GAO’s Review of FAC Information Prompts Congressional Action

Cornelia Chebinou
August 1, 2024 at 13:38:12 ET
  • Cornelia Chebinou

Congressional staff are currently taking a closer look at a Government Accountability Office (GAO) report published earlier this year on single audits, and are considering opportunities to increase award oversight. The report has sparked interest regarding whether single audit information is being fully utilized in today’s environment.

Prior to 1984 when the single audit was established, the federal government relied on numerous individual audits for each federally funded program. These audits often overlapped and caused unreasonable burdens for those grant recipients being audited. Not only were federal agency auditors conducting audits, but states were as well and often times recipients were being asked to provide duplicate information. The Single Audit Act was established to rectify these issues by requiring entitywide audits, rather than individual audits, which incorporated a review of an entity’s internal controls. According to the Office of Management and Budget’s (OMB) current uniform guidance at §200.501, recipients expending at least $750,000 annual in federal awards are required to obtain a single audit. Under the April 2024 revisions to the uniform guidance, the single audit threshold will increase to $1 million for audits of entities with fiscal years starting Oct. 1, 2024.

One of the most important aspects of the single audit is its usefulness in determining if those entities receiving federal awards are complying with grant requirements. The single audit is designed to address accountability, transparency and efficiency in the use of federal funds, and is intended to assure that taxpayer dollars awarded through federal assistance are meeting the program objectives. But is the information currently being submitted to the Federal Audit Clearinghouse (FAC) allowing oversight agencies to properly determine whether the objectives are being met?

As part of a mandate to conduct oversight of funds made available to respond to the COVID-19 pandemic, GAO noted the importance of single audits in award oversight. Single audits help ensure that entities receiving federal awards have adequate internal controls in place and comply with the requirements of the award. Because of the large increase in federal awards during the pandemic and therefore the increase in entities subject to a single audit, GAO undertook a review to access award oversight in three areas:

  • FAC data reliability for oversight purposes;
  • processes involved in using and overseeing the FAC; and
  • the extent to which federal award expenditures were linked to severe and persistent single audit findings reported in the FAC.

After concluding its review, GAO determined that some of the processes utilized make it difficult to see the entire picture. For example, the FAC currently cannot identify recipients that should have submitted a single audit but did not. Therefore, it may be difficult to determine if an entity receiving federal funds is meeting the objectives of the award.

In addition, the report found that:

“[OMB] has not designated an entity to conduct a governmentwide single audit quality review since 2007. Given the trillions of dollars of COVID-19-related financial assistance provided in recent years, a governmentwide review is increasingly important to help identify issues in the quality of single audits that can lead to unreliable FAC information.”

GAO also found that $1.17 trillion of the reported $6.97 trillion of direct federal award funds spent by recipients from 2017 through 2021 were linked to single audit findings that were both severe (i.e., contributed to an auditor’s modified opinion or material weakness) and persistent (i.e., repeated over multiple years). This is a consistent theme among the audit community and often a source of frustration. If findings are occurring year after year, why is the auditor testing information that clearly is not important to the federal agency?

To address some of these findings, GAO recommended that Congress consider amending the Single Audit Act, and that OMB and the General Services Administration make efforts to modify processes and address some of the noted deficiencies.

In direct response, Gary Peters (D-MI), chair of the Senate Homeland Security and Government Affairs Committee, and Sen. Ron Johnson (R-WI) introduced bipartisan legislation to address several of GAO’s recommendations.

The Financial Management Risk Reduction Act (S. 4716) would “improve the federal government’s ability to combat fraud by leveraging existing single audit data to minimize financial risk.” The bill specifically requires OMB and GSA, the Council on Federal Financial Assistance, and key management single audit liaisons of federal agencies to develop analytic tools to use audit data in the FAC to identify cross-governmental risks to federal award funds. The bill also requires that a strategy be developed to use audit data in the FAC to identify cross-governmental risks to federal award funds.

Further, the bill would require federal agencies to identify entities that should have undergone a single audit but did not. The legislation does not dictate how such information should be obtained, but it is likely that federal agencies will largely be expected to rely on actual expenditure data for their grant programs to identify recipients meeting the threshold.

Of note to the audit community is a provision that requires periodic governmentwide reviews of audit quality that may take into consideration ongoing reviews of single audit quality by state auditors and other independent peer review programs. The committee’s recognition of leveraging information already being obtained through various peer review programs is an important step to avoiding the costs and burdens that were associated with a similar audit quality study performed in 2007 by the President’s Council on Integrity and Efficiency. A study of audit quality conducted efficiently can help address issues with Single Audit processes in a timely manner.

After the FAC was moved from the U.S. Census Bureau to the GSA, a new FAC platform was instituted in October of 2023. GSA is currently working with a host of stakeholders to continually make modifications to the new platform to make submissions easier and more efficient. The hope is that eventually some of the issues highlighted in the GAO report will be rectified as the new platform is updated to meet the needs of its users.

In conclusion, there is still much value in single audits and the information they provide. However, if the information is not complete or cannot be accessed easily, its value is diminished. Congress has noted the usefulness of the information and is attempting to put into motion changes to enhance the value of the single audit information. If passed, the legislation will certainly help to improve efforts already underway to improve award oversight.

For More Information

The GAO report, “Single Audits: Improving Federal Audit Clearinghouse Information and Usability Could Strengthen Federal Award Oversight,” (GAO-24-106173) is available at https://www.gao.gov/products/gao-24-106173.

Cornelia Chebinou has been the director of the Washington office of the National Association of Auditors, Comptrollers and Treasurers (NASACT) since August 1999. She serves as the primary liaison with Congress, the administration, federal agencies and other associations on national issues of intergovernmental finance while representing state governmental positions; providing information to the membership; and assisting in the development of policy. She has served as the point person for state finance officials on implementation of the American Recovery and Reinvestment Act, the recent COVID aid legislation and is a past co-chair of the National Grants Partnership and International Consortium of Public Finance Managers.

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