Page 1 of 1 In an effort to clarify the Good, Better, Best Practices for the STAR 4 Business Practices Standard #3: “Annual Independent Financial Review by a Certified Public Accountant (CPA) is conducted”; the following information list the types of qualifying documents: Compiled Financial Statements Most basic level of CPA services. Involves reading the financial statements to determine if there are any obvious departures from generally accepted accounting principles. No assurance is expressed that the financial statements are in conformity with generally accepted accounting principles (expression of ‘no assurance”). No compliance testing or reporting performed. Reviewed Financial Statements (GOOD) CPA performs inquiry and analytical procedures. Less in scope than an audit, in the “Reviewed Financial Statement” a CPA issues report indicating a review has been performed and did not become aware of any material modifications that should be made in order for the statements to be in conformance with generally accepted accounting principles. Review offers “limited assurance” No compliance testing or reporting performed. Audited Financial Statements-Financial Audit (BETTER) Audit is highest level of service by CPA. Audit requires more verification and substantiations as well as a review of internal controls. Audit provides “positive assurance” that the financial statements present fairly the financial position and results of operations of the entity. No compliance testing or reporting performed. Single Audit (OMB Circular A-133) (BEST) A Single Audit is a rigorous, organization-wide audit or examination of an entity that expends $500,000* or more of Federal assistance received for its operations directly from the federal government, indirectly through a pass-through entity, or a combination of both. The Single Audit’s objective is to provide assurance to the US federal government as to the management and use of such funds by recipients such as states, cities, universities, and non-profit organizations. The Single Audit is divided into two areas: Compliance and Financial. The compliance component of a Single Audit covers the study and understanding (planning stage) as well as the testing and evaluation (exam stage) of the recipient with respect to federal assistance usage, operations and compliance with laws and regulations. The financial component is the audit of the financial statements of the entity. Program-specific audit election (BEST) When an auditee expends Federal awards under only one Federal program (excluding R&D) and the Federal program's laws, regulations, or grant agreements do not require a financial statement audit of the auditee, the auditee may elect to have a program-specific audit. * NOTE: As a reminder, when a provider signs the Keystone STARS Grant Agreement, the provider is also agreeing to follow the PA Department of Public Welfare’s - Subrecipient/Vendor Audits - Audit Clause A which states: “If in connection with the agreement, a local government or nonprofit organization expends $300,000 or more in combined state and federal funds during the program year, the subrecipient shall ensure that, for the term of the contract, an independent auditor conducts annual examinations of its compliance with the terms and conditions of this contract, as well as applicable program regulations. These examinations shall be conducted in accordance with the American Institute of Certified Public Accountants’ Statements on Standards for Attestation Engagements (SSAE), Section 601, Compliance Attestation, and shall be of a scope acceptable to the DPW. The initial Section 601 compliance examination shall be completed for the program year specified in the contract and conducted annually thereafter. The independent auditor shall issue a report on its compliance examination as defined in SSAE, Section 601.”