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PublicationDate: 6/1/95 AuditGuideType: Audit Guide for Schools SectionNumber: III SectionTitle: Illustrative Reports and Appendices PageNumbers: SECTION III ILLUSTRATIVE REPORTS AND APPENDICES Financial Statements: Example A-1 Report on the Audit of the Basic Financial Statements Example A-2 Report on the Internal Control Structure Based on an Audit of the Basic Financial Statements Example A-3 Report on Compliance Based on the Audit of the Basic Financial Statements - No Reportable Instances of Noncompliance Compliance Attestation: Example B Report Package Cover Page Example C Auditor Information Sheet Example D Report on Management's Assertions on Compliance with Specified Requirements Applicable to the SFA Programs Example E Summary Schedules A, B, C Example F Schedule of Findings and Questioned Costs Example G Auditor's Comments on Resolution Matters Relating to the SFA Programs Example H Corrective Action Plan Appendices: Appendix A SFA Programs' Minimum and Maximum Amounts Appendix B High Risk Indicators Appendix C Regional Inspector General for Audit and Related Offices Appendix D Instructions for Downloading Example E ILLUSTRATIVE REPORT ON THE AUDIT OF THE BASIC FINANCIAL STATEMENTS We have audited the balance sheet of [Institution] as of [Date] and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the [Institution's] management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of [Institution] as of [Date] and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles.*1* In accordance with Government Auditing Standards, we have also issued a report dated [Date of report] on our consideration of the [Institution's] internal control structure and a report dated [Date of report] on its compliance with laws and regulations. [Signature] [Date] *1* The opinion paragraph should be modified as necessary under the circumstances. ILLUSTRATIVE REPORT ON THE INTERNAL CONTROL STRUCTURE BASED ON AN AUDIT OF THE BASIC FINANCIAL STATEMENTS We have audited the basic financial statements of the [Institution], as of and for the year ended [Date] and have issued our report thereon dated [Date of report]*1* We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The management of [Institution] is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. In planning and performing our audit of the basic financial statements of [Institution] for the year ended [Date], we obtained an understanding of the internal control structure. With respect to the internal control structure, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk in order to determine our auditing procedures for the purpose of expressing our opinion on the basic financial statements and not to provide an opinion on the internal control structure. Accordingly, we do not express such an opinion. We noted certain matters involving the internal control structure and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the basic financial statements. [Include paragraphs to describe the reportable conditions noted.] EXAMPLE A-2 Page 2 of 2 A material weakness is a reportable condition in which the design or operation of one or more of the specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the basic financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. However, we believe none of the reportable conditions described above is a material weakness.*2* We also noted other matters involving the internal control structure and its operation that we have reported to the management of [Institution] in a separate letter dated [Date of report]*3* This report is intended for the information of the audit committee, management, and the U.S. Department of Education. However, this report is a matter of public record, and its distribution is not limited. [Signature] [Date] *1* Describe any departure from standard report. *2* If conditions believed to be material weaknesses are disclosed, the report should describe the weaknesses that have come to the auditor's attention. The last sentence of this paragraph should be modified as follows: However, we noted the following matters involving the internal control structure and its operation that we consider to be material weaknesses as defined above. These conditions were considered in determining the nature, timing, and extent of the procedures to be performed in our audit of the financial statements of (Institution) for the year ended [Date]. [A description of the material weaknesses that have come to the auditor's attention would follow.] *3* If a separate letter has not been issued, this paragraph should be omitted. EXAMPLE A-3 ILLUSTRATIVE REPORT ON COMPLIANCE BASED ON AN AUDIT OF THE BASIC FINANCIAL STATEMENTS--NO REPORTABLE INSTANCES OF NONCOMPLIANCE*1* We have audited the basic financial statements of [Institution] as of and for the year ended [Date], and have issued our report thereon dated [Date of report]*2* We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Compliance with laws, regulations, contracts, and grants applicable to [Institution] is the responsibility of [Institution's] management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of [Institution's] compliance with certain provisions of laws, regulations, contracts, and grants. However, the objective of our audit of the basic financial statements was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported herein under Government Auditing Standards.