Page images
PDF
EPUB

41.5 Definitions. 41.6 Scope of audit. 41.7 Frequency of audit. 41.8 Internal control and compliance re

views. 41.9 Subrecipients. 41.10 Relation to other audit requirements. 41.11 Cognizant agency responsibilities. 41.12 Illegal acts or irregularities. 41.13 Audit reports. 41.14 Audit resolution. 41.15 Audit workpapers and reports. 41.16 Audit costs. 41.17 Sanctions. 41.18 Auditor selection. 41.19 Small and minority audit firms. 41.20 Reporting.

AUTHORITY: Pub. L. 98-502, 31 U.S.C. ch. 75; 38 U.S.C. 501.

SOURCE: 50 FR 30937, July, 31, 1985, unless otherwise noted.

single point of contact receives the explanation; or

(2) The Secretary has reviewed the decision and determined that, because of unusual circumstances, the waiting period of at least ten days is not feasible.

(c) For purposes of computing the waiting period under paragraph (b)(1) of this section, a single point of contact is presumed to have received written notification five days after the date of mailing of such notification. (Authority: 42 U.S.C. 4231(b)) $40.11 Interstate.

(a) The Secretary is responsible for:

(1) Identifying proposed Federal financial assistance and direct Federal development that have an impact on interstate areas;

(2) Notifying appropriate officials and entities in States which have adopted a process and which select VA's program or activity.

(3) Making efforts to identify and notify the affected State, areawide, regional, and local officials and entities in those States that have not adopted a process under the order or do not select VA's program or activity;

(4) Responding pursuant to $40.10 of this part if the Secretary receives a recommendation from a designated areawide agency transmitted by a single point of contact, in cases in which the review, coordination, and communication with VA have been delegated, or

(b) The Secretary uses the procedures in $ 40.10 if a State process provides a State process recommendation to VA through a single point of contact. (Authority: 42 U.S.C. 4231(b)) $40.12 (Reserved) $40.13 Waiver.

In an emergency, the Secretary may waive any provision of these regulations. (Authority: 42 U.S.C. 4231(b))

$41.1 Purpose.

These regulations (38 CFR 41.1 through 41.20) are issued pursuant to the Single Audit Act of 1984, Pub. L. 98– 502. The act establishes audit requirements for State and local governments that receive Federal aid, and defines Federal responsibilities for implementing and monitoring those requirements. The Single Audit act requires the following:

(a) State or local governments that receive $100,000 or more a year in Federal financial assistance shall have an audit made in accordance with these regulations.

(b) State or local governments that receive between $25,000 and $100,000 a year shall have an audit made in accordance with these regulations, or in accordance with Federal laws and regulations governing the programs they participate in.

(c) State or local governments that receive less than $25,000 a year shall be exempt from compliance with the Act and other Federal audit requirements. These State and local governments shall be governed by audit requirements prescribed by State or local law or regulation.

(d) Nothing in this section exempts State or local governments from maintaining records of Federal financial assistance or from providing access to such records to Federal agencies, as

PART 41-AUDITING REQUIREMENTS

Sec. 41.1 Purpose. 11.2 41.4 [Reserved]

group or community, including an Alaskan Native village or regional o village corporations (as defined in, o established under, the Alaskan Nativ Claims Settlement Act) that is recog nized by the United States as eligibl for the special programs and service provided by the United States to Indi ans because of their status as Indians.

(i) Local government means any unit of local government within a State, in: cluding a county, a borough, munici pality, city, town, township, parish local public authority, special district school district, intrastate district council of governements, and any other instrumentality of local government.

(j) Major Federal Assistance Program for State and local governments having Federal assistance expenditures be tween $100,000 and $100,000,000, mean: any program for which Federal expend. itures during the applicable year ex. ceed the larger of $300,000, or 3 percent of such total expenditures. Where total expenditures of Federal assistance exceed $100,000,000, the following criteria apply:

provided for in Federal law or in Circular A-102, “Uniform requirements for grants to State or local governments." (Authority: Pub. L. 98-502) $841.2-41.4 [Reserved) $41.5 Definitions.

For the purposes of these regulations, the following definitions from the Single Audit Act apply:

(a) Cognizant agency means the Federal agency assigned by the OMB (Office of Management and Budget) to carry out the responsibilities described in 41.11.

(b) Federal financial assistance means assistance provided by a Federal agency in the form of grants, contracts, cooperative agreements, loans, loan guarantees, property, interest subsidies, insurance, or direct appropriations, but does not include direct Federal cash assistance to individuals. It includes awards received directly from Federal agencies, or indirectly through other units of State and local governments.

(c) Federal agency has the same meaning as the term 'agency' in section 551(1) of Title 5 U.S.C.

(d) Generally accepted accounting principles has the meaning specified in the generally accepted government auditing standards.

(e) Generally accepted government auditing standards means the Standards For Audit of Government Organizations, Programs, Activities, and Functions, developed by the Comptroller General, dated February 27, 1981.

(f) Independent auditor means:

(1) A State or local government auditor who meets the independence standards specified in generally accepted government auditing standards; or

(2) A public accountant who meets such independence standards.

