This document explains the process we call "Audit" in the Department
of Labor OIG. It describes:
how programs, projects and functions are selected for audit;
how audits are done;
how the audit reporting process works;
how audit recommendations are processed.
The purpose of an audit is not to rehash
past mistakes but to look at past events with a view toward improving
future performance. Findings from an audit can be used as a
basis for adjusting policies, priorities, structure or procedures
in order to make operations as efficient, economical and effective
The Office of Management and Budget
requires an audit to be an integral part of the management process
and responsive to the needs of management. A healthy audit
program promotes good program, administrative and financial management
and is critical to ensuring integrity in the programs of the
Department of Labor. The end result of the audit process,
the audit report, is a joint product of both the auditee and
Enacted on October 12, 1978, the Inspector
General Act established OIG's in major executive agencies of
the Federal Government. Under the provisions of the Act,
the Inspector General has broad duties and responsibilities to
provide leadership in promoting economy, efficiency, and effectiveness
while preventing and detecting fraud and abuse, as well as to
audit DOL's programs and operations nationwide. Audit work
must meet standards specified in various applicable statutes,
regulations, and executive orders, including the Government
Auditing Standards issued by the Government Accountability
The IG keeps DOL agency heads and the
Congress informed about problems, deficiencies and corrective
actions. The goal of the OIG is to ensure overall integrity
as well as economic, efficient, and effective management of DOL
programs and operations.
Selection of Audits
The IG's audit priorities, which are documented in the Annual Audit Workplan, are determined by a
combination of factors including a program's dollar value, vulnerability to fraud, waste and abuse, and prior audit
coverage, as well as suggestions from senior-level DOL managers and the Congress. In the audit planning process, DOL
activities and programs are considered in light of:
statutory and regulatory requirements;
the sensitivity of the organization,
program, activity or function, including susceptibility to
fraud, waste and abuse;
newness or changed conditions;
the dollar magnitude, Federal resources
involved or duration of the program;
the results of prior audits, reviews
and program evaluations; and
agency and Congressional requests.
Definition of an audit
TThe term "audit" is used by the Federal Government to describe not only work done to examine financial operations, but also encompasses work to:
review compliance with applicable laws and regulations,
evaluate economy and efficiency of operations, and
evaluate effectiveness in achieving program results.
An audit is a look at the past performance
of an entity, program or function to determine whether funds
were properly administered and whether the projects
have met or fallen short of program intent and expectations.
Types of Audits
All audits begin with objectives which determine the type of audit to be conducted and the audit standards to be followed. The Government Accountability Office classifies government audits. The Department of Labor OIG conducts and supervises financial and performance audits, and attestation engagements.
Financial audits determine whether the financial statements of an audited entity fairly present the results of operations.
Performance audits include economy and efficiency, program effectiveness and results, internal controls, and compliance objectives. Attestation engagements concern reporting on specific subject matters or management assertions.
The OIG is also responsible for determining whether financial audits arranged for by non-federal DOL grantees satisfy the requirements of the Single Audit Act of 1984.
The DOL Audit Process
The audit process, as conducted or
supervised by DOL auditors, is designed to maintain a channel
of communication between the auditors and management officials. Under
the Inspector General Act of 1978, as amended, the Inspector General has
access to all records, reports, audits, reviews, documents, papers,
recommendations or other materials related to the audit. Accordingly,
auditees are responsible for ensuring that employees at all levels
cooperate with the OIG by making available all documents and
information deemed necessary for the conduct of the audit.
The OIG will usually notify the auditee,
in writing, prior to the scheduled start date of an audit; however,
there are circumstances where no advance notification will be
The Entrance Conference
At the beginning of each audit, the
auditors hold an entrance conference. The purpose is to
provide management officials responsible for the function or
activity being reviewed with a description of the audit scope
and objectives. Other areas usually covered include the
time frames for completing the audit; access to required records,
information and personnel; and introduction of the audit team
members. Normally, management designates a convenient working
area for audit staff and an audit liaison official for audit
matters. The audit team will consider management's suggestions
on additional areas to include in the audit, as well as identification
of potential areas which may warrant special review.
