Are Federal Grant Recipients Accountable for their Use of Taxpayer Dollars? Evidence from Single Audits

• In Event: Audit and Firm Financing

Abstract

Single audits are intended to be the primary accountability mechanism for Federal grants to state and local governments and non-profit organizations. We test longstanding concerns that Federal agencies do not use Single audit reports when awarding funding and whether revisions to the Uniform Guidance in 2013 improved monitoring and use of Single audits. We find no evidence that the Federal agencies reduce awards to state and local governments based on Single audit reports either before or after the revised Uniform Guidance. Among nonprofits and local schools, unclean financial statement (compliance) audit reports are associated with lower subsequent expenditures prior to (after) the revised Uniform Guidance. However, this change is due to award recipients monitoring their sub-recipients more closely rather than due to stronger direct monitoring by Federal agencies. Our results indicate that the revised Uniform Guidance had little impact on Federal agencies’ monitoring of award recipients and suggest that state and local governments in particular have limited accountability for their federal expenditures.

Authors

• Bethany Brumley, University of Illinois at Urbana-Champaign

• Anne Margaret Thompson, University of Illinois-Urbana-Champaign

• Oktay Urcan, University of Illinois-Urbana-Champaign