Audit and Audit Resolution Presented by Wendy Spivey ADECA Audit Manager

2 Overview

3 Purpose of OMB A-133 To set standards for obtaining consistency and uniformity among Federal agencies for the audit of non-Federal entities expending Federal awards.

4 Subpart B - Audits.200 Audit requirements.200 Audit requirements.205 Basis for determining Federal awards expended.205 Basis for determining Federal awards expended.210 Subrecipient and vendor determinations.210 Subrecipient and vendor determinations.215 Relation to other audit requirements.215 Relation to other audit requirements.220 Frequency of Audits.220 Frequency of Audits.225 Sanctions.225 Sanctions.230 Audit costs.230 Audit costs.235 Program-specific audits.235 Program-specific audits

5 Audit Requirements Non-Federal entities expending $500,000 or more in a year are required to have single audit or program-specific audit. Non-Federal entities expending $500,000 or more in a year are required to have single audit or program-specific audit. Effective for fiscal years ending after December 31, Effective for fiscal years ending after December 31, 2003.

6 Audit Requirements Single audits are required when non- federal entities expend $500,000 or more in year in Federal awards Single audits are required when non- federal entities expend $500,000 or more in year in Federal awards Effective for fiscal years ending after December 31, Effective for fiscal years ending after December 31, 2003.

7 Audit Requirements Program-specific audits are required when: Program-specific audits are required when: An auditee expends Federal awards under only one Federal program (excluding R&D). An auditee expends Federal awards under only one Federal program (excluding R&D). Federal program laws, regulations, or grant agreements do not require a financial statement audit of the auditee. Federal program laws, regulations, or grant agreements do not require a financial statement audit of the auditee.

8 Audit Requirements Non-federal entities that expending less than $500,000 of Federal awards in a year are: Non-federal entities that expending less than $500,000 of Federal awards in a year are: Exempt from Federal audit requirements for that year Exempt from Federal audit requirements for that year Require to have records available for review or audit by appropriate officials Require to have records available for review or audit by appropriate officials

9 Federal Awards Expended Loans Loans Endowment Funds Endowment Funds Free Rent Free Rent Non-cash Assistance Non-cash Assistance Medicare Medicare Medicaid Medicaid National Credit Union Administration Loans National Credit Union Administration Loans

10 Subrecipient and Vendor Determination

11 Relation to Other Audit Requirements

12 Frequency of Audits

13 Sanctions Percentage of Federal awards withheld until audit completion Percentage of Federal awards withheld until audit completion Withholding/disallowing overhead costs Withholding/disallowing overhead costs Suspend Federal awards Suspend Federal awards Terminating Federal award Terminating Federal award

14 Audit Costs Allowable Cost Allowable Cost Direct cost Direct cost Allocated indirect cost Allocated indirect cost Unallowable Cost Unallowable Cost

15 Program-Specific Audit Guide Provides guidance on: Provides guidance on: Internal Control Internal Control Compliance Requirements Compliance Requirements Audit Procedures Audit Procedures Audit Reporting Requirements Audit Reporting Requirements

16 When Program-Specific Guides are unavailable Auditees should prepare the following: Schedule of Expenditures of Federal Awards including notes describing policies used Schedule of Expenditures of Federal Awards including notes describing policies used Schedule of Prior Audit Findings Schedule of Prior Audit Findings Corrective Action Plan Corrective Action Plan

17 When Program-Specific Guides are unavailable Auditor’s should: Auditor’s should: Perform audit on financial statements according to GAGAS Perform audit on financial statements according to GAGAS Obtain an understanding and perform tests of internal control Obtain an understanding and perform tests of internal control Perform procedures to determine the auditee has complied with laws, regulations, and provisions of contracts Perform procedures to determine the auditee has complied with laws, regulations, and provisions of contracts Follow-up on prior audit findings Follow-up on prior audit findings

18 When Program-Specific Guides are Unavailable Auditor’s report(s) should include: Opinion on presentation of financial statements Opinion on presentation of financial statements Report on internal control related to Federal program Report on internal control related to Federal program Report on compliance Report on compliance Schedule of Findings and Questioned Costs Schedule of Findings and Questioned Costs

