Page images

81068.42–2 Effective date.

August 5, 1970 (CSA Instruction 68011). May 11, 1971 (CSA Instruction 68011, Change 1).

8 1068.42–3 Definitions.

"Delegate agency" means an agency to which a grantee delegates the performance of an entire program account of a grant or a substantial part of a single program account. As used in this subpart the term also refers to "subcontractors" who contract with the grantee to perform any major portion of a CSA funded program.

“Grant-grantee" as used in this subpart, also refers to contracts of assistance and contractors under such contracts respectively.

“Responsible CSA official" means the CSA official in the Headquarters Office, or the Regional Office of CSA, who has authority to award and administer the CSA grant in question.

g 1068.424 Policy.

(a) Before funds will be released to a grantee receiving an initial Community Services Administration (CSA) grant, the grantee, must submit a statement to CSA certifying that its accounting system and that of its delegated agencies meet the standards set forth in section 243(a) of the EOA. See Appendix A of this subpart. Within three (3) months after the effective date of an initial grant, a grantee must have its accounting system surveyed and evaluated by an auditor. On the basis of the auditor's findings and conclusions, the CSA Director or the Director's designee will determine whether the accounting system meets CSA standards and, if not, whether to suspend the grant.

(b) An audit of each grant must be made annually. On the basis of resultant findings and conclusions, the Director or the Director's designee will determine whether any of the costs or expenditures incurred shall be disallowed as charges against grant funds. In the event of disallowance, the Director may seek recovery of sums by ap propriate means. The Director may also impose additional requirements to assure that the conditions that gave rise to the disallowance have been corrected and will not recur.

(c) Grantees must require of delegate agencies substantially the same audit responsibilities that CSA requires of grantees. However, grantees remain responsible to CSA for the proper expenditure of and accounting for all grant funds, whether or not delegated to other agencies. 81068.42-5 Accounting system certif

cation. (a) General. The accounting system certification states that the grantee and its delegate agencies (or subcontractors for performance of any major portion of the assisted program) have established an adequate accounting system with appropriate internal controls to safeguard assets, check the accuracy and reliability of their accounting data, promote operating efficiency and encourage compliance with prescribed management policies and any additional fiscal responsibilities and accounting requirements established by CSA.

(1) The certification may be furnished by an independent certified public accountant, an independent Statelicensed public accountant, or, in the case of a public agency, the appropriate public financial officer who accepts responsibility for providing required financial services to the grantee. The statements in Appendices B and C of this subpart will satisfy CSA's requirements for an accounting system certification.

(b) New grantees. A grantee applying for its initial CSA grant shall submit this certification to the granting office as part of the funding request. If an ap plicant is unable to obtain the certification, it should forward a statement of explanation to the granting office. The granting office may process the application without the statement where it can reasonably be expected that the statement will be furnished at or before the commencement of the grant period (that is when a new organization's accounting system is still in the process of development at the time of application). In no event, however, will any CSA funds be released to the grantee until the proper statement has been submitted.

(c) On-going grantees. Although accounting system certifications are usually required only for the initial CSA grant to the grantee, there may be instances when CSA will require a new certification from an on-going grantee For example, when there has been a significant increase in the amount of funds provided by CSA. An on-going grantee will be notified by CSA if a new certification must be submitted.

(d) Delegate agencies. A grantee may not release or commit any grant funds to a new delegate agency unless it has received from that agency an accounting system certification appropriately modeled after those shown in Appendices B and C of this subpart. If an existing delegate agency is to receive a substantial increase in funds from the grantee, a new certification must also be submitted to the grantee. These certifications are to be obtained by the grantee from its delegate agencies for retention among the grantee's records and need not be transmitted to CSA unless CSA requests them. CSA may disallow as a charge against the grant any funds released in violation of the requirement stated in this paragraph.

g 1068.42–6 Auditor selection and re

sponsibilities. (a) Selection of auditor. If the grantee is a private agency, the services of an independent certified public accountant, or independent licensed public accountant, certified or licensed by a regulatory authority of a State or other political subdivision of the United States, shall be secured. If the grantee is a local government or public agency, or if its accounting records are maintained by a local government or public agency, the auditing official or official governmental auditing agency which customarily conducts the agency's audits may be substituted for an independent auditor provided that the provisions of paragraph (d) of 81068.42.9 are complied with.

