1. 1 On-Line Financial Management Workshops Audit Requirements June 2009

2. 2 Financial Management Workshop: Audit Requirements Audit Requirements www.gao.gov

3. 3Objectives Objectives  Purpose & applicability  Responsibilities of auditee & DOL  Components of a single audit  WIA considerations  Testing for compliance

4. 4 Purpose of OMB Circular A-133 Single Audit Act (SAA)  To set standards for obtaining consistency and uniformity among Federal agencies for the audit of non-Federal entities expending Federal awards –Provides a snapshot into an organization’s financial operations –Is NOT intended to provide detailed financial coverage or in-depth review of individual programs/awards

5. 5Requirements  Required when any entity expends $500,000 or more in Federal awards in it’s fiscal year  Agencies spending less than $500,000 are exempt –Must make records available for audit or review by the federal agency, its pass-through agency, and/or GAO –Alternatives: program specific, limited scope or agreed-upon procedures

6. 6 Applicability Who is required to have a single audit?  State and local governments, colleges and universities, hospitals, and non-profit organizations that are direct grant recipients & sub recipients of Federal funds See the Single Audit Act Amendments of 1996

7. 7 Is the SSA applicable to For Profit entities? Commercial Organizations  Direct grant recipients –Responsibility of DOL  Commercial subrecipients of WIA Title I funds Expend $500,000 or more Must comply with OMB Circular A-133 Requirements –WIA Regulations at 20 CFR 667.200

8. 8 Frequency of Audits  All audits required by OMB A-133 shall be performed annually (exceptions)  Submission to Federal audit clearinghouse –Within one month of completion –No later than 9 months after auditee’s fiscal year

9. 9 Federal Audit Clearinghouse  Send Single Audit Report Package & Data Collection Form (SF-SAC) to: –Federal Audit Clearinghouse - FAC Bureau of the Census 1201 East 10 th Street Jeffersonville, IN 47132 –Phone Numbers: FAC (Census Bureau) 1-800-253-0696 Processing Center (Jeffersonville) 1-888-222-9907 –Email: govs.fac@census.gov  FAC’s website allows users to query its audit database –http://harvester.census.gov/sac/FAQ.htm#OLE_LINK17

10. 10 Single Audit Report Components  Single or separate reports by the auditor  Management letter  Auditor’s opinion on –Financial statements and –Schedule of expenditures of federal awards  Report on internal controls related to –Financial statements and –Major programs  Report on compliance  Schedule of findings & questioned costs

11. 11 Auditor’s Opinions –UNQUALIFIED OPINION Financial statements are presented fairly in conformity with GAAP. Auditor’s Clean Bill of Health –QUALIFIED OPINION Auditor is citing some matter of exception or qualification, but Otherwise financial statements presented fairly in conformity with GAAP Qualifications might be: (1) a scope limitation, or (2) a departure from GAAP exists. –ADVERSE OPINION Financial statements do not present the entity's financial position, results of operations, and cash flows in conformity with GAAP. Only issued when the financial statements contain very material departures from GAAP. –DISCLAIMER OF OPINION Auditor is unable to form an opinion on an entity's financial statements. Examples include: (1) the auditor is not independent with respect to the entity under audit, (2) a material scope limitation exists, or (3) a significant uncertainty exists.

12. 12 Opinions on Internal Controls Effective for audit periods after December 15, 2006  Significant Deficiency – replaces Reportable Condition –Is a control deficiency, or combination of control deficiencies … where there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected.  Control Deficiency - The design or operation of a control does not allow management or employees, in the course of performing their assigned functions, to prevent or detect misstatements on a timely basis.  Material Weakness – definition has changed –A significant deficiency, or combination of significant deficiencies, resulting in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.

13. 13 Risk Assessment  Criteria for HIGH RISK or LOW RISK –Current and prior audit experience –Federal agency and pass-through entity oversight. –Inherent risk of Federal program

14. 14 Low-Risk Auditee Criteria  Single audits performed annually  Opinion on financial statements are unqualified  Opinion on schedule of expenditures of Federal awards is unqualified  No deficiencies in internal control  No Federal program had audit findings

15. 15 Audit Working Papers  Retention –Minimum 3 years after issuance of auditor’s report  Access –Available upon request –Copies may be made as necessary and reasonable

16. 16 Auditee Responsibilities  Identify all Federal awards received and expended by program  Maintain internal control over Federal programs  Comply with laws, regulations, and provisions of contracts or grant agreements  Prepare appropriate financial statements  Ensure audits are properly performed and submitted when due  Prepare schedule of prior audit findings and corrective action plan

17. 17 Additional Auditee Responsibilities  Always purchase audit services through a competitive procurement process  Periodically review contract terms  Suggest limiting contract extensions to 1-2 years  Guidance: “How to Avoid a Substandard Audit: Suggestions for Procuring an Audit” http://www.gao.gov/govaud/niaf.pdf Single Audit Basics and Where to Get Help www.harvester.census.gov Advancing Government Accountability www.agacgfm.org/homepage.aspx