19 Report Submission for Program-Specific Audits All reports should be submitted: Within 30 days after receipt of the auditor’s report(s) Within 30 days after receipt of the auditor’s report(s)Or Nine months after the end of the audit period Nine months after the end of the audit period

20 Subpart C - Auditees.300 Auditee responsibilities.300 Auditee responsibilities.305 Auditor selection.305 Auditor selection.310 Financial statements.310 Financial statements.315 Audit findings follow-up.315 Audit findings follow-up.320 Report Submission.320 Report Submission

21 Auditee Responsibilities Identify all Federal awards received and expended Identify all Federal awards received and expended Maintain internal control over Federal Programs Maintain internal control over Federal Programs Comply with laws, regulations, and provisions of contracts or grant agreements Comply with laws, regulations, and provisions of contracts or grant agreements

22 Auditee Responsibilities Prepare Appropriate financial statements including Schedule of Expenditures of Federal Awards Prepare Appropriate financial statements including Schedule of Expenditures of Federal Awards Ensure audits are properly performed and submitted when due Ensure audits are properly performed and submitted when due Prepare Schedule of Prior Audit Findings and Correction Action Plan. Prepare Schedule of Prior Audit Findings and Correction Action Plan. Take corrective action on audit findings Take corrective action on audit findings

23 Auditor Selection Procurement Procurement A-102 Common Rule A-102 Common Rule Circular A-110 Circular A-110 Restrictions Restrictions Indirect cost proposal Indirect cost proposal Cost allocation plan Cost allocation plan Federal Auditors Federal Auditors

24 Financial Statements Reflection of Financial Position Reflection of Financial Position Results of Operations or Changes in Net assets Results of Operations or Changes in Net assets Cash Flows Cash Flows

25 Schedule of Expenditures of Federal Awards Individual Federal Programs by Federal Agency Individual Federal Programs by Federal Agency Identification of pass-through entity Identification of pass-through entity Awards expended for individual federal programs Awards expended for individual federal programs Notes describing accounting policies Notes describing accounting policies

26 Audit Findings Follow-up Schedule of Prior Audit Findings Schedule of Prior Audit Findings Corrective Action Plan Corrective Action Plan

27 Report Submission Data Collection Data Collection Reporting Package Reporting Package Submission to Clearinghouse Submission to Clearinghouse Submission by Subrecipients Submission by Subrecipients Report Copies Report Copies Retention Requirements Retention Requirements

28 Report Submission Reporting Package Reporting Package Financial Statements Financial Statements Summary schedule of Prior Audit Findings Summary schedule of Prior Audit Findings Auditor’s report(s) Auditor’s report(s) Corrective Action plan Corrective Action plan

29 Report Submission Clearinghouse responsibilities Clearinghouse responsibilities Distribute reporting packages Distribute reporting packages Maintain database of completed audits Maintain database of completed audits Provide appropriate information to Federal agencies Provide appropriate information to Federal agencies Follow-up with auditees regarding data collection forms and reporting packages Follow-up with auditees regarding data collection forms and reporting packages

30 Federal Audit Clearinghouse Bureau of the Census 1201 East 10 th Street Jeffersonville, IN 47132

31 Subpart D – Federal Agencies and Pass-thorough Entities.400 Responsibilities.400 Responsibilities.405 Management Decision.405 Management Decision

32 Cognizant Agency for Audit Responsibilities Recipients expending more than million in a fiscal year shall have a cognizant agency for audit. Recipients expending more than $50 million in a fiscal year shall have a cognizant agency for audit. Effective for fiscal years ending after December 31, 2003 Effective for fiscal years ending after December 31, 2003

33 Cognizant Agency for Audit Responsibilities To provide for continuity of cognizance, the determination of the predominant amount of direct funding shall be based upon direct Federal awards expended in the recipient’s fiscal years ending in 1995, 2000, 2005, and every fifth year thereafter. To provide for continuity of cognizance, the determination of the predominant amount of direct funding shall be based upon direct Federal awards expended in the recipient’s fiscal years ending in 1995, 2000, 2005, and every fifth year thereafter. Effective for fiscal years ending on or before December 31, Effective for fiscal years ending on or before December 31, 2003.

