IHS Office of Tribal Self-Governance Financial Training Session Audits and Compliance

1. IHS Office of Tribal Self-Governance Financial Training Session Audits and Compliance Presenter: Mark Moadel, IHS Director, Division of Audit, Office of Finance and Accounting

2. The Single Audit Act and OMB Circular A-133 The Single Audit Act of 1984, P.L. 98-502, as amended by the Single Audit Act Amendments of 1996, P.L. 104-156, established uniform audit requirements for State, local, and tribal governments and nonprofit organizations receiving Federal financial assistance. The Single Audit Act eliminated the grant-by-grant approach to auditing Federal awards. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, provides instructions to Federal agencies on how to implement the Single Audit Act. State, local, and tribal governments and nonprofits must comply with the Single Audit Act and OMB Circular A-133. OMB Circular A-133 requires recipients of Federal awards who spend $500,000 or more in a year in total Federal awards to have an annual single audit conducted. The Indian Self-Determination and Education Assistance Act , P.L. 93-638, requires all tribes/tribal organizations that compact with the IHS under Public Law 93-638, Title V, to comply with the Single Audit Act.

3. Single Audit Process with P.L. 93-638 Requirements Financial Statements Preparation Upon expenditure of $500,000 or more total Federal funds from all sources, a Single Audit is required under provisions of the Single Audit Act and as specified by OMB Circular A-133. P.L. 93-638 specifies that if 638 funds are provided, reporting requirements may be met through the Single Audit. The tribe/tribal organization engages an independent auditor (CPA) to conduct the audit. The tribe/tribal organization is responsible for the preparation of the financial statements and the Schedule of Expenditures of Federal Awards and accompanying notes. The tribe/tribal organization is also responsible for an acceptable A-133 audit and should take steps to ensure that a competent CPA is engaged for the completion and submittal of the audit. 3

4. Single Audit Process with P.L. 93-638 Requirements Single Audit Performance and Reporting The CPA conducts an audit of the auditee (the tribe/tribal organization) as specified in A-133. This includes a financial audit and the required Single Audit reports. The CPA is responsible for the auditor’s opinion on the financial statements and the Schedule of Expenditures of Federal Awards, the Single Audit reports, the Schedule of Findings, the Status of Prior Year Findings, and the Summary of Results. The tribe/tribal organization prepares a Corrective Action Plan to be included in the audit package. 4

5. Single Audit Process with P.L. 93-638 Requirements Single Audit Reporting Package Submission The tribe/tribal organization and CPA are jointly responsible for the preparation of the Data Collection Form (SF-SAC). The tribe/tribal organization is responsible for distribution of the completed audit package and filing the audit and SF-SAC with the Single Audit Clearinghouse. Submission of the completed audit package is due the earlier of 30 days after the tribe/tribal organization receives the audit or 9 months after the end of the tribe/tribal organization’s fiscal year. OMB Circulars direct that the reporting package is to be electronically filed with the Clearinghouse. The Clearinghouse verifies the SF-SAC is acceptably completed, and logs receipt of the audit package. If there are no findings, the audit is not distributed to funding agencies. If the SF-SAC is incomplete, inconsistent or unclear, the Clearinghouse requests corrections. The Clearinghouse does not review the audit nor assess acceptability of the audit. This is done by the awarding agencies. 5

6. Single Audit Process with P.L. 93-638 Requirements • HHS OIG National External Audit Review Center (NEAR) Review • NEAR is the official receipt point for all audits reporting on HHS funding and programs. The NEAR Center is a unit of the U.S. Department of Health and Human Services Office of Inspector General, Office of Audit Services, and located in Kansas City, Missouri. • The NEAR office receives all audit reports and logs them in as official Departmental records. Evidence of this receipt and logging process is the Common Identification Number (CIN) assigned by the NEAR office. • NEAR determines whether the audit report documentation received is complete. • If the documentation is determined not complete, NEAR procedures determine the disposition and any required notifications. • If the documentation is determined to be an audit that can be processed, the report is assigned to a reviewer for further analysis and review. • Departmental policy is that management letters are a part of the audit and need to be included with the audit report; management letters not included will be requested. 6

7. Single Audit Process with P.L. 93-638 Requirements HHS OIG National External Audit Review Center (NEAR) Review NEAR determines whether HHS has cognizant/oversight responsibilities for this audit under terms and conditions of OMB Circular A-133. If HHS has cognizant/oversight responsibilities, a determination is made on the acceptability of the audit report and will be communicated in the transmittal package issued by NEAR. NEAR identifies findings and/or questioned costs requiring Departmental resolution. These findings may be auditor-identified or developed by the NEAR reviewer from the audit report. Such findings are coded for tracking in the Departmental Stewardship System (AIMS) and assigned to the appropriate funding agency for resolution; such information is shown on the NEAR transmittal letter Attachment A, as the Resolution Agency who is the action official for resolution of the finding. An HHS Resolution Official for the entire audit is also assigned by NEAR based on the findings. The Resolution Official is listed in the transmittal letter with the office mailing address. 7

8. Single Audit Process with P.L. 93-638 Requirements HHS OIG National External Audit Review Center (NEAR) Review NEAR also assesses the audit for unusual or serious items and potential impact upon Departmental funding and programs. Examples of these items would include going concern issues, frauds, illegal activities, serious internal control issues, and other matters of grave concern. Any necessary notifications concerning these serious and unusual items are prepared. Upon completion of review, the transmittal letter is prepared for issuance by NEAR. The transmittal letter contains the audit and related correspondence, the transmittal letter and its Attachment A, and other related documents. NEAR notifies the tribe/tribal organization and their CPA of the results of the review by sending the transmittal letter and its related attachments. At the same point in time, the transmittal letter is sent to the funding agencies within HHS. 8

