Section 6.8 Audits

Accessing Funds: Section 6.8 Audits

One of the primary financial management requirements implicit with the use of Federal funds is the annual audit. 2 CFR Part 200 Subpart F provides requirements for audits of governmental entities and non-profit organizations.

Audit Requirements
An audit is an official examination and verification of accounts and records. Audits are an important part of effective financial systems, as they produce useful financial reports and verify the reliability of a grantee’s financial management systems. Only an independent CPA, with a current license to practice in New Hampshire, or the New Hampshire Auditor of Public Accounts can perform an audit.

Failure to comply with the audit requirements can jeopardize the grantee’s ability to draw grant funds and receive future grants.

Federal Requirements
The type and level of audit required by 2 CFR 200 Subpart F is based on the amount of Federal funds expended by an organization in a given fiscal year. Federal awards include financial assistance provided by the Federal government to the entire organization in the form of grants, loans, property, contracts, loan guarantees, etc.

Organizations that have expended more than $750,000 in Federal funds within a fiscal year are required to have a Single Annual Audit conducted. (For fiscal years prior to 2015, the threshold is $500,000 per fiscal year). A single audit is an audit that includes both an entity’s financial statements and its federal awards (from all applicable Federal programs).

Organizations that have expended less than $750,000 a year in federal funds are exempt from the audit requirement; however, financial records must be made available if requested.

The Audit Process
The Single Annual Audit must be performed by an independent public accountant in compliance with the Single Audit Act of 1997. The grantee is required to permit the independent auditor access to the records and financial statements of the municipality as necessary.

In procuring audit services, grantees should follow the applicable procurement standards found in Chapter 7: Procurement and Contracts. The grantee should ensure that the auditor is knowledgeable about specific accounting requirements that apply to local government.

All audits conducted in accordance with OMB A-133 (FYs prior to 2016) and 2 CFR Part 200 (FY 2016 forward) must be performed in accordance with Generally Accepted Government Auditing Standards (GAGAS) (refer to 2 CFR 200.514(a)). According to the GAGAS standards, a financial audit should determine whether:

• Financial information is presented in accordance with established or stated criteria;
• The entity has adhered to specific financial compliance requirements; or
• The entity’s internal control structure over financial reporting and/or safeguarding assets is suitably designed and implemented to achieve control objectives.

In conducting an audit, the grantee must supply the following information to the auditor at the beginning of each audit:

• A copy of the Assistance Agreement;
• A copy of all claims/draws processed during the fiscal year;
• A copy of the monitoring letter, if one was issued during or affecting the fiscal year being audited;
• A copy of the community’s most recent budget that includes the CDBG funds for the fiscal year; and
• The location of the records for the CDBG project and the person to contact along with their telephone number.

Tip: It is the responsibility of both the grantee and the grant administrator to ensure compliance
with all audit requirements.

The Audit Report
OMB Circular A-133, applied for fiscal years prior to FY16, and 2 CFR Part 200, applied for fiscal years FY16 forward, require that audit reports issued upon completion of an audit include:

• An opinion as to whether financial statements are presented fairly in all material respects in accordance with GAGAS.
• An opinion as to whether the schedule of expenditures is presented fairly in all material respects in relation to the financial statements taken as a whole.
• A report on internal controls related to financial statements and major programs.
• A report on compliance with laws, regulations, and the provisions of contracts or grant agreements.
• An opinion as to whether the auditee organization has complied with laws, regulations, and the provisions of contracts or grant agreements.
• A schedule of findings and questioned costs, which include a summary of the auditor’s results and all “audit findings.”

 

The summary of audit results must include:

• Type of report the auditor issued on financial statements;
• A statement that reportable conditions in internal controls were disclosed by the audit (where applicable);
• Statement on whether the audit disclosed any noncompliance which is material to the auditee financial statements;
• Type of report the auditor issued on compliance for major programs;
• Statement as to whether the audit disclosed any “audit findings”;
• Identification of major programs;
• Dollar threshold used to distinguish between type A and type B programs; and
• Statement as to whether the auditee qualifies as a low-risk organization.

Deadline and Submission
The submission of all audit information is the responsibility of the grantee. It is the administrator’s responsibility to inform the grantee of all audit requirements and to ensure that completed audit reports are submitted to CFDA and the appropriate offices on a timely basis.

State Submission Requirements
Municipalities must submit an Annual Notification of Single Audit Requirement (Attachment 6-8), signed by the AO no later than 60 days after their fiscal year end. Forms should be sent to the attention of:

Community Development Finance Authority
Finance Department
14 Dixon Avenue, Suite 102
Concord, NH 03301

Federal Submission Requirements
Under OMB Circular A-133 and 2 CFR Part 200, audits must be completed within nine months from the end of the fiscal year.

Grantees have no later than 30 days after receipt of the auditor’s report or March 31st (whichever is earlier) to submit the final copies to the Federal Audit Clearinghouse (FAC). According to 2 CFR 200 Subpart F, grantees must make copies of their audit available for public inspection, ensuring that protecting personally identifiable information is not included. Please also see Federal Audit Clearinghouse Public User’s Manual.