How to Prepare for an Audit Ryan Preston And Chase Lenon

Federal Grant Agreements Requirements Indiana Code 5-11-1-9 Requires the state examiner to examine all accounts and all financial affairs of every public entity IC 5-11-1-25 sets the School audit schedule as Biennial Federal Grant Agreements Grant Agreements commonly call for an annual audit, but Indiana Schools are generally exempt because of a Grandfather clause from 1986 Debt Covenants and Bond Rating Agencies Most financial institutions and bond rating agencies accept the SBOA audit report for their purposes

Types of Engagements Single Audit Financial Statement Audits Required for Schools that exceed the threshold of federal grant expenditures Financial Statement Audits Required for Schools that have outstanding debt Compliance Required for ECAs where we have determined specific compliance needs to be reviewed, or are assessed a High risk level Centralized Compliance Required for ECAs that are assessed at a Moderate or Low level of risk Special Investigation Required for Schools in which the SBOA had determined a need to review specific areas for a specific time period

Goals Provide Reader Opinions on Information Presented by Auditee Provide Reader with Noncompliance of Federal Requirements for Major Programs and State Requirements Provide Management with less Significant Noncompliance of Federal and State Requirements

Entrance Conference Examiners should explain objective of engagement. Testing for non-compliance, obtaining assurance if applicable… Explanation of Management’s responsibilities Informing management of fees, records to be requested, estimated timeline of engagement… Please ask any questions if you are not clear on anything the examiner provides or requires! Who is invited Those Charged with Governance – Normally School Board President Management – Normally the Fiscal Officer (Treasurer) and the Superintendent What is discussed Introduction to the Field Examiners that will be working on the audit General overview of: Audit Objectives; Management Responsibilities; Audit Procedures (General, Internal Control, Compliance); Informing Management of general records that will be requested; When audit will begin and the expected issuance date Continuing Expectations Provide and inform attendees with a method to allow for continued communication throughout the audit process

Financial Statements FE will present the fiscal officer with the compiled financial statements, notes to financial statements, and Schedule of Federal Expenditures FE will request fiscal officer to review and complete the Form 13

Understanding the Unit FEs will inquire or investigate the key employees in conducting the school financial functions FEs will determine the general environment the school is existing in and what procedures and processes are in place that allow the School to operate Unit could be asked to complete/update an SBOA Form 7 questionnaire School officials will be asked to provide school board meeting minutes and could be asked to complete a Unit Environment questionnaire

Identify Risks Risks Associated with Significant Audit Areas How Unit has Addressed Risks How it Will Effect Audit Procedures Performed

Internal Controls Substantive Testing Policies and Procedures that have been instituted will be tested to ensure that they are sufficient and are working Substantive FEs will perform audit steps to determine if financial statement information is materially correct FEs will request documentation for processes like collections, payments, etc. FEs will request things like bank reconcilements and ledgers, will also test things like receipts, claims, payroll

Federal Program Audits Schedule of Federal Expenditures Information input into Gateway Annual Financial report Selection of Major Programs Based on dollar amount threshold and Risk Based Assessment Audit of Major Programs Audit procedures performed to determine compliance with federal grant requirements FEs will test internal controls and substantive applicable federal compliance requirements like allowable costs, reporting, eligibility, cash management, level of effort, period of performance, procurement/suspension/debarment, program income, special tests and provisions.

What has Happened After the Audit Period? Subsequent Events What has Happened After the Audit Period? Debt Issuance Significant Change in Financial Situation Consolidation

Concluding Fieldwork Determine Opinions Compile Findings and Audit Results and Comments Request Auditee prepared schedules Status of Prior Audit Findings Compile Management Letter Comments

Exit Conference Request Auditee prepared schedules Options to Respond Who is Invited What is Discussed Request Auditee prepared schedules Federal Findings Corrective Action Plans Options to Respond IC 5-11-5-1.5 State Corrective Action Plans for all repeat federal findings and repeat Audit Results and Comments

What Not To Do Panic! Try to hide things –we are here to help! The auditor should be viewed as a resource, not an adversary. Be afraid to ask questions. Try not to look at an audit as something to complicate your life! An audit is a irreplaceable tool to ensure your finances are in order.

Questions?