GAQC Alert No. 164 


    GAQC Alert #164 - New Federal Audit Guides Issued for Compliance Audits of For-Profit Recipients
     
    New Federal Audit Guides Issued for Compliance Audits of For-Profit Recipients
           
      AICPA
    March 30, 2011
    GAQC Alert #164
     
     
    In This Alert
       
    ED Issues Lender and Lender Servicer Attestation Guides
    ED Revising Other For-Profit Audit Guides
    New Department of Energy Audit Guide
    Other Federal Agency Efforts Relating to For-Profit Audits in Process
    Archived GAQC Yellow Book Training Available
    Mark Your Calendars
       
    Upcoming GAQC Web Events are as follows:

    Wednesday, April 6, 2011, from 1:00PM – 3:00 PM (Eastern Time): State and Local Government Financial Statement Audits: A 2011 Audit Issues Rundown. Registration instructions can be found in GAQC Alert #163.

    Tuesday, May 3rd from 1:00 PM – 3:00 PM (Eastern Time): The Required GAQC 2011 Annual Webcast Update. Register for the CPE option by clicking here. More details and non-CPE registration instructions to follow in an upcoming GAQC Alert.

    Read GAQC Alert #160 to learn more about upcoming GAQC Web Events, as well as information on other AICPA governmental CPE opportunities.
    Now Available
       

    The recent GAQC Web event titled, The OMB Cost Principles and Their Relevance to Your Single Audits, is now available in an archived format. The audio and slides are available on the Archived Member Web Events page of the GAQC Web site

       
    Stay Informed
       
    To stay abreast of these and other relevant events, visit the GAQC Web site at:  gaqc.aicpa.org.  Also, we welcome any suggestions or questions.  Please send them by e-mail to GAQC@aicpa.org.

    GAQC members may only reproduce and distribute GAQC e-alerts internally within the firm or State Audit Organization to other Center member personnel as part of the organization's professional services. For information about permission to copy any part of these documents for redistribution or inclusion in other work, please click on the copyright notice at the bottom of the page or phone the AICPA copyright permission hotline 919-402-4031.
     
    Dear Center Members
    For various reasons, including the issuance of the American Recovery and Reinvestment Act of 2009 (Recovery Act), there has been significant activity by federal agencies in establishing or updating compliance audit or attestation requirements relating to for-profit entities participating in federal programs. The Governmental Audit Quality Center (GAQC) has been very active in working with these agencies, including providing feedback on drafts of the federal agency audit guides. The purpose of this GAQC Alert is to inform you about federal agency activity in this area. After reading this GAQC Alert you will learn about:
    The issuance of two new attestation guides issued by the Department of Education (ED) directed at lenders and lender servicer organizations;
    Status of other ED guides for other for-profit entities currently in process of revision;
    The issuance of a Department of Energy (Energy) audit guide directed at for-profit entities participating in various new Energy grant programs;
    Other federal agency efforts relating to for-profit audits in process; and
    The availability of an archived GAQC Web event that might prove useful in providing basic Yellow Book training for auditors new to such audits.
    ED Issues Lender and Lender Servicer Attestation Guides
    In January 2011, ED issued two new updated compliance attestation guides for lenders holding Federal Family Education Loan Program (FFEL Program) loans and lender servicers that service such loans. The titles of the guides are as follows:
    Lender Compliance Attestation Engagement Guide for Lenders Holding Federal Family Education Loan Program Loans (Lender Guide).
    Lender Servicer Financial Statement Audit and Compliance Attestation Guide for Lender Servicer that Service Federal Family Education Loan Program Loans (Lender Servicer Guide).
    These two guides, which require compliance attestation engagements (instead of compliance audits), supersede the December 1996 guide titled, Compliance Audits (Attestation Engagements) for Lenders and Lender Servicers Participating in the Federal Family Education Loan Program, and are both effective for fiscal years ending on or after June 30, 2011. Earlier application is recommended, but not required. The guides are available by clicking here. The Lender Guide can be found as Item C.1 in the link provided and the Lender Servicer Guide can be found at Item C.2 in the link provided.

