Common Single Audit Findings in the Islands

1. Common Single Audit Findings in the Islands Prepared and Presented By: Frank Crawford, CPA www.crawfordcpas.com frank@crawfordcpas.com

2. Common Elements of Findings • CRITERIA • CONDITION • CAUSE • EFFECT • RECOMMENDATION / BENEFIT • MANAGEMENT RESPONSE

3. Criteria • What Should Be • For internal control findings, criteria is the control element, policy or procedure that should be designed and/or complied with • For compliance findings, the criteria is the specific compliance requirement

4. Condition • What Is or Has Happened • For internal control findings, condition is a finding that an important control element, policy or procedure is not designed, or is designed but not complied with • For compliance findings, the condition is the specific finding or instance of noncompliance

5. Cause • Why the Condition Exists or Occurred • Cause is the most difficult element of a complete finding to write; if not written well, it will be difficult to understand; the writer of the finding must use their best professional judgment to determine cause • Cause may involve multiple issues such as lack of priority, ability, resources, motivation, or may involve intent • It is the most crucial element of the finding for writing an effective recommendation for corrective action

6. Effect • What Has or Can Happen as a Result • Effect is important to communicate in order to get the attention of the decision makers • Effect could involve the occurrence or higher than acceptable risk of: • Undetected errors • Undetected fraud • Financial losses • Increased liability

7. Recommendation • What You Should Do About It • The “recommendation” must be specific and complete if you expect the proposed corrective action to be the right corrective action and be effective • The “recommendation” is built upon the proper identification of the “cause”

8. Management’s Response • Proposed Corrective Action or Inaction • Management’s response is important to ensure the finding is not in error or to learn that mitigating factors may exist • Auditors should let management know when their proposed corrective action may not be sufficient to correct the condition

9. WHERE THEY GET REPORTED • Types of Findings • Internal control deficiencies • Noncompliance • Other matters • Appropriate Reports • Financial reporting on internal control, compliance and other matters – financial statements (YB) • Financial reporting on internal control and compliance - A133 Single Audit • Single audit schedule of findings and questioned costs • Management letter

10. Internal Control Deficiencies • Controls over financial reporting • Significant deficiencies • Material weaknesses • Controls over compliance • Financial statements • Significant deficiencies • Material weaknesses • Federal awards • Significant deficiencies • Material weaknesses

11. Compliance • Financial statements compliance • Direct and material effect • Federal awards compliance • Material to a type of requirement of a major program

12. Other Matters • Potential fraud • Indications of abuse • Other operational or performance matters