SECTION 400

SECTION 400

REPORTING STANDARDS AND REQUIREMENTS - SINGLE AUDITS

Section 401 - Background

.01 In order to satisfy the "single audit" reporting requirements of Office of Management and Budget (OMB) Circular A-133 and the requirements of the City of Philadelphia under this Audit Guide, the auditor shall determine and report whether:

· The financial statements of the organization presents fairly its financial position and changes in net assets in accordance with generally accepted accounting principles, and that the schedule of expenditures of federal, state and city awards is presented fairly in all material respects in relation to the organizations financial statements taken as a whole;

· The organization has an internal control structure to provide reasonable assurance that the organization is managing federal, state and City of Philadelphia awards in compliance with applicable laws and regulations, and controls that ensure compliance with laws and regulations that could have a material impact on the financial statements; and

· The organization has complied with laws and regulations that may have a direct and material effect on its financial statement amounts and on each major federal program.

.02 When performing a "Single Audit" under the requirements of this Audit Guide and OMB Circular A-133, the audit report should include the following:

Financial Audit:

· Basic financial statements

· Schedule of expenditures of federal, state and city awards.

· Notes to basic financial statements and notes to schedule of expenditures of federal, state and city awards.

· Independent auditor's opinions on the basic financial statements and the schedule of expenditures of federal, state and city awards.

Compliance and Internal Control:

· Independent auditorís report on internal control related to the financial statements and major programs.

· A report on compliance with laws, regulations, and the provisions of contract or grant agreement(s) and an opinion as to whether the organization complied with laws, regulations, and the provisions of contract or grant agreement(s) which could have a direct and material effect on each major program.

Section 401 (Cont.)

Other Schedules and Reports:

· Supplementary financial schedule(s) required by the City of Philadelphia Department making the award to the organization. (The type of financial schedule is specified by the City Department in Sections 1000 to 6000.) (See Sections 409.02 to 409.04)

· Independent auditor's opinion or agreed upon procedures report on the required City of Philadelphia supplementary schedule(s). (See Sections 409.05 to 409.07)

· Special purpose auditor's reports required by a City of Philadelphia Department as specified in Sections 1000 to 6000. (See Sections 409.08 and 409.09)

· Schedule of findings and questioned costs. (See Section 408)

· Separate communication of nonmaterial findings and a management letter. (See Sections 408.11 and 408.12)

· Report on illegal acts, if any. (See Sections 408.13 and 408.14)

Section 402 - Audit Period

.01 The annual audit period under a single audit for the City of Philadelphia is the organization's fiscal year end. The audit report would cover all financial transactions of the organization including an audit of appropriate federal, state or city financial awards expended during the fiscal year of the organization, along with appropriate reporting on internal control and compliance.

Section 403 - Independent Auditor's Report on the Basic Financial Statements and Supplementary Schedule of Expenditures of Federal, State and City Awards

.01 OMB Circular A-133 and this Audit Guide require the auditor to express an opinion about whether the basic financial statements of an organization as a whole are presented fairly in conformity with generally accepted accounting principles (GAAP). In addition, this report is to include an opinion as to whether the schedule of expenditures of federal, state and city awards is presented in all material respects in relation to the basic financial statements taken as a whole. The financial statements provide the City of Philadelphia and other appropriate funding agencies with an understanding of an organization's accounting policies and procedures.

.02 This report should make specific reference to the audit having been performed in accordance with Government Auditing Standards and the City of Philadelphia Subrecipient Audit Guide.

Section 403 (Cont.)

.03 An illustrative report is presented in Section 412.

Section 404 - Schedule of Expenditures of Federal, State and City Awards

.01 OMB Circular A-133 requires the auditor to report on the Schedule of Expenditures of Federal Awards. The schedule should list all federal financial assistance administered by the organization.

.02 OMB Circular A-133 requires that the City of Philadelphia's redistribution of federal financial assistance known as "pass-through awards," to other "quasi- government" or not-for-profit organizations be treated by the last recipient as though they were received directly from the federal government. The recipient of a pass-through award is a subrecipient. Accordingly, pass-through awards should be included on the same basis as federal financial assistance programs that are received directly. The schedule should separately report assistance received directly and assistance received through pass-through awards. The listing of the pass-through awards should include both the federal CFDA (Catalog of Federal Domestic Assistance) number and the pass-through grant award number.

.03 For a single audit under the requirements of this Audit Guide, besides following the requirements specified above, the auditor will be required to report upon the following:

a. All direct federal financial assistance;

b. All federal assistance received as a pass-through award from the Commonwealth of Pennsylvania or any other locality; and

c. All financial assistance received from the City of Philadelphia. These awards may include federal, state or city financial assistance.

.04 Based upon the above, the Schedule of Expenditures of Federal Awards could include federal, state or city financial assistance. Based upon the type of funding audited, the schedule will be appropriately headed. For example, where an organization receives federal, state and city financial assistance, the schedule will be labeled as "Schedule of Expenditures of Federal, State and City Awards"; or if only federal and state assistance is received, the schedule will be labeled "Schedule of Expenditures of Federal and State Awards".

.05 The Schedule of Expenditures of Federal, State and City Awards required by this Audit Guide will have the following format:

· The schedule is to reflect the appropriate portion of a multi-funded City of Philadelphia program (one that has federal, state and city funds) under each of the three funding categories. A multi-funded city award is not to be presented on the schedule as one line item. A breakdown is required for federal purposes under OMB Circular A-133 and the City is requiring separate information on the state and city funded portions of the award.

Section 404 (Cont.)

.06 The organization and/or the City of Philadelphia is responsible for identifying what portion of each award is either federal, state or city funded. Where this determination cannot be made, then the total award is to be reported on the Schedule of Expenditures of Federal, State and City Awards under federal awards. This total combined reporting should include a footnote that the delineation by federal, state or city funded portion is not determinable.

.07 The Schedule of Expenditures of Federal, State and City Awards requires the inclusion of a CFDA number for all federal financial assistance received directly or as a "pass-through award". The CFDA numbers are listed in the Catalog of Federal Domestic Assistance and for many of the City of Philadelphia funded awards in Sections 1000 to 6000 of this Guide, by program type.

.08 If the CFDA number is not available, the schedule should include a footnote to that effect and include the program name or other identifier obtained from the award document.

.09 The financial information included in the schedule should be derived from the organization's books and records from which the basic financial statements were prepared. It should be prepared to the greatest extent practical on a basis consistent with the contract/grant reports. However, the schedule's data may not fully agree with the contract/grant reports because, among other reasons, the contract/grant reports:

· May be prepared on a different fiscal period.

· May include cumulative amounts (from prior years) rather than only current-year data.

