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AFMD-82-5 1 (1981-10-30)

handle is hein.gao/gaobabcpl0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE / 7 70 WASHINGTON, D.C. 20548 ACXWnNG AMD PIIANCIAL Ner wnDIVISIMN B-204360 OCTOBER 30,1981 The Honorable Drew Lewis The Secretary of Transportation Dear Mr. Secretary: 116770 Subject: State Highway Agencies Need to Employ Inde- pendent Auditors for Audits of Federal Funds (AFMD-82-5) We recently reviewed the Department of Transportation's (DOT's) plan for auditing Federally funded State highway programs. We did this because we were concerned that this plan could violate the independence standard for Government auditing contained in the Comptroller General's Standards for Audit of Governmental Organi- zations, Programs, Activities, and Functions. After our review, we concluded that the plan is unacceptable because it violates the independence standard for Government audi- ting. We based our conclusion on the fact that DOT plans to let State highway agencies' internal auditors rather than auditors in- dependent of and external to the organizations be the principal auditors of Federal funds received. We believe the use of inde- pendent auditors will reduce the potential for compromising audits of Federal funds and help minimize the possibility of fraud and abuse. OBJECTIVE, SCOPE, AND METHODOLOGY Our objective was to determine if DOT's plans for conduct- ing Federally required audits would impose any organizational impairments to independence. To accomplish this, we interviewed officials in headquarters and regional offices, reviewed audit policies and procedures of the Federal Highway Administration and the Office of Inspector General, and interviewed State highway agency officials in the 50 States and the District of Columbia. AUDITING PLANS FOR FEDERAL HIGHWAY PROGRAM OMB Circular A-102, Attachment P, requires Federal grant re- cipients to arrange for independent audits of their operations at least every 2 years. Although DOT and its Federal Highway Admin- istration recognize that internal audit groups cannot be considered independent for Attachment P audits, the Administration has drafted (911520) C) I ' ' 1.5

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