(g) Internal controls means the plan of organization and methods and procedures adopted by management to ensure that:

(1) Resource use is consistent with laws, regulations, and policies;

(2) Resources are safeguarded against waste, loss, and misuse; and

(3) Reliable data are obtained, maintained, and fairly disclosed in reports.

(h) Indian tribe means any Indian tribe, band, nations, or other organized

[blocks in formation]

(k) Public accountants means those individuals who meet the qualification standards included in generally accepted government auditing standards for personnel performing government audits.

(1) State means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and the Trust Territory of the Pacific Islands, any instrumentality thereof, and any multi-State, regional or interstate entity that has governmental functions and any Indian tribe.

(m) Subrecipient means any person or (3) The organization has complied government department, agency, or es- with laws and regulations that may tablishment that receives Federal fi have material effect on its financial nancial assistance to carry out a pro statements and on each major Federal gram through a State or local govern

assistance program. ment, but does not include an individual that is a beneficiary of such a (Authority: Pub. L. 98-502) program. A subrecipient may also be a direct recipient of Federal financial as

841.7 Frequency of audit. sistance.

Audits shall be made annually unless (Authority: Pub. L. 98-502)

the State or local government has, by

January 1, 1987, a constitutional or $41.6 Scope of audit.

statutory requirement for less frequent The Single Audit Act provides that:

audits. For those governments, the (a) The audit shall be made by an

cognizant agency shall permit biennial independent auditor in accordance with

audits, covering both years, if the govgenerally accepted government audit ernment so requests. It shall also ing standards covering financial and honor requests for biennial audits by compliance audits.

governments that have an administra(b) The audit shall cover the entire tive policy calling for audits less freoperations of a State or local govern- quent than annual, but only for fiscal ment or, at the option of that govern years beginning before January 1, 1987. ment, it may cover departments, agencies or establishments that received,

(Authority: Pub. L. 98-502) expended, or otherwise administered

$41.8 Internal control and compliance Federal financial assistance during the

reviews. year. However, if a State or local government receives $25,000 or more in The Single Audit Act requires that General Revenue Sharing Funds in a the independent auditor determine and fiscal year, it shall have an audit of its report on whether the organization has entire operations. A series of audits of internal control systems to provide individual departments, agencies, and reasonable assurance that it is manestablishments for the same fiscal year aging Federal assistance programs in may be considered a single audit.

compliance with applicable laws and (C) Public hospitals and public col. regulations. leges and universities may be excluded (a) Internal control review. In order to from State and local audits and the re

provide this assurance the auditor quirements of this Circular. However,

must make a study and evaluation of if such entities are excluded, audits of

internal control systems used in adthese entities shall be made in accord

ministering Federal assistance proance with statutory requirements and

grams. The study and evaluation must the provisions of Circular A-110, “Uni

be made whether or not the auditor inform requirements for grants to uni

tends to place reliance on such sysversities, hospitals, and other non

tems. As part of this review, the audiprofit organizations."

tor shall: (d) The auditor shall determine whether:

(1) Test whether these internal con(1) The financial statements of the

trol systems are functioning in accordgovernment, department, agency or es

ance with prescribed procedures. tablishment present fairly its financial

(2) Examine the recipient's systems position and the results of its financial

for monitoring subrecipients and oboperations in accordance with gen- taining and acting on subrecipient erally accepted accounting principles;

(2) The organization has internal ac- (b) Compliance review. The law also counting and other control systems to requires the auditor to determine provide reasonable assurance that it is whether the organization has complied managing Federal financial assistance with laws and regulations that may programs in compliance with applica have a material effect on each major ble laws and regulations; and

Federal assistance program,

15 anontodo ntinguineinlog

audit reports.

(1) In order to determine which major principles for State and local gover programs are to be tested for compli- ments,” and Attachment F of Circul ance, State and local governments A-102, “Uniform requirements f shall identify in their accounts all Fed- grants to State and local gover eral funds received and expended and ments." the programs under which they were (iii) The principal compliance r received. This shall include funds re- quirements of the largest Federal a ceived directly from Federal agencies programs may be ascertained by refe and through other State and local gov ring to the Compliance Supplement fi ernments.

Single Audits of State and Local Govern (2) The review must include the selec ments, issued by OMB and availabl tion and testing of a representative from the Government Printing Offic number of charges from each major For those programs not covered in th Federal assistance program. The selec- Compliance Supplement, the audit tion and testing of transactions shall may ascertain compliance requir be based on the auditor's professional ments by researching the statutes, res judgment considering such factors as ulations, and agreements governing in the amount of expenditures for the pro- dividual programs. gram and the individual awards; the (3) Transactions related to other Fed newness of the program or changes in

eral assistance programs that are se its conditions; prior experience with

lected in connection with examination the program, particularly as revealed

of financial statements and evaluatior in audits and other evaluations (e.g.,

of internal controls shall be tested fc inspections, program reviews); the ex

compliance with Federal laws and reg tent to which the program is carried

ulations that apply to such trans out through subrecipients; the extent

actions. to which the program contracts for (Authority: Pub. L. 98-502) goods or services; the level to which the program is already subject to pro- $41.9 Subrecipients. gram reviews or other forms of inde- State or local governments that re pendent oversight; the adequacy of the ceive Federal financial assistance an controls for ensuring compliance; the provide $25,000 or more of it in a fisca expectation of adherence or lack of ad year to a subrecipient shall: herence to the applicable laws and reg (a) Determine whether State or loca ulations; and the potential impact of subrecipients have met the audit re adverse findings.