.10 The expenditures reported on the Schedule of Expenditures of Federal, State and City Awards for the City of Philadelphia are to be in agreement with the amounts reflected in any supplemental financial schedule as required by Sections 1000 to 6000 of this Audit Guide. These expenditures should agree since the financial information on the Schedule of Expenditures of Federal, State and City Awards and the Supplementary Schedule are both based upon the organization's books and records, as audited by the independent auditor.

Where an award includes program income generated by the program operations, then such program income and any resultant expenditures are to be considered in the determination of the activity to be reported as expenditures.

.11 In certain instances, the total program expenditures may exceed the maximum reimbursement under the award when additional non-grant sources provide support for a program. The Schedule of Expenditures of Federal, State and City Awards should separately identify funded expenditures but may also show non-funded expenditures as separate amounts, or as an explanatory note to the schedule.

When the organization has submitted a budget modification to raise the budget ceiling, believes it will be approved, and intends to bill the City of Philadelphia for those expenditures in excess of the current approved budget, the actual total expenditures should be reflected on the Schedule of Expenditures of Federal, State and City Awards. The amount and circumstances concerning the excess should be disclosed in a footnote.

Section 404 (Cont.)

.12 In assessing the completeness of the schedule, the auditor should consider, among other things, evidence obtained from audit procedures performed in the audit of financial statements, such as procedures performed to evaluate the completeness and classification of recorded expenditures. This may include sending confirmations to granting federal agencies or recipient governments when conducting an audit of a subrecipient.

.13 An illustrative Schedule of Expenditures of Federal, State and City Awards is presented in Section 413.

Section 405 - Notes to the Schedule of Expenditures of Federal, State and City Awards

.01 There should be notes to the schedule to ensure it is presented fairly. The information that should be included in the notes follows:

· Basis of accounting of the data.

· Disclosure of the nature of the differences between the amounts presented in the schedule and the amounts reported in related financial reports to the funding source.

· Explanation of the relationship of the data presented to the basic financial statements.

· Assumptions used to value noncash programs and means of calculations.

· Unique matters necessary to understand the amounts presented for any individual program.

· Information on subrecipients the organization had contractual agreements with related to federal, state or city awards. This would include names of the subrecipients and related expenditure amounts.

· Other matters considered necessary to ensure that the schedule is not misleading.

.02 An example of some notes is presented in Section 414.

Section 406 - Independent Auditor's Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

.01 This report, required by OMB Circular A-133 and Government Auditing Standards reports on:

Internal control related to the financial statements.

Compliance with laws, regulations, and the provisions of contracts or grant agreements, noncompliance with which could have a material effect on the financial statements.

Section 406 (Cont.)

This report shall describe the scope of testing of internal control and the results of the tests, and, where applicable, refer to the separate Schedule of Findings and Questioned Costs described in Section 408 of this Audit Guide.

.02 The report's compliance with Government Auditing Standards, as specified on page 52, requires that:

The report on financial statements should either: (1) describe the scope of the auditors' testing of compliance with laws and regulations and internal controls and present the results of those tests or (2) refer to separate reports containing that information. In presenting the results of those tests, auditors should report irregularities, illegal acts, other material noncompliance, and reportable conditions in internal controls. In some circumstances, auditors should report irregularities and illegal acts directly to parties external to the audited entity.

Auditors may report on compliance with laws and regulations and internal controls in the report on the financial statements or in separate reports. When auditors report on compliance and controls in the report on the financial statements, they should include an introduction summarizing key findings in the audit of the financial statements and the related compliance and internal controls work. Auditors should not issue this introduction as a stand-alone report. When auditors report separately on compliance and controls, the report on the financial statements should state that they are issuing those additional reports.

.03 Illustrative reports on Compliance and Internal Control in accordance with Government Auditing Standards are presented in Sections 415 and 416.

Section 407 - Independent Auditor's Report on Compliance with Requirements Applicable to Each Major Program and the Internal Control Structure Over Compliance in Accordance with OMB Circular A-133

.01 This report, required by OMB Circular A-133 includes a:

Report on internal control related to major programs.

An opinion as to whether the organization complied with laws, regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on each major program.

This report shall describe the scope of testing of internal control and the results of the tests, and, where applicable, refer to separate Schedule of Findings and Questioned Costs described in Section 408 of this Audit Guide.

.02 Illustrative reports on compliance and internal control related to major programs under OMB Circular A-133 are presented in Sections 417 and 418.

Section 408 - Schedule of Findings and Questioned Costs

.01 Under the requirements of OMB Circular A-133 and this Audit Guide, a report issued in accordance with these directives shall include a Schedule of Findings and Questioned Costs. This schedule shall include the following three components:

Summary of Auditorís Results

This section would include:

The type of report the auditor issued on the financial statements of the organization (i.e., unqualified opinion, qualified opinion, adverse opinion, or disclaimer of opinion);

Where applicable, a statement that reportable conditions in internal control were disclosed by the audit of the financial statements and whether any such conditions were material weaknesses;

A statement as to whether the audit disclosed any noncompliance which is material to the financial statements of the organization;

Where applicable, a statement that reportable conditions in internal control over major programs were disclosed by the audit and whether any such conditions were material weaknesses;

The type of report the auditor issued on compliance for major programs (i.e., unqualified opinion, qualified opinion, adverse opinion, or disclaimer of opinion);

A statement as to whether the audit disclosed any audit findings which the auditor is required to report under Section 408.03 of this Audit Guide.

An identification of major programs;

The dollar threshold used to distinguish between Type A and Type B programs.

A statement as to whether the auditee qualified as a low-risk auditee.

Summary of Findings Relating to Government Auditing Standards

This section would summarize each finding and provide a reference number to the actual detailed audit finding.

Summary of Findings and Questioned Costs Related to Federal, State and City Federal Awards

This section would summarize each finding and questioned cost and provide a reference to the actual detailed finding and/or questioned cost.

Section 408 (Cont.)

Presentation of Findings and Questioned Costs

.02 When the auditor is reporting a finding on internal control or compliance, whether dollar related (questioned cost) or non-dollar related, the audit finding presentation should adhere to the requirements of Government Auditing Standards, which requires that:

· Auditors should report significant audit findings, and where applicable, the auditors' conclusions.

- Auditors should report the significant findings developed in response to the audit objective. In reporting the findings, auditors should include sufficient, competent and relevant information to promote adequate understanding of the matters reported and to provide convincing but fair presentations in proper perspective. Auditors should also report appropriate background information that readers need to understand the findings.

- Audit findings have often been regarded as containing the elements of criteria, condition and effect, plus cause when problems are found. However, the elements needed for a finding depends entirely on the objectives of the audit. Thus, a finding or set of findings is complete to the extent that the audit objectives are satisfied and the report clearly relates those objectives to the finding's elements.

- The report should contain conclusions when called for by the audit objectives. Conclusions are logical inferences about the program based on the auditors findings.

