Deloitte & Touche LLP Audit of the University of Georgia Research Foundation, Inc. for FY Ended June
Description
IG-00-040QUALITYDELOITTE & TOUCHE LLP AUDIT OF THECONTROL UNIVERSITY OF GEORGIA RESEARCHREVIEW FOUNDATION, INC. FOR FISCAL YEAR ENDEDJUNE 30, 1999REPORTSeptember 7, 2000OFFICE OF INSPECTORNational Aeronautics and GENERALSpace AdministrationAdditional CopiesTo obtain additional copies of this report, contact the Assistant Inspector General for Auditingat (202) 358-1232, or visit www.hq.nasa.gov/office/oig/hq/issuedaudits.html.Suggestions for Future AuditsTo suggest ideas for or to request future audits, contact the Assistant Inspector General forAuditing. Ideas and requests can also be mailed to:Assistant Inspector General for AuditingCode WNASA HeadquartersWashington, DC 20546-0001NASA HotlineTo report fraud, waste, abuse, or mismanagement, contact the NASA OIG Hotline at (800) 424-9183, (800) 535-8134 (TDD), or at www.hq.nasa.gov/office/oig/hq/hotline.html#form; or writeto the NASA Inspector General, P.O. Box 23089, L’Enfant Plaza Station, Washington, DC20026. The identity of each writer and caller can be kept confidential, upon request, to the extentpermitted by law.Reader SurveyPlease complete the reader survey at the end of this report or athttp://www.hq.nasa.gov/office/oig/hq/audits.html.AcronymsAICPA American Institute of Certified Public AccountantsD&T Deloitte & Touche LLPHHS Department of Health and Human ServicesNASA National Aeronautics and Space AdministrationOMB Office of Management and BudgetR&D Research and ...
Informations
| Publié par | Mafor |
| Nombre de lectures | 132 |
| Langue | English |
Extrait
QUALITY CONTROL REVIEW REPORT
National Aeronautics and Space Administration
IG-00-040
DELOITTE & TOUCHE LLP AUDIT OF THE UNIVERSITY OF GEORGIA RESEARCH FOUNDATION, INC. FOR FISCAL YEAR ENDED JUNE 30, 1999
September 7, 2000
OFFICE OF INSPECTOR
GENERAL
Additional Copies To obtain additional copies of this report, contact the Assistant Inspector General for Auditing at (202) 358-1232, or visitedsuisq//hig/oceiffo/vog.asan.qhwww.mtlsth.uaid.
Suggestions for Future Audits To suggest ideas for or to request future audits, contact the Assistant Inspector General for Auditing. Ideas and requests can also be mailed to: Assistant Inspector General for Auditing Code W NASA Headquarters Washington, DC 20546-0001
NASA Hotline To report fraud, waste, abuse, or mismanagement, contact the NASA OIG Hotline at (800) 424-9183, (800) 535-8134 (TDD), or atww.wromlmf#.ethintlhoq//hig/oceiffo/vog.asan.qh; or write to the NASA Inspector General, P.O. Box 23089, L’Enfant Plaza Station, Washington, DC 20026. The identity of each writer and caller can be kept confidential, upon request, to the extent permitted by law.
Reader Survey Please complete the reader survey at the end of this report or at http://www.hq.nasa.gov/office/oig/hq/audits.html.
Acronyms AICPA American Institute of Certified Public Accountants D&T Deloitte & Touche LLP HHS Department of Health and Human Services NASA National Aeronautics and Space Administration OMB Office of Management and Budget R&D Research and Development SOP Statement of Position
Office of Inspector General
September 7, 2000
Mr. Edward Heys, Partner Deloitte & Touche LLP 191 Peachtree Street, NE, Suite 1500 Atlanta, GA 30303-1924 Re: Final Report on Quality Control Review of Deloitte & Touche LLP Audit of The University of Georgia Research Foundation, Inc. for Fiscal Year Ended June 30, 1999, Assignment Number A0003600 Report No. IG-00-040 Dear Mr. Heys: The subject final report is provided for your use and comment. Please refer to the Executive Summary for the overall audit results. Our evaluation of your response is incorporated into the body of the report. With respect to management's partial concurrence with the recommendation, we request that management reconsider its position to correct the Foundation’s fiscal year 1999 audit and provide additional comments by September 22, 2000. The recommendation will remain open for reporting purposes until corrective action is completed. In addition, please notify us when action has been completed on the recommendation. If you have any questions concerning the report, please contact Mr. Patrick Iler, Director, Audit Quality, Office of Inspector General, at (216) 433-5408, or Ms. Vera Garrant, A-133 Audit Manager, at (202) 358-2596. We appreciate the courtesies extended to the audit staff. The final report distribution is in Appendix E of the report.
