SECTION 500

 

AUDITING AND REPORTING STANDARDS AND REQUIREMENTS - PROGRAM AUDIT ON AN AWARD (NON SINGLE AUDIT)

 

 

Section 501 - Background

 

.01 Under the provisions of this Audit Guide, the organization may have to engage their auditor to have an audit on an individual City of Philadelphia program award rather than a "single audit", as described in Section 300 of this Guide.

 

.02 A program audit would be required where the provisions of Office of Management and Budget (OMB) Circular A-133 when the subrecipient organization receives Federal financial assistance of $300,000 or more during the organizationís fiscal year directly or indirectly from the City of Philadelphia and expends those funds under only one Federal program.

 

.03 The program audit must be conducted in accordance with certain provisions of this Audit Guide as specified in Section 503, and in accordance with Government Auditing Standards. The type of audit being performed on the City of Philadelphia program in accordance with Government Auditing Standards (GAS) is a financial related audit, defined on page 13 of GAS, as follows:

 

Financial related audits include determining whether (1) financial information is presented in accordance with established or stated criteria, (2) the entity has adhered to specific financial compliance requirements, or (3) the entity's internal control structure over financial reporting and/or safeguarding assets is suitably designed and implemented to achieve the control objectives.

 

Financial related audits may include, as detailed in item 2.5a. on page 13 of GAS, an audit of:

 

Segments of financial statements; financial information (for example, statement of revenue and expenses, statements of cash receipts and disbursements, ...); budget requests, and variances between estimated and actual financial performance.

 

 

Section 502 - Audit Period

 

.01 All program audits are be performed on an annual basis based upon the organization's fiscal year.

 

Section 503 - Auditing Requirements

 

.01 When performing a program audit, the auditor is required to adhere to certain sections of this Audit Guide. The following is a listing of those sections the auditor is required to utilize in performance of the program audit:

 

Section 503 (Cont.)

 

Section Section No. Reference

No. Section and Subsection Heading Applicable to Program Audit

 

100 Administration and Overview Entire Section

 

200 Summary of Applicable Literature Entire Section

 

300 General Auditing Standards and Requirements

 

· Introduction 301.01 to 301.04

 

· Working Papers 302.01 to 302.04

 

· Planning 303.01 to 303.06

 

· Testing of Compliance with Laws and

Regulations 304.01 to 304.07

 

· Auditing Requirements 306.01 to 306.25

 

· Audit Sampling 307.01 to 307.05

 

· Questioning of Costs 308.01 to 308.05

 

· Subrecipient Requirements 309.01 to 309.05

 

· Disclosure of Possible Fraud, Irregularities

and Other Illegal Acts 310.01 to 310.05

 

· Follow-up of Prior Audit Report Findings 311.01 to 311.04

 

· Written Representations from Management 312.01 to 312.05

 

· Exit Conference 313.01 to 313.02

 

1000 Commerce Department Entire Section

 

2000 Human Services Department Entire Section

 

3000 Mayor's Office of Community Services Entire Section

 

4000 Office of Housing and Community

Development Entire Section

 

5000 Offices of Services to the Homeless and

Adults Entire Section

 

6000 Public Health Department Entire Section

 

Section 503 (Cont.)

 

.02 As the above chart indicates most of the required procedures specified in this Audit Guide are applicable to a program audit. The only procedures not applicable generally relate to a single audit.

 

 

Section 504 - Reporting Requirements

 

.01 When performing a program-specific audit under the requirements of this Audit Guide, the audit report should include the following:

 

a. Financial Statements:

 

· A schedule of expenditures of federal, state and city awards.

 

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

 

· Notes to the financial schedules.

 

b. Independent Auditor's Reports:

 

· Independent auditor's opinion on the Schedule of Expenditures of Federal, State and City Awards and supplementary schedule(s) required by this Audit Guide. (In certain instances an audit report is not required on supplementary schedules required by a particular City of Philadelphia Department, but rather, an agreed-upon procedures report).

 

· Independent auditor's report on compliance and internal control over financial reporting based on an audit of financial statements performed in accordance with Government Auditing Standards.

 

· Independent auditor's report on compliance with requirements applicable to major program and internal control over compliance in accordance with OMB Circular A-133.

 

c. Other Schedules and Reports:

 

· Special purpose auditor's reports required by a City of Philadelphia Department as specified in Sections 1000 to 6000.

 

· Schedule of findings and questioned costs.

 

· Schedule of prior audit findings.

 

 

Section 504 (Cont.)

 

· Separate communication of nonmaterial compliance findings and a management letter.

 

· Report on illegal acts, if any.

 

.02 The above report requirements, in most instances would cover one City of Philadelphia contract award. In some instances one federal program could contain "cluster of programs" (as defined in OMB Circular A-133, Subpart A, Section 105) which may have multiple City of Philadelphia contract awards. Where there are multiple awards being reported upon for the same or different City of Philadelphia Department(s), the contract awards are to be combined in one audit report. This combined report must, however, still disclose separate financial information in the basic financial statements and any supplementary schedules by each contract award for each City of Philadelphia department.