ï Auditors should report recommendations for actions to correct problem areas and to improve operations.

- Auditors should report recommendations when the potential for significant improvement in operations and performance is substantiated by the reported findings. Recommendations to effect compliance with laws and regulations and improve management controls should also be made when significant instances of noncompliance are noted or significant weaknesses in controls are found.

.03 Audit findings in accordance with OMB Circular A-133, would require the auditor to report:

Reportable conditions in internal control over a major program. The auditorís determination of whether a deficiency in internal control is a reportable condition for the purpose of reporting an audit finding is in relation to a type of compliance requirement for a major program or an audit objective identified in the compliance supplement. The auditor shall identify reportable conditions which are individually or cumulatively material weaknesses.

Section 408 (Cont.)

Material noncompliance with the provisions of laws, regulations, contracts, or grant agreements related to a major program. The auditorís determination of whether a noncompliance with the provisions of laws, regulations, contracts, or grant agreements is material for the purpose of reporting an audit finding is in relation to a type of compliance requirement for a major program or an audit objective identified in the compliance supplement.

Known questioned costs which are greater than $10,000 for a type of compliance requirement for a major program or when an opinion is required on a supplemental schedule as specified in Sections 408.02 to 408.05 of this Audit Guide.

The auditor shall also report known questioned costs when likely questioned costs are greater than $10,000 for a type of compliance requirement for a major program or when an opinion is required on a supplemental schedule as specified in Sections 408.02 to 408.05 of this Audit Guide. Known questioned costs are those specifically identified by the auditor. In evaluating the effect of questioned costs on the opinion on compliance, the auditor considers the best estimate of total costs questioned (likely questioned costs), not just the questioned costs specifically identified (known questioned costs).

Known questioned costs which are greater than $10,000 for a federal program which is not audited as a major program. Except for audit follow-up, the auditor is not required to perform audit procedures for such a federal , state or city program; therefore, the auditor will normally not find questioned costs for a program which is not audited as a major program. However, if the auditor does become aware of questioned costs for a program which is not audited as a major program (e.g., as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $10,000, then the auditor shall report this as an audit finding.

The circumstances concerning why the auditorís report on compliance for major programs is other than an unqualified opinion, unless such circumstances are otherwise reported as audit findings in the Schedules of Findings and Questioned Costs for Federal, State or City awards.

Known fraud affecting a federal, state or city award, unless such fraud is otherwise reported as an audit finding in the Schedule of Findings and Questioned Costs for Federal, State or City Awards. This paragraph does not require the auditor to make an additional reporting when the auditor confirms that the fraud was reported outside of the auditorís reports under the direct reporting requirements of GAGAS.

Instances where the results of audit follow-up procedures disclosed that the summary schedule of prior audit findings prepared by the auditee in accordance with Section 410 materially misrepresents the status of any prior audit finding.

.04 Audit findings shall be presented in sufficient detail for the organization to prepare a corrective action plan and take corrective action and for federal agencies and the City of Philadelphia to arrive at a management decision. The following specific information shall be included, as applicable, in audit findings.

Section 408 (Cont.)

Federal program and specific federal award identification including the CFDA title and number, federal award number and year, name of federal agency, and name of the applicable pass-through entity. When information, such as the CFDA title and number or federal award number, is not available, the auditor shall provide the best information available to describe the federal award.

Where applicable, the City of Philadelphia Department making the award along with the City of Philadelphia contract number and contract period.

The criteria or specific requirement upon which the audit finding is based, including statutory, regulatory, or other citation.

The condition found, including facts that support the deficiency identified in the audit finding.

Identification of questioned costs and how they were computed.

Information to provide proper perspective for judging the prevalence and consequences of the audit findings, such as whether the audit findings represent an isolated instance or a systemic problem. Where appropriate, instances identified shall be related to the universe and the number of cases examined and be quantified in terms of dollar value.

The possible asserted effect to provide sufficient information to the organization and federal agency, or the City of Philadelphia, to permit them to determine the cause and effect to facilitate prompt and proper corrective action.

Recommendations to prevent future occurrences of the deficiency identified in the audit finding.

Views of responsible officials of the auditee when there is disagreement with the audit findings, to the extent practical.

.05 Each audit finding in the Schedule of Findings and Questioned Costs shall include a reference number to allow for easy referencing of the audit findings during follow-up.

.06 Audit findings (e.g., internal control findings, compliance findings or questioned costs) which relate to the same issue should be presented as a single audit finding. Where practical, audit findings should be organized by federal agency or by City of Philadelphia pass-through activity.

.07 Audit findings which relate to both the financial statements and federal awards, as reported under Sections 406 and 407 of this Audit Guide, respectively, should be reported in both sections of the Schedule of Findings and Questioned Costs. However, the reporting in one section of the schedule may be in summary form with a reference to a detailed reporting in the other section of the schedule.

.08 The organization at the completion of the audit, shall prepare a corrective action plan to address each audit finding included in the current year auditorís reports. The corrective action plan shall provide the name(s) of the contract person(s) responsible for corrective action, the corrective

Section 408 (Cont.)

action planned, and the anticipated completion date. If the organization does not agree with the audit findings or believes corrective action is not required, then the corrective action plan shall include an explanation and specific reasons.

.09 The corrective action plan is due upon presentation of the report to the City of Philadelphia. A report will not be considered complete and acceptable by the City of Philadelphia until the corrective action plan is submitted.

.10 An example of the proper presentation of audit findings and questioned costs is presented in Section 422.

Separate Written Communications

.11 Where the auditor has issued a separate written communication to the management of the audited organization such communication, commonly referred to as a "Management Letter", must be submitted to the City of Philadelphia.

.12 The management letter is to be transmitted along with the audit report, when the audit report is transmitted to the City of Philadelphia. A report will not be considered complete and acceptable by the City of Philadelphia until the management letter is submitted.

Reporting on Irregularities and Illegal Acts

.13 Where the auditor determines that a report on an irregularity or illegal act is necessary the guidance previously provided in Section 310 of this Audit Guide should be followed.

.14 Reporting of any potential illegal act or irregularity under a City of Philadelphia award would include notification to appropriate officials at the City of Philadelphia, Department of Finance and the City Department(s) providing financial assistance to the organization. In all instances of reporting such information, the auditor should consult with appropriate legal counsel.

Section 409 ñ Other Schedules and Reports

.01 In addition to the financial schedules, reports and opinions required under an audit in accordance with OMB Circular A-133, the City of Philadelphia under this Audit Guide will require additional information and disclosures. These additional requirements are specified in this section.

Supplementary Financial Schedule

.02 On almost all City of Philadelphia awards the organization is normally required to submit periodic reports of financial and/or program activity. A supplementary schedule of this activity must be presented in the audit report when the total expenditures for a City of Philadelphia contract is $300,000 or more (this is the total amount of assistance expended, whether Federal, State or City funded) and a supplementary schedule is required by a particular City Department as specified in Sections 1000 to 6000 of this Audit Guide.

