WHO TO CONTACT DURING THE LIVE EVENT
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-On the web, use the chat box at the bottom left of the screen
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IMPORTANT INFORMATION FOR THE LIVE PROGRAM
This program is approved for 2 CPE credit hours. To earn credit you must:
• Participate in the program on your own computer connection (no sharing) – if you need to register
additional people, please call customer service at 1-800-926-7926 ext.1 (or 404-881-1141 ext. 1).
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• Listen on-line via your computer speakers.
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• To earn full credit, you must remain connected for the entire program.
Sharpening Single Audit Practices and Avoiding
Audit DeficienciesTHURSDAY, MAY 23, 2019, 1:00-2:50 pm Eastern
FOR LIVE PROGRAM ONLY
Tips for Optimal Quality
Sound Quality
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FOR LIVE PROGRAM ONLY
May 23, 2019
Sharpening Single Audit Practices and Avoiding Audit Deficiencies
Angie M. Hillestad, Partner
Eide Bailly
Kurt Schlicker, CPA, Manager
Eide Bailly
Notice
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY
THE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY
OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT
MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR
RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
You (and your employees, representatives, or agents) may disclose to any and all persons,
without limitation, the tax treatment or tax structure, or both, of any transaction
described in the associated materials we provide to you, including, but not limited to,
any tax opinions, memoranda, or other tax analyses contained in those materials.
The information contained herein is of a general nature and based on authorities that are
subject to change. Applicability of the information to specific situations should be
determined through consultation with your tax adviser.
SHARPENING SINGLE AUDIT PRACTICES AND
AVOIDING AUDIT DEFICIENCIESMay 2019
PRESENTERS
Angie Hillestad, CPAPartner Eide Bailly [email protected]
Kurt Schlicker, CPAManager Eide Bailly [email protected]
6
TODAY’S AGENDA
• Current authoritative guidance
• Title 2 U.S. Code of Federal Regulations Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (Uniform Guidance)
• Common areas of concern and avoiding common deficiencies
• Auditors• Factors impacting quality
• Low Risk vs High Risk Determinations
• Major Program Determination
• Internal Controls
• Reporting
• Auditees• Common findings
• Q&A
7
CURRENT
AUTHORITATIVE
GUIDANCE
8
UNIFORM GUIDANCE CODIFICATION
• Subpart A – Acronyms and Definitions
• Subpart B – General Provisions
• Subpart C – Pre-Federal Award Requirements and Contents of Federal Awards
• Subpart D – Post Federal Award Requirements
• Subpart E – Cost Principles
• Subpart F – Audit Requirements
• Appendixes I – XII (miscellaneous information that is often missed)
Title 2 CFR Part 200
9
COMMON AREAS OF
CONCERN AND
AVOIDING COMMON
DEFICIENCIES
10
AUDITORS
11
• Single Audit Experience• Firm
• Partner
• Managers/Staff
• Training/CPE• Not just limited to Partners
• Quality Control Systems• Subject to a 2nd review?
• Single Audit Technical Committee
• Developing expertise
• Familiarity with the audit guide
(see next slide)
PRIMARY FACTORS IMPACTING QUALITY
12
AICPA Audit Guide:
Government Auditing Standards
and Single AuditsKey resource for auditors; you should
be using this Guide!
Order now at:
http://www.aicpastore.com/
Covers internal control over financial
reporting in Government Auditing
Standards section.
Includes chapters on internal control
over compliance and compliance
requirements in a single audit under
the UG.
13
COMMON PROBLEM AREAS
• Low Risk vs High Risk Auditee
Problem Area:
• Timely DCF submission
• Unmodified opinion on the financial statements and SEFA
• No material weaknesses, material noncompliance, or QC > 5%
• No going concern
Criteria:
• Not based on judgment!