(1) A grantee receiving an initial CSA grant shall, within thirty (30) days of the receipt of the CSA Form 314, Statement of CAP Grant, supply the responsible CSA official and the Regional Auditor with the name of the auditor or auditing organization which it has selected. CSA will notify the grantee if its selection is not acceptable. If no notice is received from CSA within fif

teen (15) calendar days of the nomination, the grantee may engage the auditor. The Regional Auditor will provide the auditor with copies of the Audit Guide.

(2) The auditor approved to conduct the preliminary audit survey may also conduct the annual audit. Once an auditor has been selected and approved, it is not necessary to renominate the auditor in subsequent years as long as he/she complies with the provisions of the Audit Guide and CSA directives. However, when a grantee changes its auditor or when CSA notifies the grantee that its present auditor is unacceptable, renomination must take place and approval must again be obtained from CSA.

(3) When Federal audits are performed in accordance with the Audit Guide, they may be acceptable in lieu of an audit by a certified or licensed public accountant. See paragraph (c) $ 1068.42–9. The responsible CSA official will determine whether the scheduled completion date of such an audit will satisfy CSA's time requirement.

(4) The grantee shall furnish the

(4) The grantee shall IU auditor with copies of the approved grant proposal, official grant documents, and all applicable CSA directives, including this subpart.

(b) Auditor's responsibilities. The auditor selected by the grantee is responsible for conducting a preliminary audit survey and/or annual audit in accordance with provisions of the Audit Guide. The audit survey will be directed toward an evaluation of the adequacy of the grantee's accounting sysquacy of the grantee's acco tem and internal controls. The survey should determine whether sufficient internal controls have been established to safeguard assets, check the accuracy and reliability of accounting data, promote operating efficiency and encourage compliance with prescribed management policies and any additional fiscal responsibilities and accounting requirements established by CSA.

(1) The annual audit will be for the purpose of determining whether the grantee and its delegate agencies have adequately discharged their financial responsibilities and to evaluate compliance with grant conditions and with CSA directives.

(2) It is therefore essential that the (4) If the preliminary audit survey independent auditors be familiar with conducted by the grantee's anditor CSA grant conditions as well as with does not cover the accounting systems other Federal requirements, official of all delegate agencies, the grantee memoranda and publications of CSA must comply with paragraph (6) of this and, particularly, the contents of this section. subpart. These materials will be fur (b) Delegate agencies. Whenever a nished by the grantee.

grantee is required to secure an ac(3) Independent auditors should clear counting system certification fro ly understand their responsibilities in delegate agency, it shall also require this area. They must be aware that that within three (3) months of the efthey are responsible for pointing out, fective date of the delegate agency in their report, any matters of audit agreement, a preliminary audit survey importance both to the grantee and to of the delegate agency's accounting CSA. The report should include an system be conducted by an independent evaluation of the accounting system auditor. This requirement shall be inand internal controls and make rec- cluded in the delegate agency agreeommendations for improvements.

ment. The grantee is responsible for de (4) The auditor should submit five (5) termining, on the basis of the survey copies of all reports to the Regional report, whether the delegate agency's Auditor concurrent with his/her sub accounting system and internal conmission to the grantee.

trols meet the standards of section

243(a) of the EOA. The grantee shall 8 1068.42–7 Required preliminary audit

consult with the responsible CSA offisurvey.

cial to determine the appropriate 80(a) Grantee. Immediately after re tion to be taken in those cases where ceipt of CSA Form 314, Statement of the accounting system of a delegate CAP Grant, for an initial CSA grant, agency is not adequate. However, the the grantee shall arrange for an inde- responsibility for ensuring that delependent auditor to conduct, with three gate agencies establish and maintain (3) months after the effective date of adequate accounting systems rests the grant, a preliminary audit survey with the grantee. CSA may disallow to evaluate the adequacy of the grant- any charges to grant funds resulting ee's accounting system and internal from expenditures by a delegate agency controls and ability to meet the stand after the grantee has received notice of ards set forth in section 243(a) of the the inadequacy of the delegate agenEOA as detailed in the Audit Guide. cy's accounting system, or after the

