One of the few positive takeaways of the current economic environment is the availability of public funds. To combat the impact of the COVID crisis, many entities have received a substantial increase in the value of their federal funds or have received federal funds for the first time. As always, when dealing with the federal government, there may be restrictions. As a recipient of federal funding, this monitoring may require a single audit.
Section 2-90 of the Connecticut regulations authorize public accountants to examine the books and records of state departments, commissions and boards, and parastatals. Subsection (c) provides that each audit may include a performance review to determine whether it is effective in meeting stated legislative objectives.
Following Generally Accepted Government Auditing Standards (GAGAS) published by the Government Accountability Office (GAO), a performance audit provides results or conclusions based on an assessment of adequate and sufficient evidence against the criteria. Performance checks provide objective analysis to help management and those charged with governance and oversight use the provided information to improve program performance and operations, reduce costs, facilitate decision-making through monitoring parties, or initiate corrective measures and contribute to public accountability. GAGAS uses the term program to include government entities, organizations, programs, activities, and functions. GAO's current performance monitoring standards are included in the government monitoring standards, the Yellow Book.
This performance verification activity can be performed as part of a compliance check or a separate performance check, depending on the scope of the audit to be carried out.
Compliance Checks
Section 2-90 of the Connecticut regulations authorize public accountants to examine the books and records of state departments, commissions and boards, and parastatals. These audits will typically span two fiscal years and focus on state funds rather than federal funds. These audits will be in addition to any audit activity that may have been performed to meet the audit requirements of the Comprehensive Annual Financial Report, formerly known as the Comprehensive Annual Financial Report and Single Federal audit. A departmental audit is an agreement audit that focuses mainly on the agency's internal control structure and compliance with specific laws, regulations, contracts, and concession agreements. A departmental audit is a kind of performance audit as spelled out in the GAO Yellow Book. The audit of the accounts is carried out as part of our work on the comprehensive annual financial report.
Transaction tests performed as part of a compliance audit for individual state agencies aim to assess the agency's internal control systems and compliance issues. When the internal control framework is material or significant to issuing an opinion on the comprehensive annual financial report or to meeting the requirements of the federal law on the single audit, the internal control framework has been included in the scope of the request of our annual report Full financial report or single audit.
Single Federal Audit
Congress passed the Single Auditing Act of 1984 and amendments to the Single Auditing Act of 1996 to improve the financial management of federal financial aid programs of state and local governments, establish requirements uniforms for federal financial assistance audits, promote the use of efficient and effective audit resources, and ensure that federal departments trust and use audit work performed under the law. The law sets out requirements for audits of the entity's financial statements, including the Federal Expense Allocation Program (SEFA), and testing and reporting on internal control and compliance with federal laws and regulations relevant to financial aid. The law requires independent auditors to conduct the audit following Generally Accepted Government Auditing Standards (GAGAS), as given by the Government Accountability Office (GAO) in its Yellow Book.
State and local governments must perform a single audit to receive federal financial assistance of $750,000 or more. A single audit consists of auditing the basic financial statements and federal financial assistance (FFA). All FFA programs should be categorized as Type A, and Type B based on a dollar limit calculated in accordance with the Uniform Guide and based mainly on the total FFA spent for the entity given by the OMB (Office of Management and Budget). All programs will undergo a risk analysis to obtain which federal programs will be audited.
The auditor should plan and perform internal control tests for large federal programs to ensure that relevant controls prevent or detect material non-conformities with applicable FFA requirements. Also, the auditor should determine whether the agency has complied with laws, regulations, and provisions of contracts or grant agreements that possess a direct and material effect on each of the major federal programs. Compliance requirements for FFA programs can be found in the Uniform Guide published by the Office of Management and Budget.
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