Department of the Interior
Effective Date:
9/28/07
Series: Audits
Part 360: Departmental Audits
Chapter 1: Audit Authority, Policy, and
Responsibilities
Originating Office:
Office of
Inspector General
360 DM 1
1.1 Purpose. This chapter provides policies, procedures
and responsibilities for performing audits of and related services on programs
and operations of (1) the Department of the Interior (DOI or the Department);
(2) the Insular Areas of Guam, American Samoa, the U.S. Virgin Islands, and the
Commonwealth of the Northern Mariana Islands; and (3) the Compact States of the
Federated States of Micronesia, the Republic of the Marshall Islands, and the
Republic of Palau.
1.2 Authority. This chapter is issued pursuant to the
provisions of the Inspector General Act of 1978, as amended, 5 U.S.C.A. App.3,
(the IG Act); the Budget and Accounting Procedures Act of 1950 (31 U.S.C.
2 et. seq.); the Chief Financial
Officers Act of 1990 (Public Law 101-576); the Single Audit Act of 1984 (Public
Law 98-502), as amended; Insular Areas Act (Public Law 97-357); Compacts of
Free Association Act of 1985 (Public Law 99-239 as amended by Public Law
108-239, and Public Law 99-658); Office
of Management and Budget (OMB) Circular A-50, September 29, 1982; OMB Circular
A-123, revised December 21, 2004; OMB Circular A-127, July 23, 1993; and
OMB Circular A-133, June 24, 1997.
1.3 Policy.
A. Objectives. The Office of Audits conducts audits and
evaluations and makes recommendations designed to (1) promote economy,
efficiency and effectiveness in administering programs and operations of the
Department, Insular Areas, and Compact States; (2) prevent and detect fraud,
waste and abuse in programs and operations of the Department and Insular Areas;
and (3) keep the Secretary of the Interior and the Congress fully and currently
informed about problems and deficiencies in the Department's and Insular Area
governments' programs and operations and the necessity for and progress of
corrective actions.
B. Standards. Audits by or for the Department will be
conducted in accordance with the "Government Auditing Standards"
promulgated by the Comptroller General of the
C. Distinction Between Departmental Management
Responsibilities and OIG Office of Audits Responsibilities. Both the OIG and the Department play
important roles in ensuring that adequate internal controls in the Department’s
programs and operations are in place and properly functioning. OMB Circular A-123 (Management Accountability
and Control) requires each agency and individual Federal manager to (1) assess
internal control, (2) correct internal control deficiencies, and (3) report
on internal control. The Inspector
General is responsible for conducting or arranging for audits of activities
carried out or financed by the Department for the purpose of promoting economy,
efficiency, and effectiveness or preventing and detecting fraud, waste, and
abuse in the Department's programs and operations. An audit serves to independently evaluate the
adequacy of established controls.
However, the audit is not a substitute for the control responsibilities
of bureaus and offices to provide adequate organization, policy, day-to-day
operating procedures, and administrative review activities.
1.4 Responsibilities.
A. Assistant Inspector General for Audits
(AIG-A). The AIG-A is responsible to
the Inspector General for supervising the performance of all auditing
activities relating to the Department's and Insular Area governments' programs
and operations. The AIG-A:
(1) Manages, supervises, coordinates, and
conducts audits/evaluations, and other reviews relating to Departmental and
Insular Area governments' programs and operations.
(2) Provides audit services to all management
levels within the Department and Insular Area governments, including
examinations of its grantees, contractors, lessees, permittees, and royalty
payors.
(3) Assists bureaus and offices, Insular Area
governments, and Compact States in evaluating policies, procedures, standards
and criteria relating to audit activities conducted by these activities.
(4) Determines when audits can be carried out
by organizations outside the OIG and evaluates the adequacy of audits performed
for the Department by non-Federal organizations to determine that such audits
meet generally accepted government auditing standards.
B. Assistant Secretaries and Heads of
Bureaus and Offices are responsible for:
(1) Providing timely responses to all draft and
final audit reports and taking appropriate actions on recommendations.
(a) In order to be valid, all responses to
draft and final audit reports must be signed by a senior management official of
the organization to which the report is addressed.
(b) Responses to draft performance audit
reports on Departmental or Insular Areas programs, activities, and functions
are normally due within 30 days.
