Community Services Block Grant Program: HHS Needs to Improve	 
Monitoring of State Grantees (07-FEB-06, GAO-06-373R).		 
                                                                 
The House Committee on Education and the Workforce has asked GAO 
to review the administration of the Community Services Block	 
Grant (CSBG) program. As part of this review, we are examining	 
the Department of Health and Human Services' (HHS) efforts to	 
monitor states' use of CSBG funds. Specifically, we have been	 
reviewing efforts undertaken by HHS's Office of Community	 
Services (OCS), which has primary responsibility for		 
administering the CSBG program. 				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-373R					        
    ACCNO:   A46418						        
  TITLE:     Community Services Block Grant Program: HHS Needs to     
Improve Monitoring of State Grantees				 
     DATE:   02/07/2006 
  SUBJECT:   Accountability					 
	     Block grants					 
	     Documentation					 
	     Funds management					 
	     Grant monitoring					 
	     Internal controls					 
	     Knowledge, skills and abilities			 
	     Noncompliance					 
	     Records retention					 
	     Reporting requirements				 
	     Community and supportive services			 
	     programs						 
                                                                 
	     Policies and procedures				 
	     Timeliness 					 
	     Community Services Block Grant Program		 

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GAO-06-373R

February 7, 2006

The Honorable Wade F. Horn

Assistant Secretary for Children and Families

U.S. Department of Health and Human Services

Subject: Community Services Block Grant Program: HHS Needs to Improve
Monitoring of State Grantees

Dear Mr. Horn:

As you know, the House Committee on Education and the Workforce has asked
GAO to review the administration of the Community Services Block Grant
(CSBG) program. As part of this review, we are examining the Department of
Health and Human Services' (HHS) efforts to monitor states' use of CSBG
funds. Specifically, we have been reviewing efforts undertaken by HHS's
Office of Community Services (OCS), which has primary responsibility for
administering the CSBG program. The purpose of this letter is to bring to
your attention concerns that we have about OCS' ability to effectively
fulfill its CSBG monitoring responsibilities.

Under the Community Services Block Grant Act, as amended, OCS is required
to evaluate several states' use of CSBG funds annually and issue reports
on the results of those evaluations to the states and Congress. In
addition, the standards pursuant to 31 U.S.C. section 3512(c), (d),
commonly referred to as the Federal Managers' Financial Integrity Act of
1982, require federal agencies to establish and maintain internal controls
to provide reasonable assurance that agencies achieve the objectives of
effective and efficient operations, reliable financial reporting, and
compliance with applicable laws and regulations.1 In order to have
sufficient internal controls, managers should have policies and procedures
in place that, among other things, ensure that statutory responsibilities
are fulfilled; agency information and communications are available,
reliable, and timely; and staff have adequate training and skills.

In the course of our work to date, we found that OCS does not have the
policies, procedures, and internal controls in place needed to carry out
its monitoring efforts. Specifically, we found that

1For more information on internal control standards, see GAO, Standards
for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1
(Washington: D.C.: November 1999), and Office of Management and Budget,
Circular No. A-123, Management's Responsibility for Internal Control,
(Washington: D.C.: December 21, 2004).

           o  OCS staff that conduct monitoring visits told us they lacked
           the full range of necessary skills to perform these visits, and
           procedures are not in place to ensure that monitoring teams
           collectively have requisite skills. Specifically, CSBG staff told
           us they lacked the expertise needed to assess the financial
           operations of state CSBG programs-a key component of the CSBG
           monitoring process.

           o  OCS did not issue mandatory reports on monitoring results to
           any of the six states it visited during fiscal years 2003 and
           2004. OCS officials informed us that they intend to issue reports
           for fiscal year 2005 visits. However, 6 months after completing
           these visits, OCS has yet to issue a final report to any state.
           Although OCS monitoring procedures direct staff to write reports
           after visits and send draft reports on their findings to state
           agencies for review and comment before final issuance, the
           procedures do not include instructions with regard to specific
           time frames for completing these steps.

           o  OCS cannot locate key documents pertaining to its monitoring
           visits of states conducted in 2003 and 2004. Although OCS
           officials stated that program files should include documentation
           of its monitoring visits, we found that OCS's file management
           policies do not include directions on retaining these monitoring
           documents. Additionally, officials told us that staff responsible
           for carrying out monitoring activities had retired and their files
           could not be located.

           o  OCS's most recent CSBG report to Congress, which covers fiscal
           years 2000 to 2003, did not include information on the results of
           its state evaluations, as required by statute. In its previous
           report to Congress, which covered fiscal year 1999, OCS provided
           information on these results and acknowledged that it is
           statutorily obligated to do so. Additionally, OCS has not been
           timely in issuing these reports and has not submitted them
           annually to Congress, as required. For example, OCS issued a
           consolidated report for fiscal years 2000 to 2003 in December
           2005. Officials in OCS and the Administration for Children and
           Families' (ACF) Office of Legislative Affairs and Budget said that
           the report was issued just recently because of time lags in
           receiving data from states and the length of the agency's internal
           review process.

In conclusion, OCS's procedures and controls are not adequate to ensure
that it performs its monitoring responsibilities in a timely and effective
manner. As a result, states and congressional oversight committees are not
receiving information that is required under law. States may not have made
improvements to how they administer CSBG funds because they were not made
aware of findings from OCS's evaluations. Furthermore, OCS's failure to
provide timely reports that include the results of these evaluations
hinders Congress' ability to carry out its oversight responsibilities.
Also troubling is that OCS will not be able to produce this information
for the years for which monitoring documentation has been lost. Finally,
by sending staff without sufficient expertise in financial management on
monitoring visits, OCS failed to ensure that states spent federal dollars
appropriately.

In order to ensure that OCS has the internal controls to fulfill its CSBG
monitoring responsibilities, we recommend that you instruct the director
of OCS to establish formal written policies and procedures for

           o  ensuring that teams conducting monitoring visits include staff
           with requisite skills,
           o  ensuring the timely completion of monitoring reports to states,
           o  maintaining and retaining documentation of monitoring visits,
           and
           o  ensuring the timely issuance of annual reports to Congress.

We met with OCS and other ACF staff on February 2, 2006 and presented
these findings. These staff had no comments on the findings but stated
that they are beginning to undertake actions intended to address issues we
raised with their monitoring efforts. In the meantime, we are continuing
our review of the CSBG program. We will include the issues raised in this
letter, and any actions that your agency has taken to resolve them, along
with the other findings in our final report. If you or your staff have any
questions about this correspondence, please contact me at (202) 512-7215.

Sincerely yours,

Marnie S. Shaul

Director, Education, Workforce, and Income Security Issues
*** End of document. ***