Sincerely, [Original signed by]
Russell A. Rau Enclosure
cc: AO/Chief Information Officer B/Chief Financial Officer B/Comptroller BF/Director, Financial Management Division G/General Counsel H/Associate Administrator for Procurement JM/Acting Director, Management Assessment Division
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Contents
Executive Summary,i
Introduction, 1
Finding and Recommendations, 2
Internal Control Documentation, 2
Appendix A Single Audit Requirements, 6
Appendix B Objectives and Scope,9
Appendix C Quality Control Review Methodology,11
Appendix D Deloitte & Touche LLP Comments,14
Appendix E Report Distribution,15
IG-00-040 A0003600
NASA Office of Inspector General
September 7, 2000
Quality Control Review of Deloitte & Touche LLP Audit of The University of Georgia Research Foundation, Inc. for Fiscal Year Ended June 30, 1999
Executive Summary
Background.The University of Georgia Research Foundation, Inc. (Foundation), of Athens, Georgia, contributes to the educational, research, and service functions of The University of Georgia through gifts, contributions, and grants from individuals, private organizations, and Government agencies to perform sponsored research, development, or other programs of the University. All research grants awarded to the Foundation are subcontracted to the University of Georgia, which administers the grants.
The Department of Health and Human Services (HHS) is the cognizant audit agency for the Foundation, and the National Aeronautics and Space Administration (NASA) is a Federal funding agency to the Foundation. HHS granted the NASA Office of Inspector General permission to perform a quality control review of the Deloitte & Touche LLP (D&T) audit of the Foundation for the fiscal year ended June 30, 1999.1 Office of Management and Budget (OMB) Circular A-1332requires the audit. The Foundation reported total fiscal year Federal expenditures for NASA of $642,839 and total expenditures of $54,039,566.
Appendix A provides details on the single audit requirements.
Objectives. The objective of our report review was to determine whether the report the Foundation submitted to the Federal Audit Clearinghouse3meets the applicable reporting standards and OMB Circular A-133 reporting requirements.
The objectives of our quality control review were to determine whether D&T conducted the financial statement and research and development major program audit in accordance with applicable standards and whether the audit meets the auditing and reporting requirements of
1single audit for the Foundation for the fiscal year ended June 30,The Atlanta, Georgia, office of D&T, performed the 1999. 2Appendix A contains information on OMB Circular A-133, “Audits of States, Local Governments, and Non-Profit 3of Management and Budget to establish theThe Single Audit Act Amendments of 1996, §7504(c), requires the Office Federal Audit Clearinghouse to receive the Circular A-133 audit reports.
OMB Circular A-133. See Appendixes B and C for details on the objectives, scope, and methodology. Results of Review. D&T issued its audit report on the Foundation on September 17, 1999. The D&T working papers for the audit contained deficiencies because D&T did not adequately communicate the internal auditor’s scope of work related to documenting internal controls for the research and development program. Without sufficient documentary evidence to support that the auditors understand internal controls, an independent reviewer cannot determine whether the auditors properly planned the audit and would not know the auditors’ basis for the conclusions on internal control.
· Reported A-133 Results.identified a compliance finding on a National ScienceD&T (1) Foundation award, (2) questioned no costs, and (3) issued an unqualified opinion4on the financial statements, Schedule of Expenditures of Federal Awards,5and major program compliance.6 Also, the auditors found no instances of noncompliance in the financial statement audit that are required to be reported under generally accepted government auditing standards.7auditors noted no matters involving internal controls Finally, the (relating to the financial statement or major programs) that are considered to be material weaknesses8 .