(1) The auditor should submit, within grantee has failed to require the timely three (3) months after the effective submission by the delegate agency of a date of the grant, five (5) copies of the preliminary accounting system survey. survey report to the Regional Auditor (c) Response to Preliminary Audit Surconcurrent with his/her submission to vey Findings. On the basis of findings the grantee.

and conclusions resulting from the sur(2) A preliminary audit survey may vey, the Director, or the Director's desalso be required when a grantee's re- ignee, will determine whether the funding grant action includes a signifi- grantee's accounting system and intercant increase in its funding level. When nal controls have been shown to meet these situations occur, the grantee will the standards of section 243(a) of the be notified by CSA that a survey is re- EOA and, if not, whether to suspend quired.

the grant. The grantee will be advised (3) If a survey report itself is unac- in writing what further action is needceptable to CSA (that is, the reported to satisfy CSA's requirements. If does not conform to the requirement in major deficiencies are disclosed, the the Audit Guide), the grantee will re- Director, or the Director's designee, ceive notice of this fact from CSA. In may suspend the grant or advise the such instances, the cost of the survey grantee in writing that corrective acmay be disallowed as a charge against tion must be taken within thirty (30) grant funds.

calendar days.

(1) In the event of suspension, the Inspector General, CSAJOCS, at the adgrantee will be given a specified dress specified in $1050.112(c), within 60 amount of time, which will not exceed days after the end of the audited prosix (6) months, within which to estab gram year or grant period, except that lish the necessary systems and con audit reports for public grantees shall trols. In the event of failure to do so be submitted within 90 days after the within the time allowed, the grant will end of the audited period. A grantee be terminated pursuant to CSA's pub may request an extension of this deadlished regulations.

line from the appropriate office. An ex

tension of up to 30 days will be granted $ 1068.42-8 Required annual audit. to a non-public grantee upon a showing

(a) Grantee. Each grantee shall ar of reasonable cause that the grantee, range for an annual audit to ensure despite special efforts, cannot submit that the financial statements present the audit report within 60 days. Furfairly the financial position of the ther extensions for non-public grantees grantee, that the grantee is complying or any extensions for public grantees with applicable CSA directives and will be granted only in extraordinary with general and special grant condi circumstances. tions, and that appropriate financial (b) Delegate agencies. The grantee is and administrative procedures and con- responsible for either including deletrols have been installed and are oper- gate agencies' administration of grant ating effectively. In the case of com- programs within its own annual audit munity action agencies and other or of ensuring that separate independgrantees on a program year basis, the ent audits are conducted for delegate audit shall cover the grantee's prior agencies. Whether or not the delegaprogram year in total unless CSA has tion of a portion of the grant program approved in writing a different audit has been approved by CSA, the grantee period. In the case of grantees not on a remains responsible for proper acprogram year basis, the audit shall counting for expenditures of grant cover the first full year of the grant pe- funds. The Audit Guide contains deriod (or the entire grant period if less tailed directions on the inclusion of than a year) and audits conducted delegate agency information in the thereafter shall cover each succeeding grantee's audit report. year, and the final fraction of a year, if (c) Response to annual audit findings. any, of the grant period. Five (5) copies Grantee shall respond in writing to obof the report shall be submitted by the servations and recommendations in anauditor to the Regional Auditor con nual audit reports when requested to current with his submission to the do so by CSA. Unless an extension of grantee within six (6) months after the time is expressly granted, the response end of the program year or grant pe- shall be submitted to the responsible riod audited. CSA grant funds may not CSA official in five (5) copies, within be used for more than one audit annu thirty (30) calendar days from the date ally, except where CSA requests in CSA notifies the grantee of findings writing additional audits.

and recommendations. (1) If an audit report itself is unac (1) In the response, the grantee may ceptable to CSA (that is, the report take exception to particular findings does not conform to the requirements and recommendations. The rationale in the Audit Guide), the grantee will for such exceptions should be clearly receive notice as to what further ac- set out in the response. The response tion, if any, is necessary to meet CSA's should point out corrections already requirements. In such instances, the made and state what action is proposed cost of the audit may be disallowed as and the estimated completion date of a charge against grant funds.

such action. Although the grantee need (2) Audits for Periods Ending on or not send the granting office all docuAfter October 1, 1981. With respect to mentation supporting corrections unprogram years or grant periods ending less requested to do so, documentation on or after October 1, 1981, the grant- of actions taken is very important and ee's auditor must submit five (5) copies must be available for review during of the audit report to the Office of the later audits.