34 Cognizant Agency for Audit Responsibilities The determination of the predominant amount of direct funding shall be based upon direct Federal awards expended in the recipient’s fiscal years ending in 2004, 2009, 2014, and every fifth year thereafter. The determination of the predominant amount of direct funding shall be based upon direct Federal awards expended in the recipient’s fiscal years ending in 2004, 2009, 2014, and every fifth year thereafter. Effective for fiscal years ending after December 31, Effective for fiscal years ending after December 31, 2003.

35 Cognizant Agency Responsibilities Provide technical audit advice and liaison Provide technical audit advice and liaison Grant extensions for report submission Grant extensions for report submission Obtain/Conduct quality control reviews of selected audits Obtain/Conduct quality control reviews of selected audits Report irregularities or illegal acts Report irregularities or illegal acts Advise auditor/auditee of deficiencies requiring corrective action Advise auditor/auditee of deficiencies requiring corrective action

36 Cognizant Agency Responsibilities Coordinate audits or reviews for Federal Agencies Coordinate audits or reviews for Federal Agencies Coordinate decisions for audit findings affecting federal programs of more than one agency Coordinate decisions for audit findings affecting federal programs of more than one agency Coordinate audit work and reporting responsibilities Coordinate audit work and reporting responsibilities Consider auditee request to qualify as low-risk Consider auditee request to qualify as low-risk

37 Oversight Agency Responsibilities Provide technical advice to auditees and auditors Provide technical advice to auditees and auditors Assume most or all responsibilities performed by a cognizant agency. Assume most or all responsibilities performed by a cognizant agency.

38 Federal Agency Responsibilities Inform recipient of Federal awards Inform recipient of Federal awards Advise recipients of Federal laws, regulations, and provisions of contracts Advise recipients of Federal laws, regulations, and provisions of contracts Ensure audits and reports are complete and received Ensure audits and reports are complete and received Provide technical advice and counsel Provide technical advice and counsel

39 Federal Agency Responsibilities Make decisions on audit findings in a timely manner Make decisions on audit findings in a timely manner Ensure recipients take timely and appropriate corrective action Ensure recipients take timely and appropriate corrective action Assign OMB to responsible person Assign OMB to responsible person

40 Pass-Through Entity Responsibilities Identify Federal awards Identify Federal awards Advise subrecipients of Federal laws, regulations, supplemental requirements, and provisions of contracts Advise subrecipients of Federal laws, regulations, supplemental requirements, and provisions of contracts Monitor activities of subrecipients Monitor activities of subrecipients Ensure recipients expending $500,000 or more meet audit requirements Ensure recipients expending $500,000 or more meet audit requirements

41 Pass-Through Entity Responsibilities Make decisions on audit findings in a timely manner Make decisions on audit findings in a timely manner Ensure recipients take timely and appropriate corrective action Ensure recipients take timely and appropriate corrective action Consider necessary adjustments of pass- through entities own records Consider necessary adjustments of pass- through entities own records Require subrecipients to permit pass-through entities and auditors access to records. Require subrecipients to permit pass-through entities and auditors access to records.

42 Management Decision Cognizant agencies are responsible for audit findings affecting programs of more than one Federal agencies. Cognizant agencies are responsible for audit findings affecting programs of more than one Federal agencies. Federal agencies are responsible for audit findings related to Federal awards of its recipients. Federal agencies are responsible for audit findings related to Federal awards of its recipients. Pass-through entities are responsible for audit findings related to Federal awards of its subrecipients. Pass-through entities are responsible for audit findings related to Federal awards of its subrecipients.

43 Management Decisions Responsible entity shall make decision within six months of receipt of audit report. Responsible entity shall make decision within six months of receipt of audit report. Corrective action should be within six months after receipt of audit report. Corrective action should be within six months after receipt of audit report. Each decision should include reference numbers assigned by the auditor. Each decision should include reference numbers assigned by the auditor.