    ED provided the GAQC with a high-level summary of changes resulting from the issuance of these guides which are as follows:
    There are now two separate guides for lenders and lender servicers whereas the previous ED guidance for these entities was in one guide.
    Some compliance requirements from the previous ED Guide were not carried forward due to recently passed legislation that discontinues lending under the FFEL Program.
    Audited financial statements (under Government Auditing Standards) are now required as part of the reporting package for lender servicers.
    There are minimum sample sizes required for compliance testing in both ED Guides.
    All findings of noncompliance must be reported in the Schedule of Findings, regardless of materiality.
    Reporting packages (as defined in each ED Guide) are now required to be submitted to ED for all lender and lender servicers subject to the ED Guides. Previously, lenders and lender servicers that originated or held more than $5 million but less than $10 million in FFEL Program loans and had no findings of noncompliance were not required to submit to ED.
    Reporting packages are now required to be submitted electronically to ED via e-mail.
    Practitioners should also be aware of a reporting requirement related to fraud, abuse and illegal acts in section 2.10 of the Lender Guide and section 2.12 of the Lender Servicer Guide. These sections require that if any fraud, illegal act, or abuse related to the FFEL Program is detected, regardless of dollar value, the auditor must report this immediately to the ED Assistant Inspector General for Investigations. This requirement differs from the direct reporting requirements in Government Auditing Standards which only require the auditor to direct report fraud, illegal acts, or abuse after management and those charged with governance fail their own obligation to report it to external parties as soon as is practicable. This difference is notable because some state confidentiality laws could preclude an auditor from reporting such information directly to ED without an expressed consent from the auditee. Therefore, practitioners are advised to consider adding language to their engagement letters to address this ED reporting requirement stating that acceptance of the engagement letter by the auditee grants the auditor permission to directly notify the appropriate ED personnel if the auditor becomes aware of illegal acts, fraud, or abuse that has occurred or is likely to have occurred.
    ED Revising Other For-Profit Audit Guides
    ED is also working on two other ED Guides as follows. Watch future GAQC communications for updates on these Guides.

    The January 2000 ED Guide titled, Audits of Federal Student Financial Assistance Programs at Participating Institutions and Institution Servicers, is also being revised. The GAQC provided extensive comments on a draft that was provided to us several months ago. ED has informed us that they expect to issue the revision to this Guide in March 2011, with an expected effective date for periods ending on or after June 30, 2011.

    The September 2002 ED Guide titled, Foreign School Audit Guide, is also in the process of being revised by ED. The GAQC has not yet been provided a draft of this Guide for review and we have also not received an expected release/effective date from ED.
    New Department of Energy Audit Guide

    Energy has also recently released a new federal audit guide (Energy Guide) for conducting program compliance audits of for-profit recipients and subrecipients of federal financial assistance from Energy (e.g., electric utilities, automotive companies, machinery companies, etc.). This guidance, announced in an Energy Policy Flash, was needed to cover audits of numerous new Energy programs that were established as a result of the Recovery Act. These grants address things such as energy efficiency, renewable energy, clean coal power, fossil and nuclear energy, and electricity delivery. Even though the Energy Guide was issued in 2011, it is effective for all for-profit recipients and subrecipients beginning with fiscal years ending in 2010 (i.e., retroactively) and thereafter.

    The GAQC worked closely with Energy as it developed its guidance, reviewing numerous working drafts of the guidance. Generally, the guidance is loosely based on the structure of an audit under Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. For example, there is a general audit program, a compliance supplement that contains compliance requirements similar to those contained in Part 3 of the OMB Compliance Supplement, and a program matrix (similar to Part 2 of the OMB Compliance Supplement) which identifies the compliance requirements that are generally applicable to the various Energy programs covered by the Guide.

