The $21,000 increase in printing and reproduction will support Working Capital Fund (WCF) activities and the Regions' use of the General Services Administration (GSA) Cost per Copy Program. Except in this area, the majority of the OIG wide budget categories decreased. These adjustments have resulted in a net decrease of $328,900 in operating costs. Since the OIG proposes to reduce staffing levels in FY 1995, operating costs also reflect corresponding reductions.

OFFICE OF THE ASSISTANT INSPECTOR GENERAL FOR AUDITING

SUMMARY STATEMENT

Description

Under the authority of the IG Act of 1978, as amended, and under the executive direction of the IG and Deputy IG, the Assistant Inspector General for Auditing (AIGA) supervises and conducts all audit activities related to DOT programs and operations. As overseer of all audit activities, the AIGA ensures compliance with the standards established by the Comptroller General of the United States, the PCIE, and other professional guidelines. In addition, the AIGA provides oversight for: audit work performed by independent public accountants under the Single Audit Act of 1984, audit work by the Defense Contract Audit Agency (DCAA) and other audit organizations for contracts anticipated or awarded by the Department, and audits of financial statements of departmental entities or activities. Also, support is provided to Inspections and Evaluations and Investigations as needed.

In FY 1994, the Office of the AIGA consisted of the AIGA's immediate office (JA-1), the Deputy AIGA (JA-2), three Headquarters offices (JA-10, JA-20, and JA-30), and eight regional offices. In order to achieve the FY 1995 budget target, the Office of the AIGA will consolidate the Headquarters offices.

Audit Resources

A breakdown of audit positions by office and function is provided below.

Management and Supervision

Senior Headquarters and field audit officials who direct the performance of all audits relating to DOT programs and operations.

Clerical and Administrative Support

Staff members who type reports

and correspondence, answer telephones, file documents, and perform other duties in support of the audit mission.

Technical Support Includes two computer specialists involved in provision of automated data retrieval and analysis services for the entire OIG. Also included is one statistical advisor, an engineer advisor, and an auditor responsible for planning and audit tracking systems. The statistical advisor provides consulting advice to OIG personnel and Departmental requesters on the appropriate use of statistical and mathematical techniques in the execution of audits, inspections and evaluations, investigations, and Departmental operations. The engineer advisor acts as engineering consultant to auditors, inspectors, and investigators, providing expert advice and overseeing engineers detailed to or under contract with the OIG. Automated Data Processing (ADP), statistical, and engineering advice is used extensively in the development of audit methodology and in the evaluation of technical findings.

Internal Audits These resources are used to conduct performance and financial audits of major programs and activities of the Department. These audits involve the propriety of financial operations, the evaluation of economy and efficiency of operations, and reviews of program results. During FY 1993, we issued 122 internal audit reports with $365 million of costs questioned and unsupported as well as funds to be put to better

use.

Economy and efficiency audits include determining: (1) whether the entity is acquiring, protecting, and using its resources (such as personnel, property, and space) economically and efficiently; (2) the causes of inefficiencies or uneconomical practices; and (3) whether the entity has complied with laws and regulations concerning matters of economy and efficiency.

Program audits include determining: (1) the extent to which the desired results or benefits established by the Congress are being achieved; (2) the effectiveness of organizations, programs, activities, or functions; and (3) whether the entity has complied with laws and regulations applicable to the program.

Financial statement audits determine (1) whether the financial statements of an audited entity present fairly the financial position, results of

operations, and cash flows or changes in financial position in accordance with Generally Accepted Accounting Principles, (2) whether the entity has internal control structures which provide reasonable assurance of achieving its internal control objectives, and (3) whether the entity has complied with laws and regulations for those transactions and events that may have a material effect on the financial statements.

Financial related audits include determining whether (1) financial information and related items are fairly presented in accordance with established criteria, and (2) the entity has adhered to specific financial compliance requirements.

Contract Audits - These audits are performed to advise the Department's contracting officers whether contractors' costs, either actual or estimated, are fairly presented. To this end, the auditor determines if contractors have followed applicable Federal regulations and cost accounting standards in pricing goods or services that are being procured by DOT. Although we have responsibility for all contract audit services required by DOT procurement offices, most of this contract audit work is accomplished by DCAA under a reimbursable agreement. We review each audit report as received and transmit, on a biweekly basis, a summarization of audit results to the appropriate procurement offices. For each report reviewed, this summarization identifies the management actions needed on the audit findings and recommendations. During FY 1993, these audits recommended reductions of $194 million from contractor proposals and $136 million from contractor-claimed incurred costs. They also identified $66 million of unsupported costs.

Grant and Subsidy Audits - Under the provisions of the Single Audit Act of 1984 (P.L. 98-502), any state or local government grantee which receives $100,000 or more a year in Federal funds is required to have an audit by an independent auditor. The Act mandates that the audit cover the entire financial and compliance operations of the organization. Our resources are used to provide technical advice to grantees and their

independent auditors to ensure that audits are accomplished in

accordance with established performance and reporting standards. OIG oversight is carried out through desk reviews of the audit reports and quality control reviews of the audit work performed. A desk review is an evaluation of an audit report to determine if it meets the requirements of the Office of Management and Budget (OMB) Circular A-128 and the reporting standards issued by the Comptroller General of the United States. A quality control review is a review of the independent auditor's working papers supporting an individual audit to determine whether the audit work meets the requirements of OMB Circular A-128 and the standards for working paper preparation issued by the Comptroller

General. DOT provides grants totaling more than $21 billion annually to about 2,300 recipients. OIG is the cognizant Federal agency for 764 recipients of Federal aid. Federal cognizant responsibility for the remainder of DOT's Federal-aid recipients is primarily assigned to the Department of Health and Human Services (HHS) and the Department of Housing and Urban Development. During FY 1993, a total of 1,365 grant/subsidy audit reports were issued with $56 million of questioned costs, unsupported costs, and funds to be put to better use.

Resources are also used in support of the audits of the Maritime Administration's Operating Differential Subsidy Program and the subsidy audits related to claims made by air carriers for the Office of the Secretary's Essential Air Service (EAS) Program. EAS claims are for subsidized scheduled air service to eligible small communities that would not otherwise be served by air carriers as a result of airline deregulation.

Hotline Complaints Audit resources are used to verify allegations of fraud, waste, abuse, and mismanagement relating to DOT programs that are submitted to the DOT Hotline. For FY 1993, 14 hotline complaints were submitted to and responded by the audit staff. involved: (1) waste of government funds on contracts, of non-appropriated funds, (3) mismanagement improprieties, and (4) misuse of government resources.

These complaints (2) improper use and personnel