July 12, 2007
Significant percentages of unacceptable audits and audits of limited reliability were discovered in the“ National Single Audit Sampling Project” conducted by the Audit Committee of the President’s Council on Integrity and Efficiency, which released its report on June 21 (see www.ignet.gov/pande/audit/NatSamProjRptFINAL2.pdf). The report recommends that the Office of Management and Budget: “Enter into dialogue with the AICPA and State Boards of Accountancy to identify and implement ways to further the quality of single audits and address the due professional care issue noted in this Project.”
Quality control reviews were conducted on a statistical sample of 208 audits, randomly selected from a universe of over 38,000 audits submitted and accepted for the period April 1, 2003 through March 31, 2004. These were split into two strata: Stratum I for audits of entities that expended $50 million or more of Federal awards, and Stratum II for entities expending less than $50 million but more than $500,000 of Federal awards. There were 96 Stratum I audits reviewed and 112 Stratum II. The project team found unacceptable 24 percent of the Stratum I audits reviewed and 40 percent of the Stratum II audits, indicating the single audits reporting large dollars of Federal awards are more likely to be of acceptable quality.
The most prevalent deficiencies observed were:
Not documenting the understanding of internal controls over compliance requirements (27.1 percent Stratum I, 57.1 percent Stratum II, and 56.5 percent overall)
Not documenting testing internal controls of at least some compliance requirements (34.4 percent of Stratum I, 61.6 percent of Stratum II, and 61 percent overall)
Not documenting compliance testing of at least some compliance requirements (47.9 percent of Stratum I, 59.8 percent of Stratum II and 59.6 percent overall).
The report sets out a three-pronged approach to improve the quality of single audits: (1)
Revise and improve single audit standards, criteria and guidance. (2) Establish minimum requirements for training on performing single audits. (3) Review and enhance processes to address unacceptable single audits. This includes: “Review the suspension and debarment process to identify whether (and if so, how) it can be more efficiently and effectively applied to address unacceptable audits, and based on that review, pursue appropriate change to the process.”
NASBA Chair Wesley Johnson and President David Costello wrote in June to John Higgins, Jr., Inspector General and Chair of the PCIE Audit Committee: “NASBA would welcome the opportunity to enter into a dialogue, as recommended …, to further the quality of single audits. NASBA would certainly be ready to assist in the development of a process that would facilitate the referral of deficient A-133 audits to Boards for investigation. In addition we could participate in discussions of perceived time and cost barriers that have prevented some federal agencies from starting their own investigations. Based on the investigation experiences of several Boards, we might be able to offer suggestions to the federal agencies.”
- MEMBER CENTER