Audit and Audit Resolution Presented by Wendy Spivey ADECA Audit Manager

Audit and Audit ResolutionAudit and Audit Resolution

Presented byPresented by

Wendy SpiveyWendy Spivey

ADECA Audit ManagerADECA Audit Manager

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OverviewOverview

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Purpose of OMB A-133Purpose of OMB A-133

To set standards for obtaining To set standards for obtaining

consistency and uniformity among consistency and uniformity among

Federal agencies for the audit of non-Federal agencies for the audit of non-

Federal entities expending Federal Federal entities expending Federal

awards.awards.

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Subpart B - AuditsSubpart B - Audits

.200 Audit requirements.200 Audit requirements .205 Basis for determining Federal awards .205 Basis for determining Federal awards

expendedexpended .210 Subrecipient and vendor .210 Subrecipient and vendor

determinationsdeterminations .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

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Audit RequirementsAudit Requirements

Non-Federal entities expending Non-Federal entities expending $500,000$500,000

or more in a year are required to have or more in a year are required to have

single audit or program-specific audit.single audit or program-specific audit.

Effective for fiscal years ending after Effective for fiscal years ending after

December 31, 2003December 31, 2003..

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Single audits are required when non-Single audits are required when non-

federal entities expend federal entities expend $500,000$500,000 or or

more in year in Federal awards more in year in Federal awards


December 31, 2003December 31, 2003..

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Program-specific audits are required when:Program-specific audits are required when:

An auditee expends Federal awards An auditee expends Federal awards

under only one Federal program under only one Federal program

(excluding R&D).(excluding R&D).

Federal program laws, regulations, or Federal program laws, regulations, or

grant agreements do not require a grant agreements do not require a

financial statement audit of the auditee.financial statement audit of the auditee.

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Non-federal entities that expending Non-federal entities that expending

less than less than $500,000$500,000 of Federal of Federal

awards in a year are:awards in a year are: Exempt from Federal audit requirements Exempt from Federal audit requirements

for that yearfor that year Require to have records available for Require to have records available for

review or audit by appropriate officialsreview or audit by appropriate officials

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Federal Awards ExpendedFederal Awards Expended

LoansLoans Endowment FundsEndowment Funds Free RentFree Rent Non-cash AssistanceNon-cash Assistance MedicareMedicare MedicaidMedicaid National Credit Union Administration National Credit Union Administration

LoansLoans

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Subrecipient and Vendor Subrecipient and Vendor DeterminationDetermination

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Relation to Other Relation to Other Audit RequirementsAudit Requirements

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Frequency of AuditsFrequency of Audits

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SanctionsSanctions

Percentage of Federal awards Percentage of Federal awards

withheld until audit completionwithheld until audit completion

Withholding/disallowing overhead Withholding/disallowing overhead

costscosts

Suspend Federal awardsSuspend Federal awards

Terminating Federal awardTerminating Federal award

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Audit CostsAudit Costs

Allowable CostAllowable Cost Direct costDirect cost Allocated indirect costAllocated indirect cost

Unallowable CostUnallowable Cost

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Program-Specific Audit GuideProgram-Specific Audit Guide

Provides guidance on:Provides guidance on:

Internal ControlInternal Control

Compliance RequirementsCompliance Requirements

Audit ProceduresAudit Procedures

Audit Reporting RequirementsAudit Reporting Requirements

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When Program-Specific GuidesWhen Program-Specific Guides are unavailable are unavailable

Auditees should prepare the following:Auditees should prepare the following:

Schedule of Expenditures of Federal Awards Schedule of Expenditures of Federal Awards

including notes describing policies usedincluding notes describing policies used

Schedule of Prior Audit FindingsSchedule of Prior Audit Findings

Corrective Action PlanCorrective Action Plan

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When Program-Specific Guides When Program-Specific Guides are unavailableare unavailable

Auditor’s should:Auditor’s should: Perform audit on financial statements Perform audit on financial statements

according to GAGASaccording to GAGAS Obtain an understanding and perform Obtain an understanding and perform

tests of internal controltests of internal control Perform procedures to determine the Perform procedures to determine the

auditee has complied with laws, auditee has complied with laws, regulations, and provisions of contractsregulations, and provisions of contracts

Follow-up on prior audit findingsFollow-up on prior audit findings

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When Program-Specific Guides When Program-Specific Guides are Unavailableare Unavailable

Auditor’s report(s) should include:Auditor’s report(s) should include: Opinion on presentation of financial Opinion on presentation of financial

statementsstatements Report on internal control related to Report on internal control related to

