California Department of Food
and Agriculture
CDFA Audit Process
of CAC’s contracts
Presented By:
• Alicia Lauron, CPA
• Jason Jones, Staff Auditor
Audit Process
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Engagement letter
Planning
Fieldwork
Preliminary report
Response from CAC (Recipient), if applicable
Final report
Preparing for the Audit
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You will receive an engagement letter that includes a
request for accounting records and supporting
documents such as:
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General ledgers / Object Expenditure Report
Organization chart / flowchart
Contract /agreement files and billing records
Payroll information
Operating expenses documentation
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Travel, indirect cost rates and certifications, expense allocation
worksheets
Contract agreements, if applicable
Audit Objectives
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Ensure the CAC / Recipient is in compliance with:
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Terms and conditions of the contract / agreement
Appropriate state and federal requirements and guidelines
Determine whether the billings are supported by the
accounting records and submitted in compliance with
all applicable requirements and guidelines
Purpose of Audit
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The CDFA is accountable for monitoring recipients &
sub- recipients of Federal Awards entered into with
CDFA.
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Our audit is based upon selective testing of your
accounting records and related data. Since we will not
examine all transactions, there is a risk that we may
not detect all errors and irregularities, whether material
or not.
Cost Principles Applicability
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We will perform our audit in compliance with cost
principles applicable to state and local governments,
Title 2 in the Code of Federal Regulations, Part 225 (2
CFR 225), and the grants management common rule,
Title 7 in the Code of Federal Regulations, Part 3016.
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Federal 2 CFR 225 can be found at the following
website: http://www.gpo.gov/fdsys/pkg/CFR-2012-title2vol1/pdf/CFR-2012-title2-vol1-part225.pdf
Allowable Costs
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An allowable cost is one that meets both the
criteria for authorized expenditures specified in
the cost principles in 2 CFR 225 and / or the
contract / agreement.
Note: The contract / agreement can be more
restrictive than the CFR.
Criteria: Allowability of Costs
Cost charged to an award must be:
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Necessary and reasonable for proper and efficient performance
and administration of Federal Awards
Allocable to Federal Awards under the provisions of 2 CFR 225
Treated consistently as a direct or indirect cost
Adequately documented
Net of applicable credits
Determined in accordance with generally accepted accounting
principles (GAAP), except as otherwise stipulated in the
applicable cost principles.
Criteria: continued
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Not included as cost or used to meet the cost-sharing or matching
requirements of another federal award, unless specifically
permitted by federal law or regulations.
Authorized or not prohibited under state or local laws and
regulations.
In conformance with limits or exclusions on types or amounts of
costs, as set forth in the applicable cost principles, federal laws,
award terms & conditions, or other governing regulations.
Consistent with the recipient’s policies, regulations, and
procedures that apply to both federal awards & other activities of
the recipient.
Composition of Cost
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Direct Costs – those that can be identified
specifically with a particular final cost objective.
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Indirect Costs – those incurred for a common
or joint purpose benefiting more than one cost
objective, and not readily assignable to the
cost objectives specifically benefitted, without
effort disproportionate to the results achieved.
Personnel Costs
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Compensation for personal services paid currently or
accrued, for services rendered during the period of
performance under Federal awards includes wages,
salaries, and fringe benefits.
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Charges to Federal Awards for salaries and wages,
whether treated as direct or indirect costs, will be
based on payrolls documented in accordance with
generally accepted practice of the governmental unit
and approved by a responsible official(s) of the
governmental unit.
Personnel Cost Documentation
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Where employees work solely on a single Federal Award or cost
objective, charges for their salaries & wages will be supported by
periodic certification at least prepared semi-annually and will be
signed by the employee or supervisory official having first hand
knowledge of the work performed by the employee.
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Where employees work on multiple activities or cost objectives, a
distribution of their salaries or wages will be supported by
personnel activity reports or equivalent documentation which
meets the standard discuss on the next slide.
Standards: Personnel Activity
Reports
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Must reflect an after-the-fact distribution of the actual activity of
each employee.
Must account for the total activity for which each employee is
compensated
Must be prepared at least monthly and must coincide with one or
more pay periods
Must be signed by the employee
Budget estimates or other distribution percentages determined
before the services are performed do not qualify as support for
charges to Federal Awards.
Sample: Personnel Activity Report
Sample: Payroll Register Report
Mileage Reimbursement
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Cost claimed needs to be adequately documented, and
necessary for the performance of the contract.
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Transportation costs may be charged on an actual cost
basis or mileage basis in lieu of actual costs incurred.
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Mileage reimbursement covers gasoline, the cost of
maintenance, insurance, licensing, registration,
depreciation, and all other costs associated with the
operation of the vehicle.
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Federal mileage rate can be found at the following website:
http://www.gsa.gov/mileage
Sample: Vehicle Mileage Logs
Vehicle Mileage Log Form
Additional Information
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Federal 2 CFR 225 website:
http://www.gpo.gov/fdsys/pkg/CFR-2012-title2vol1/pdf/CFR-2012-title2-vol1-part225.pdf
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Federal mileage rate website:
http://www.gsa.gov/mileage
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SCO mandated cost program for local agencies
website: http://sco.ca.gov/ard_mancost.html
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CDFA Audit Office
Main: (916) 900-5026
Fax: (916) 999-3001
Questions and Answers