Section 409 (Cont.)

.03 The type of supplementary schedule to be presented in the audit report depends upon the City of Philadelphia Department providing the award to the organization. For the specific type of supplementary schedule to be presented, the organization and its independent auditor should refer to the appropriate subsection in Sections 1000 to 6000 of this Audit Guide.

.04 When the period of the award from the City of Philadelphia is different than the organization's fiscal year, then the reporting of the supplementary financial information will require special presentation. In such instances the supplementary financial schedule must reflect separate reporting for all contracts in which the organization had activity during the fiscal year. For example, when the organization's fiscal year is March 31 and the City contract award is on a June 30 year, the supplementary schedule must include:

· The financial activity of the award for the period April 1st to June 30th (the last three months of the award which has continued from the prior fiscal year); and

· The financial activity of the new award for the period July 1st to March 31st (the first nine months of the award).

.05 In some instances the supplemental financial schedules will require an auditorís opinion in accordance with the City of Philadelphia, Subrecipient Audit Guide. In other instances the supplemental financial schedules will only require an agreed-upon procedures report on whether the amounts reflected in the schedules are in agreement with the agencyís books of account. The type of report/opinion for a particular City Department is specified in Sections 1000 to 6000.

.06 The auditorís report on the supplemental financial schedules should make specific reference to the audit or agreed-upon procedures having been performed in accordance with the City of Philadelphia Subrecipient Audit Guide and provides an opinion on the fair presentation of the schedule "in relation to" the basic financial statements.

.07 Illustrative reports for both the presentation of an opinion on the supplementary schedule(s) and agreed upon procedures report are presented in Sections 419 and 420, respectively.

Special Purpose Auditor's Report(s)

.08 Certain City of Philadelphia Departments may require the auditor to issue reports in addition to those reports required in Sections 403, 406, 407 and 409.05 of this Audit Guide. Those additional reports, if any, are specified in Sections 1000 to 6000 of this Guide.

.09 An example of these additional reports would be the reports on cost allocations required by the Department of Human Services (Section 2000) and Department of Public Health (Section 6000).

Section 410 - Follow-up of Prior Audit Report Findings

.01 In accordance with Government Auditing Standards (Chapter 4, paragraph 4.10) auditors should follow up on known findings and recommendations from the previous audit that could affect the current financial statement audit. They should do this to determine whether the organization has taken timely and appropriate corrective actions. Auditors should report the status of uncorrected material findings and recommendations from prior audits that affect the current financial statement audit.

.02 Under OMB Circular A-133 and the requirements of the City of Philadelphia, Subrecipient Audit Guide, the organization is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the organization is to prepare a summary schedule of prior audit findings. The summary schedule of prior audit findings shall include the reference numbers the auditor assigns to audit findings. Since the summary schedule may include audit findings from multiple years, it shall include the fiscal year in which the finding initially occurred.

.03 The summary schedule of prior audit findings (prepared by the organization) is to report the status of all audit findings included in the prior audit report. The summary schedule is to also include audit findings reported in the prior audit report except audit findings listed as corrected in accordance with paragraph (1) below, or no longer valid or not warranting further action in accordance with paragraph (4) below.

When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.

When audit findings were not corrected or were only partially corrected, the summary schedule shall describe the planned corrective action as well as any partial corrective action taken.

When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the federal agencyís or a City of Philadelphia departmentís management decision, the summary schedule shall provide an explanation.

When the organization believes the audit findings are no longer valid or do not warrant further action, the reasons for this position shall be described in the summary schedule. A valid reason for considering an audit finding as not warranting further action is that all of the following have occurred:

Two years have passed since the audit report in which the finding occurred was submitted to the federal clearinghouse and to the City of Philadelphia;

The federal agency or the City of Philadelphia is not currently following up with the subrecipient on the audit finding; and

A management decision was not issued.

Section 410 (Cont.)

.04 The auditor is to determine whether the follow-up stated by the organization in the Summary Schedule of Prior Audit Findings accurately reflects the actual action taken by the organization based upon the current audit. Instances where the results of audit follow-up procedures disclosed that the summary of prior audit findings prepared by the organization materially misrepresents the status of prior audit finding, then the auditor needs to note such and present a finding in the Summary Schedule of Findings and Questioned Costs.

Section 411 - Other Information

Table of Contents

.01 All audit reports are to include a Table of Contents including page number references.

Freedom of Information Act

.02 Under the Freedom of Information Act (Public Law 90-23), reports become available for release to the public, once they are accepted, finalized and issued to the City of Philadelphia, to the extent that information contained in them is not subject to exemptions of the Act. Accordingly, the auditor should not include names, social security numbers or other personal identification in either the body of the report or any attached schedules.

Section 412 - Unqualified Opinion on Financial Statements and Supplementary Schedule of Expenditures of Federal, State and City Awards

Independent Auditorís Report

[Addressee]

We have audited the accompanying statement of financial position of (Name of Organization) as of June 30, 19XX, and the related statements of activities and cash flows (1) for the year then ended. These financial statements are the responsibility of (Name of Organization)ís management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of (Name of Organization) as of June 30, 19XX, and the changes in its net assets and its cash flows for the year then ended in conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued our report dated [date of report] on our consideration of (Name of Organization)ís internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants.

Our audit was performed for the purpose of forming an opinion on the basic financial statements of (Name of Organization) taken as a whole. The accompanying schedule of expenditures of federal, state and city awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and the City of Philadelphia Subrecipient Audit Guide, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. (2) (3) (4)

[Signature]

[Date]

Section 412 (Cont.)

(1) If the not-for-profit organization is a voluntary health and welfare organization, this phrase should be modified to read " and the related statements of activities, functional expenses and cash flowsÖ."

When reporting on supplementary information, the auditor should consider the effect of any modifications to the report on the basic financial statements. Further, if the report on supplementary information is other than unqualified, this paragraph should be modified. Guidance for reporting in these circumstances is described in SAS No. 29, Reporting on Information Accompanying the Basic Financial Statements in Auditor Submitted Documents (AICPA, Professional Standards, vol. 1, AU sec. 551, paragraphs 551.09-.11 and 551.13-.14)

(3) This paragraph should be deleted if the schedule of expenditures of federal, state and city awards is not presented with the financial statements (i.e., a separate single audit package is issued). In such circumstance, the required reporting on the schedule may be incorporated in the report issued to meet the requirements of U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and City of Philadelphia Subrecipient Audit Guide. See Sections 417 and 418 and footnotes 2 and 3, respectively, for additional guidance.

(4) If reporting on additional supplementary information, this paragraph should be modified to describe the additional supplementary information. SAS No. 29 (AICPA, Professional Standards, vol. 1, AU sec. 551), provides useful guidance.