Federal programFederal program Report on complianceReport on compliance Schedule of Findings and Questioned CostsSchedule of Findings and Questioned Costs

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Report Submission for Report Submission for Program-Specific AuditsProgram-Specific Audits

All reports should be submitted:All reports should be submitted:

Within 30 days after receipt of the Within 30 days after receipt of the auditor’s report(s)auditor’s report(s)

OrOr

Nine months after the end of the audit Nine months after the end of the audit periodperiod

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Subpart C - AuditeesSubpart 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

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Auditee ResponsibilitiesAuditee Responsibilities

Identify all Federal awards received Identify all Federal awards received

and expendedand expended Maintain internal control over Federal Maintain internal control over Federal

ProgramsPrograms Comply with laws, regulations, and Comply with laws, regulations, and

provisions of contracts or grant provisions of contracts or grant

agreementsagreements

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Auditee ResponsibilitiesAuditee Responsibilities

Prepare Appropriate financial Prepare Appropriate financial statements including Schedule of statements including Schedule of Expenditures of Federal AwardsExpenditures of Federal Awards

Ensure audits are properly performed Ensure audits are properly performed and submitted when dueand submitted when due

Prepare Schedule of Prior Audit Prepare Schedule of Prior Audit Findings and Correction Action Plan. Findings and Correction Action Plan.

Take corrective action on audit Take corrective action on audit findingsfindings

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Auditor SelectionAuditor Selection

ProcurementProcurement A-102 Common RuleA-102 Common Rule Circular A-110Circular A-110

RestrictionsRestrictions Indirect cost proposalIndirect cost proposal Cost allocation planCost allocation plan

Federal AuditorsFederal Auditors

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Financial StatementsFinancial Statements

Reflection of Financial PositionReflection of Financial Position

Results of Operations or Changes in Results of Operations or Changes in

Net assetsNet assets

Cash FlowsCash Flows

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Schedule of Expenditures of Schedule of Expenditures of Federal AwardsFederal Awards

Individual Federal Programs by Individual Federal Programs by Federal Agency Federal Agency

Identification of pass-through entityIdentification of pass-through entity Awards expended for individual Awards expended for individual

federal programsfederal programs Notes describing accounting policiesNotes describing accounting policies

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Audit Findings Follow-upAudit Findings Follow-up

Schedule of Prior Audit FindingsSchedule of Prior Audit Findings

Corrective Action PlanCorrective Action Plan

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Report SubmissionReport Submission

Data CollectionData Collection Reporting PackageReporting Package Submission to ClearinghouseSubmission to Clearinghouse Submission by SubrecipientsSubmission by Subrecipients Report CopiesReport Copies Retention RequirementsRetention Requirements

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Reporting PackageReporting Package


Summary schedule of Prior Audit FindingsSummary schedule of Prior Audit Findings

Auditor’s report(s)Auditor’s report(s)

Corrective Action planCorrective Action plan

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Clearinghouse responsibilitiesClearinghouse responsibilities Distribute reporting packagesDistribute reporting packages Maintain database of completed auditsMaintain database of completed audits Provide appropriate information to Provide appropriate information to

Federal agenciesFederal agencies Follow-up with auditees regarding data Follow-up with auditees regarding data

collection forms and reporting packagescollection forms and reporting packages

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Federal Audit ClearinghouseFederal Audit Clearinghouse

Bureau of the CensusBureau of the Census

1201 East 101201 East 10thth Street Street

Jeffersonville, IN 47132Jeffersonville, IN 47132

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Subpart D – Federal Agencies and Subpart D – Federal Agencies and Pass-thorough EntitiesPass-thorough Entities

.400 Responsibilities.400 Responsibilities

.405 Management Decision.405 Management Decision

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Cognizant Agency for Audit Cognizant Agency for Audit Responsibilities Responsibilities

Recipients expending more than Recipients expending more than $50

millionmillion in a fiscal year shall have a in a fiscal year shall have a

cognizant agency for audit.cognizant agency for audit.


December 31, 2003December 31, 2003

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Cognizant Agency for Audit Cognizant Agency for Audit ResponsibilitiesResponsibilities

To provide for continuity of cognizance, To provide for continuity of cognizance, the determination of the predominant the determination of the predominant amount of direct funding shall be based amount of direct funding shall be based upon direct Federal awards expended in upon direct Federal awards expended in the recipient’s fiscal years ending in 1995, the recipient’s fiscal years ending in 1995, 2000, 2005, and every fifth year 2000, 2005, and every fifth year thereafter.thereafter.

Effective for fiscal years ending on or Effective for fiscal years ending on or before before December 31, 2003December 31, 2003..

