Part III - Chapter 19: Audit Requirements
HIGHLIGHTS OF CHAPTER:
- Audit Objectives
- Audit Reporting Requirements
- Audit Submission Requirements
- Failure To Comply
- Audit Threshold
- Audit Confirmation Requests
- Due Dates for Audit Reports
- Audit Compliance
- Resolution of Audit Reports
- Top Ten Audit Findings
- Audit of Subrecipients
- Technical Assistance
- Full-Scope Auditing
- Commercial (For-Profit) Organizations
- Distribution of Audit Reports
- OIG Regional Offices
This chapter establishes responsibilities for the audit of organizations receiving agency funds. The intent of this chapter is to identify the policies for determining the proper and effective use of public funds rather than to prescribe detailed procedures for the conduct of an audit.
Awards are subject to conditions of fiscal, program, and general administration to which the recipient expressly agrees in accepting the award. Accordingly, the audit objective is to review the recipient's administration of funds and required non-Federal contributions for the purpose of determining whether the recipient has:
- Established an accounting system integrated with adequate internal fiscal and management controls to provide full accountability for revenues, expenditures, assets, and liabilities. This system should provide reasonable assurance that the organization is managing Federal financial assistance programs in compliance with applicable laws and regulations.
- Prepared financial statements which are presented fairly, in accordance with generally accepted accounting principles.
- Submitted financial reports (which may include Financial Status Reports, Cash Reports, and Claims for Advances and Reimbursements), which contain accurate and reliable financial data, and are presented in accordance with the terms of applicable agreements.
- Expended Federal funds in accordance with the terms of applicable agreements and those provisions of Federal law or regulations that could have a material effect on the financial statements or on the awards tested.
AUDIT REPORTING REQUIREMENTS
Independent auditors should follow the requirements prescribed in OMB Circular A-133. The recipient's books of account must support all amounts reported to OJP. The recipient's financial activity reported to OJP should reconcile to the amounts reported on the grantee's audited financial statements. If there are any differences between the recipient's audited financial statements and the financial activity reported to OJP, the recipient must be able to explain the differences.
If the auditor becomes aware of illegal acts or other irregularities, prompt notice shall be given to recipient management officials above the level of involvement. The recipient, in turn, shall promptly notify the Federal cognizant agency and/or awarding agency of the illegal acts or irregularities and of proposed and actual actions, if any.
All awarding agency personnel have the responsibility to inform the Office of the Chief Financial Officer, DOJ's Office of General Counsel, the Office of the Inspector General, and State and local law enforcement agencies or prosecuting authorities, as appropriate, of any known violations of the law within their respective area of jurisdiction.
Audit costs for audits not required or performed in accordance with OMB Circular A-133 are unallowable. If the grantee did not expend $500,000 or more in Federal funds during the organization's fiscal year, but contracted with a certified public accountant to perform an audit, these costs may not be charged to the grant.
AUDIT SUBMISSION REQUIREMENTS
For fiscal periods ending on or after January 1, 2008, the Federal Audit Clearinghouse (FAC) requires all grant recipients to submit Form SF-SAC and the Single Audit Reporting package online utilizing the Internet Data Entry System (IDES). Recipients will use the IDES to:
- Enter form SF-SAC data online;
- Check form SF-SAC data for errors using the "Check Data" feature;
- Upload a PDF copy of the Single Audit Reporting package;
- Certify form SF-SAC electronically using a signature code provided by the IDES; and
- Submit their complete certified form SF-FAC and Single Audit Reporting package to the FAC electronically.
To review the submission requirements and create an online report ID, visit FAC's Web site at http://harvester.census.gov/fac/collect/ddeindex.html.
FAILURE TO COMPLY
Failure to have audits performed as required will result in the withholding of new discretionary awards and/or withholding of funds or change in the method of payment on active awards.
- Non-Federal entities that expend $500,000 or more in Federal funds (from all sources including passthrough subawards) in the organization fiscal year (12-month turnaround reporting period) shall have a single organizationwide audit conducted in accordance with the provisions of OMB Circular A-133.
- Non-Federal entities that expend less than $500,000 a year in Federal awards are exempt from Federal audit requirements for that year. However, records must be available for review or audit by appropriate officials including the Federal agency, passthrough entity, and General Accounting Office.
AUDIT CONFIRMATION REQUESTS
Send audit confirmation requests to:
Office of the Chief Financial Officer
Attention: Grants Financial Management Division
810 Seventh Street, NW.
Washington, DC 20531
DUE DATES FOR AUDIT REPORTS
Audits are due no later than 9 months after the close of each fiscal year during the term of the award.
Techniques used to determine recipient compliance with Federal requirements when an organizationwide audit has not been conducted include:
- Obtaining audits from recipients that were made in accordance with the "Government Auditing Standards;"
- Relying on previous audits performed on recipients' operations;
- Desk reviews by program officials of project documentation;
- Project audits by auditors or auditors obtained by recipients; and
- Evaluations of recipients' operations by program officials.
RESOLUTION OF AUDIT REPORTS
Timely action on recommendations by responsible management officials is an integral part of the effectiveness of an audit. Each recipient shall have policies and procedures for responding to audit recommendations by designating officials responsible for:
- Following up;
- Maintaining a record of the action taken on recommendations and time schedules for completing corrective action;
- Implementing audit recommendations;
- Submitting periodic reports to the cognizant Federal audit agency on recommendations and actions taken; and
- Providing an audit special condition on all subawards. This special condition contains information, such as the audit report period, required audit report submission date, and name and address of the cognizant Federal agency. The policy of the awarding agency is not to make new awards to applicants who are not in compliance with the audit requirements.