· Report Quality Review Results.The Foundation audit report meets the applicable reporting guidance and regulatory requirements contained in OMB Circular A-133.
· Audit Quality Review Results.The D&T audit work generally meets the applicable auditing guidance and requirements contained in: (1) OMB Circular A -133 and its related Compliance Supplement, (2) generally accepted government auditing standards, and (3) generally accepted auditing standards for the research and development major program. However,D&T did not adequately communicate the scope of the internal auditor’s work as required by the American Institute of Certified Public Accountants’ (AICPA) Codification of Statements on Auditing Standards. The working 4An unqualified opinion means that the financial statements are presented fairly in all material respects, expenditures of Federal funds are presented fairly, in relation to the financial statements taken as a whole, and the auditee has complied with all applicable laws, regulations, and contract provisions that could have a direct and material effect on each major program. 5annual Federal award expenditures by FederalThe Schedule of Expenditures of Federal Awards shows the amount of agency for each program, grant, or contract. 6Major program compliance refers to an assessment of the auditee’s compliance with laws, regulations, and provisions of contracts or grant agreements that could have a direct and material effect on each major program. 7broad statements of the auditors’ responsibilities, promulgated by the Comptroller General of theThese standards are United States. 8The American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 98-3, Appendix D, defines a material weakness as “
the condition in which the design or operation of one or more of the internal control components [control environment, risk assessment, control activities, information and communication, and monitoring] does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the 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.
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papers do not meet the generally accepted government auditing standards and AICPA Codification of Statements on Auditing Standards documentation requirements. Consequently, without an oral explanation for an independent reviewer, there is no evidence to indicate (1) that the auditors understood internal controls and appropriately planned the audit or (2) the basis for the auditors’ conclusion. However, this deficiency did not affect the audit opinion because the requisite audit work was, in fact, performed but not properly documented. Details are in the finding.
Recommendations.that for the Foundation’s fiscal year ended June 30, We recommend 1999, and for future audits, D&T document the scope of the internal audit work and ensure that the auditors’ understanding of internal controls is adequately documented.
future audits.
Deloitte & Touche LLP will consider NASA’s comments in
Evaluation of Management’s Response. The Deloitte & Touche LLP comments are partially responsive to the recommendation. The firm did not address whether it would correct the deficiencies in the Foundation’s fiscal year 1999 audit. An independent reviewer should be able to understand how the contents of the working papers meet the OMB Circular A-133 auditing requirements without an oral explanation by the auditors. We ask that Deloitte & Touche LLP reconsider its position and provide us additional comments in response to the final report.
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Introduction
The Single Audit Act Amendments of 1996 (Public Law 104-156) and the June 24, 1997, revision to OMB Circular A-133 require that an auditee obtain an annual audit of its fiscal year Federal expenditures. The audit must be performed by independent auditors and must be in accordance with the Single Audit Act Amendments of 1996, OMB Circular A-133 and its related Compliance Supplement, and the generally accepted government auditing standards that are applicable to financial audits.
A complete reporting submission in accordance with OMB Circular A-133 includes the following: (1) financial statements and related opinion, (2) Schedule of Expenditures of Federal Awards and related opinion, (3) report on internal controls and compliance review on the financial statements, (4) report on internal controls review and compliance opinion on major programs, and a (5) Schedule of Findings and Questioned Costs.9
Appendix A contains additional details on the Single Audit requirements.
9Appendix C describes the information contained in the Schedule of Findings and Questioned Costs.