 

Financial Statements

 

.03 The program audit report shall include the following financial statements on each City of Philadelphia award audited:

 

a. A Schedule of Expenditures of Federal, State and City Awards. This schedule (as illustrated in Section 505) requires information by award for the expenditures of federal, state or city funding. 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 and the city is requiring separate information on the state and city funded portions of the award. 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 statement under federal award, with a footnote that the delineation by federal, state or city funding is not determinable.

 

The expenditures reported on this statement 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 this statement and the Supplementary Schedule are both based upon the organization's books and records, as audited by the independent auditor.

 

b. Supplementary financial schedules. On almost all City of Philadelphia awards the organization will be required to submit periodic reports of financial and/or program activity. Under the requirements of this Audit Guide a supplementary schedule of this activity (if required) must be presented in the audit report. 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.

 

 

Section 504 (Cont.)

 

 

  1. Notes to financial statements. The notes to the above statements which describe the significant accounting policies utilized in preparing the statements along with any other relevant information.

 

Independent Auditor's Report on Schedule of Expenditures of Federal, State and City Awards Financial Statements and Supplementary Financial Schedules

 

.04 This Audit Guide requires the auditor to express an opinion about whether the financial statements relating to the program award being audited are presented fairly in all material respects in conformity with the stated accounting policies.

 

.05 For an organization to comply with this Audit Guide, it is not necessary that the financial statements be presented in conformity with GAAP; it is sufficient if the auditor merely reports on such conformity in accordance with GAAS, Government Auditing Standards and the City of Philadelphia Subrecipient Audit Guide. For various reasons, such as to comply with reporting of program expenditures in accordance with contract award conditions, the organization may prepare their financial statements on a basis of accounting other than GAAP. When this is the case, the auditor's report should be prepared in accordance with SAS No. 62, Special Reports (AICPA, Professional Standards, Vol. 1, AU Sec. 623), which requires that it include a paragraph that (a) states the basis of presentation and refers to the note to the financial statements describing the basis and (b) states that the basis of presentation is a comprehensive basis of accounting other than GAAP.

 

.06 In addition to the opinion on the financial statements of the program being audited, the auditor's report should also include an opinion on any supplementary financial schedules included in the report as required by Sections 1000 to 6000 of this Audit Guide when an opinion is required. Certain City of Philadelphia Departments only require an agreed-upon procedures report. Whether the City of Philadelphia Department requires an opinion or an agreed-upon procedures report is specified in Sections 1000 to 6000 of this Audit Guide. The agreed-upon procedures report is presented in Section 420.

 

.07 The auditor must state in the auditorís report that the audit was conducted in accordance with the City of Philadelphia Subrecipient Audit Guide. The appropriate language for the report is currently being developed by the AICPA. The auditor, when issuing a program specific audit report to the City of Philadelphia should follow the directives issued by the AICPA.

 

Auditorís Reports on Compliance and Internal Control

 

.08 The appropriate language for the reports are currently being developed by the AICPA. The auditor, when issuing a program specific audit report to the City of Philadelphia should follow the directives issued by the AICPA.

 

Section 504 (Cont.)

 

Other Schedules and Reports

 

.09 The other types of schedules and reports listed in Section 504.03b., have been previously discussed in Sections 408 to 410 of this Audit Guide. Listed below are the appropriate provisions of Sections 408 to 410 that are applicable to a program audit.

 

Section No. Reference

Schedule and/or Report Applicable to Program Audit

 

Special Purpose Auditor's Report 409.08 and 409.09

 

Presentation of Findings and

Questioned Costs 408.01 to 408.10

 

Separate Written Communications

on Findings/Management Letter 408.11 and 408.12

 

Reporting on Illegal Acts 408.13 and 408.14

 

Follow-up of Prior Audit Report Findings 410

 

Other Information

 

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

 

.11 In accordance with the principles of the Freedom of Information Act (Public Law 90-23), reports, once they are accepted, finalized and issued to the City of Philadelphia are available, if they are requested, to members of the press and the general public, 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 505 ñ 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

 

 

Federal

CFDA (1) (2)

Award Number/Funding Source Number Award Period Expenditures

 

Contract No. 93-5000:

 

· Federal Funding:

 

U.S. Department of Health and

Human Services XX.XXX 7/1/XX-6/30/XX $ XX,XXX

 

· State Funding:

 

Pennsylvania Department of

Public Welfare N/A 7/1/XX-6/30/XX XX,XXX

 

· City Funding:

 

Philadelphia Department of

Public Health N/A 7/1/XX-6/30/XX X,XXX

 

Total $ XX,XXX

 

See accompanying notes to these financial statements.

 

 

(1) Catalog of Federal Domestic Assistance.

 

(2) Accrued expenditures in accordance with the requirements of Section 504.03 of this Audit Guide.