• Have a template that documents all the requirements (for prior 2 years)
Prevention:
14
COMMON PROBLEM AREAS
• Major Program Determination
Problem Area:
• Audited within prior 2 years
• Most recent audit results
• Results of follow-up or other significant changes
• Federal oversight
• Federal agency identifies as high-risk
Criteria:
• Determination of Type A is not judgment based
• Use the final SEFA to ensure coverage obtained
• Review compliance supplement for appropriate clusters
• Review the SEFA formatting to ensure CFDA’s are subtotaled appropriately
Prevention:
15
COMMON PROBLEM AREAS
• Internal Controls
Problem Area:
• Documentation of IC environment
• Control vs compliance testing
• Achieving low control risk
Criteria:
• Separate memo or document that evidences IC environment• Identify key controls for testing
• Training and understanding on control vs compliance• Compliance includes: Uniform Guidance, Grant Awards, and Compliance Supplement
as applicable
• Controls: The processes that provide reasonable assurance regarding compliance
• Workpapers that clearly identify control tests vs compliance tests
• Assessing risk appropriately
• Following suggested sample sizes in the audit guide
Prevention:
16
COMMON PROBLEM AREAS
• Reporting• Audit reports
• Findings
Problem Area:
• Requirements of findings (see 200.516)• Questioned costs
• Control vs compliance
Criteria:
• Use AICPA report illustrations and/or similar templates
• Separate workpaper that documents all deficiencies identified
• Proper evaluation and resolution on all identified deficiencies
Prevention:
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AUDITEES
19
COMMON FINDINGS
Internal Controls:• Lack of review
• Review not detecting errors
• No control
Prevention:• Documented internal controls
that address areas of
potential non-compliance
• Understanding internal
controls
• Understanding compliance
requirements
20
COMMON FINDINGSAllowable Activities /
Allowable Costs:• Payroll:
• Time and effort tracking
• Fringe benefits
• Budget vs actual
• Internal controls on salaried
employees
21
COMMON FINDINGS
Allowable Activities/Allowable Costs:• Indirect Costs:
• Modified Total Direct Costs
• Costs not being allocated in accordance with
the cost allocation plan (CAP)
• Unallowed costs in the CAP
• Double dipping as an indirect and direct cost
• Internal controls in preparation and allocation
22
COMMON FINDINGS – ALLOWABLE COSTS
Alcoholic Beverages
Audit Costs Bad Debt
Bonding Costs
Contingency Donations
Depreciation Entertainment Fundraising
23
COMMON FINDINGS – ALLOWABLE COSTS
Interest MembershipsParticipant Support
Professional Services
Proposal Costs
Recruiting
Relocation Taxes Travel
24
COMMON FINDINGS
Allowable Activities/Allowable Costs Prevention:
• Supplemental timecards and true-up• Training or references available for allowable fringe
benefits• Monitoring changes to the CAP• Training on CAP preparation
• Simplified vs Multiple Allocation vs Special Method
• Independent review of CAP claims• Knowing where to look-up allowability!• Design and implement internal controls to monitor
compliance
25
COMMON FINDINGS
Cash Management
• Methodology of application of program income.
• Drawing in advance of immediate cash needs (i.e. drawdowns based on estimated disbursements or in advance for the entire year).
Prevention
• Reviewing expenditure and program income data.
• Understanding actual vs. pending transactions.
• Design and implement internal controls to monitor compliance.
