1. Internal Control of ARRA Funds: A Pilot for Faster Reporting John Fisher US Department of Health & Human Services Office of Inspector General Office of Audit Services August 10, 2010 2010 NASACT ANNUAL CONFERENCE

2. Recovery Act

3. Single Audit Internal Control Pilot Project – ARRA Programs Volunteer collaborative effort. Focus on more timely communication of significant deficiencies and material weaknesses in internal control over compliance for selected major programs with ARRA expenditures. Reporting required prior to the completion of the Single Audit and no later than 6 months after the Auditees year-end. Theory was that it would allow Auditees to correct internal control deficiencies related to ARRA funds in a more timely manner to reduce potential future unallowable costs.

4. Internal Control Pilot Project States 1. Alaska 2. California 3. Colorado 4. Florida 5. Georgia 6. Louisiana 7. Maine 8. Missouri 9. Nevada 10. North Carolina 11. Ohio 12. Oklahoma 13. South Dakota 14. Tennessee 15. Texas 16. Virginia

5. Original Programs DOL 17.255 – Unemployment Insurance DOT 20.205 – Highway Infrastructure Investment Recovery Act DOT Cluster 20.500/20.507 –Federal Transit - Capital Investment Grants EPA 66.458 – Capitalization Grants for Clean Water State Revolving Funds EPA 66.468 – Capitalization Grants for Drinking Water State Revolving Funds DOE 81.042 – Weatherization Assistance for Low Income Persons ED Cluster 84.394/84.397 – State Fiscal Stabilization Fund Ed Cluster 84.010/84.390 – Title I Grants to Local Educational Agencies HHS 93.713 – Child Care Development Block Grant HHS 93.778 – Medicaid Assistance Program Multiple Agencies – Research and Development Cluster

6. Results A total of 56 programs were audited. In 11 cases the auditors did not report any deficiencies for the audited program. Five of the 127 reported deficiencies were considered Material Weaknesses.

7. Summary of Results ProgramNumber of States Audited Total Number of Program Findings DOL 17.255 811 DOL WIA Cluster11 DOT 20.205 58 DOT Highways Cluster 23 EPA 66.458 10 EPA 66.468 10 DOE 81.042 33 DOE 81.041 11 ED Title I Grants to Local Education Agencies Cluster 34

8. Summary of Results - Continued Program Number of States Audited Total Number of Program Findings ED Special Education Cluster 12 ED Vocational Rehabilitation Cluster 27 ED 84.04812 ED 84.35712 ED 81.36712 ED State Fiscal Stabilization Cluster 44 USDA SNAP Cluster28 DOJ 16.73812

9. Summary of Results - Continued Program Number of States Audited Total Number of Program Findings Research and Development Cluster 23 HHS 93.71328 HHS 93.778514 HHS TANF Cluster16 HHS 93.56315 HHS CSBG Cluster15 HHS 93.65827 HHS 93.65929 HHS Aging Cluster210

10. Findings In two cases the auditors reported the ARRA funds had been awarded to entities whose internal controls were inadequate to ensure Federal funds were used appropriately. State agency had not previously managed Federal funds and consequently did not have detailed processes or policies for disbursing and managing Federal funds. State agency began applying for Recovery Act funds in March 2009 but the Commission had not implemented a system of internal controls adequate to ensure that the funds were used appropriately.

11. Findings - Continued Internal controls were not adequate to ensure ARRA funds were properly reported. Internal controls were not adequate to minimize excess unspent balances of ARRA funds at the grantee and subrecipient levels. Internal controls were not adequate to ensure ARRA expenditures were allowable. Procurement internal controls were inadequate. Internal controls were not adequate to ensure eligible goods and services were provided to eligible individuals and entities. Auditees were not providing subrecipients with timely information about Federal award requirements, increasing the risk of noncompliance with grant terms.

12. Audit Resolution Data Based on Responses Received From Federal Agencies Cutoff Date – July 16, 2010

13. Audit Resolution Agency# FindingsResolvedUnresolved Labor12 0 DOT1147 EPA000 Energy404 Education231013 USDA808 Justice202 DHHS64559 R&D (HHS)330 Total1278443

14. Unresolved Audit Findings Five Education Findings Were Reported Corrected in State Single Audit Texas

15. Pilot Assessment Sufficient Participation - YES Useful information to auditees and Federal program management - YES Effective audit resolution by Federal agencies YES - HHS, Ed, Labor NO - DOT, Energy, USDA

16. Other Comments - States Project elevates the importance of SA and program accountability No substantial changes from current audit processes Willing to participate in Phase 2 More relief is needed Compliance Supplement is needed earlier

17. Potential Pilot Phase 2 - Considerations Need immediate start – July 19, 2010 Revise list of programs (consult with RATB, Agency & GAO inputs) Provide State relief funds Identify agency point of contact for program requirements and audit resolution for each program Include universities and non-profits

18. Concluding Remarks John Fisher 816-426-3204 US Department of Health & Human Services Office of Inspector General Office of Audit Services

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