*3* This report is intended for the information of the audit committee, management, and the U.S. Department of Education. However, this report is a matter of public record and its distribution is not limited. [Signature] [Date] *1* Report should be modified as appropriate if reportable instances of noncompliance are found. *2* Describe any departure from the standard report. *3* See Government Auditing Standards, Chapter 5, paragraphs 5.18-5.19, for reporting criteria EXAMPLE D ILLUSTRATIVE REPORT ON MANAGEMENT'S ASSERTIONS ON COMPLIANCE WITH SPECIFIED REQUIREMENTS APPLICABLE TO THE SFA PROGRAMS We have examined management's assertions included in its representation letter*1* dated [Date], that [Institution] complied with [list specified compliance requirement or attach in accompanying schedule], relative to participation in the Federal Student Financial Assistance Programs during the year ended [Date]. As discussed in that representation letter, management is responsible for [Institution's] compliance with those requirements. Our responsibility is to express an opinion on management's assertions about [Institution's] compliance based on our examination. Our examination was made in accordance with Government Auditing Standards, issued by the Comptroller General of the United States; standards established by the American Institute of Certified Public Accountants; and the Audit (Attestation) Guide, Audits/Attestation Engagements of Federal Student Financial Assistance Programs, issued by the U.S. Department of Education, Office of the Inspector General, June 1995 and accordingly, included examining, on a test basis, evidence about [Institution's] compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination on [Institution's] compliance with specified requirements. In our opinion, management's assertions that [Institution] complied with the aforementioned requirements for the year ended [Date] are fairly stated, in all material respects.*2* This report is intended solely for the information of an audit committee, management, and the U.S. Department of Education. However, this report is a matter of public record and its distribution is not limited. [Signature] [Date] *1* Alternatively, management may make it's written assertions in a separate report. The IPA should follow the reporting guidance in SSAE No. 3. *2* The IPA should modify the standard report if any of the following conditions exists: - There is a material noncompliance with specified requirements; - There is a matter involving a material uncertainty; - There is a restriction on the scope of the engagement; - The IPA decides to refer to the report (excluding servicer audit report) of another IPA as the basis, in part, for the IPA's report; or - If management discloses the noncompliance and appropriately modifies its assertion, the IPA should refer to the guidance in paragraphs 63 - 64 of SSAE No. 3. **[This example, "Summaries Must Be Included in the Findings and Questioned Costs Section of the Report," is currently unavailable for viewing. Please reference your paper document for additional information.]** EXAMPLE F SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Must be Attached to Auditor's Report on Compliance) IF THIS SCHEDULE IS NOT PREPARED IN ACCORDANCE WITH ALL ELEMENTS DESCRIBED BELOW, THE COMPLIANCE REPORT PACKAGE WILL BE REJECTED AND THE INSTITUTION MAY BE SUBJECT TO ADMINISTRATIVE SANCTIONS PURSUANT TO 34 CFR 668 SUBPART G. This schedule should include the following: 1. The number of students and dollar value by SFA program for: - Population; - Selected sample; - Instances of noncompliance; - Information on all noncompliance findings; and - IPA's definition of material noncompliance. 2. If the sample was expanded to evaluate statistically the projected error rate: the sampling methodology; confidence level; precision; expected rate of occurrence and estimated disallowances to the population including the point estimate and lower and upper limits. 3. Summary Schedules A, B, and C (see Example E). GAO audit standards state that well-developed findings generally contain these attributes: - Statement of condition - Criteria - Effect - Cause - Recommendation The IPA should attempt to identify the condition, criteria, effect, and cause to provide sufficient information to ED officials to permit timely and proper corrective action. As part of an finding the IPA is required to make a recommendation for corrective action to the institution. If corrective action is not necessary, the IPA must describe the reason. The institution must develop a SEPARATE corrective action plan (see Example H) based on the IPA's findings and recommendations and must include this plan when submitting the report package. [[Example G, "Auditor's Comments On Resolution Matters Relating To The SFA Programs," is currently unavailable for viewing. Please reference your paper document for additional information.]] EXAMPLE H CORRECTIVE ACTION PLAN (Must be on Institution's Letterhead) Audit Firm _________________________ Audit Period ______________________________ A. Comments on Findings and Recommendations: The institution must provide a statement of concurrence or nonconcurrence with the findings and recommendations. If the institution does not agree with a finding, specific information must be provided to support its position. If the information is voluminous, an appendix may be attached to the submission. If the institution determines that the questioned costs are unallowable or that the charges cannot be supported, the institution should provide a statement to that effect in the corrective action plan. If the institution believes a questioned cost, or a portion of that cost is an allowable cost, the institution must identify the allowable portion by program.*1* B. Actions Taken or Planned: The institution must detail actions taken or planned to correct deficiencies identified in the report. For planned actions, institutions must provide projected dates for completion of major tasks. If the institution believes a corrective action is not required, a statement describing the reasons must be included. C. Status of Corrective Actions on Prior Findings: For all prior audits, e.g. IPA SFA, ED OIG, ED-SFAP program review, and State Guarantee Agency and SPRE reports, the institution must comment on all prior findings whether or not corrective action has been completed.