In addition to the material weaknesses discussed in appendixes II and III, we found a significant deficiency in the federal government’s internal control over management of federal grants, related to deficiencies at certain federal entities. Also, we reported a significant deficiency in fiscal year 2011 regarding loans receivable and loan guarantee liabilities. We considered the control deficiencies in loans receivable and loan guarantee liabilities to be a material weakness in fiscal year 2012, as noted above, as additional control deficiencies in this area were identified in fiscal year 2012.
In fiscal year 2012, federal grants management internal control deficiencies, primarily regarding inadequate monitoring and oversight of grant programs, were identified at several federal entities. For example, the auditor of one federal entity that awards and manages significant amounts of grants reported that related information and communication systems did not collect and disseminate timely, reliable, and relevant information to those charged with making informed decisions regarding grants. Additionally, another entity’s auditor reported that effective monitoring procedures over certain grant activities and the maintenance of related documentation have not been implemented. These internal control deficiencies could adversely affect the federal government’s ability to ensure that grant funds are being used in accordance with applicable program laws and regulations.