09-15, Audit of the Financial Management Survey Responses of New Grantees

Audit of the Financial Management Survey Responses of New Grantees

The Office of Inspector General (OIG), Corporation for National and Community Service (Corporation), performed an audit of the Financial Management Responses of New Grantees. The purpose of the audit was to determine if the new grantees' responses to the Corporation's Financial Management Survey (FMS), and additional procedures performed by the Corporation, are adequate to determine whether the new grantees' financial management systems meet applicable regulations, Office of Management and Budget (OMB) Circular and grant requirements.

In OIG Report #98-02 Review of Corporation for National and Community Service Pre-Award Financial Assessment of Grant Applicants, dated February 20, 1998, we found that Office of Grants Management (OGM) staff did not always collect information required for assessing new grantees. OGM also did not always resolve new grantee deficiencies that were identified during the assessment process prior to making a grant award or renewal.

Our 1998 report recommended that the OGM strengthen its guidelines for pre-award financial assessments of grantees. Specifically, the report provided detailed information on how to document the grant officer's assessment and consistently document procedures performed during site visits. It also recommended criteria for determining when a more detailed assessment, other than the Financial Management Survey and a review of prior grantee audit reports, was necessary.

Many of the same problems identified by the OIG 11 years ago were found during this audit. For example, the OGM still primarily relies on the responses provided on the FMS, a less-than-reliable source of information, to determine whether new grantees' financial management systems meet OMB Circular and grant requirements. The FMS contains self-reported information and lacks any method for verification of responses. The Corporation's review process also needs improvement. Of the 32 FMS documents provided by OGM for our audit, we found that 20, or 63 percent, showed no documentary evidence of a review by Grants Management personnel.

These serious shortcomings became evident in our on-site tests of 13 new grantees for this audit. Of that total, we found that nine new grantees had financial management systems that were either inconsistent with their FMS responses or were not in compliance with applicable regulations.