Responses to final audit reports are normally due in 30 days. Responses to external audit reports on grants
and contracts are due in 90 days. If a
shorter response timeframe is required, it will be stated in the report and/or
transmittal letter. Extensions of up to
15 days may be granted under certain circumstances.
(c) Responses should state whether there is
agreement with each recommendation. If
there is non-concurrence, the specific reasons must be stated. The response should include the corrective
actions taken or planned. If the
response provides for future corrective actions, it should indicate when
completion of such action is contemplated and the official responsible for
completing the action. Copies of new or
revised policies and/or operating procedures issued in response to the audit
report recommendations should be attached to the response. The response should also provide
agreement/disagreement with the monetary impact of the findings in the report,
and the reasons for any disagreement.
For contract audit reports, the response should provide the amount of
disallowed, questioned, or unsupported costs which have been resolved (that is,
reinstated or sustained) or are still under review by the agency. For contract pre-award, termination
settlement, and claim audits, a record of negotiation should be provided in
accordance with the Federal Acquisition Regulation. Responses should be addressed to the OIG
official specified in the transmittal memorandum.
(d) Notice
of Potential Finding and Recommendation: The Notice of Potential Finding and
Recommendation (NPFR) is a tool used to inform clients of a potential
finding. The NPFR is considered a
working document and its purpose is to generate discussion with the client in
order to establish clear communication relating to the potential finding. NPFR’s will be used in performance audits,
financial and financial related audits, and evaluations when appropriate. NPFR’s will request a client response to the
issue and proposed recommendation and/or additional information to resolve the
issue. A timeframe for response
(generally 10 days) and contact information will be included in the NPFR.
(2) Designating an initial contact point (audit
liaison officer) and advising the OIG of the designation and any changes in the
contact point.
(3) Submitting audit suggestions to the OIG in
areas of substantive interest to Departmental, bureau, and Insular Area
management officials. The suggestions
should be in writing and include the following:
(a) The specific aspects of the program,
function, or activity to be addressed.
(b) Why the audit is being suggested and any
specific inquiries, studies, internal or external criticisms, or the reference
material of which the auditors should be aware.
(c) If there is a date by which audit results
are needed in order to facilitate impact on operations or management decisions.
(d) Other reviews or related activities with
which the audit efforts should be coordinated and the contact point for the
reviews.
(e) The priority for each suggestion. The OIG will evaluate all suggestions. Bureaus and offices should provide further
information as required to evaluate the priority of the suggested audits.
(4) Informing the OIG of all audits performed
by contractors and of evaluations of programs, functions, or organizations
prior to initiation of the audits or evaluations.
(5) Ensuring that adequate follow-up actions
are taken by the bureaus and offices on OIG recommendations.
(6) Providing, as required by the Inspector
General Act, appropriate and adequate office space at headquarters, regional,
and field office locations, together with such equipment, office supplies, and
communications facilities and services as may be necessary to execute the
audits.
C. Coordination and Cooperation During the
Audit. Departmental officials and
their staffs, contractors, and grantees will cooperate with OIG auditors to
facilitate the accomplishment of audits and other reviews. All data required by the auditors will be
made available promptly upon request.
The OIG or an authorized representative, in carrying out the provision
of the Inspector General Act, is authorized to have access to all records,
reports, documents, or other material available to the Department or Insular
Areas that relate to programs and operations for which the Inspector General
has responsibilities under the Act.
(1) About 10 days before the start of an audit
or other review, the head of the bureau or office concerned is notified and
arrangements are made for an entrance conference. On audits of contracts and grants, the notice
is given to the contractor or grantee and the administering office of the
Department or Insular Area. At the
entrance conference, representatives of the OIG discuss the scope and
objectives of the audit and facilitate arrangements. The views of the auditee are sought,
including suggestions for modifying the proposed scope of the audit to
appropriately include matters of special concern to management.
(2) During the audit, periodic meetings are
held with management officials to advise them of the status of the audit and of
any issues requiring their immediate attention.
Also, the OIG will issue written notices of potential findings and
recommendations to inform management of any potential audit findings and to
obtain feedback on the accuracy of the potential finding.
(3) Upon
completion of the audit, a close-out conference is held with appropriate officials
to provide a further opportunity to discuss the tentative findings and
recommendations. Departmental and
Insular Area senior managers are responsible for ensuring that the appropriate
officials attend the conference.
9/28/07 #3767
Replaces 2/21/89 #2842