GAO Report Highlights State Subaward Oversight Gaps

The Government Accountability Office released a report identifying four oversight deficiencies most frequently cited in single-audit findings for state recipients of federal grants. The findings apply to any non-federal entity that expends over $1 million in federal awards during a fiscal year, a threshold that triggers a required single audit.

The report cites incomplete subrecipient risk assessments, inadequate monitoring of expenses and single-audit compliance, failure to issue timely management decisions on audit findings, and inaccurate or missing reports on subawards of $30,000 or more. These deficiencies were drawn from a nongeneralizable random sample of 96 single-audit reports filed on the Federal Audit Clearinghouse covering the period 2020 through 2024.

GAO recommends that states adopt elements of its Fraud Risk Framework to strengthen oversight. Suggested actions include automating data-analytic tests, expanding training to mitigate staff turnover, standardizing forms, sharing data with federal partners, and updating grant-management systems to improve internal controls. The framework also calls for more consistent federal guidance on regulatory changes.

To develop its conclusions, GAO reviewed the audit sample, examined inspectors-general reports, and interviewed officials from nine state grant offices with subaward oversight experience. The agency notes that the federal government obligated over $1.2 trillion in grant awards in fiscal year 2025, the majority of which flowed through state programs.

If states align their oversight practices with the Fraud Risk Framework, GAO expects a reduction in fraud risk and more reliable reporting on subawards, thereby enhancing the integrity of federal grant programs.