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Are you Ready for an Audit? Acquisition Internal Control Considerations

Are you Ready for an Audit? Acquisition Internal Control Considerations. Department of Commerce, Office of Inspector General. Contents. Audit Guidance and Criteria OIG Evaluations of Internal Control Acquisition Separation of Duties. Internal Control Audit Guidance.

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Are you Ready for an Audit? Acquisition Internal Control Considerations

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  1. Are you Ready for an Audit?Acquisition Internal Control Considerations Department of Commerce, Office of Inspector General

  2. Contents • Audit Guidance and Criteria • OIG Evaluations of Internal Control • Acquisition Separation of Duties

  3. Internal Control Audit Guidance • AICPA Codification of Auditing Standards • GAO Yellow Book • GAO Red Book • GAO Financial Audit Manual • GAO…

  4. Acquisition Internal Control Criteria Internal control activities can be tested against many federal requirements, including: • Federal Accounting Standards Advisory Board Statements • Federal Acquisition Regulation • Department Administrative Orders • Anti-deficiency Act • Prompt Payment Act Final Rule • Federal Financial Management Improvement Act • Federal Managers’ Financial Integrity Act of 1982 • OMB Bulletins and Circulars (especially A-123 & A-11)

  5. Evaluating Significant Controls • Identify control objectives • Identify key control activities • Determine nature, timing, and extent of control tests • Conduct tests and evaluate results • Assess control risk

  6. Evaluating Significant Controls – Sample Procurement Tests

  7. Evaluating Significant Acquisition Controls Sample obligation control findings • Identify at least two approvals on all obligations (fund certification and approving official) before the contract’s period of performance begins. • Identify three approvals on all contractual obligations - fund certification, approving officer (for bona fide needs), and contracting officer (for delegated procurement authority). • Providing fund certifications and authorizations verbally or by email can be accepted, but should not be the primary organizational control. • Obtain all required authorizations before the obligation is entered into the financial system. • Fiscal year appropriations can only be used for needs of that fiscal year, regardless of when performance occurs.

  8. Separation of Duties and Key Acquisition Control Activities Overall • Approvals must be from authorized individuals (electronic or manual) • Approvers should not record obligations or payments • Obligations cannot occur before approval (e.g. contracting officer cannot bind the government before an approving official agrees) • Obligations cannot be recorded if not finalized (e.g. obligations cannot be recorded prior to contracting officer approval) • One person cannot control multiple key roles

  9. Separation of Duties Considerations • What opportunities exist when controls are not in place?

  10. Separation of Duties for Acquisitions (Ex.1)

  11. Separation of Duties for Acquisitions (Ex.2)

  12. Separation of Duties for Acquisitions (Ex. 3)

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