Term Paper: Government Accounting Office in America

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[. . .] In its 1980 report, the Subcommittee recognized that higher fourth quarter obligations may not indicate a problem with wasteful spending. The Subcommittee noted that spending at year- end may be the result of legitimate, planned, and worthwhile spending intended by Congress. However, the Subcommittee found numerous examples in which agencies took short cuts in the last few weeks of the fiscal year that led to questionable contracts. Hurry-up procurement practices resulted in the purchase of millions of dollars worth of goods and services for which there was no demonstrated current need. The Subcommittee found that to spend quickly, the government frequently paid inflated prices, incurred higher administrative costs for overtime, and awarded contracts that were not in the government's best financial interest. At the time the Subcommittee issued its 1980 report, civilian and defense agencies operated under separate procurement systems with different authorities and regulations. Agencies were expected to use competition to the maximum extent practicable, but there was no statutory requirement for the justification and approval of sole-source contracts.

3] Financial Audit: 1997 Consolidated Financial Statements of the United States Government (GAO/AIMD-98-127, March 31, 1998).

Our prior work on year-end spending has shown that problems occurred in the past when budget execution was not monitored effectively. Periodically, Congress has asked that we review and report on agencies' rates of obligations.[4] A continuing theme of these earlier reports was the questionable quality of the data reported to Treasury and OMB. In our earlier work, we used data published in the quarterly Treasury Bulletin, which was aggregated by department, agency, and object classification, that is, by items of expense. The source of this information was Treasury's Financial Management Service (FMS) Standard Form (SF) 225 - Report on Obligations. In December 1995, according to Treasury officials, the reporting requirement and the resulting data published in the Treasury Bulletin were eliminated to reduce the reporting burden on agencies.

OMB continues to require that agencies report their quarterly obligations on the SF 133 - Report of Budget Execution (SF 133), approximately 20 days after the close of each calendar quarter. Unlike the SF 225, obligations are not shown by object classification. Agencies are also expected to reconcile their year-end SF 133 report with comparable data provided to the MASS TRANSIT - GRANTS Management OVERSIGHT IMPROVING, BUT BETTER FOLLOW-UP NEEDED ON GRANTEES' NONCOMPLIANCE

United States General Accounting Office Washington, D.C. 20548

Resources, Community, and Economic Development Division

B-277231

April 3, 1998

Congressional Committees

The Department of Transportation's (DOT) Federal Transit Administration (FTA) administers a multibillion-dollar program of financial assistance for grantees that provide urban and rural public mass transportation. In 1992, GAO designated FTA's management and oversight of billions of dollars in federal transit grants as a high-risk federal program that was especially vulnerable to fraud, waste, abuse, and mismanagement. Since that time, FTA has taken several steps to address the oversight weaknesses that were responsible for its high-risk designation. In February 1995, as a result of the various initiatives FTA was undertaking to improve its grants management oversight, GAO removed FTA from its high-risk list with the understanding that we would continue to monitor the progress and implementation of FTA's oversight initiatives.

This report discusses our latest review of FTA's grants management oversight. Specifically, the report discusses (1) FTA's initiatives that have provided an increased focus on grants management oversight and (2) the improvements that can be made to correct grantees' noncompliance and assess the program's effectiveness. The report does not include an assessment of FTA's oversight activities in the areas of civil rights, planning, and safety. We are providing this report to you because of your responsibilities for authorizing and funding federal transit programs.

Results in Brief Ongoing initiatives and related organizational changes are continuing to strengthen FTA's oversight of federal transit grants and thus decrease the risk associated with its multibillion-dollar grants program. By improving guidance and training for staff and grantees, standardizing oversight procedures, and using contractor staff, FTA has improved the quality and consistency of its grants management oversight. In particular, FTA's risk assessment process has helped to target limited oversight resources and has provided a strong foundation for improved oversight. Furthermore, the overhaul of the Triennial Review Program, a performance evaluation of most grantees performed at least once every 3 years, has given FTA better guidance, training, and more resources to monitor grantees. FTA has also made better use of other specialized oversight tools at its disposal, such as financial management and procurement reviews, and has demonstrated a greater willingness to use stringent enforcement actions to compel grantees to resolve noncompliance issues.