(2) CSA will consider the grantee's disallowances through increases in the response and any additional requested required non-Federal share in subseinformation in determining whether quent grants or contracts. specific expenditures of project funds (1) Failure by the grantee to satisfy a or contributions to the non-Federal final disallowance or take corrective share would be disallowed. If any are action to remedy deficiencies in its acdisallowed, the responsible CSA official counting system and internal controls will send the grantee written notice of determined by CSA after audit may rethe determination to disallow expendi- sult in suspension, termination, or tures. Unless the grantee appeals the other remedial action. The United determination within thirty (30) cal States reserves the right to bring suit endar days after the date of the notice, or take other appropriate legal action the determination will become final. to recover the amounts in question. (d) Grantee appeals of audit disallow

(44 FR 56568, Oct. 1, 1979, as amended at 47 FR ances. An appeal shall be in writing and 22535, May 25, 1982] shall contain a clear statement of the issue or issues which the grantee wish- $ 1068.42–9 Federal, State and local au. es to have considered in the appeal.

dits. The grantee may include with the ap (a) General. Audits and examinations peal statements any supporting facts of grantee's operations may be conor arguments which the grantee feels ducted by CSA auditors, auditors from should be considered. Appeals from de the staffs of other Federal agencies, terminations made by Headquarters of State and local auditors, and the U.S. ficials should be addressed to the Dep General Accounting Office. Grantees uty Director, Community Services Ad and delegate agencies must cooperate ministration, Washington, DC 20506. fully with General Accounting Office

(1) Appeals from determinations (GAO) and CSA auditors when they made concerning regionally funded conduct audits and examinations of grants will be addressed to the Re- grant programs. gional Director or the Regional Direc- (b) Audits and surveys by CSA. CSA tor's designee. Copies of all responses audits and surveys are designed to propreviously submitted by the grantee to vide CSA management with informathe responsible CSA official and other tion as to the effectiveness of adminispertinent information must accompany trative procedures and controls and to the appeal.

assist the grantee in improving pro(2) The official reviewing the appeal, gram operations. As such, CSA audits or the official's designee, shall consider usually supplement, but do not subthe appeal, together with any com- stitute for or duplicate, the work of the ments submitted by cognizant offices grantee's independent auditor. of CSA (a copy of which shall be simul- (c) Audits and surveys by other Federal taneously sent to the grantee). In his/ agencies. Grantees that have grants her discretion, the reviewing official from or contracts with other Federal may offer the grantee an informal

ne grantee an informal agencies such as the Department of Dehearing at which relevant CSA officials fense or Department of Health, Edumay also be heard. The decision on the cation, and Welfare may be subject to appeal shall be final.

surveys and audits by those agencies. (e) Satisfaction of final audit disallow- In these instances, the CSA Audit Diviances. Unless the grantee receives writ sion, if informed in advance, will try to ten notice from CSA granting an exten arrange with the cognizant audit agension, all final disallowances shall be cy to have them audit CSA programs satisfied within ninety (90) days of the concurrently with their audits of the date on which the disallowance be- grantees' other programs. Where such comes final. Grantees shall satisfy audits meet the requirement of this final disallowance through cash pay- subpart and are performed in accordments to CSA unless they have re- ance with the Audit Guide, CSA will ceived written notice allowing an al- approve them as acceptable in lieu of ternative means of satisfaction. In an audit by the grantee's auditor some instances, grantees under Title II (d) Audits and surveys by state and of the EOA may be permitted to satisfy local auditors. Public grantees may be

« PreviousContinue »