April 12, 2012
Auditors Propose Strategies for Agencies to Meet Federal Requirements
SALEM – A new Secretary of State audit suggested strategies for Oregon to better budget and manage federal Level of Effort programs. Level of Effort is a federal compliance requirement prohibiting states and other recipients from reducing their own spending when federal dollars are awarded. Oregon receives federal funding for 49 Level of Effort programs, mostly for social services and education, on the condition that the state maintains its previous levels of commitment to them. If these on-going commitments are not met, the state risks penalties and the loss of federal dollars.
Level of Effort requirements impact the state’s General Fund because the state often spends these funds to meet the commitments. The Oregon Legislative Assembly needed to add $62.5 million of General Fund dollars in 2011 to four programs so that they could remain compliant with their Level of Effort requirements. In some cases, federal rules allow the state to get credit for spending by other programs or state agencies.
While auditors found Oregon agencies have generally complied with Level of Effort requirements, some agency staff expressed concern that state commitment levels could be difficult to sustain in the future. Auditors found state agencies could better coordinate and combine their program efforts to meet these Federal requirements, which could save General Funds.
“During challenging economic times it is more important than ever to leverage limited General Fund dollars in order to preserve federal funding for important programs,” said Secretary of State Kate Brown.
The audit found general agreement among state staff that Level of Effort requirements helped secure continued funding for particular programs. However, agency staff also expressed concern that unclear federal requirements and inadequate federal guidance made administration of Level of Effort programs complicated and discouraged innovation and efficiencies for some programs. Level of Effort can also be insensitive to changes in service populations or short-term economic downturns that leave critical non-Level of Effort programs subject to greater reductions.
“Federal agencies need to reevaluate their Level of Effort requirements and guidance to reduce red tape and help ensure state and federal funds are getting the greatest value possible”, said Audits Division Director Gary Blackmer “We will be seeking Federal consideration of the issues we identified.”
The audit report, including the agency response, can be found at www.sos.state.or.us/audits
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