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AUDIT: FREQUENTLY-ASKED QUESTIONS

Updated: 01 February 2011


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AUDIT SUBMISSION REQUIREMENTS

When are the audit reports and the Summary Report Form due to the OIG?
The audit reports and electronic submissions of the Summary Report Form are due 120 days after the recipient's fiscal year end. (AG §III-1). CAUTION: Summary Report Forms must be received electronically before audit report is processed internally.

How many copies of the audit report should I send? Where do I send them?
Three copies of the audit report package should be sent to
OFFICE OF INSPECTOR GENERAL
LEGAL SERVICES CORPORATION
3333 K ST NW
WASHINGTON DC 20007-3558
The audit reports must be received in the Office of Inspector General not later than 120 days after the end of the recipient's fiscal year. The OIG does not accept the postmark date.

What are the requirements for requesting an extension to submit the audit report?
Requests for extensions of time for submission of the audit reports must be submitted in writing not later than two weeks prior to the report due date and directed to the Office of Inspector General. Requests not submitted in the required time frame will be granted only for unforeseen, extraordinary and compelling reasons. The extension request must address the specific reason(s) for the request. (AG §III-2). Indications of inadequate audit preparation and planning are not considered compelling circumstances.
You may submit the extension request by email to audits@oig.lsc.gov or fax to 1 202 337 6616.

Are Summary Report Forms required for subrecipient audits?
No. SRFs are not required for subrecipient audits.

AUDIT GUIDANCE: RECIPIENTS AND SUBRECIPIENTS

Are Office of Management and Budget (OMB) Circular A-133 audits required for recipients of LSC funds?
Yes. Current guidance for audits of LSC recipients is found in:
Are recipients of less than $500,000 exempt from LSC audit requirements under the new OMB Circular A-133?
No. The Revised OMB Circular A-133 increased the threshold for a Single Audit from $300,000 to $500,000 of federal awards expended. LSC's 1996 and 1997 appropriation law requires an audit regardless of grant amount and takes precedence over the revised OMB Circular A-133 audit requirements. Accordingly, the increased audit threshold specified in revised OMB Circular A-133 does not apply to recipients of LSC funds. There is no change in audit requirements for recipients of LSC funds. The applicability of the requirements of the 1996 LSC Audit Guide specified in paragraph I-3 remains unchanged.

What are the audit requirements for subrecipient audits?
Subrecipient audit requirements are addressed in the subgrant agreements. Please do not arrange for, or submit, an audit of a subrecipient of LSC funds that does not comply with the executed subgrant agreement, unless you have received express approval from the OIG.

What is the cognizant agency for LSC funds?
The LSC OIG is the audit oversight agency for recipients and subrecipients of LSC funds.

Is the IPA allowed access to records covered by the attorney-client privilege?
The IPA is within the privilege and has access to any records that, in the auditor's judgement, are necessary to complete the audit. If the recipient claims attorney-client privilege, to deny or to restrict the auditor access to documents and information, the IPA should notify the OIG immediately. IPAs are expected to follow the reporting requirements under generally accepted auditing standards (GAAS), e.g. scope limitation.

Does the OMB Compliance Supplement apply to LSC funds?
The OMB Compliance Supplement does not apply to LSC funds. The LSC Compliance Supplement (Appendix A) to the LSC Audit Guide for Recipients and Auditors, identifies the laws and regulations that apply to LSC funds under an OMB Circular A-133 audit. The IPAs are expected to cite the LSC Compliance Supplement in their reports on Compliance with Requirements applicable to Major Programs and Internal Controls over Compliance in accordance with OMB Circular A-133 (AG §III-1). IPAs should be aware that if non-LSC funds (Federal or state) of a recipient are subject to consideration under an OMB Circular A-133 audit, the OMB Compliance Supplement may otherwise apply to those funds.

What are 5-day letters?
5-day letters (same as 5-day Special Reports) is a special reporting requirement established by Congress in the 1996 appropriations legislation (AG §I-9C). They are required when the auditor finds noncompliance with the restrictions and prohibitions identified by an asterisk (*) in the December 1998 Compliance Supplement. Audit Bulletin 97-01 (November 24, 1997) specifies that 5-day letters are limited to any instances of noncompliance with the practice restrictions identified in the Compliance Supplement. See Audit Reporting Requirements below for further details.

For purposes of the annual audit, is it acceptable for the IPA to select cases for testing from the population of cases subject to grantee's self-inspection procedures?
No. For purposes of the A-133 audit, the sample should be selected from the entire population of cases as defined in the December 1998 Compliance Supplement (Part C). Selecting a sample from a population of only cases that were previously subject to a self-inspection, or passed the self-inspection process would result in a biased sample and could not provide a reasonable basis for an opinion. AU350.24 and .34, which provides further guidance to auditors on sample selection states, in relevant part:
"Samples should be selected in such a way that the sample can be expected to be representative of the population. Therefore, all items should have an opportunity to be selected... ."
Case sampling is discussed in Audit Bulletin 2001-01 (February 4, 2000) and Audit Bulletin 2005-01 (December 2004).

