FEDERAL AUDIT REQUIREMENTS

1
FEDERAL AUDIT REQUIREMENTS

• Kansas Association of Local Health Departments
• Mid-Year Meeting
• June 16 17, 2009
• By Mark W. Dick
• Allen, Gibbs Houlik, L.C.
• June 16 17, 2009

2
History of Single Audit
Each agency used to be responsible for its own
audits Audits were not coordinated Inflated costs
to Federal Government Undue burden
3
Single Audit Report

• Financial statements
• Schedule of expenditures of Federal awards
• Auditors opinions on fair presentation of
  financial statements
• Schedule of expenditures of Federal awards

4
Single Audit Report

• Auditors report on internal control opinion on
  compliance
• Auditors schedule of findings and questioned
  costs
• Auditees corrective action plans and
• A summary schedule of prior audit findings

5
A-133 Emphasis

• Sets standards for audit consistency and
  uniformity
• Identifies compliance requirements
• Establishes criteria for testing internal
  controls
• Tests for reasonable assurance that financial
  statements are accurate

6
Circular Organization

• General
• Gives the purpose of the circular and definitions
  of frequently used terms
• Audits
• Specific information on audit requirements

7
Circular Organization

• Responsibilities defined for
• Auditees
• Federal Agencies
• Pass-Through Entities
• Auditors

8
OMB Circular A-133

• Appendix
• A.- Data Collection Form
• B.- Compliance Supplement

9
A-133 Subpart B Audits

• Defines
• Who is required to be audited
• Determining subrecipient vs vendor
• Frequency of audits

10
A-133 Subpart C Auditees

• Auditee responsibilities
• Identify all Federal awards received (funds are
  listed in the A-133 report)
• Maintain control over Federal program
• Comply with laws regulations
• Prepare financial statements
• Ensure audits are done submitted when due
• Follow up and take corrective action

11
A-133 Subpart D Pass-through Entities

• Responsibilities
• Identify Federal awards to subrecipient (CFDA)
• Advise subrecipient of Federal requirements
• Monitor subrecipient for compliance

12
A-133 Subpart E Auditors

• Responsibilities
• Financial statements
• Internal control
• Compliance with regulations
• Follow-up on prior audit findings

13
Pass-through Entity Responsibilities

• Award Identification
• Inform the sub-recipient of the federal award
  information (e.g. award name, CFDA)
• During- the-Award-Monitoring
• Monitor the subs use of funds through regular
  contact
• Sub-recipient Audits
• Ensure that entities of met the A-133 audit
  requirements

14
Internal Controls

• Sense of conducting operations ethically
• Positive responsiveness to questioned costs
• Staff knowledge of compliance requirements
• Training programs

15
Compliance Requirements

• Ensure that funds were used only for activities
  that further the objectives outlined in the award
  document
• 14 areas of review (A-N)
• Emphasis on largest expenses
• Employee compensation
• GA costs
• Equipment

16
Compliance Internal Controls

• A. Activities Allowed or Unallowed
• Identify the types of activities allowed or
  prohibited
• Test for proper classification accumulation
• Review Sub-awards to ensure activities are
  allowable

17
Compliance Internal Controls

• B. Allowable Costs/Cost Principles
• Reasonable, Necessary, Allowable
• OMB A-87
• G A Expenses
• Comparisons of budgets to actual costs

18
Compliance Internal Controls

• C. Cash Management
• Cost reimbursable
• Cash Advances
• Letter of credit
• Funds requested are for actual expenses

19
Compliance Internal Controls

• D. Davis-Bacon Act
• All laborers and mechanics employed to work on
  construction projects financed by the Federal
  government must be paid prevailing wage rates.

20
Compliance Internal Controls

• E. Eligibility
• Who can participate in a Federal program and the
  amounts for which they qualify
• Subrecipients are reviewed for eligibility

21
Compliance Internal Controls

• F. Equipment and Real Property Management
• Proper records adequate safe guards
• Disposition of equipment
• Agency compensated if sold
• Property tags in place

22
Compliance Internal Controls

• G. Matching, Level of Effort
• Comply with A-87
• Test to determine if commitment met
• Verify source of funds is allowable
• Review effort requirements were met
• Commitment from management to meet matching
  requirements

23
Compliance Internal Controls

• H. Period of Availability of Federal Funds
• Only cost resulting from obligations incurred
  during the funding period may be charged to the
  award
• Test transactions charged after the award expired
• Mechanisms for identifying awards about to expire

24
Compliance Internal Controls

• I. Procurement, Suspension Debarment
• Purchases are made in compliance with the Common
  Rule
• Contracts are not made with entities or
  individuals that have been suspended or disbarred
• University has existing codes of conduct

25
Compliance Internal Controls

• J. Program Income
• Gross income received that is directly generated
  by the federally funded project during the grant
  period
• Verify income is added to the budget
• Verify income was properly accounted for

26
Compliance Internal Controls

• K. Real Property Acquisition Relocation
  Assistance
• Equitable treatment if property is acquired

27
Compliance Internal Controls

• L. Reporting
• Financial -Recipients should use standard
  financial reporting forms
• Special Reporting -as required by the agency

28
Compliance Internal Controls

• M. Subrecipient Monitoring
• Ensure Compliance with Federal requirement
• Reasonable assurances that subrecipients obtain
  required audits

29
Subrecipient Monitoring

• Subrecipient monitoring is a requirement in OMB
  Circular A-133

30
Compliance Internal Controls

• N. Special Tests Provisions

31
Surviving an Audit

• Question When do you begin preparing for an
  audit?
• Answer The day you submit the proposal!

32
Documents Required for Audit

• Copy of Agreement
• Proof of Salary Approval
• Copies of ALL invoices paid on the account
• Include P.O. if required for purchase
• Cost Sharing Documentation
• Cost Sharing worksheet/account

33
Documents Required for Audit

• Effort Reports
• Must match payroll charges
• Sub-Awards
• Copy of award
• Copy of report or deliverable from sub.
• Copy of approved final invoice

34
Documents Required for Audit

• Reconciliation Documentation
• Proof that the charges were reviewed
• Are charges valid
• Are encumbrances correct
• Have recipients been paid

35
Key to Successful Audit

• Organized Files
• Documentation for expenses
• Appropriate Approvals
• Audit Trails
• Knowledge of policies and regulations

36
Audits

• Document! Document! Document!
• Auditors want to know why the
• award was charged for
• the expense

37
Auditor Management

• Dont assume the auditor has basic knowledge of
  regulations
• Understand all auditors questions
• If you are not sure - check it out
• Dont ramble or provide additional information
• Keep track of questions and responses

38
Possible Consequences for Noncompliance

• Corrective Actions
• Additional Special Award Terms and Conditions
• Loss of Expanded Authorities
• Cost Disallowance and Repayment
• Termination of Award
• Civil and/or Criminal Violations and Imposed
  Penalties

39
Questions?

• ???