Meliora Partners, Inc'

1
Meliora Partners, Inc.

• Understanding Your Audit
• Dan Miller

2
Purpose of Audits

• Fulfill a requirement
• Provide information
• A professional outside opinion

3
Auditor Selection

• RFP
• Agency Procurement Policy
• Offer/Contract
• Engagement Letter

4
Independent Auditor Report

• Who gets the information?
• Who is responsible?
• Can anyone do an audit?
• What types of opinions are there?
• Why are internal controls highlighted?
• Who decides on additional information and is
  some mandatory?

5
Agency vs Auditor

• Draft Report
• Final Report
• Management Letter
• Data Collection Form
• Tax Return

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Agency Fiscal Summary

• Nature of Activities
• Basis of Accounting
• Cash
• Accrual
• Modified Cash
• Statutory

7
Statement of Financial Position

• Is it a requirement to compare years?
• What does current mean?
• Explanation of line items
• Who decides what separate line items will appear
  on the statement?

8
Its Time to Work!Exercise 1
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Statement of Activities

• Why are two years presented?
• How can you unearn something?
• How can you have negative revenue why not just
  call it an expense?
• Who chooses these categories and can they change?
• How do I know if they are overspending or missing
  revenue?

10
Statement of Cash Flows

• What is this statement telling you?
• Why all the subcategories?
• Is having a decrease in cash ever good?
• Since this is a cash statement, do the numbers
  like interest paid represent cash payments only
  and not accruals?

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Notes to the Financial Statements

• What is required to be footnoted?
• Is there a requirement about the order that
  footnotes are presented?
• Is the basis of accounting always accrual and who
  gets to decide if it is not?

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Notes to the Financial Statements

• Do I, as the reader, have to worry about accounts
  receivable being collected?
• If the auditor has stated how donated (in-kind)
  matching is valued, can I assume that this meets
  all grant requirements?
• This audit shows grants payable and unearned
  revenue. If it is all owed to a grantor, why are
  they separated?

13
Notes to the Financial Statements

• If I read the footnote on deferred revenue
  correctly, these monies have been advanced. So
  the majority of cash in this agency on 6/30/06 is
  owed to someone?
• What should an agency do if they have significant
  dollars at a bank that exceed FDIC limits?

14
Notes to the Financial Statements

• The self-insurance footnote says they had a bad
  debt from the insurance company. If they had a
  contract, how can this be?
• How can the Board of Directors designate money to
  be used from a negative number for the year ended
  6/30/06 as is referenced in footnote 14?

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Compliance

• Schedule of Expenditures of Federal and
  non-federal Awards
• Schedule of Grant Budget to Actual
• Report on Compliance and Internal Control
• Report on Compliance over Major Programs
• Schedule of Prior Year Audit Findings

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Compliance

• Schedule of Findings and Questioned Costs
• Summary of Auditor Results
• Financial Statement Findings
• Federal Award Findings and Questioned Costs

17
Compliance

• Schedule of Expenditures of Federal and
  non-federal Awards
• Schedule of Grant Budget to Actual
• Report on Compliance and Internal Control
• Report on Compliance over Major Programs
• Schedule of Prior Year Audit Findings

18
Compliance

• Schedule of Findings and Questioned Costs
• Summary of Auditor Results
• Financial Statement Findings
• Federal Award Findings and Questioned Costs