quirements of these regulations an (i) In making the test of trans- whether subrecipients covered by Cir actions, the auditor shall determine cular A-110, “Uniform requirements fo whether:

grants to universities, hospitals, an (A) The amounts reported as expendi- other nonprofit organizations," hav tures were for allowable services, and met that requirement;

(B) The records show that those who (b) Determine whether the sub received services or benefits were eligi- recipient spent Federal assistanc ble to receive them.

funds in accordance with applicabl (ii) In addition to transaction test laws and regulations. This may be ac ing, the auditor shall determine wheth complished by reviewing an audito er:

the subrecipient made in accordanc (A) Matching requirements, levels of with these regulations, Circular A-110 effort and earmarking limitations were or through other means (e.g., progran met,

reviews) if the subrecipient has not ye (B) Federal financial reports and had such an audit; claims for advances and reimburse (c) Ensure that appropriate correc ments contain information that is sup tive action is taken within six month ported by the books and records from after receipt of the audit report in in which the basic financial statements stances of non-compliance with Fed have been prepared, and

eral laws and regulations; (C) Amounts claimed or used for (d) Consider whether subrecipient au matching were determined in accord- dits necessitate adjustment of the reance with OMB Circular A-87, “Cost cipient's own records; and

(e) Require each subrecipient to per- the implementation of OMB Circular mit independent auditors to have ac- A-128: cess to the records and financial state (a) The Office of Management and ments as necessary to comply with Budget will assign cognizant agencies these regulations.

for States and their subdivisions and

larger local governments and their sub(Authority: Pub. L. 98-502)

divisions. Other Federal agencies may $41.10 Relation to other audit require

participate with an assigned cognizant ments.

agency, in order to fulfill the cog

nizance responsibilities. Smaller govThe Single Audit Act provides that

ernments not assigned a cognizant an audit made in accordance with these

agency will be under the general overregulations shall be in lieu of any fi

sight of the Federal agency that proDancial or financial compliance audit vides them the most funds whether direquired under individual Federal as- rectly or indirectly. sistance programs. To the extent that (b) A cognizant agency shall have the a single audit provides Federal agen- following responsibilities: cies with information and assurances (1) Ensure that audits are made and they need to carry out their overall re- reports are received in a timely mansponsibilities, they shall rely upon and ner and in accordance with the requireuse such information. However, a Fed- ments of these regulations. eral agency shall make any additional (2) Provide technical advice and liaiaudits which are necessary to carry out son to State and local governments and its responsibilities under Federal law independent auditors. and regulation. Any additional Federal (3) Obtain or make quality control audit effort shall be planned and car reviews of selected audits made by nonried out in such a way as to avoid du Federal audit organizations, and proplication.

vide the results, when appropriate, to (a) The provisions of these regula- other interested organizations. tions do not limit the authority of Fed (4) Promptly inform other affected eral agencies to make, or contract for Federal agencies and appropriate Fedaudits and evaluations of Federal fi- eral law enforcement officials of any nancial assistance programs, nor do reported illegal acts or irregularities. they limit the authority of any Federal They should also inform State or local agency Inspector General or other Fed- law enforcement and prosecuting aueral audit official.

thorities, if not advised by the recipi(b) The provisions of these regula ent, of any violation of law within tions do not authorize any State or

their jurisdiction. local government or subrecipient

(5) Advise the recipient of audits that thereof to constrain Federal agencies,

have been found not to have met the in any manner, from carrying out addi

requirements set forth in these regulational audits.

tions. In such instances, the recipient (C) A Federal agency that makes or

will be expected to work with the audicontracts for audits in addition to the

tor to take corrective action. If correcaudits made by recipients pursuant to

tive action is not taken, the cognizant these regulations shall, consistent with

agency shall notify the recipient and other applicable laws and regulations,

Federal awarding agencies of the facts arrange for funding the cost of such ad

and make recommendations for folditional audits. Such additional audits

lowup action. Major inadequacies or reinclude economy and efficiency audits,

petitive substandard performance of program results audits, and program

independent auditors shall be referred to appropriate professional bodies for

disciplinary action. Authority: Pub. L. 98-502)

(6) Coordinate, to the extent prac

ticable, audits made by or for Federal $41.11 Cognizant agency responsibil.

agencies that are in addition to the au

dits made pursuant to these regulaThe Single Audit Act provides for tions; so that the additional audits Cognizant Federal agencies to overseebuild upon such audits.

evaluations.

ities.

« PreviousContinue »