9. Single Audit Process with P.L. 93-638 Requirements Tribe/Tribal Organization Management Response to Findings The tribe/tribal organization receives the transmittal letter from NEAR. In accordance with instructions given in the transmittal letter, a response to the Attachment A findings and questioned costs is to be sent to the Resolution Official designated in the transmittal letter. IHS Division of Audit The IHS Division of Audit is located with the Office of Finance and Accounting and handles issues related to the audits of IHS funds and programs. The Division of Audit receives the transmittal letter from NEAR at approximately the same time as the tribe/tribal organization. The transmittal letter is logged into the DARMIS audit resolution database, along with any related materials or correspondence, to track the status of the resolution process and to accumulate a historical picture for the specific organization. The transmittal letter is forwarded to the appropriate IHS awarding officials with a request for the Letter of Determination (LOD) in order to resolve the audit in the Departmental Stewardship System (AIMS). 9

10. Single Audit Process with P.L. 93-638 Requirements Office of the Secretary (OS)/ASRT/Office of Finance, Division of Systems Policy and Audit Resolution (DSPAR) The Division of Systems Policy and Audit Resolution is located within the Office of the Secretary, HHS. DSPAR receives the transmittal letter from NEAR at approximately the same time as the tribe/tribal organization and the IHS Division of Audit. The transmittal letter is distributed to DSPAR when the identified findings and/or questioned costs affect more than one funding agency within HHS. The transmittal letter is logged into the DARMIS audit resolution database. As the HHS Resolution Official, DSPAR will notify the funding agencies of their assigned HHS Resolution Agency responsibilities and distribute any correspondence and/or Corrective Action Plan received to the funding agencies listed in the Attachment A. If also an assigned HHS Resolution Agency, DSPAR will review its assigned audit findings and the corrective action plan in the audit report, including recent updates. If additional information is needed to complete the resolution process, DSPAR will discuss this with the tribe/tribal organization, CPA, NEAR, and funding agencies and awarding officials, as appropriate. 10

11. Single Audit Process with P.L. 93-638 Requirements HHS Resolution Agency Awarding Officials Upon receipt of the transmittal letter, the awarding official should contact the tribe/tribal organization for any needed information or materials. Once the awarding official has sufficient information and documentation to satisfy themselves regarding the issues identified in the finding or as a questioned cost, a determination on the matter is made. The determination on the disposition of the finding or questioned cost is communicated to the tribe/tribal organization in a Letter of Determination (LOD). A copy of the Letter of Determination is sent to the assigned Resolution Official and is the basis for the Office of Inspector General Clearance Document (OCD). 11

12. Single Audit Process with P.L. 93-638 Requirements Office of Inspector General Clearance Document (OCD) IHS Division of Audit: Based upon the Letter of Determination, the IHS Division of Audit prepares and transmits an Office of Inspector General Clearance Document (OCD) to the HHS OIG. A copy of the OCD is also sent to the awarding official. If a questioned cost is determined to be a disallowed cost, a copy of the Letter of Determination and resulting OCD are transmitted to the Program Support Center (PSC) and a receivable is established. DSPAR: Once DSPAR makes a determination on the disposition of findings as an assigned Resolution Agency, then it will send a Letter of Determination to the tribe/tribal organization notifying them of the results of the review and the disposition of the findings, and prepare and transmit an OCD to the HHS OIG. 12

13. IHS Division of Audit Contact Information • IHS Division of Audit Single Audit Resolution Services Assignments • James Baker: Bemidji, Billings, Nashville, Oklahoma City • phone: 301-443-4984, email: James.Baker@ihs.gov • Kathyrine Soliven: Albuquerque, Alaska, Navajo, Portland • phone: 301-443-4973, email: Kathyrine.Soliven@ihs.gov • Susan Blair: Aberdeen, California, Phoenix, Tucson • phone: 301-443-3252, email: Susan.Blair@ihs.gov • Mark Moadel: Lead - Single Audit Resolution Services • phone: 301-443-4873, email: Mark.Moadel@ihs.gov 13

14. Example NEAR Transmittal 14

15. Example NEAR Transmittal 15

16. Example NEAR Transmittal Attachment A 16

17. Example NEAR Transmittal Attachment A 17

18. Example Letter of Determination (LOD)

19. Example Letter of Determination (LOD)

20. Important Indian Self-Determination and Education Assistance Act (ISDEAA) Audit Provisions • 25 U.S.C. § 458aaa-5(c)(1) • Title V tribes/tribal organizations must comply with the Single Audit Act • 42 C.F.R. § 137.165 - Self-governance tribes/tribal organizations are required to undertake annual audits • 25 U.S.C. § 450j-1(f), Limitation on remedies relating to cost disallowances • “The 60-day rule”: audits are deemed accepted if not rejected by National External Audit Review Center (NEAR) within 60 days. • “The 365-day rule”: disallowances are barred if the tribe/tribal organization isn’t notified of the disallowance within 365 days of NEAR’s receipt of the audit.

21. Auditee Responsibilities • The Tribe/Tribal Organization (auditee) must: • Identify all of its Federal awards received and spent and the Federal programs under which each was received. • Comply with Federal laws and regulations and contract and grant provisions related to the appropriate Federal program. • Maintain an internal control system over Federal programs which provide reasonable assurance that it is managing its Federal awards in compliance with Federal laws and regulations and contract and grant provisions. • Prepare appropriate financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. • Ensure that audits are completed in accordance with OMB Circular A-133 and submitted on time. • Follow up and take corrective action on audit findings.