Section 413 - Schedule of Expenditures of Federal, State and City Awards

(Name of Organization)

Schedule of Expenditures of Federal, State and City Awards

For the year ended June 30, 19XX

Pass-

Federal Through

Federal Grantor/Pass-Through Grantor CFDA (1) Grantor's (2)

Program Title Number Number Award Period Expenditures

Federal Financial Assistance: (3)

U.S. Department of Health and Human

Services:

Direct Programs:

Mental Health Planning &

Demonstration XX.XXX N/A X/X/XX-X/X/XX $ XXX,XXX

HIV Care Formula XX.XXX N/A X/X/XX-X/X/XX X,XXX

Pass-through Pennsylvania Department

of Public Welfare: (4)

Targeted Assistance Program XX.XXX XXXX X/X/XX-X/X/XX XX,XXX

Pass-through Pennsylvania Department

of Public Welfare/Philadelphia

Department of Public Health: (5)

Mental Health, Community Support

Program XX.XXX XXXX X/X/XX-X/X/XX XXX,XXX

Mental Retardation, MA Waiver XX.XXX XXXX X/X/XX-X/X/XX XX,XXX

Total U.S. Department of

Health and Human Services XXX,XXX

U.S. Department of Housing and Urban

Development:

Direct Program:

Community Development Block Grant XX.XXX N/A X/X/XX-X/X/XX XX,XXX

Pass-through Pennsylvania Department

of Community Affairs/Philadelphia

Office of Housing and Community

Development:

Housing Preservation, Rehab-

ilitation and New Construction XX.XXX XXXX X/X/XX-X/X/XX XXX,XXX

Total U.S. Department of

Housing and Urban

Development XXX,XXX

Total Federal Financial Assistance $ XXX,XXX

See accompanying notes to schedule of expenditures of federal, state and city awards.

Section 413 (Cont.)

(Name of Organization)

Schedule of Expenditures of Federal, State and City Awards (Cont.)

For the year ended June 30, 19XX

(8) Pass-

Federal DCA Through

State Grantor/Pass-Through Grantor CFDA (1) Project Grantor's (2)

Program Title Number Number Number Award Period Expenditures

State Financial Assistance:

Pennsylvania Department

of Public Welfare:

Direct Program: (6)

Mental Health Impatient

Services N/A XXXX X/X/XX-X/X/XX $ XXX,XXX

Pass-through Philadelphia

Department of Public

Health:

Mental Health, Community

Support Program N/A XXXX X/X/XX-X/X/XX XXX,XXX

Total Pennsylvania

Department of Public

Welfare XXX,XXX

Pennsylvania Department of

Community Affairs:

Direct Program:

Neighborhood Reconstruction N/A XXXX XXXX X/X/XX-X/X/XX X,XXX

Pass-through Philadelphia

Office of Housing and

Community Development:

Housing Preservation,

Rehabilitation and New

Construction N/A XXXX XXXX X/X/XX-X/X/XX XXX,XXX

Total Pennsylvania

Department of

Community Affairs XXX,XXX

Total State Financial

Assistance $ XXX,XXX

See accompanying notes to schedule of expenditures federal, state and city awards.

Section 413 (Cont.)

(Name of Organization)

Schedule of Expenditures of Federal, State and City Awards (Cont.)

For the year ended June 30, 19XX

Pass-

Federal Through

CFDA (1) Grantor's (2)

City Grantor/Program Title Number Number Award Period Expenditures

City Financial Assistance: (7)

Philadelphia Department of Public

Health:

Mental Health Community Support

Program N/A XXXX X/X/XX-X/X/XX $ XX,XXX

Mental Retardation, MA Waiver N/A XXXX X/X/XX-X/X/XX XX,XXX

Total Philadelphia Department

of Public Health XX,XXX

Philadelphia Office of Housing and

Community Development:

Housing Preservation, Rehabilitation

and New Construction N/A XXXX X/X/XX-X/X/XX X,XXX

Total Philadelphia Office

of Housing and Community

Development X,XXX

Total City Financial Assistance $ XX,XXX

Total Federal, State and City

Financial Assistance $ XXX,XXX

See accompanying notes to schedule of expenditures of federal, state and city awards.

(1) Catalog of Federal Domestic Assistance

Accrued expenditures in accordance with the requirements of Sections 404.10 and 404.11 of this Audit Guide.

(3) All federal financial assistance by federal department providing the financial assistance, with sub-totals by federal department. The listing should differentiate between direct awards and pass-through awards.

Section 413 (Cont.)

(4) Federal awards received by the organization directly from the Commonwealth of Pennsylvania.

(5) Federal awards received by the organization from the City of Philadelphia either indirectly from the State to the City or from the Federal government to the City.

(6) This Audit Guide is not requiring a single audit of state financial assistance received directly from the Commonwealth of Pennsylvania. However, if there is such assistance and it is not reported, the auditor should appropriately disclose this information in the notes to this schedule. (See Section 414).

(7) This part of the schedule should list City general revenue funding of awards by City department.

(8) For all contract awards funded through the Department of Community Affairs (DCA) of the Commonwealth of Pennsylvania, the auditor is required by DCA to provide the DCA Project Number. This should be obtained on direct program awards on the award agreement or on pass-through awards from the Office of Housing and Community Development (OHCD) of the City of Philadelphia by contacting OHCD.

Section 414 - Notes to Schedule of Expenditures of Federal, State and City Awards

The following represents sample notes to the Schedule of Expenditures of Federal, State and City Awards.

(Name of Organization)

Notes to Schedule of Expenditures of Federal, State and City Awards

Year ended June 30, 19XX

1. General Information:

The accompanying schedule of expenditures of federal, state and city awards presents the activities in all the federal, state and city financial assistance programs of (Name of Organization). All financial assistance received directly from federal, state or city agencies as well as financial assistance passed through other governmental agencies or not-for-profit organizations are included on the schedule. (1)

2. Basis of Accounting:

The accompanying schedule of expenditures of federal, state and city awards is presented using the accrual basis of accounting. The amounts reported in this schedule as expenditures may differ from certain financial reports submitted to federal, state or city funding agencies due to those reports being submitted on either a cash or modified accrual basis of accounting.

3. Relationship to Basic Financial Statements:

Federal, state and city awards expenditures are reported on the statement of functional expenses as program services. In certain programs, the expenditures reported in the basic financial statements may differ from the expenditures reported in the schedule of federal, state and city awards due to program expenditures exceeding grant or contract budget limitations which are not included as federal, state and city awards.

