guideline for determining whether an auditor is independent, but there will no longer be a laundry list of prohibited activities. This will give auditors more flexibility and allow them to apply judgment in unique situations.

Now that the Recovery Act is one year old, the Government Accountability Office is taking a look back — and a look forward — at how state and local agencies have used the money they received, and the efforts being made to improve accountability for those awards.

Most of the nearly 200-page report deals with specific programs and agencies, including Medicaid, Transportation, and Education, but GAO also addresses issues relating to recipient reporting, and a significant amount of attention to the OMB A-133 single audit process.

GAO seems generally pleased with OMB’s efforts to use single audits, although the office continues to urge OMB — and Congress — to amend the single audit process so that it can be more efficient and timely. And GAO has several agency-specific recommendations, such as encouraging the Education Department to work with OMB on a formula for determining FTE jobs during the summer months.

One new recommendation that should be of interest to most recipients is that OMB develop a “formal and feasible” framework for review of recipient reporting changes during the continual update period and consider providing more time for agencies to review and provide feedback to recipients before posting updated reports on Recovery.gov.

You can read the full GAO report here.

While Grants.gov has made the grants process somewhat easier for both federal awarding agencies and potential applicants, the Government Accountability Office says the web portal has systemic problems that need to be addressed.

GAO’s report echoes many previous reports about Grants.gov. For federal agencies, the benefits of using Grants.gov include eliminating the need to develop agency-specific electronic systems and making their funding opportunities available to a wider audience. For grantees, the online search and apply portal reduces paperwork and offers access to a wider array of grant opportunities. And both benefit from faster application processing.

But a “cumbersome” registration process and “uneven” system performance often result in frustration for grantees and late applications. At the federal level, a lack of clear, written policy regarding who is responsible for what on Grants.gov, as well as the “pass-the-hat” voluntary method of funding the system often cause problems, GAO says.

In the report, GAO makes four recommendations, again, most of which may sound familiar to those in the grants world. They include for example, urging OMB to work with federal agencies to ensure that Grants.gov is properly funded, and establishing a stakeholder group to improve communications. 

To read the full report, click here.

According to a new report from the Government Accountability Office, there could be significant changes to the federal government’s single audit process in 2009.

At the request of members of Congress, GAO took a look at how the OMB Circular A-133 single audit process could be revised to improve federal oversight and accountability of grant funds. The current process, GAO reported, offers no way to ensure how or even if federal agencies implement single audit requirements. Further there are variations among federal agencies as to how they carry out their oversight responsibilities, such as quality control reviews.

GAO went on to describe current efforts to improve the audit process. OMB anticipates that revisions to Circular A-133 and the checklist for performing quality control reviews will be completed in the fall of 2009. Also, the AICPA plans to finalize applicable auditing standards and the AICPA Audit Guide, and to develop illustrative practice aids in 2009, GAO reported.

GAO’s report is available here.

For those interested in A-133, Management Concepts offers a two-day course, Audit of Federal Grants and Cooperative Agreements. For information about this training, click here.