The awarding agency monitors the audit requirements through its audit tracking system and is responsible for tracking audit reports received through the audit process until the audit has been resolved and closed.
TOP 10 AUDIT FINDINGS
- Financial Status Reports not submitted timely;
- Accounting procedures need improvement;
- Suspension and Debarment Certifications not obtained;
- Programmatic reporting requirements not met;
- Subrecipients not adequately monitored;
- Fixed assets not adequately monitored;
- Grant management procedures need improvement;
- Segregation of duties not adequate;
- Cash management procedures need improvement; and
- Procurement procedures need improvement.
AUDIT OF SUBRECIPIENTS
When subawards are made to another organization or organizations, the recipient shall require that subrecipients comply with the audit requirements set forth in this chapter.
Recipients are responsible for ensuring that subrecipient audit reports are received and for resolving any audit findings. Known or suspected violations of any law encountered during audits, including fraud, theft, embezzlement, forgery, or other serious irregularities, must be communicated to the recipient.
For subrecipients who are not required to have an audit as stipulated in OMB Circular A-133, the recipient is still responsible for monitoring the subrecipients' activities to provide reasonable assurance that the subrecipient administered Federal awards in compliance with Federal requirements.
The DOJ Office of the Inspector General is available to provide technical assistance to recipients in implementing the audit requirements of this chapter where DOJ is the assigned cognizant agency or has oversight responsibilities because it has provided the preponderance of direct Federal funding to the recipient. This assistance is available for areas such as:
- Review of the audit arrangements and/or negotiations;
- Review of the audit program or guide to be used for the conduct of the audit; and
- On-site assistance in the performance of the audit, when deemed necessary, as a result of universal or complex problems that arise. Requests for technical assistance should be addressed to the appropriate DOJ Regional Inspector General's Office (see listing of regional offices).
In addition to arranging and providing for the organizational, financial, and compliance audits required by OMB Circular A-133, individual recipients and subrecipients are encouraged to provide for additional audit coverage, as deemed appropriate. The additional audit coverage to be provided should be determined based on the circumstances surrounding the particular organization, function, program, or activity to be audited, management needs, and available audit capability.
Additional audit coverage could involve such organizational determinations relating to the following:
- Are resources managed and used economically and efficiently?
- Are desired results and objectives achieved effectively?
- Are the organization's accounting system and system of internal controls acceptable prior to the receipt of awarding agency funds?
- Are the organization's systems and controls adequate to detect fraud, waste, and abuse?
COMMERCIAL (FOR-PROFIT) ORGANIZATIONS
These organizations shall have financial and compliance audits conducted by qualified individuals who are organizationally, personally, and externally independent from those who authorize the expenditure of Federal funds. This audit must be performed in accordance with Government Auditing Standards, 2003 Revision. The purpose of this audit is to ascertain the effectiveness of the financial management systems and internal procedures that have been established to meet the terms and conditions of the award. Usually, these audits shall be conducted annually, but not less frequently than every 2 years. The dollar threshold for audit reports established in OMB Circular A-133, as amended, applies.
DISTRIBUTION OF AUDIT REPORTS
The submission of audit reports for all grantees shall be as follows:
- State and Local Governments, Institutions of Higher Education, and Nonprofit Institutions. Completed audit reports for State and local governments, institutions of higher education, and nonprofit institutions should not be submitted to OJP (unless requested by an agency official).
All single audit reports must be submitted electronically, rather than in paper format, to the Federal Audit Clearinghouse. There is information on FAC's Web site for grantees submitting their audit reports. Instructions for submitting audit reports are listed at http://harvester.census.gov/fac/collect/formoptions.html.
- Commercial Organizations and Individuals. One copy of all audit reports for commercial organizations and individuals should be mailed to the U.S. Department of Justice, Office of Justice Programs, Office of the Chief Financial Officer, ATTN: Control Desk, 810 Seventh Street, NW., Room 5303, Washington, DC 20531.
OIG Regional Offices
|Regional Audit Office||Geographical Area|
|Atlanta Region (40)
Ferris B. Polk, Regional Audit Manager
75 Spring Street, Suite 1130
Atlanta, GA 30323
|Alabama, Florida, Georgia, Mississippi, North Carolina, Puerto Rico, South Carolina, Tennessee, and Virgin Islands|
|Chicago Region (50)
Carol S. Taraszka, Regional Audit Manager
500 W. Madison, Suite 3510
Chicago, IL 60661
|Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Ohio, and Wisconsin|
|Dallas Region (80)
Robert J. Kaufman, Regional Audit Manager
207 S. Houston Street
Box 4, Room 275
Dallas, TX 75202
|Arkansas, Louisiana, Oklahoma, and Texas
|Denver Region (60)
David M. Sheeren, Regional Audit Manager
1120 Lincoln Street, Suite 1500
Denver, CO 80203
|Arizona, Colorado, Idaho, Kansas, Montana, Nebraska, New Mexico, North Dakota, South Dakota, Utah, and Wyoming|
|Philadelphia Region (70)
Richard A. McGeary, Regional Audit Manager
701 Market Street, Suite 201
Philadelphia, PA 19106
|Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont|
|San Francisco Region (90)
David J. Gaschke, Regional Audit Manager
1200 Bayhill Drive, Suite 201
San Bruno, CA 94066
|Alaska, American Samoa, California, Guam, Hawaii, Nevada, Oregon, Trust Territory of the Commonwealth of Northern Mariana Islands, and Washington|
|Washington Region (30)
Troy M. Meyer, Regional Audit Manager
1300 North 17th Street, Suite 3400
Arlington, VA 22209
|District of Columbia, Maryland, Virginia, and West Virginia|