Report Contents
What OIG Audited
From FY 2018 through FY 2020, the Department of State (Department) reported approximately $358 million in active grants and cooperative agreements to for-profit organizations in the State Assistance Management System (SAMS). In 2013, the Department mandated the use of SAMS. According to the Department, SAMS is its online Federal financial assistance management system built to unify Federal assistance processes and provide greater transparency, accountability, and reporting capabilities to bureaus and posts.
The Office of Inspector General (OIG) conducted this audit to determine whether the Department managed and monitored selected grants and cooperative agreements to for-profit organizations in accordance with applicable Federal requirements, Department policies and guidance, and award terms and conditions. To perform the audit, OIG reviewed nine selected awards to for-profit organizations, across four Department bureaus, which were active in SAMS between FY 2018 and FY 2020.
What OIG Recommends
OIG made 11 recommendations to improve internal controls related to the oversight of grants and cooperative agreements. On the basis of the Bureau of Administration’s response to a draft of this report, OIG considers all 11 recommendations resolved, pending further action. A synopsis of management’s response to the recommendations offered and OIG’s reply follow each recommendation in the Audit Results section of this report. The Bureau of Administration’s response to a draft of this report is reprinted in its entirety in Appendix B.
What OIG Found
Grants Officers (GO) and Grants Officer Representatives (GOR) did not always manage and monitor selected awards in accordance with requirements. Specifically, OIG found that GOs and GORs did not consistently perform and document performance and financial monitoring, complete annual updates to risk assessments and monitoring plans, obtain audit reports, or conduct annual reviews when applicable. In addition, OIG found that oversight personnel were maintaining key documentation in “unofficial” award files that included personal computer drives, shared drives, or bureau-specific systems, which is contrary to Department policy that mandates the use of SAMS as the official award file.
OIG determined that a primary reason for the deficiencies identified is that the Department has not required the use of a key oversight function within SAMS to manage post-award activities. Specifically, the SAMS’ Post-Award Activities (PAA) function is a control mechanism for post-award activities to assist both recipients and oversight personnel in award management and monitoring. Although Department policy requires the use of SAMS for awards management, the use of the PAA function within SAMS is optional and therefore not being consistently used by oversight personnel. In addition, OIG noted instances in which the Department’s Federal assistance oversight policies and procedures were not clear. For example, OIG found that policy related to GOR review of award recipients’ financial reports was not clear, and the policy was also not explicit about who is responsible for ensuring that annual reviews are conducted for awards with a period of performance exceeding 12 months. Moreover, the Department needs a communication strategy to ensure that GOs and GORs are aware of oversight requirements and understand oversight responsibilities. Until these deficiencies are corrected, the Department will not have reasonable assurance that awards are being administered in accordance with requirements nor will it be able to affirm that the awards are achieving expected program goals and objectives.
Report Terms
Report Recommendations
OIG recommends that the Bureau of Administration revise the Federal Assistance Directive to require Grants Officers (GO) and Grants Officer Representatives (GOR) to fully use the State Assistance Management System Domestic’s Post-Award Activities function to upload and review documentation for all post-award tasks, such as the review of Performance Progress Reports and Federal Financial Reports, GOR reports, annual reviews, other monitoring activities; and to document workflows for submitting, reviewing, and monitoring post-award activities among the GO, GOR, and award recipient.
Concurrent with the implementation of Recommendation 1, OIG recommends that the Bureau of Administration require bureaus to perform quarterly reviews of the State Assistance Management System Domestic’s Post-Award Activities function reports. The reviews should verify that Grants Officers and Grants Officer Representatives have complied with oversight requirements such as the review of Performance Progress Reports and Federal Financial Reports, GOR reports, annual reviews, and other monitoring activities.
Concurrent with the implementation of Recommendation 1, OIG recommends that the Bureau of Administration require bureaus to designate an official to review the State Assistance Management System’s Post-Award Activities function reports to verify that Grants Officers and Grants Officer Representatives comply with oversight requirements.
OIG recommends that the Bureau of Administration modify the State Assistance Management System user training to include guidance on documenting the Grants Officer and Grants Officer Representative workflows within the State Assistance Management System using the Post-Award Activities function.
OIG recommends that the Bureau of Administration conduct a survey of Grants Officers and Grants Officer Representatives to identify technical issues related to the use of and suggested improvements for the State Assistance Management System Domestic’s Post-Award Activities function.
Following implementation of Recommendation 5, OIG recommends that the Bureau of Administration analyze the results of the survey to identify the reasons hindering the use of State Assistance Management System Domestic’s Post-Award Activities function, including technical issues that need to be addressed and if appropriate, develop and implement a corrective action plan to increase the use of the State Assistance Management System Domestic’s Post-Award Activities function.
OIG recommends that the Bureau of Administration revise the Federal Assistance Directive to clearly articulate that the Grants Officer Representative (GOR) must provide the Grants Officer with a written assessment (GOR report) of the recipient’s performance based on a review of the Program Progress Report and Federal Financial Report within 30 days of receipt of the reports.
OIG recommends that the Bureau of Administration develop and implement a communications strategy that provides Grants Officer Representatives with specific and detailed requirements for financial monitoring to improve their understanding of and compliance with those requirements. This communications strategy should underscore the importance of reviewing the Federal Financial Report to ensure that the amount of funds expended is commensurate with the work accomplished on the award.
OIG recommends that the Bureau of Administration develop and implement a communications strategy that provides Grants Officers with specific and detailed requirements for financial monitoring to improve their understanding of and compliance with those requirements. This communications strategy should underscore the critical importance of reviewing and approving the Federal Financial Report in a timely manner within the Payment Management System, rather than allowing a default approval. It should further remind Grants Officers that Grants Officer Representatives could be delegated Federal Financial Report approval responsibility within the Payment Management System to ensure timely approval of reports.
OIG recommends that the Bureau of Administration revise the Code of Federal Regulations, Title 2, Subtitle B, Chapter VI, Part 600, Section 600.101, to include a reference to the Federal Assistance Directive foreign for-profit audit requirements or add a new section detailing audit requirements to for-profit organizations. Language included should be consistent with the Federal Assistance Directive and the Department of State’s Standard Terms and Conditions.
OIG recommends that the Bureau of Administration develop and implement a communications strategy that provides Grants Officers with specific and detailed audit requirements for foreign for-profit organizations to improve their understanding of and compliance with those requirements. This communications strategy should underscore the critical importance of requiring, obtaining, and reviewing audit reports to inform risk assessments and to formulate monitoring plans.