4. Subrecipient Funding:

A portion of the contract awards received from (Name of Grantor), as reflected in the accompanying schedule of expenditures of federal, state and city awards, was subcontracted to the following organizations:

Subrecipient Name Subrecipient Expenditures

(1) State financial assistance awards not received from the City of Philadelphia are not a required part of an audit in accordance with the City of Philadelphia Subrecipient Audit Guide. Where such state financial assistance is not reflected in the schedule of expenditures of federal, state and city awards, this paragraph should be appropriately modified. Those state financial assistance awards not audited should be disclosed.

Section 415 - Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

[No Reportable Instances of Noncompliance and No Material Weaknesses (No Reportable Conditions Identified)]

[Addressee]

We have audited the financial statements of (Name of Organization) as of and for the year ended June 30, 19XX, and have issued our report thereon dated September 15, 19XX (1). We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Compliance

As part of obtaining reasonable assurance about whether (Name of Organization)ís financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. (2)

Internal Control Over Financial Reporting

In planning and performing our audit, we considered (Name of Organization)ís internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. (3)

This report is intended for the information of the audit committee, management and federal, state and city awarding agencies and pass-through entities. (4) However, this report is a matter of public record and its distribution is not limited.

[Signature]

[Date]

Section 415 (Cont.)

Describe any departure from the standard report (e.g., qualified opinion, modification as to consistency due to change in accounting principle, reference to the report of other auditors, etc.)

If the auditor has issued a separate letter to management to communicate matters that do not meet the criteria for reporting in paragraph 5.18 of Government Auditing Standards, this paragraph should be modified to include a statement such as the following:

However, we noted certain immaterial instances of noncompliance that we have reported to management of (Name of Organization) in a separate letter dated September 15, 19XX.

If the auditor has issued a separate letter to management to communicate other matters involving the design and operation of the internal control over financial reporting, this paragraph should be modified to include a statement such as the following:

However, we noted other matters involving the internal control over financial reporting that we have reported to management of (Name of Organization) in a separate letter dated September 15, 19XX.

If this report is issued for an audit that is not subject to U.S. Office of Management and Budget Circular A-133, this sentence should be modified as follows:

This report is intended for the information of the audit committee, management and [specify legislative or regulatory body].

Section 416 - Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

[Reportable Instances of Noncompliance and Reportable Conditions Identified]

[Addressee]

We have audited the financial statements of (Name of Organization) as of and for the year ended June 30, 19XX, and have issued our report thereon dated September 15, 19XX. (1) We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Compliance

As part of obtaining reasonable assurance about whether (Name of Organization)ís financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance that are required to be reported under Government Auditing Standards which are described in the accompanying schedule of findings and questioned costs as items [List related finding reference numbers] (2)

Internal Control Over Financial Reporting

In planning and performing our audit, we considered (Name of Organization)ís internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect (Name of Organization)ís ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. Reportable conditions are described in the accompanying schedule of findings and questioned costs as items [List related finding reference numbers].

A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness. (3) (4)

Section 416 (Cont.)

This report is intended for the information of the audit committee, management and federal, state and city awarding agencies and pass-through entities. (5) However, this report is a matter of public record and its distribution is not limited.

[Signature]

[Date]

Describe any departure from the standard report (e.g., qualified opinion, modification as to consistency due to change in accounting principle, reference to the report of other auditors, etc.)

We also noted certain immaterial instances of noncompliance that we have reported to management of (Name of Organization) in a separate letter dated September 15, 19XX.

If conditions believed to be material weaknesses are disclosed, the report should identify the material weaknesses that have come to the auditorís attention. The last sentence of this paragraph should be replaced with language such as the following:

However, of the reportable conditions described above, we consider items [List related finding reference numbers] to be material weaknesses.

We also noted other matters involving the internal control over financial reporting that we have reported to management of (Name or Organization) in a separate letter dated September 15, 19XX.

If this report is issued for an audit that is not subject to U.S. Office of Management and Budget Circular A-133, this sentence should be modified as follows:

This report is intended for the information of the audit committee, management and [specify legislative or regulatory body].

Section 417 ñ Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133
[Unqualified Opinion on Compliance and No Material Weaknesses (No Reportable Conditions Identified)]

[Addressee]

Compliance

We have audited the compliance of (Name of Organization) with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 19XX. (Name of Organization)ís major federal programs are identified in the summary of auditorís results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of (Name of Organization)ís management. Our responsibility is to express an opinion on (Name of Organization)ís compliance based on our audit.

We conducted our audit of compliance in accordance with generally accepted auditing standards; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about (Name of Organization)ís compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on (Name of Organization)ís compliance with those requirements.

In our opinion, (Name of Organization) complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 19XX. However, the results of our auditing procedures disclosed instances of noncompliance with those requirements that are required to be reported in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and questioned costs as items [List related finding reference number]. (1)

Internal Control Over Compliance

The management of (Name of Organization) is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered (Name of Organization)ís internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133.

Section 417 (Cont.)

Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. (2)

This report is intended for the information of the audit committee, management and federal awarding agencies and pass-through entities. However, this report is a matter of public record and its distribution is not limited.

[Signature]

[Date]

When there are no such instances of noncompliance identified in the schedule of findings and questioned costs, the last sentence should be omitted.

(2) As noted in footnote 3 in Section 412, there may be instances where it would be appropriate to report on the schedule of expenditures of federal, state and city awards in this report (i.e., a separate single audit package is issued). In such a circumstance, a new section should be added immediately following this paragraph as follows:

Schedule of Expenditures of Federal, State and City Awards

We have audited the basic financial statements of (Name of Organization) as of and for the year ended June 30, 19XX, and have issued our report thereon dated September 15, 19XX. Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying schedule of expenditures of federal, state and city awards is presented for purposes of additional analysis as required by OMB Circular A-133 and the City of Philadelphia Subrecipient Audit Guide and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

Section 418 - Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133

[Qualified Opinion on Compliance and Reportable Conditions Identified]

[Addressee]

Compliance

As described in item [List related finding reference number] in the accompanying schedule of findings and questioned costs, (Name of Organization) did not comply with requirements regarding [identify type(s) of compliance requirement] that are applicable to its [identify major federal program]. Compliance with such requirements is necessary, in our opinion, for (Name of Organization) to comply with requirements applicable to that program.

In our opinion, except for the noncompliance described in the preceding paragraph, (Name of Organization) complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 19XX. (1)

Internal Control Over Compliance

Section 418 (Cont.)

We noted certain matters involving the internal control over compliance and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over compliance that, in our judgment, could adversely affect (Name of Organization)ís ability to administer a major federal program in accordance with applicable requirements of laws, regulations, contracts and grants. Reportable conditions are described in the accompanying schedule of findings and questioned costs as items [List related finding reference numbers].

A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily

disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness. (2) (3)

[Signature]

[Date]

When other instances of noncompliance are identified in the schedule of findings and questioned costs as required by OMB Circular A-133, the following sentence should be added:

The results of our auditing procedures also disclosed other instances of noncompliance with those requirements that are required to be reported in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and questioned costs as items [List related finding reference number].