Is it a close-out audit if the recipient is merging into another LSC-funded entity?
Yes. A close-out audit consists of the financial statemnets and compliance reports, prepared according to LSC OIG guidance, for the final period in which the auditee received direct LSC funds. It is a close-out audit if it is the last financial accounting for an auditee as a separate entity even if that auditee is merging into another LSC-funded entity in the next reporting period.

Are subrecipient agreements and contracts with private attorneys for legal representation of clients related party transactions?
No. Subrecipient agreements and contracts with private attorneys for legal representation of clients are not related party transactions.

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AUDIT REPORTING REQUIREMENTS

What reports and financial statements should be included in my submission?
The Audit Reports that should be included in your submission, at a minimum, are as follows:
Please include a table of contents and write the LSC Grant Recipient number on the cover of the audit report.

Where can I find guidance on the form and content of the A-133 audit reports?
Auditors should contact the American Institute of Certified Public Accountants for guidance on the form and content of reports. Sample reports can be found on the AICPA web site: Illustrative Auditor’s Reports Under Circular A-133 – Updated for SAS No. 117. Further guidance can be found in Government Auditing Standards and Circular A-133 Audits - AICPA Audit Guide.

What are some examples of "procedural or administrative items" that should not be included in the 5-day letter?
The regulations marked for inclusion in the 5-day reporting requirement are those related to the practice restrictions and prohibitions created by the 1996 appropriation legislation. For 5-day reporting, the OIG is interested if an IPA finds actual instances of cases or matters that violate those restrictions and prohibitions. The types of findings that should not be reported in a 5-day letter include issues such as absence of policies and procedures required under the regulations, lack of signatures on forms, and similar procedural problems (unless, as a result of the weakness cited, a grantee participated in an actual case or matter that violated the restrictions and prohibitions).

Does the IPA have 5-days to notify the recipient of instances of noncompliance?
The IPA must notify the recipient in writing immediately upon obtaining sufficient competent evidential matter to determine that an instance of noncompliance has occurred (See AG § II-1.H).

When does the 5-day reporting requirement begin?
The recipient's 5-day reporting requirement begins with the receipt of the IPAs report on noncompliance found. In the event the recipient does not report to the OIG within the 5-days of receipt of the IPAs report, the IPA's 5-day reporting requirement begins.

What is the CFDA number for LSC funds?
In lieu of an agency number the Single Audit Clearinghouse has assigned LSC the pseudo code '09'. To create a CFDA number use '09' followed by a period and the 6-digit LSC recipient number. For example, a grantee with an LSC Recipient Number of '757100' would have a CFDA Number = 09.757100.

Is the Data Collection Form (DCF) required by A-133 required for LSC funds?
No, not as far as LSC funds are concerned. If a recipient has other federal funds subject to A-133, the form may be required. However, if LSC is the only source of funds covered by the A-133 audit, the DCF is not required.

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CORRECTIVE ACTION PLANS

Where should the Corrective Actions Plans (CAPs) be submitted?
There is a change in the routing of CAPs from what is specified in the Audit Guide § I-9.D. Rather than forwarding CAPs to the OIG, recipients should submit the CAPs directly to LSC Management addressed to:
LORA RATH
OFFICE OF COMPLIANCE AND ENFORCEMENT
LEGAL SERVICES CORPORATION
3333 K ST NW
WASHINGTON DC 20007-3558

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ACCOUNTING & FINANCIAL REPORTING REQUIRMENTS

Where can I find guidance on LSC's accounting and financial reporting requirements?
Guidance on LSC's accounting and financial reporting requirements can be found in the Legal Services Corporation Accounting Guide for LSC Recipients (2010 Edition) [PDF 406K]. Questions relating to the Accounting Guide and Statement of Financial Accounting Standards (SFAS) 116 and 117 implementation should be directed to: Charles Crittenden at crittenc@lsc.gov or 1 202 295 1522.

May LSC recipients use LSC funds for fundraising activities?
LSC management has advised the OIG that recipients may use reasonable amounts of LSC funds for fundraising activities.

How should grantees classify FY2011 grant funds received in FY2010 in the December 31, 2010 financial statements?
LSC management has advised that Section 2-2.1 of the Accounting Guide for LSC Recipients (2010 Edition) requires that LSC grant and contract support be recognized and classified as temporarily restricted revenue. Temporarily restricted LSC net assets can be reclassified as unrestricted when eligible expenses are incurred. The revenue recognition policy must be disclosed in the notes to financial statements. In addition, the components of LSC support and net assets balances must be disclosed in the notes and/or supplemental schedules to the financial statements. Funds received for future grant periods should not be used in the calculation of excess fund balance under 45 C.F.R Part 1628, Recipient Fund Balances, or in the calculation of the PAI expenditure requirement, or included in the financial information reported on the Summary Report Form.

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