18. 18 Pass-Through Entity Responsibilities  Entities that pass through federal funds to subrecipients are responsible for: –Ensuring that the requirements of A-133 and the grant are met –Preparing management decisions on subrecipient audit findings

19. 19 Federal Awarding Agency Responsibilities  Ensure audits and reports are complete and received in timely manner  Make decisions on audit findings in a timely manner  Ensure recipients take timely and appropriate corrective action

20. 20 DOL’s Responsibilities  From the Federal Audit Clearinghouse, reports are sent to OIG. –OIG reviews & distributes the reports to the appropriate agency for resolution  For DOL-ETA funded programs/grants –Resolution is completed through DOL-ETA’s Grant Officer’s Determination Process Initial Determination –Includes an informal resolution process Final Determination Debt Collection ALJ Hearing

21. 21 Resolution of Findings

22. 22 Formal Resolution  Accept or reject audit findings  Apply sanctions  Decision within 180 days  Awarding agency responsibility

23. 23 Pre-Resolution Stage  Accept audit or return for additional work  Provide opportunity for additional documentation  Establish time frames  Provide contact information

24. 24 Non-Federal Resolution  No prescribed system  Ensure corrective action  Allow or disallow costs  Determine applicability of “stand in” costs  Establish debt  Provide appeal rights

25. 25 WIA Considerations  Non-Federal Resolution –Governor is responsible for resolving the audit findings related to LWIAs and other subrecipients –Must use same resolution process, debt collection, and appeals procedures for WIA as used for other grant programs

26. 26 Monetary Findings  Clear violation of law or regulations –Eligibility –Unallowable costs  Not supported by source documentation –Cannot be traced from books of account  Result in disallowed cost

27. 27 Administrative Findings  Deficiency in internal controls or financial systems  Result in required corrective action  Time frames for completion  Sanctions if not corrected

28. 28 Resolution process Preliminary decision Findings format –Condition –Criteria –Effect –Cause –Recommendation Informal resolution period Final management decision

29. 29  Stand-In… Part II, Chapter 12, One-Stop Financial Management TAG Comptroller General Decision B-208871.2, dated February 9, 1989

30. 30 Stand-In Costs  Allowable costs substituted for disallowed costs  Additional program costs not financed by grant  Included in audit scope  Not result In limitation violation

31. 31 Stand-In Costs #2  Accounted for in grantee financial system  Documented in same manner as all grant costs  In-kind contributions not acceptable  Same time period  Costs of same organization

32. 32 Stand-in Costs are NOT  Uncompensated overtime  Unbilled premises costs associated with fully depreciated publicly owned buildings  Allocated costs derived from an improper allocation methodology  Discounts, refunds, rebates  Any State share of the cost of State or community college tuition

33. 33 Debt Collection  Non-federal –No prescribed system –Must have process & procedures  Payment to ETA –If fund availability lapsed

34. 34 Debt Collection  System for collection of debts  Cash is always preferred  WIA grants only –Waiver of liability –Advance approval of proposed corrective actions –Offset

35. 35 Waiver of Liability  Grantee may request from Grant Officer  20 CFR 667.720(c)(1-5) –Subrecipient level –Not gross negligence, willful disregard or failure to follow standards –If fraud, aggressive action by grantee –Debt established –Formal request with supporting documents

36. 36 Advance Approval  Contemplated corrective actions –Including debt collection  Grantee request of Grant Officer  Criteria listed in 20 CFR 667.730(b) –Substantially the same as waiver of liability

37. 37Offset  WIA –Grantee Level –For Subrecipient misexpenditures  U.S. Treasury –Any source of funds

38. 38 Testing for Compliance  How do you ensure compliance with Federal audit requirements at the grantee and sub recipient level? –Review laws, regulations, and other compliance requirements –Include audit requirements in subrecipient contract agreement

39. 39 Sanctions for Non-Compliance  Percentage of Federal awards withheld until audit completion  Withholding/disallowing overhead costs  Suspend Federal awards  Terminating Federal award

40. 40 Regulatory References  OMB Circular A-133 –Including the Compliance Supplement  29 CFR Part 96  29 CFR Part 99  Government Auditing Standards – Yellow Book

41. 41 Web Resources  http://www.gao.gov/ - Government Auditing Standards (Yellow Book)  http://www.oig.dol.gov/public/reports/oa/documents/singleaudi tcfoBrochure.pdf - DOL’s Office of Inspector General (OIG) summarizes the audit requirements on their website  http://harvester.census.gov/sac - FAC and Single Audit Database  http://www.access.gpo.gov/nara/cfr/waisidx - Provides links to specific regulations, CFRs, Federal Register notices, public laws, and Privacy Act issuances  http://www.whitehouse.gov/OMB/ - Provides links to all OMB circulars, compliance supplements, and OMB policy  http://www.cfda.gov - Catalog of Federal Domestic Assistance (CFDA) website – Provides CFDA # and description of major federally funded programs

42. 42Questions? If you have questions, please contact your Federal Project Officer