(2) If conditions believed to be material weaknesses are disclosed, the report should identify the material weaknesses that have come to the auditorís attention. The last sentence of this paragraph should be replaced with language such as the following:

However, of the reportable conditions described above, we consider items [List related finding reference number] to be material weaknesses.

Section 418 (Cont.)

(3) As noted in footnote 3 in Section 412, there may be instances where it would be appropriate to report on the schedule of expenditures of federal, state and city awards in this report (i.e., a separate single audit package is issued). In such a circumstance, a new section should be added immediately following this paragraph as follows:

Schedule of Expenditures of Federal, State and City Awards

We have audited the basic financial statements of (Name of Organization) as of and for the year ended June 30, 19XX, and have issued our report thereon dated September 15, 19XX. Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying schedule of expenditures of federal, state and city awards is presented for purposes of additional analysis as required by OMB Circular A-133 and the City of Philadelphia Subrecipient Audit Guide and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

Section 419 - Independent Auditor's Opinion on Supplementary Financial Schedules Required by Sections 1000 to 6000

[Addressee]

We have audited the financial statements of (Name of Organization) for the year ended June 30, 19XX, and have issued our report thereon dated September 15, 19XX. These financial statements are the responsibility of (Name of Organization) management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States; and the City of Philadelphia Subrecipient Audit Guide. Those standards and the City of Philadelphia Subrecipient Audit Guide require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Our audit was made for the purpose of forming an opinion on the basic financial statements of (Name of Organization) taken as a whole. The accompanying (specify appropriate financial schedule(s) as required by Sections 1000 to 6000) is presented for purposes of additional analysis and is not a required part of the basic financial statements. The information in that schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly presented in all material respects in relation to the basic financial statements taken as a whole.

(Signature)

(Date)

Section 420 - Agreed-Upon Procedures Report on Supplementary Financial Schedules Required by Sections 1000 to 6000

[Addressee]

We have applied certain agreed-upon procedures, as discussed below, to the financial schedules and reports listed below of the (Name of Organization) for the year ended June 30, 19XX, solely to assist you in complying with the requirements of the City of Philadelphia Subrecipient Audit Guide. These agreed-upon procedures have been performed in conjunction with, and in addition to, our audit of the (Name of Organization) as of and for the year ended June 30, 19XX on which we have issued our report dated September 15, 19XX. It is understood that this report is solely for the use of management and the City of Philadelphia, (specify City Department(s)) and should not be used for any other purpose. This restriction is not intended to limit the distribution of this report which, upon acceptance by the City of Philadelphia, (specify City Department(s)) is a matter of public record. Our procedures and findings are as follows:

a. We have applied procedures to determine whether the amounts presented in the schedules listed below are in agreement with the amounts recorded in the books of account of the (Name of Organization) for the year ended June 30, 19XX.

City of Philadelphia Contract Schedule

Department Number Reference

(List each supplemental schedule by City of Philadelphia award)

(Specify in detail as to any differences noted between those amounts as reflected in the schedules and in the books of account.)

b. We inquired of management regarding any adjustment to the amounts reflected in the supplementary schedules identified in item a. above. These inquires disclosed the following adjustments: (1)

(Detail any adjustments, or if required by Section 1000 to 6000 of this Audit Guide provide reference to a supplementary schedule of adjustments.)

Because the above procedures do not constitute an audit conducted in accordance with generally accepted auditing standards; Government Auditing Standards issued by the Comptroller General of the United States; and the City of Philadelphia Subrecipient Audit Guide, we do not express an opinion on any of the financial schedules referred to above. In connection with the procedures referred to above, no matters came to our attention that caused us to believe that the specified amounts should be adjusted. (2) Had we performed additional procedures or had we conducted an audit of the financial schedules in accordance with generally accepted auditing standards;

Section 420 (Cont.)

Government Auditing Standards; and the City of Philadelphia Subrecipient Audit Guide, matters might have come to our attention that would have been reported to you. This report relates only to the financial schedules referred to above and does not extend to any other financial statements of (Name of Organization), taken as a whole.

(Signature)

(Date)

(1) If there were no adjustments, then this sentence should read:

These inquiries disclosed no adjustments.

(2) Where certain matters came to the auditor's attention which are disclosed in the preceding paragraphs of the report, then this sentence should have the following phrase added:

..., other than those deficiencies noted in items a. and b. above.

Section 421 - Sample Schedule of Findings and Questioned Costs

(Name of Organization)

Schedule of Findings and Questioned Costs

For the year ended June 30, 19XX

Summary of Auditorís Results:

The auditorís report issued on the basic financial statements of (Name of Organization) was an (unqualified opinion, qualified opinion, adverse opinion or disclaimer of opinion).

Reportable conditions in internal control, based upon an audit in accordance with Government Auditing Standards, were disclosed by the audit of the financial statements. (1). Certain conditions numbered (List related finding reference number) were deemed to be material weaknesses. (2)

The audit disclosed compliance findings (List related finding reference number) which are material to the financial statements based upon an audit in accordance with Government Auditing Standards.

(or)

The audit disclosed no instances of noncompliance which are material to the financial statements in accordance with Government Auditing Standards.

Reportable conditions in internal control over major programs, based upon an audit in accordance with OMB Circular A-133, were disclosed. (1) Certain conditions numbered (List related finding reference number) were deemed to be material weaknesses. (2)

The auditorís report issued on compliance for major programs was an (unqualified opinion, qualified opinion, adverse opinion, or disclaimer or opinion).

The audit disclosed compliance findings which are required to be reported under the provisions of OMB Circular A-133.

(or)

The audit did not disclose any compliance findings which are required to be reported under the provisions of OMB Circular A-133.

Section 421 (Cont.)

The following federal programs were designated as major programs:

Federal Agency/ Federal Pass-through

Pass through CFDA Entityís Federal

Entity Number Award Number Expenditures

The dollar threshold used to distinguish between Type A and Type B programs (as specified in Section 520(b) of OMB Circular A-133 was $300,000 (4).

The (Name of Organization) did or did not qualify as a low-risk auditee.

Summary of Findings Relating to Government Auditing Standards: (3)

Finding Summary Finding Reference

(Provide a brief description on the (Provide applicable finding reference

finding) number)

Summary of Findings and Questioned Costs Related to Federal, State and City Awards: (3)

Finding Questioned Costs

Finding Summary Reference Amount

(Provide a brief description (Provide applicable (If a dollar amount

on the finding) finding reference related to finding

number) provide total amount)

If there are no reportable conditions this statement should be eliminated.

If the reportable conditions are not material weaknesses, then the following statement should be included.

None of the conditions were deemed to be material weaknesses.

If there are no findings this section should be eliminated.

