OMB A-133 Audits
Belinda Rinker, Senior Advisor to the Office of Head Start
belinda.rinker@acf.hhs.gov
Why are programs audited?

Each year, the Federal Government spends billions of
dollars on Federal awards to state and local
government entities and non-profit organizations. To
ensure that these monies are being used for their
intended purpose, the Single Audit Act, as amended,
requires each reporting entity that expends $500,000
or more in Federal awards in a year to obtain an
annual “single audit.” The audit covers both the
reporting entity’s financial statements and Federal
awards.
2007 Report on Single Audit Sampling Project

Of 208 randomly selected audits:

115 (48.6%) were acceptable and could be relied on

30 (16.0%) had significant deficiencies and were of
limited reliability

63 (35.4%) were unacceptable and could not be
relied on

Reliability went up with the size of the grantee
2007 Report on Single Audit Sampling Project

Most prevalent deficiencies included:

Not documenting internal controls

Not testing internal controls

Not testing compliance requirements

Incorrect identification of major programs as having been
audited

Caused by lack of due professional care
2007 Report on Single Audit Sampling Project

Recommendations:

Revise and improve single audit standards, criteria
and guidance

Establish minimum requirements for training on
performing single audits

Review and enhance processes to address
unacceptable single audits
Sample Audit Report Section
Audit Terms (Type of Audit Report)




Unqualified opinion: The grantee has complied with laws,
regulations, and the provisions of contracts or grant
agreements that could have a direct and material effect
on each major program.
Qualified opinion: The financial statements as a whole are
presented in conformity with generally accepted
accounting principles (GAAP), with the exceptions noted.
Adverse opinion: The financial statements as a whole are
not in conformity with GAAP.
Disclaimer of opinion: The auditor is unable to express an
opinion as to the presentation of financial statements in
conformity with GAAP.
Audit Terms (Financial Statements)




Going concern: There is a reasonable probability that the
grantee may not continue in operation beyond its current
funding period.
Material weakness: A deficiency in internal control such that
there is a reasonable possibility that a material misstatement
of the entity’s financial statements will not be prevented, or
detected and corrected on a timely basis.
Significant deficiency: A deficiency in internal control that is less
severe than a material weakness, yet important enough to
merit attention by those charged with governance.
Material noncompliance: The grantee is not in compliance with
laws, rules, regulations or contracts at a material level.
Going Concern in DRS

An agency has been determined within the twelve
months preceding the responsible HHS official's
review under § 1307.7 of this part to be at risk of
failing to continue functioning as a going concern. The
final determination is made by the responsible HHS
official based on a review of the findings and opinions
of an audit conducted in accordance with section 647
of the Act; an audit, review or investigation by a State
agency; a review by the National External Audit
Review (NEAR) Center; or an audit, investigation or
inspection by the Department of Health and Human
Services Office of Inspector General.
Key Risk Factors and Red Flags









Increased borrowing, especially short term
Inability to pay debts as they come due
Assets are valued at less than liabilities
Prior audit findings
Turnover of key fiscal staff
Inadequate monitoring of sub-recipients (delegates)
Asset values are going down without explanation
Mortgage payments with no associated permission
Related party transactions