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Cognizant Agency for Audit Cognizant Agency for Audit ResponsibilitiesResponsibilities

The determination of the predominant The determination of the predominant

amount of direct funding shall be based amount of direct funding shall be based

upon direct Federal awards expended in upon direct Federal awards expended in

the recipient’s fiscal years ending in 2004, the recipient’s fiscal years ending in 2004,

2009, 2014, and every fifth year thereafter.2009, 2014, and every fifth year thereafter. Effective for fiscal years ending after Effective for fiscal years ending after

December 31, 2003.December 31, 2003.

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Cognizant Agency ResponsibilitiesCognizant Agency Responsibilities

Provide technical audit advice and Provide technical audit advice and liaisonliaison

Grant extensions for report submissionGrant extensions for report submission Obtain/Conduct quality control reviews Obtain/Conduct quality control reviews

of selected auditsof selected audits Report irregularities or illegal actsReport irregularities or illegal acts Advise auditor/auditee of deficiencies Advise auditor/auditee of deficiencies

requiring corrective actionrequiring corrective action

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Cognizant Agency ResponsibilitiesCognizant Agency Responsibilities

Coordinate audits or reviews for Federal Coordinate audits or reviews for Federal AgenciesAgencies

Coordinate decisions for audit findings affecting Coordinate decisions for audit findings affecting federal programs of more than one agencyfederal programs of more than one agency

Coordinate audit work and reporting Coordinate audit work and reporting responsibilitiesresponsibilities

Consider auditee request to qualify as low-riskConsider auditee request to qualify as low-risk

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Oversight Agency ResponsibilitiesOversight Agency Responsibilities

Provide technical advice to auditees Provide technical advice to auditees

and auditorsand auditors

Assume most or all responsibilities Assume most or all responsibilities

performed by a cognizant agency.performed by a cognizant agency.

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Federal Agency ResponsibilitiesFederal Agency Responsibilities

Inform recipient of Federal awardsInform recipient of Federal awards Advise recipients of Federal laws, Advise recipients of Federal laws,

regulations, and provisions of contractsregulations, and provisions of contracts Ensure audits and reports are complete Ensure audits and reports are complete

and receivedand received Provide technical advice and counselProvide technical advice and counsel

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Federal Agency ResponsibilitiesFederal Agency Responsibilities

Make decisions on audit findings in a Make decisions on audit findings in a

timely mannertimely manner

Ensure recipients take timely and Ensure recipients take timely and

appropriate corrective actionappropriate corrective action

Assign OMB to responsible personAssign OMB to responsible person

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Pass-Through Entity Pass-Through Entity ResponsibilitiesResponsibilities

Identify Federal awardsIdentify Federal awards Advise subrecipients of Federal laws, Advise subrecipients of Federal laws,

regulations, supplemental requirements, regulations, supplemental requirements, and provisions of contractsand provisions of contracts

Monitor activities of subrecipientsMonitor activities of subrecipients Ensure recipients expending $500,000 or Ensure recipients expending $500,000 or

more meet audit requirementsmore meet audit requirements

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Pass-Through Entity Pass-Through Entity ResponsibilitiesResponsibilities

Make decisions on audit findings in a timely Make decisions on audit findings in a timely mannermanner

Ensure recipients take timely and Ensure recipients take timely and appropriate corrective actionappropriate corrective action

Consider necessary adjustments of pass-Consider necessary adjustments of pass-through entities own recordsthrough entities own records

Require subrecipients to permit pass-Require subrecipients to permit pass-through entities and auditors access to through entities and auditors access to records.records.

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Management DecisionManagement Decision

Cognizant agencies are responsible for Cognizant agencies are responsible for audit findings affecting programs of more audit findings affecting programs of more than one Federal agencies.than one Federal agencies.

Federal agencies are responsible for audit Federal agencies are responsible for audit findings related to Federal awards of its findings related to Federal awards of its recipients.recipients.

Pass-through entities are responsible for Pass-through entities are responsible for audit findings related to Federal awards of audit findings related to Federal awards of its subrecipients.its subrecipients.

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Management DecisionsManagement Decisions

Responsible entity shall make decision Responsible entity shall make decision

within six months of receipt of audit report.within six months of receipt of audit report.

Corrective action should be within six Corrective action should be within six

months after receipt of audit report.months after receipt of audit report.

Each decision should include reference Each decision should include reference

numbers assigned by the auditor.numbers assigned by the auditor.