44 Subpart E – Auditors.500 Scope of Audit.500 Scope of Audit.505 Audit reporting.505 Audit reporting.510 Audit findings.510 Audit findings.515 Audit working papers.515 Audit working papers.520 Major Program Determination.520 Major Program Determination.525 Criteria for Federal program risk.525 Criteria for Federal program risk.530 Criteria for a low-risk auditee.530 Criteria for a low-risk auditee

45 Scope of Audit Financial Statements Financial Statements Internal Control Internal Control Compliance Compliance Audit follow-up Audit follow-up Data Collection Form Data Collection Form

46 Audit Reporting Opinion stating whether financial statements are presented fairly Opinion stating whether financial statements are presented fairly Report on internal control related to financial statements and major programs. Report on internal control related to financial statements and major programs. Report on compliance with laws, regulations, and provisions of contracts or grant agreements Report on compliance with laws, regulations, and provisions of contracts or grant agreements

47 Audit Reporting Schedule of Findings and Questioned Costs Schedule of Findings and Questioned Costs Summary of Auditor’s results Summary of Auditor’s results Findings related to financial statements Findings related to financial statements Findings and Questioned Costs for Federal Awards Findings and Questioned Costs for Federal Awards

48 Audit Findings Reported Reportable conditions in internal control over major programs. Reportable conditions in internal control over major programs. Material noncompliance with the provisions of laws, regulations, contracts, or grant agreements. Material noncompliance with the provisions of laws, regulations, contracts, or grant agreements. Questioned costs greater than $10,000 for compliance requirement for a major program Questioned costs greater than $10,000 for compliance requirement for a major program

49 Audit Findings Reported Questioned cost greater than $10,000 for Federal program not audited as a major program. Questioned cost greater than $10,000 for Federal program not audited as a major program. Circumstances concerning why opinion on report on compliance for major programs is not unqualified Circumstances concerning why opinion on report on compliance for major programs is not unqualified Fraud affecting a Federal award Fraud affecting a Federal award

50 Audit Finding Detail Federal program and specific Federal award identification Federal program and specific Federal award identification Criteria or requirement which audit finding is based Criteria or requirement which audit finding is based Conditions found in audit finding Conditions found in audit finding Identification and computation of questioned costs Identification and computation of questioned costs

51 Audit Finding Detail Information providing prevalence and consequences of audit findings Information providing prevalence and consequences of audit findings Information regarding cause and effect of finding Information regarding cause and effect of finding Recommendations to prevent future deficiencies Recommendations to prevent future deficiencies Views of responsible officials Views of responsible officials

Reference Numbers All audit findings in the Schedule of Findings and Questioned Costs should include a reference number to be used during follow up.

53 Audit Working Papers Retention Retention Minimum 3 years after issuance of auditor’s report Minimum 3 years after issuance of auditor’s report Access Access Available upon request Available upon request Copies may be made as necessary and reasonable Copies may be made as necessary and reasonable

54 Major Program Determination Risk-based approach Risk-based approach Current and prior audit experience Current and prior audit experience Oversight by Federal agencies and pass- through entities Oversight by Federal agencies and pass- through entities Inherent risk of Federal Program Inherent risk of Federal Program

55 Federal Program Risk Criteria Current and prior audit experience Current and prior audit experience Federal Agency and Pass-Through Entity oversight. Federal Agency and Pass-Through Entity oversight. Inherent Risk of Federal Program Inherent Risk of Federal Program

56 Low-Risk Auditee Criteria Single audits performed annually Single audits performed annually Opinion on financial statements are unqualified Opinion on financial statements are unqualified Opinion on Schedule of Expenditures of Federal Awards is unqualified Opinion on Schedule of Expenditures of Federal Awards is unqualified No deficiencies in Internal control No deficiencies in Internal control

57 Low-Risk Auditee Criteria Federal Programs Federal Programs Internal control deficiencies identified as material weaknesses Internal control deficiencies identified as material weaknesses Noncompliance with provisions of laws, regulations, contracts, or grant agreements Noncompliance with provisions of laws, regulations, contracts, or grant agreements Questioned costs exceeding 5% of total Federal awards expended Questioned costs exceeding 5% of total Federal awards expended

58 Resources OMB Circulars – OMB Circulars –