*2* The institution must provide a report on the status of corrective actions taken on prior findings that remain open. An update must be included on dates for completion of major tasks and responsible officials for any actions not completed. _________________________________________ (Signature) Institution Official's Title *1* The institution is required to have the IPA provide a statement that the necessary documents were located/obtained and/or that the actions were taken either with the CAP or during the audit resolution process. *2* ED may have issued a FAD for a prior audit/examination. A FAD describes any corrective actions the institution is required to take within 45 days of receipt (unless otherwise stated) of the FAD. **[Appendix A, "SFA Programs' Minimum and Maximum Amounts," is currently unavailable for viewing. Please reference your paper document for additional information.]** **[Appendix B, "High Risk Indicators," is currently unavailable for viewing . Please reference your paper document for additional information.]** APPENDIX C REGIONAL INSPECTOR GENERAL FOR AUDIT and RELATED OFFICES Regional Inspector General for Audit Department of Education/OIG 1200 Main Tower, Room 2130 Dallas, Texas 75202-5040 214-767-3826 FAX: 214-767-2024 RELATED OFFICES' ADDRESSES: Director, Institutional Participation Division Office of Student Financial Assistance Programs P.O. Box 23800 L'Enfant Plaza Station, SW Washington, DC 20026 Audit Resolution Branch Department of Education-IMD P.O. Box 23800 L'Enfant Plaza Station, SW Washington, DC 20026 APPENDIX D Page 1 of 3 INSTRUCTIONS FOR DOWNLOADING EXAMPLE E Example E, Summary Schedules A, B, & C can be downloaded from the Single Audit Bulletin Board System (SABBS). These files have been consolidated into a single file-- SFASCHED.EXE to facilitate downloading. Minimum requirements to access the SABBS and download this file include: An IBM compatible computer with a 286 microprocessor 2 MB of RAM (1 MB must be extended memory) A Hard Disk with a minimum of 2 MB free space A 1.44 MB Floppy drive Printer (Hewlett-Packard LaserJet recommended or a dot matrix printer capable of printing in pica and elite pitch {10/12 cpi} DOS 3.3x or above A Modem Communications Software The communications software should be set as follows: Parity = N Data Bits = 8 Stop Bits = 1 Duplex = Full Tel. # = 202 512-4286 When accessing the SABBS, you will be prompted for your first/last name and your organization. You will also be prompted to enter a password for future use. Upon first entering the SABBS you are in the "Main Menu" of the "General Public (Open) Conference Area". To download the file-- SFASCHED.EXE, you should perform the following procedures: 1. From the General Public (Open) Conference, Press "J" to "Join another conference". You are prompted for the number of the Conference you wish to join. 2. Press "9" to join the "Single Audit - Education Conference". You will be informed that you are now in the Single Audit - Education conference and asked to press the "Enter" key. You are now in the "Main Menu" of this conference. 3. Press "F" to change from the "Main Menu" to the "Files Menu". APPENDIX D Page 2 of 3 4. Press "L" to "List" the files in this conference, and then press "Enter" key to list all files. A list of files will appear. Press "D" to "Download" a file. You are prompted to enter the number of the file you wish to download. Enter the number next to the file -- SFASCHED.EXE (for example enter the number 3). 5. You are then prompted for the next file you wish to download. Press enter (i.e. leave blank). You are then prompted whether you wish to log off or continue after downloading. After responding to this question, the file should start to download at this time. Extracting and Installing the files from SFASCHED.EXE After downloading: 1. Create a subdirectory on your hard drive-- C:Move the SFASCHED.EXE file from your download directory in your communications program to the C:directory. (NOTE: Do not move the file to a floppy drive since the extracted programs are too large to fit). 2. After moving the file, log to the C:directory (NOTE: If you copied instead of moving the SFASCHED.EXE file from your communications directory to the C:directory, you will want to delete this file from your communications directory). 3. Type SFASCHED from the C:directory which contains the file-- SFASCHED.EXE. Three files will be extracted (INSTALL.FIL, INSTALL.EXE, & FINAID.PAK). After extracting: 1. You must now "install" the program. To install, type INSTALL from the C:directory. 2. The installation program will create another subdirectory-- C:on your hard drive and install database and program files to it. The installation program will also copy a file-- SFA.BAT to your root directory-- C: APPENDIX D Page 3 of 3 During the installation of the program you will be asked to enter: Name of institution Address of institution Audit period Employer Identification Number (EIN) After running the Install program, simply access the root directory on your hard drive-- C:and type SFA. This will start the program used to complete Example E, Summary Schedules A,B, & C. Multiple Schools You must run the Install program (See After extracting above) for each institution you wish to prepare Example E, Summary Schedules A, B, & C. Data entry for an institution MUST be completed and saved to a diskette (the Utilities Menu contains a routine to perform this operation) prior to reinstalling the program for another institution. Reinstalling the program deletes all Example E files previously created. |