Report Contents
What OIG Audited
Federal agencies can require applicants for Federal assistance awards to cover a share of the costs for implementing the award. The nonFederal share of costs, frequently called “cost share” or “matching costs,” refers to that portion of the project or program costs that is not borne by the Federal Government. During FY 2019 and FY 2020, the Department of State (Department) awarded 2,995 grants and cooperative agreements, of which, 296 included cost-sharing requirements totaling $60.8 million.
The Office of Inspector General (OIG) conducted this audit to determine whether recipients of selected Department grants and cooperative agreements complied with cost-sharing requirements in accordance with the award agreements.
What OIG Recommends
OIG made 12 recommendations to 3 Department bureaus to improve internal controls related to monitoring cost-sharing requirements and to determine whether identified questioned costs are allowable and supported. On the basis of the Department’s responses to a draft of this report, OIG considers the 12 recommendations resolved, pending further action. A synopsis of management’s responses to the recommendations offered and OIG’s reply follow each recommendation in the Audit Results section of this report. Responses received from the Bureau of Administration; Bureau of Population, Refugees, and Migration; and the Office to Monitor and Combat Trafficking in Persons are included in their entirety in Appendices C through E, respectively.
What OIG Found
Recipients of the eight financial assistance awards reviewed for this audit mostly complied with cost-sharing requirements in accordance with the award agreements. However, OIG found that award recipients could not support 12 (13 percent) of 89 expense transactions selected for sampling, totaling $46,306. Additionally, three of the award recipients used expenses incurred outside of the awards’ periods of performance to fulfill the cost-share requirement established in the agreements. Finally, OIG found that 8 (22 percent) of 36 Federal Financial Reports (Standard Form 425) reviewed for this audit included an incomplete or incorrect cost-share amount.
OIG determined that the incomplete or incorrect cost-share reporting occurred, in part, because of weaknesses in the Department’s system of internal controls that is meant to discover and correct errors during award execution. For example, monitoring plans were not tailored to awards, monitoring controls were not adjusted when the COVID-19 pandemic prevented site visits, and Grants Officer Representatives (GOR) training did not provide adequate instruction for oversight of cost-share requirements. Furthermore, Grants Officers (GO) and GORs lacked clarity related to their responsibilities for monitoring financial aspects of awards.
As a result of its testing, OIG identified $261,119 of unsupported or unallowable cost-share transactions. Until the internal control deficiencies identified are corrected, the Department will not have reasonable assurance that cost-sharing requirements are being fulfilled in accordance with Federal requirements and award agreements.
Report Terms
Report Recommendations
OIG recommends that the Bureau of Administration amend the Federal Assistance Directive to include a requirement that Grants Officers and Grants Officer Representatives detail in the monitoring plan the specific monitoring activities that will be performed, including monitoring cost-share amounts.
OIG recommends that the Bureau of Administration update the monitoring plan template to include a requirement for users to detail the specific monitoring activities that will be performed, including monitoring cost-share amounts.
OIG recommends that the Bureau of Administration amend the Federal Assistance Directive to require that Grants Officers and Grants Officer Representatives include alternative oversight actions in a monitoring plan if planned activities cannot be performed as originally intended.
OIG recommends that the Bureau of Administration amend the Federal Assistance Directive to require that financial monitoring conducted by Grants Officers and Grants Officer Representatives include expense sampling based on the risk assessment. Expense sampling should verify that expenses are supported and incurred within the period of performance, and that cost-share expenses (if applicable) are supported.
OIG recommends that the Bureau of Administration modify the standard site visit checklist to include a section on recipient expense sampling based on the assessment. Expense sampling should verify that expenses are supported and incurred within the period of performance, and that cost-share expenses (if applicable) are supported.
OIG recommends that the Bureau of Administration amend the Federal Assistance Directive to include a requirement that Grants Officers and Grants Officer Representatives use the modified standard site visit checklist (Recommendation 5) during an in-person site visit or during a desk audit when an in-person site visit cannot be performed.
OIG recommends that the Bureau of Administration develop training for Grants Officer Representatives related to verifying that cost-share commitments have been met, when applicable.
OIG recommends that the Bureau of Administration modify the Grants Officer Representative standard designation memorandum template to clearly articulate Grants Officer Representative responsibilities with respect to monitoring the financial aspects of an award, including cost-share amounts.
OIG recommends that the Bureau of Population, Refugees, and Migration (PRM) determine whether the $87,242 in unallowable cost-share amounts incurred outside of the period of performance for cooperative agreement SPRMCO19CA0099 (see Table B.1) are allowable and (b) recover any costs determined to be unallowable.
OIG recommends that the Under Secretary for Civilian, Security, Democracy, and Human Rights, Office to Monitor and Combat Trafficking in Persons (TIP), (a) determine whether the $109,421 in unallowable cost-share amounts incurred outside of the period of performance for grant SSSJTIP20GR0008 (see Table B.1) are allowable and (b) recover any costs determined to be unallowable.
OIG recommends that the Under Secretary for Civilian Security, Democracy, and Human Rights, Office to Monitor and Combat Trafficking in Persons, (a) determine whether the $37,576 in unsupported cost-share amounts reported for grant SSJTIP20GR0008 (see Table B.1) are supported and allowable and (b) recover any costs determined to be unsupported and unallowable.
OIG recommends that the Under Secretary for Civilian Security, Democracy, and Human Rights, Office to Monitor and Combat Trafficking in Persons, (a) determine whether the $8,730 in unsupported cost-share amounts reported for grant SSJTIP19GR0004 (see Table B.1) are supported and (b) recover any costs determined to be unsupported.