Summary: In a study to determine if the Department of Labor and its grantees are vulnerable to misuse and abuse of Government funds, GAO concentrated on whether Labor has an adequate system of internal controls. It also reviewed the manner in which Labor carries out its Comprehensive Employment and Training Act (CETA) program audit responsibilities. For the CETA program, GAO found internal controls to be unacceptably weak at the grantees reviewed, despite numerous Labor regulations and publications which provide internal control guidance and requirements. These conditions make the grantees vulnerable to illegal acts and unintentional errors and reinforce the importance of conducting regular audits of their operations to assure that propoer internal controls are in place over CETA funds. The CETA Amendments of 1978 require the Secretary of Labor to audit or arrange for audit of grantees and their subgrantees to ensure that funds are spent for the purposes intended. When audits do disclose illegal, erroneous, or questionable expenditures, it is important that any misspent funds be recovered in a timely manner. Lengthy delays have been reported in resolving audit findings at Labor. While some improvements have been made, there are still considerable delays occurring in resolving these delays. In assessing the vulnerability of prime sponsors and subgrantees, GAO found problems in the management of cash, equipment, procurement, and the payroll. A review of CETA audits disclosed significant findings that are having an important effect on the program. However, at the time of the review, fewer than half the required audits had been performed. Audits of prime sponsors were not always timely, did not address management responsibilities over subgrants and contracts, and did not have all the characteristics of a quality audit. Labor did not have an effective system for controlling and summarizing subgrantee audits principally because a lack of audit resources results in its inabililty to accomplish more audits.
