Executive Order No. 13520 – Reducing Improper Payments Results of Single Audit Workgroup

1. Executive Order No. 13520 – Reducing Improper PaymentsResults ofSingle Audit Workgroup National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

2. Executive Order Goals • Reduce improper payments by intensifying efforts to eliminate payment error, waste, fraud, and abuse in major programs • While continuing to ensure that Federal programs serve and provide access to their intended beneficiaries National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

3. Eight Workgroups • Guidance • Access • Publishing Website • Internal Controls • Improve Information Sharing • Enhance Contractor Accountability • Single Audit • Incentives & Accountability National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

4. SA Workgroup Membership • Federal • OMB • OIG • Program Management • Audit Follow-up • State • NSAA • State auditors National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

5. Business Question How can the effectiveness of the Single Audit process (SA) be improved and measured; and, how can the Single Audit and the Improper Payments Information Act (IPIA) process be coordinated, where appropriate, to enhance Federal program accountability? National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

6. Issue Areas • Examining the Single Audit & IPIA • Streamlining and Enhancing the Single Audit to Identify and Assist in Reducing Improper Payments • Improving Usefulness of the Single Audit for Reducing Improper Payments and Improving Program Accountability • Single Audit Act objectives National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

7. Purpose not to measure improper payments • SA selection of major programs is non-Federal entity dependent • SA test period is based upon entity FY and NFE FYs vary • SA sample size chosen to answer Yes/No question of compliance vs. estimate of error rate and amount • Purpose of audit is an attest function based upon management representations, not to obtain original data and determine an estimate National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

8. Assists in Reducing Improper Payments • Base level of accountability and transparency • Identify I/C weaknesses & non-compliance • Follow-up on corrective action for findings • Starting point for assessing risk area for IP • Enhances control environment through discipline of audit process National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

9. Recommendations • Instilling Federal Leadership • Managing Risks • Using Single Audit Reports Effectively • Amending the Single Audit Objectives National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

10. Instilling Federal Leadership • Agency head designate an accountable official for SA • Improve management SA coordination between agencies • Study division of agency SA leadership between management and OIG • Add agency management contacts to the Supplement National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

11. Managing Risks • Increase focus on top 150 NFE • Conduct study of tiered audit approach • Refocus SA compliance testing on types of compliance requirements most likely to result in IP • Shorten the SA cycle • Establish central process to ensure that all SA are filed with FAC National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

12. 6. Study Tiered Audit Approach Source: 2008 Clearinghouse data National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

13. 6. Study Tiered Audit Approach One possible approach: • First tier – e.g., $500,000 to 2 million • Yellow Book audit • SEFA • Second tier – e.g., $2 million and above • Traditional Single Audit National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

14. 6. Study Tiered Audit Approach Other suggestions: For lower tiered entities – • Limited Single Audit • Allow more time to complete SA • SA less frequent than annually National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

15. 6. Study Tiered Audit Approach Concerns / Challenges: • SA may be only direct oversight for small entities • Any reduction in SA effort would be offset by need for increased federal oversight • Public interest in “small” entities National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

16. 7. Refocus SA Compliance Testing What’s in … A/B. Allowable activities and costs (including costs claimed for matching) • Cash management • Eligibility • Reporting • Subrecipient monitoring • Special Tests and provisions National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

17. 7. Refocus SA Compliance Testing Include in Special Tests if required: D. Davis-Bacon • Equipment and Real Property Management • Level of Effort and Earmarking • Period of Availability • Procurement and Suspension & Debar. • Program Income • Real Property Acquisition & Relocation National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

18. 8. Shorten the SA Cycle • Phase in period to 6 months – FY begin • July 1, 2012 due in 8 months • July 1, 2013 due in 7 months • July 1, 2014 due in 6 months • Audit resolution shortened from 6 months to 4 months • Goal of completing audit and audit resolution two months prior to end of next fiscal year National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

19. 8. Shorten the SA Cycle • NFE management must close books quicker and prepare SEFA earlier • Pass-through must identify CFDA & amount of award at time of disbursement • Issues with States incorporating component units • Auditor must start work sooner and perform more interim procedures • Compliance Supplement issued in February • Agencies must improve structure to provide guidance National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

20. Effective Use of SA Reporting • Conduct pilot project to digitize SA reports • Improve identification of high-risk audit findings • Develop baseline, metrics, and targets to track the effectiveness of SA over time • Implement an interagency SA analysis & reporting function. • Focus SA follow-up on whole of program accountability and individual NFE accountability National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

21. Effective Use of SA Reporting • Expand the FAC role to provide central support and tracing of the audit follow-up process • Revise approach for follow-up on cross-cutting findings • Conduct pilot for coordinating review of IP & SA results for IP high priority programs • Conduct study for actions needed when QC identified that could cause IP • Conduct study to determine how SA reports could be posted to internet National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010

22. Amending the SA Objectives 20. Amend objective 5 to require agencies to not only rely upon and use the work done under the Single Audit Act, but to act on the results of SA. National Association of State Auditors Annual Conference – Carefree, Arizona June 17, 2010