Early in the process, the auditors survey program
activities or organization functions to obtain background information
such as mission, resources, responsibilities, and identification
of key accounting and programmatic systems of operation and their
The detailed examination or audit
verification phase of an audit is normally a comprehensive
review of selected areas of a program, activity or function. The
auditors use an audit program developed specifically for this
program, activity or function.
Audit field work consists
of interviewing auditee staff, observing operations, and reviewing, analyzing and documenting
Keeping Management Informed
During the audit, OIG staff keeps management
advised of findings as they are developed. OIG communicates
in the following ways:
Discussions/Meetings --For routine audit findings, OIG will usually inform management
through informal discussions or meetings which serve two purposes. First, they provide an opportunity for the auditors to clearly
understand the facts and circumstances surrounding the finding(s)
and to correct misunderstandings and inaccuracies. Second,
they provide the auditee early notice of deficiencies so management
can take immediate corrective action, when possible.
Briefings --During the audit, when important issues arise,
the auditors may schedule formal briefings with management. The
significance of the issues determines the level of management
asked to participate.
Discussion Draft Report and the Exit Conference
The OIG will schedule an exit conference to go over a discussion draft of the report. The purpose of the exit
conference is to communicate audit results to auditee management and to obtain management's comments on proposed
findings and recommendations before the formal draft audit report is issued. In many instances, the issues presented
by OIG at the exit conference were previously discussed with management. This is management's opportunity to impact
the findings and recommendations prior to issuance of the draft report. Management's input is important to ensure
that the audit results are fairly presented, audit recommendations are
reasonable and feasible, and any errors or misrepresentations are corrected.
The Audit Report
Draft Report - After field work is completed and management's comments on the discussion draft at the exit conference
have been considered, a draft audit report is prepared. The draft report will normally be issued with a request that
management provide written comments within a specified time on the facts and conclusions of each finding and recommendation presented in the report. The draft report is officially a "work-in-progress" and is not a public document.
Final Report - At the end of the response period, after reviewing and assessing the auditee's written response to
the draft report, OIG issues the final audit report to the DOL agency for resolution of the recommendations in the report.
The final audit report aims to provide a fair, complete and accurate picture of the audited area during the audit period.
Usually, the report includes a description of the scope, objectives, and methodology of the audit, a statement that
the audit was made in accordance with generally accepted government auditing standards, and a description of the
findings and recommendations for corrective action. It also includes management's written response to draft report.
If the OIG disagrees with any of management's comments on the draft report, the reasons will be explained in the final
Response to the Final Audit
correspondence transmitting the final audit report will outline
suggested actions to resolve or close its recommendations. An
audit recommendation is resolved when the
DOL agency and the OIG agree on the
action that will correct the problem or deficiency that produced
the recommendation. An audit recommendation is closed when
the agreed-upon corrective action has been completed.
OMB Circular A-50, "Audit Followup," requires
resolution of audit recommendations within 6 months (180 days)
of issuance of a final audit report or, in the case of audits
performed by non-Federal auditors, 180 days after receipt of
the report by the Federal Government.
The DOL agency management decisions
may propose corrective actions on monetary and non-monetary recommendations
in accordance with applicable laws, regulations and administrative
policy. Corrective actions occur between the DOL funding
agency and the audited entity, with OIG having oversight responsibility
for ensuring that corrective actions are appropriate.
Where recommendations cannot be resolved
because of disagreement between the DOL agency and the
OIG, the matter will be referred to the DOL Audit Followup Official,
who determines what corrective measures are appropriate.
Reporting to the Congress --Semiannually,
the Inspector General must report on OIG activities of the immediately
preceding 6-month period. This report includes:
a description of significant problems,
abuses and deficiencies relating to the Department's programs
and operations disclosed as a result of OIG activities;
the corrective actions recommended
by the OIG on those significant problems, abuses, and deficiencies;
any significant recommendations described
in previous semiannual reports which are still not resolved;
any disagreement with the DOL Audit
Followup Official's settlement of differences between the OIG
and the DOL funding agency.
The audit process should be viewed as
an opportunity for an objective, skilled and impartial review
of program operations which can result in recommendations for improvement. In
most instances, implementing audit recommendations can lead to
better program operations and resource savings.