26
COMMON FINDINGS
Eligibility:• Document retention
• Obtaining complete information
• Missing required re-
determinations
Prevention:• Case file checklists
• Independent review and
approval
• Re-determination notifications
• Design and implement internal
controls to monitor compliance
27
COMMON FINDINGS
Equipment and Real Property Management:• Identification of the federal asset
• Disposition without requesting instructions from the Federal agency
• Lack of physical inventory every two years
Prevention:• Addition & disposition checklists
• Independent review of additions and dispositions
• Training of non-grant personnel
• Design and implement internal controls to monitor compliance
28
COMMON FINDINGS
Matching, Level of Effort, Earmarking:
• Double dipping (using same costs for multiple awards)
• Using federal awards to match other federal awards
• Matching funds aren’t allowable
• Lack of monitoring for compliance (no process in place)
Prevention:
• Appropriate chart of accounts and grant cost tracking
• Training on requirements, including allowable costs
• Design and implement internal controls to monitor compliance
29
Period of Performance:• Incurring obligations in the liquidation period (and requesting reimbursement for them)
• Pre-award costs without approval
Prevention:• Training on obligation dates vs liquidation dates
• Written requests for pre-award costs
• Independent review and approval of costs
• Design and implement internal controls to monitor compliance
COMMON FINDINGS
30
COMMON FINDINGS
• Lack of written policies or policies that are not compliant
• Lack of documentation of quotes
• State vs Federal vs Local noncompliance
• Conflicts of interest that were not documented
• History of procurement was not adequately documented
• Contract provisions were not complete
• Inappropriate purchase method (aggregation)
Procurement, Suspension and Debarment:
32
COMMON FINDINGS
• Inappropriate factors impacting competition:• Geographical preferences
• Soliciting a pre-approved list only (not full and open)
• Inaccurate descriptions
• Unnecessary experience requirements
• Inappropriate use of sole source
• Suspension and Debarment was not verified (or not documented)
• Internal Controls for Purchasing Alliances
Procurement, Suspension and Debarment:
33
COMMON FINDINGS
• Designing and reviewing policy to ensure it is compliant
• Training employees on the procurement policy
• Several layers of review, depending on procurement type
• Design and implement internal controls to monitor compliance
• Gaining a full understanding of the entire procurement cycle
Procurement, Suspension and Debarment Prevention:
34
COMMON FINDINGS Program Income:
• Lack of identifying the income as federal (and subject to
federal compliance requirements)
• Spending program income on unallowable costs
Prevention:• Obtaining clarification of the grantor’s definition of program
income
• Training on how program income is applied (subtracted from
draws or spent in addition)
• Design and implement internal controls to monitor compliance
35
COMMON FINDINGSReporting:
• Lack of supporting
documentation or reconciliations
• Inaccurate reports
• Verifying prepopulated numbers
for accuracy
Prevention:• Independent review and
approval
• Document retention, including
supporting information (i.e. not
just the reports)
• Design and implement internal
controls to monitor compliance
36
COMMON FINDINGS
• Subawards not updated for U.G.
• No risk assessment policies or procedures
• Risk assessment policies/procedures but lack of performance
• Lack of review of subrecipient audit reports
• Lack of management decisions
• Lack of suspension and debarment verification on subrecipients (or not documented)
Subrecipient Monitoring
37
COMMON FINDINGS
Subrecipient Monitoring Prevention:
• Training, training, training
• Documented policies
• Document retention
• Calendar of monitoring
• Assignment of responsibilities
• Design and implement internal controls to monitor compliance38
COMMON FINDINGS
Special Tests - Overall:• Differ from grant to grant
• Understand the terms of grant
award
• Ensure appropriate training is
in place
• Implement internal controls as
appropriate
39
BRINGING IT ALL TOGETHER
• Auditees and auditors should be very familiar with Uniform Guidance• Advise clients where to read the requirements
• Advise clients how to find information
• Auditees and auditors should be aware of common findings
• Corrective Action Plans and Status of Prior Year Findings• Auditee prepared
• Something achievable
• Regulators on the look out for long standing findings
• Audit firms should have quality control systems in place
• Regulations continually change – CPE for single audits should be
ongoing!
40
This presentation is presented with the understanding that the information contained does not constitute legal, accounting or other professional advice.
It is not intended to be responsive to any individual situation or concerns, as the contents of this presentation are intended for general information
purposes only. Viewers are urged not to act upon the information contained in this presentation without first consulting competent legal, accounting or
other professional advice regarding implications of a particular factual situation. Questions and additional information can be submitted to your Eide
Bailly representative, or to the presenter of this session.
QUESTIONS?
41
THANK YOU
Angie Hillestad, CPA
Partner
605.367.6703
Kurt Schlicker, CPA
Manager
775.689.9234
42