(4) Specify higher amount if total federal awards exceeded $10,000,000.

(Name of Organization)

Schedule of Findings and Questioned Costs

For the year ended June 30, 19XX

Questioned Costs

CFDA Award Federal State City

Finding Description Program Name Number Number Total Share Share Share

1. Indirect Costs Claimed in Excess of Allowable ABC Program XX.XXX XX-XXX $ 20,337 $15,253 $3,051 $2,033

Condition:

The (Name of Organization) invoiced the City

of Philadelphia, Department of (specify City

Department) for $20,337 of indirect costs in

excess of the amount allowable. The

questioned costs resulted from the Organi-

zation misclassifying equipment costs as

materials and supplies and therefore utilizing

equipment costs in the calculation of indirect

costs, which is not allowable, as follows:

Total allowable direct costs $ 862,260

Indirect cost rate 13.93%

Allowable indirect costs 120,113

Less: indirect costs billed to City 140,450

Difference - questioned costs $ 20,337

Cause:

Fiscal personnel at the Organization were unaware

of the misclassification of equipment costs to the

materials and supplies expense account.

Effect:

The (Name of Organization) overbilled the City of

Philadelphia $20,337 of indirect costs.

(Name of Organization)

Schedule of Findings and Questioned Costs (Cont.)

For the year ended June 30, 19XX

Questioned Costs

CFDA Award Federal State City

Finding Description Program Name Number Number Total Share Share Share

1. (Cont.)

Criteria:

OMB Circular A-122, Attachment A, Subsection

D(2)(b) excludes capital expenditures from the

computation of indirect costs.

Recommendation:

We recommend that the (Name of Organization) remit

the overbilled amount of $20,337 to the City of Philadelphia.

2. Lack of Time and Attendance Records XYZ Program XX.XXX XX-XXX $ 21,254 $ 5,314 $ 15,940 $ -0-

Condition:

We are questioning $21,254 of salaries and

wages and related fringe benefits for the

job position of the Assistant Project Co-

ordinator, because time and attendance

records were not maintained for the individual.

The time and attendance records are

necessary to substantiate the costs charged

to this award since only 53% of the total

individual's time was charged to the award.

(Name of Organization)

Schedule of Findings and Questioned Costs (Cont.)

For the year ended June 30, 19XX

Questioned Costs

CFDA Award Federal State City

Finding Description Program Name Number Number Total Share Share Share

2. (Cont.)

Calculation of questioned costs as follows:

Total salaries and wages

charged to the award $ 17,280

Plus: applicable fringe benefits

(calculated at 23% of salaries and

wages) 3,974

Total $ 21,254

Cause:

The individual whose time and attendance was not

available was a new employee who did not get

instructions on the requirement of submitting

a time record.

Effect:

Salaries and wages costs were incurred in the

operation of the program, the propriety of which

cannot be determined since documentation in the

form of a time and attendance records is not

available.

(Name of Organization)

Schedule of Findings and Questioned Costs (Cont.)

For the year ended June 30, 19XX

Questioned Costs

CFDA Award Federal State City

Finding Description Program Name Number Number Total Share Share Share

2. (Cont.)

Criteria:

OMB Circular A-122 Attachment B, under

item 6 "Compensation for Personnel Services,

Subsection L "Support of Salaries and Wages"

requires that:

- Reports reflecting the distribution of activity

of each employee must be maintained for

all staff members (professionals and non-

professionals) whose compensation is charged

in whole or in part, directly to awards.

- The reports must reflect an after-the-fact

determination of the actual activity of each

employee. Budget estimates do not

qualify as support for charges to award.

- The reports must be signed by the individual

employee, or by a responsible supervisory

official having first hand knowledge of the

activities performed by the employee.

- The reports must be prepared at least monthly

and must coincide with one or more pay periods.

- The reports must indicate the total number

of hours worked each day by each employee.

(Name of Organization)

Schedule of Findings and Questioned Costs (Cont.)

For the year ended June 30, 19XX

Questioned Costs

CFDA Award Federal State City

Finding Description Program Name Number Number Total Share Share Share

2. (Cont.)

Recommendation:

We recommend that the (Name of Organization)

obtain adequate alternate documentation to

support the allocation of the 53% allocation of

time. In the future a time record of actual hours

expended by program should be prepared and

maintained.

3. Excessive Cash Balances CBA Program XX.XXX XXXX -0-

Condition:

The (Name of Organization) drew down advance

funding via letters of credit in excess of immediate

cash needs and did not deposit such funds in an

interest bearing account, as follows:

Date of Advance Funds Excess

Drawdown Amount Utilized Funds

3/19/XX $ 450,000 $ 200,000 $ 250,000

5/16/XX 375,000 260,000 115,000

Cause:

The Organization's fiscal personnel were under the

assumption that such interest income could be

utilized for the benefit of the program without

reporting the amount to the City of Philadelphia.

(Name of Organization)

Schedule of Findings and Questioned Costs (Cont.)

For the year ended June 30, 19XX

Questioned Costs

CFDA Award Federal State City

Finding Description Program Name Number Number Total Share Share Share

(Cont.)

Effect:

As a result of the above the federal government

had $365,000 of idle funds, which based upon

interest rates during that period, resulted in lost

interest income of $1,200.

Criteria:

OMB Circular A-110, Attachment F, paragraph

2(e), requires the recipient of federal funds

advanced by the letter-of-credit method to make

drawdowns as close as possible to the time of

making disbursements.

Recommendation:

We recommend that the $1,200 be deducted against

the next drawdown of funds.

(Name of Organization)

Schedule of Findings and Questioned Costs (Cont.)

For the year ended June 30, 19XX

Questioned Costs

CFDA Award Federal State City

Finding Description Program Name Number Number Total Share Share Share

4. Missing Documentation TAL Program N/A XXX-XXX $12,400 $10,000 $2,400 $ -0-

Condition:

We are questioning $12,400 of equipment costs

because the (Name of Organization) could not

provide to us supporting documentation, in the

form of a vendor's invoice, for the following items:

Equipment Purchase Date No. Amount

(3) Computers 4/20/XX 103 $10,323

(4) Office Desks and

(4) Chairs 5/1/XX 137 2,077

Total $12,400

The above missing invoices were the only items

not provided to us as part of an audit sampling

of 50 transactions.

Cause:

The vendor invoices were apparently misfiled, and

cannot be located.

Effect:

Program costs were incurred which the Organization

could not provide documentation as to the propriety

of the expenditure.

(Name of Organization)

Schedule of Findings and Questioned Costs (Cont.)

For the year ended June 30, 19XX

Questioned Costs

CFDA Award Federal State City

Finding Description Program Name Number Number Total Share Share Share

4. (Cont.)

Criteria:

OMB Circular A-110, Attachment F (2)(g)

requires accounting records to be supported by

source documentation.