• What are the audit requirements for my grant?
• What happens if the Office of Inspector General selects my project for an audit?
• What happens if the audit report determines certain costs or activities are unallowable?
• Can I appeal the Department’s decision that I must repay money?

The project activities are finished, the Department has received all the required reports, and the records of your project are safely stored away for the next three years. That just about takes care of everything, right? Not quite. During the life of a grant project, you will most likely be required to get an independent audit of your project and its expenditures and to send a copy of the audit report to the Audit Clearinghouse. In some instances, the Department conducts its own audit of your grant project after the end of the project period. This is one reason that it is important that you observe and follow the record retention requirements.

What are the audit requirements for my grant?

The audit requirements of EDGAR, set forth in OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, implement the Single Audit Act Amendments of 1996. The circular provides uniform requirements for all grantees—state and local governments (including Indian tribal governments), colleges and universities, hospitals and other non-profit organizations. Under these requirements, grantees that expend $500,000 or more in a year in federal awards must have a single audit or program specific audit performed for that year in accordance with the provisions of Circular A-133.

It is important to remember that there are two types of audits for discretionary grant projects. The first type is the one your organization arranges to have done by independent auditors in response to requirements of OMB Circular A-133. Generally, OMB Circular A-133 audits look at expenditures of federal funds across an entire organization and test the financial system by examining expenditures under major projects of the grantee. The second type is an audit for fiscal and program compliance done by the Department's Office of Inspector General (OIG). Audits conducted by the OIG occur less frequently than A-133 audits and not every grantee is audited. The Office of the Chief Financial Officer (OCFO) is the office in the Department that reviews A-133 audit reports. OIG audits are most often triggered by serious audit findings identified during an OCFO review of the A-133 audit reports.

You must send copies of your audit reports to the Single Audit Clearinghouse as specified in the attachments that accompany your GAN.

What happens if the Office of Inspector General selects my project for an audit?

The OIG audit follows several specific steps, which include an entrance conference, survey, fieldwork, exit conference, draft audit report, and final audit report. The entrance conference is held to explain the purpose of the audit, establish working arrangements, obtain copies of necessary documents from your organization, and answer any questions you may have.

During the survey phase, OIG auditors gather from you general information on your organization. In the third phase, fieldwork, auditors study specific activities or operations and examine pertinent documents, records, and procedures.

The exit conference takes place before the OIG issues its draft report. The exit conference gives your organization an opportunity to comment on OIG findings and provide additional information before the draft report is issued.

The draft report presents the preliminary OIG findings and recommendations. You will have 30 days to respond to the findings in a draft report. Your comments will be included as an attachment to the final report. The final report gives the name of an official in the Department who is responsible for resolving the issues discussed in the report. Sometimes, the final report will ask you to offer comments on that version in 30 days as well.

To obtain more information on preparing for an audit, you should get a copy of OMB's A-133 Compliance Supplement that is issued annually. The supplement is the guide for auditors that conduct the yearly audits under the Single Audit Act. It is also a helpful guide for grantees in preparing for an audit. The Compliance Supplement is available for sale from the Government Printing Office by calling (202) 512-1800. The stock number for this document is 041-001-00593-5. It can be accessed electronically on OMB's Web site at the following URL: http://www.whitehouse.gov/omb/circulars.

What happens if the audit report determines certain costs or activities are unallowable?

Sometimes an audit report concludes that there are deficiencies or weaknesses in a grantee's financial system or programmatic activities. Weaknesses or deficiencies revealed in an audit report are called "audit findings." Sometimes this information is related to expenditures for items or services that an auditor determines are not allowed by Department (or other federal) regulations. If this happens, the Department takes steps to recover the money from the grantee, starting with the audit resolution process that entails many activities. In this situation, the audit report is given to an audit resolution specialist. This individual's job is to resolve any audit report findings and write a Program Determination Letter (PDL) that sets forth the Department's decision on the audit findings in the report and outlines the corrective action a grantee is required to take and/or the amount that is to be repaid. The audit resolution specialist uses the governing regulations (for the audit period), including EDGAR, any special terms and conditions, and attachments that apply to the grant to resolve the issues specified in the audit report. Grantees may be asked to provide additional information and documentation during the audit resolution process.

Can I appeal the Department’s decision that I must repay money?

The PDL will include any information on appeal procedures that might be available to you. You need to adhere to these procedures carefully, particularly with respect to the deadline for submitting an appeal.