The U.S. Government Accountability Office on Tuesday released a report detailing common deficiencies in how states oversee federal grant money passed on to local governments and nonprofits.
According to the agency, this monitoring is necessary to lower fraud risks and make sure programs achieve their targets. During fiscal year 2025, the federal government committed more than $1.2 trillion toward grant programs, with most of the money going to states.
States can directly deliver services or pass funding to other entities in the form of subawards. Federal regulations assign most oversight responsibility for these passed-through funds to prime recipients, such as states. Nonfederal entities that spend over $1 million in federal awards during a fiscal year must undergo a single audit, the report says.
The GAO reviewed a sample of 96 single audits from 2020 through 2024 and identified four frequent oversight deficiencies. These included incomplete evaluations of subrecipient risk, failing to ensure expenses were documented or allowable, not issuing timely management decisions on noncompliance issues, and inaccurate or missing reports on subawards of $30,000 or more.
State grant management officials and other entities interviewed by the GAO suggested several ways to address oversight challenges. Suggestions included automating oversight steps, conducting more training to mitigate staff turnover, standardizing forms, and updating grant management systems, the agency said. Sharing data between state and federal agencies was also recommended to improve transparency.
The agency noted that many of these suggestions, alongside regulatory changes and open recommendations, align with its Fraud Risk Framework. The GAO said these opportunities could help manage and reduce the risk of fraud in federal programs.