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Audit and Audit ResolutionAudit and Audit Resolution
Presented byPresented by
Wendy SpiveyWendy Spivey
ADECA Audit ManagerADECA Audit Manager
3
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.
4
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
5
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..
6
Audit RequirementsAudit Requirements
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
Effective for fiscal years ending after Effective for fiscal years ending after
December 31, 2003December 31, 2003..
7
Audit RequirementsAudit Requirements
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.
8
Audit RequirementsAudit Requirements
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
9
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
13
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
14
Audit CostsAudit Costs
Allowable CostAllowable Cost Direct costDirect cost Allocated indirect costAllocated indirect cost
Unallowable CostUnallowable Cost
15
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
16
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
17
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
18
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
19
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
20
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
21
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
22
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
23
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
24
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
25
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
26
Audit Findings Follow-upAudit Findings Follow-up
Schedule of Prior Audit FindingsSchedule of Prior Audit Findings
Corrective Action PlanCorrective Action Plan
27
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
28
Report SubmissionReport Submission
Reporting PackageReporting Package
Financial StatementsFinancial Statements
Summary schedule of Prior Audit FindingsSummary schedule of Prior Audit Findings
Auditor’s report(s)Auditor’s report(s)
Corrective Action planCorrective Action plan
29
Report SubmissionReport Submission
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
30
Federal Audit ClearinghouseFederal Audit Clearinghouse
Bureau of the CensusBureau of the Census
1201 East 101201 East 10thth Street Street
Jeffersonville, IN 47132Jeffersonville, IN 47132
31
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
32
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.
Effective for fiscal years ending after Effective for fiscal years ending after
December 31, 2003December 31, 2003
33
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..
34
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.
35
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
36
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
37
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.
38
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
39
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
40
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
41
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.
42
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.
43
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.
44
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
45
Scope of AuditScope of Audit
Financial StatementsFinancial Statements
Internal ControlInternal Control
ComplianceCompliance
Audit follow-upAudit follow-up
Data Collection FormData Collection Form
46
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
47
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
48
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
49
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
50
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
51
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.
53
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
54
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
55
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
56
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
57
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
Recommended