FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
SYSTEM FOR MONITORING FEDERAL GRANTS IS INADEQUATE
The Department's system for monitoring the administration of federal grants to
determine that federal grant funds are used in accordance with grant requirements and
applicable State and federal laws, regulations, and rules has not included all grant
programs and has not detected certain instances of noncompliance.
In July, 1997 the Department adopted a new grant administration policy which reassigned
the responsibility for Department-wide coordination and monitoring of federal grant
programs to the Office of Fiscal Management (OFM). However, the policy was unclear as to
what monitoring activities and responsibilities were expected of the OFM. During the
current audit period, the Department drafted a revision to this policy to further define
the OFM's overall responsibilities and monitoring activities. However, these procedures
had not been finalized or implemented as of June 30, 1999.
The Department administered 27 federal programs and expended $22,918,657 during FY
1999.
Failure to adequately monitor all of its federal grants constitutes an internal control
weakness and could result in the possible mismanagement of grant funds, questioned or
disallowed costs, or the withdrawal of grant programs by the federal agencies. (Finding 2,
pages 20-21) This finding has been repeated since 1996.
We recommended the Department continue with its implementation of its new grant
coordination policy to ensure general and specific grant requirements have been met for
all federal grant programs.
Department officials concurred with our recommendation and stated the procedures will
be finalized and issued to Department staff in FY 2000. (For previous Department
responses, see Digest Footnote #1.)
INACCURATE REPORTING OF ABANDONED MINED LAND RECLAMATION PROGRAM COSTS
The Department inaccurately reported costs for the Abandoned Mined Lands
Reclamation Program (CFDA #15.252). Errors in reporting led to $130,905 of reported costs
being questioned.
The Department of Interior regulations (43 CFR 12.60 et seq.) state that
"accurate, current, and complete disclosure of financially assisted activities must
be made in accordance with the financial reporting requirements of the grant."
(Finding 5, page 25)
We recommended the Department make the necessary corrections and repayment for the
Abandoned Mined Land Reclamation Program grant. Further, we recommended procedures
utilized to prepare grant reporting be revised to insure accurate reporting of
expenditures.
Department officials concurred with our recommendation and stated the revised reports
will be submitted to the Department of Interior in February 2000. In addition, the
Department stated written procedures for monitoring this grant will be revised in FY 2000
to ensure accurate reporting of future grant expenditures.
INELIGIBLE COSTS CHARGED TO THE ABANDONED MINED LAND RECLAMATION PROGRAM
The Department charged ineligible costs to two of its Abandoned Mined Land
Reclamation Program Grants (CFDA #15.252). As a result, questioned costs of $26,784 from
grant number GR 70170 and $48,367 from grant number GR 80170 were reported. (Finding 6,
pages 26-27)
We recommended the Department make corrections and repayment for Abandoned Mined Land
Reclamation Program grant questioned costs. Further, we recommended grant administration
procedures include guidance concerning allowable cost principles and appropriate reviews
thereof.
Department officials concurred with our recommendation and stated revised reports will
be submitted to the U.S. Department of Interior in February, 2000. In addition, the
Department plans to revise the program's written procedures in FY 2000 to provide guidance
concerning allowable cost principles and review of program expenses.
INDIRECT COST RECOVERIES IN EXCESS OF APPROVED AMOUNTS
The Department received indirect cost recoveries from various federal programs in
excess of amounts allowed in its indirect cost agreement.
The Department's indirect cost agreement provided that the approved rate was to be
applied to a cost base of personal service costs, excluding health insurance because this
cost was not equally distributed among all cost centers of the Department. However, the
Department had not appropriately excluded health insurance costs from the federal
programs. Inclusion of health insurance in the calculation of indirect costs led to
questioned costs of $71,200 from seven different federal grants. (Finding 7, pages 28-29)
We recommended the Department contact its cognizant agency and make the necessary
arrangements to repay the overpayments of indirect cost recoveries and to correct
financial reporting as applicable.
Department officials concurred with our recommendation and stated they will work with
their cognizant agency to resolve the questioned costs identified. In addition, the
Department will revise the indirect cost calculation to include health insurance in the
base.
OTHER FINDINGS
The remaining findings were less significant and are being given attention by the
Department. We will review progress towards the implementation of our recommendations in
our next compliance audit.
Mr. Brad Hammond, Chief Internal Auditor for the Department, provided the responses.
AUDITORS’ OPINION
Our auditors stated the Department’s financial statements as of and for
the year ended June 30, 1999 are fairly stated in all material respects.
____________________________________
WILLIAM G. HOLLAND, Auditor General
WGH:JSC:pp
SPECIAL ASSISTANT AUDITORS
Sleeper, Disbrow, Morrison, Tarro & Lively were our special assistant
auditors for this audit.
DIGEST FOOTNOTES
#1 SYSTEM FOR MONITORING ADMINISTRATION OF FEDERAL GRANTS IS INADEQUATE - Previous
Department Responses
1998: We concur. The Department will continue our on-going efforts to strengthen
the Agency's grant coordination processes. To address a prior audit finding, the
Department in 1997 adopted a new grant policy which reassigned the responsibility for
Department-wide coordination of Federal grant programs to the Office of Fiscal Management.
Efforts to fully implement this policy are in progress. Since the prior audit the
Department also has made enhancements to the Department's grant accounting system and held
an in-house training seminar to educate Agency staff on Federal grant requirements and
Department grant procedures. During FY 1999, the Office o Fiscal Management will complete
Agency-wide procedures to more explicitly define the grant responsibilities of the
Department's various offices. In addition, offices which participate in Federal programs
will document their internal control systems for managing such programs.
1996: We concur. The Department is continuing our efforts to fully implement the
Agency's grant coordination policy to ensure that general and specific grant requirements
are met for all federal grant programs. As part of these efforts all divisions of the
Department have been reminded of the requirements of the policy, and in July 1996 a
revised edition of the Department's Finance Handbook was issued to Agency staff. This
Handbook contains procedures for the administration of federal grant programs. In FY 1997,
the Department also implemented revisions to our programmatic accounting system. This
system will be used by all divisions to document costs on federal programs and will assist
our efforts to monitor and coordinate all federal assistance programs.