Finding and Recommendations
Internal Control Documentation
The internal auditors at the Foundation prepared working papers that do not meet the generally accepted government auditing standards and the AICPA Codification of Statements on Auditing Standards documentation requirements. The working papers are incomplete in that without an oral explanation, they do not adequately describe the auditors’ understanding of internal controls for the research and development program. This occurred because D&T did not adequately communicate the audit scope to the internal auditors. Without sufficient documentary evidence to support that the auditors understand internal controls, an independent reviewer (1) cannot determine whether the auditors properly planned the audit and (2) would not know the auditors’ basis for the conclusions on internal control. Internal Control Requirements
OMB Circular A-133 §___.500 requires the auditor to perform an audit of the entire organization in accordance with generally accepted government auditing standards. The audit scope includes the financial statements, internal controls, and compliance over Federal programs. In general, §___500(c)(1) requires the auditor to perform procedures to obtain an understanding of internal controls over Federal programs that is sufficient to plan the audit for major programs.10 The AICPA Statement of Position (SOP) 98-3, “Audits of States, Local Governments, and Not-for-Profit Organizations Receiving Federal Awards, sections 8.7, 8.10, and 8.16, describe the auditors’ responsibilities for planning the review of internal controls for major programs. The auditors must obtain a sufficient understanding of internal control over Federal programs by performing procedures to understand the design of the five internal control components (control environment; risk assessment; control activities; information and communication; and monitoring) related to the A-133 compliance requirements11for each major program. The auditors must also determine whether the internal controls are operating. The auditors plan the internal control testing to support a low assessed level of control risk for the
10A major program is athat the auditors determined through risk analysis is subject to auditFederal program for the organization’s current fiscal year. 11Appendix A describes the compliance requirements.
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assertions12 98-3,relevant to the compliance requirements for each major program. SOP section 8.16, explains:
“
[F ]ederal agencies want to know if conditions indicate that auditees have not implemented adequate internal control over compliance for federal programs to ensure compliance with applicable laws and regulations.
OMB Circular A-133 Compliance Supplement, Part 6, provides guidance on reviewing the five components of internal controls for each type of compliance requirement. The information in the Supplement is intended to assist non-Federal entities and their auditors in complying with the internal control requirements by describing the objectives of internal controls and certain characteristics that when present and operating effectively, may ensure compliance with the program requirements.
Internal Audit Oversight Requirements.
Internal auditors from non-profit organizations are specifically excluded from the OMB Circular A-133 definition of an auditor. Therefore, internal auditors may not issue OMB Circular A-133 reports. As a result, D&T must review and accept the internal auditor’s work as its own. D&T must also issue OMB Circular A-133 reports that are supported by the internal auditor’s work. AICPA Codification of Statements on Auditing Standards §322.08 through .11 require auditors to assess the competency and objectivity of the internal auditors when the internal audit work may affect the nature, timing, and extent of the auditing procedures. Sections 322.23 through 322.26 require the auditor to evaluate, through testing, the quality and effectiveness of the internal auditor’s work when the work is expected to affect the audit procedures. The auditor’s evaluation should consider such factors as whether the internal audit scope will meet the objectives, adequacy of the audit programs, working paper documentation, and the conclusions reached. D&T met the requirements of §322, except for requirements in subsection 322.27, “Using Internal Auditors to Provide Direct Assistance to the Auditor, which states:
In performing the audit, the auditor may request direct assistance from the internal auditors. This direct assistance relates to work the auditor specifically requests the internal auditors to perform to complete some aspect of the auditor’s work. For example, internal auditors may assist the auditor in obtaining an understanding of internal control or in performing tests of controls or substantive tests, consistent with the guidance about the auditor’s responsibility
. When direct assistance is provided, the auditor should assess the internal auditors’ competence and objectivity
and 12Assertions are explicit or implicit representations by management that are embodied in financial statement elements (assets, liabilities, revenue, and expenses). The assertions are: · Existence/Occurrence. assets exist, and the transactions that produced them actually occurred.The entity’s · .ssenetelpmoC The financial statements reflect a complete record of all transactions that occurred, and none are omitted. · entity has valid title to all assets and real obligations for all liabilities.Rights/Obligations. The · Valuation/Allocation. The correct methods were used to place values on the assets, and the transactions have been assigned to the correct periods. · Presentation/Disclosure. Alland complete presentation are included in the the disclosures necessary for full financial statements.
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