Although FTA is improving its oversight of federal transit grants, the agency needs to give more attention to issuing reports on triennial reviews in a timely manner; these reviews help to ensure that grantees are adequately safeguarding the billions of federal dollars provided to them. In addition, while we found that documentation pertaining to the various grants management oversight reviews was adequately maintained by most FTA regional offices, the almost total lack of documentation found in FTA's New York Regional Office, the region that oversees the most transit grant dollars, gives us little confidence that appropriate follow- up on noncompliance findings was being performed there. Furthermore, many grantees still frequently do not meet FTA'S time frames for correcting the noncompliance findings and deficiencies identified by oversight reviews. In many cases, FTA regional officials told us that these problems could often be attributed to the lack of staff assigned to carry out oversight activities. In this connection, we note that FTA never followed through on an internal task force's earlier recommendation to look at how staff allocations are made between program and oversight functions. As a result, there is no strong correlation between the number of grants, the number of staff performing oversight, and the time spent on oversight from region to region.

FTA does not know the full extent to which grantees' noncompliance with federal requirements is putting federal dollars at risk because it is not effectively using an established information system intended to track the resolution of oversight findings. This system has the potential to be a useful tool in tracking compliance, identifying problems, and even assessing the effectiveness of the FTA oversight program in meeting performance standards. Currently, however, the system is not updated by regional staff as required, nor is it used by headquarters officials to help manage or monitor the oversight activities of FTA's regional staff - leaving FTA susceptible to, and unable to quickly respond to, situations in any of its regional offices that might compromise good oversight. FTA officials say they are currently working to improve this system.

Background

FTA provides financial assistance to states and localities to develop, operate, maintain, and improve mass transit systems. Since 1964, over $85 billion in mass transit grants has been distributed to states and local transit agencies. In fiscal year 1997, FTA provided more than $4.5 billion to over 600 grantees. FTA currently oversees about $42 billion in active grants. Recipients of FTA grants must comply with applicable federal statutes and regulations. Grantees certify to FTA that they have the ability and intention to meet all of the requirements placed upon them. For exaxnple, all grant recipients must safeguard their federal investment by (1) keeping accurate and current records on the use of federal funds and (2) adequately controlling cash flow and inventory. Grantees must also make several certifications to FTA, including that they (1) have the ability to provide satisfactory continuing control and maintenance of FTA's property, (2) will purchase required inventory competitively, and (3) will follow "Buy American" provisions. (Details on these and other certifications are contained in app. I.)

Whereas grantees are responsible for the day-to-day management of their grants, FTA is responsible for overseeing grantees' compliance with federal requirements and ensuring the proper use of federal transit funds. FTA headquarters, through its Office of Oversight staff of 17, is responsible for developing policy and procedures for carrying out grants management oversight. FTA carries out these responsibilities primarily through approximately 70 staff located in 10 regional offices throughout the United States. (Fig. 1 shows the location of each regional office and the states each region encompasses.) Each regional office is responsible for overseeing anywhere from 28 to 116 grantees and 172 to 872 grants. (See app. II for a list of FTA's current grant allocations, by FTA region). FTA's

Office of Oversight is responsible for ensuring that regional office staff implement grants management oversight policies and procedures in a similar and consistent manner.

Figure 1: FTA's 10 Regions

Map Deleted From Text]

FTA uses a number of "tools" to oversee federal grantees, these tools and their main purpose.

1] Section 5307 of title 49 requires that comprehensive performance reviews be performed at least once every 3 years on grantees who receive funds under this section. Currently, section 5307 grantees receive approximately 89% of all FTA funds.

FTA also has several enforcement tools to… [END OF PREVIEW]

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