    The Energy Guide requires for-profit recipients and subrecipients that expend $500,000 or more in a year under Energy federal awards to have an audit in accordance with the Guide. When a for-profit recipient or subrecipient has multiple Energy awards and one or more of the awards have expenditures of $500,000 or more, a compliance audit is required for each of the awards with $500,000 or more in expenditures. The remaining awards do not require, individually or in the aggregate, a compliance audit. Recipients or subrecipients that have total expenditures of $500,000 or more but that do not have any single award with expenditures of $500,000 or more are required to have a compliance audit of the awards in the aggregate (i.e., as a cluster of awards). Awards audited as a cluster should share common compliance requirements.

    The Guide is available in the following sections on the Energy Web site:

    Part I: General Audit Program

    Part II: General Compliance Supplement

    Part III: Program Specific Compliance Requirements

    Part IV: Types of Compliance Requirements (Matrix of Energy Programs)

    Part V: Federal Assistance Reporting Checklist and Instructions (summarizes management reporting responsibilities)

    Part VI: Federal Assistance Reporting Checklist and Instructions for R&D Projects (summarizes management reporting for Research and Development).

    Other Federal Agency Efforts Relating to For-Profit Audits in Process

    The GAQC has also been working with the U.S. Department of Commerce (Commerce) as it establishes new audit requirements directed to for-profit recipients and subrecipients (e.g., telecommunications companies) participating in the Broadband Technology Opportunities Program (BTOP), which was established by the Recovery Act. The GAQC has reviewed several drafts of a new BTOP audit guide to be issued by Commerce in the near future. It will be required for auditees that receive BTOP awards exceeding $100,000.

    Additionally, the GAQC is aware that the U.S. Department of Agriculture Rural Utility Service (RUS) is also considering changes to its existing audit guidance in Part 1773 of USDA regulation for RUS borrowers. Such changes are intended to expand the RUS guidance to also cover for-profit recipients of grants (established by the Recovery Act) provided to extend broadband services to underserved rural areas.

    Watch future GAQC communications for future developments relating to these efforts.

    Archived GAQC Yellow Book Training Available

    Many of the engagements described above are subject to both Government Auditing Standards and the requirements of the federal audit or attestation guide. The GAQC recently hosted a Web event titled, The 2007 Yellow Book: What a Beginner Needs to Understand, which is now available in archived form on the GAQC Web site. If you have clients that are subject to the audit guides discussed in this GAQC Alert, this archived event will be helpful to your staff working on these audits that may be unfamiliar with the Yellow Book, as well as other staff working on governmental or not-for-profit organization audits that are new to the Yellow Book or want a refresher. Listen to the Web event today.

     
    *   *   *   *   *
    Sincerely,
    AICPA Governmental Audit Quality Center

    Stay Informed
    To stay abreast of these and other relevant events, visit the GAQC Web site at:  gaqc.aicpa.org.  Also, we welcome any suggestions or questions.  Please send them by e-mail to GAQC@aicpa.org.
    GAQC members may only reproduce and distribute GAQC e-alerts internally within the firm or State Audit Organization to other Center member personnel as part of the organization's professional services. For information about permission to copy any part of these documents for redistribution or inclusion in other work, please click on the copyright notice at the bottom of the page or phone the AICPA copyright permission hotline 919-402-4031.
     
    ©2011 The American Institute of Certified Public Accountants.
    AICPA Online privacy policies and copyright information.
    AICPA, 1211 Avenue of the Americas, New York, NY 10036
     
     
         
    To change your e-mail address and preferences at any time click here.
    To unsubscribe from AICPA GAQC e-mails send an email to GAQC_Remove@email.aicpa.org.
    AICPA respects your privacy. We do not rent or sell e-mail addresses. Read our privacy policy.
    American Institute of Certified Public Accountants, 220 Leigh Farm Road, Durham, NC 27707-8110.
     

     

         



    A A A


     
    Copyright © 2006-2014 American Institute of CPAs.