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Subpart E – AuditorsSubpart 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

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Scope of AuditScope of Audit


Internal ControlInternal Control

ComplianceCompliance

Audit follow-upAudit follow-up

Data Collection FormData Collection Form

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Audit ReportingAudit Reporting

Opinion stating whether financial Opinion stating whether financial

statements are presented fairlystatements are presented fairly Report on internal control related to Report on internal control related to

financial statements and major programs.financial statements and major programs. Report on compliance with laws, Report on compliance with laws,

regulations, and provisions of contracts regulations, and provisions of contracts

or grant agreementsor grant agreements

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Audit ReportingAudit Reporting

Schedule of Findings and Questioned Schedule of Findings and Questioned

CostsCosts

Summary of Auditor’s resultsSummary of Auditor’s results

Findings related to financial statementsFindings related to financial statements

Findings and Questioned Costs for Findings and Questioned Costs for

Federal AwardsFederal Awards

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Audit Findings ReportedAudit Findings Reported

Reportable conditions in internal control Reportable conditions in internal control

over major programs.over major programs.

Material noncompliance with the provisions Material noncompliance with the provisions

of laws, regulations, contracts, or grant of laws, regulations, contracts, or grant

agreements.agreements.

Questioned costs greater than $10,000 for Questioned costs greater than $10,000 for

compliance requirement for a major compliance requirement for a major

programprogram

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Audit Findings ReportedAudit Findings Reported

Questioned cost greater than $10,000 Questioned cost greater than $10,000

for Federal program not audited as a for Federal program not audited as a

major program.major program. Circumstances concerning why Circumstances concerning why

opinion on report on compliance for opinion on report on compliance for

major programs is not unqualified major programs is not unqualified Fraud affecting a Federal awardFraud affecting a Federal award

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Audit Finding DetailAudit Finding Detail

Federal program and specific Federal Federal program and specific Federal

award identificationaward identification Criteria or requirement which audit Criteria or requirement which audit

finding is basedfinding is based Conditions found in audit findingConditions found in audit finding Identification and computation of Identification and computation of

questioned costsquestioned costs

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Audit Finding DetailAudit Finding Detail

Information providing prevalence and Information providing prevalence and consequences of audit findingsconsequences of audit findings

Information regarding cause and Information regarding cause and effect of findingeffect of finding

Recommendations to prevent future Recommendations to prevent future deficienciesdeficiencies

Views of responsible officialsViews of responsible officials

Reference NumbersReference Numbers

All audit findings in the All audit findings in the

Schedule of Findings and Schedule of Findings and

Questioned Costs should Questioned Costs should

include a reference number to include a reference number to

be used during follow up.be used during follow up.

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Audit Working PapersAudit Working Papers

RetentionRetention Minimum 3 years after issuance of Minimum 3 years after issuance of

auditor’s reportauditor’s report

AccessAccess Available upon requestAvailable upon request Copies may be made as necessary and Copies may be made as necessary and

reasonablereasonable

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Major Program DeterminationMajor Program Determination

Risk-based approachRisk-based approach

Current and prior audit experienceCurrent and prior audit experience

Oversight by Federal agencies and pass-Oversight by Federal agencies and pass-

through entitiesthrough entities

Inherent risk of Federal ProgramInherent risk of Federal Program

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Federal Program Risk CriteriaFederal Program Risk Criteria

Current and prior audit experienceCurrent and prior audit experience

Federal Agency and Pass-Through Federal Agency and Pass-Through

Entity oversight.Entity oversight.

Inherent Risk of Federal ProgramInherent Risk of Federal Program

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Low-Risk Auditee CriteriaLow-Risk Auditee Criteria

Single audits performed annuallySingle audits performed annually Opinion on financial statements are Opinion on financial statements are

unqualifiedunqualified Opinion on Schedule of Expenditures Opinion on Schedule of Expenditures

of Federal Awards is unqualifiedof Federal Awards is unqualified No deficiencies in Internal controlNo deficiencies in Internal control

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Low-Risk Auditee CriteriaLow-Risk Auditee Criteria

Federal ProgramsFederal Programs Internal control deficiencies identified as Internal control deficiencies identified as

material weaknessesmaterial weaknesses

Noncompliance with provisions of laws, Noncompliance with provisions of laws,

regulations, contracts, or grant agreementsregulations, contracts, or grant agreements

Questioned costs exceeding 5% of total Questioned costs exceeding 5% of total

Federal awards expendedFederal awards expended

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ResourcesResources

OMB Circulars – OMB Circulars –

www.whitehouse.gov/ombwww.whitehouse.gov/omb

Documents

Audit and Audit Resolution Presented by Wendy Spivey ADECA Audit Manager