Sneak Preview: OIGs Say Risk Assessment Methods in Some Reviews Are ‘Flawed’

(The following is excerpted from a recent Thompson Grants Compliance Expert article.) While some federal auditors are noticing that awarding agencies and pass-through entities are more dutifully conducting risk assessments of grantees and subrecipients than in prior years, the methods they are using to do these assessments often are not adequate, according to a statement made recently during a National Grants Management Association Annual Grants Training conference session with officials from federal agency Inspectors General offices (OIGs).

Kathleen Sedney, assistant inspector general for audits, inspections and evaluations at the Department of the Interior OIG, told attendees that OIG grant-related audits in previous years found that federal agencies and pass-through entities often were not conducting necessary risk assessments. Federal awarding agencies must have in place a framework for evaluating the risks posed by applicants (§200.206(b)(1)); while pass-through entities must assess the level of risk of subrecipients to determine an appropriate level of monitoring (§200.322(b)). Although she noted that more recent audits are showing that agencies and pass-through entities now are assessing risks, their methods used for these assessments “are flawed.”

In some cases, agencies and pass-through entities are not assessing risk appropriately when using a risk checklist “because they did not put any critical thinking into that checklist to determine if the risk assessment makes sense,” Sedney explained. “In addition, if [agencies and pass-through entities] determine if a grantee is high risk, they must make sure to apply additional mitigating measures [to limit risks]. Put more thought into these risk assessments” to improve their effectiveness.

Pamela Van Dort, acting deputy inspector general for AmeriCorps OIG, stated that her office recently found that 70% of AmeriCorps OIG audits since 2015 had a subrecipient monitoring finding. “This is an area in which [pass-through entities] can do better, and is an area of increased focus across the government,” she said, noting that improved subrecipient monitoring early in the grants process can help to reduce the risk of subrecipient’s perpetrating fraudulent activities. “Even if we can’t prevent fraud, better controls and monitoring can help detect it early.”

Van Dort also said her office has noted an increasing number of audit findings in recent reports related to falsified or lacking timekeeping records, unsupported expenses and recipients overcharging grants.

(The full version of this story has now been made available to all for a limited time here.)

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