Preparing for an Inspector General audit

Abstract

A successful audit starts with having strong financial management systems in place, avoiding common pitfalls, and being prepared when the auditor knocks on the door. Community HealthCorps survived an Inspector General audit and shared lessons learned from the experience during the 2005 AmeriCorps*Direct Best Practices Conference in Nashville, Tennessee. This effective practice is excerpted from the Community HealthCorps' resource Don't Be Afraid of the Big, Bad Audit

Issue

As stewards of federal dollars, national service programs are entrusted to use the resources allocated to them prudently and in accordance with all rules and regulations. Audits are one way to prevent and detect fraud and abuse, and programs that do not follow financial requirements can face penalties or debarment. However necessary, going through an audit can be time-consuming and stressful for programs that are unprepared.

Action

Don't wait until you're informed of an upcoming audit to become prepared. Actions you can take now:

Have systems and procedures to account for federal assistance before receiving your grant award.
Set up your financial systems to record operating costs separately from grant costs and record costs separately for each grant.
Be familiar with which OMB Circulars apply to you.

Once you're notified of an upcoming audit:

Invite key participants, including your audit firm, to the entrance conference.
Confirm duration of the auditor's fieldwork.
Assign staff support for auditor requests.
Request regular staff briefings.
Review logistical and administrative matters such as your office work hours, availability, and how to request documents and communication.

After the field work is completed:

Invite key participants to the exit conference.
Receive a summary of deficiencies in a draft report.
Continue to gather information and address deficiencies.
Submit initial response within 30 days.

The scope of the audit will usually include the three most recently completed years of the program. The auditor will be reviewing the parent organization's internal controls, program expenses including grantee match, and sub-grantee selection and monitoring. At the subgrantee/program level, the auditor will be reviewing internal controls, member or volunteer records, program expenses including grantee match, and allowable activities.Common audit findings:

lack of written policies and procedures
lack of segregation of duties
lack of proper timekeeping systems
missing timesheets or activity reports
timesheets are based on budgeted figures instead of actual time
insufficient member records
inadequate tracking of member hours
lack of supporting documentation for required match
financial Status Reports not reconciled to the General Ledger
misclassification of expenses

Context

Community HealthCorps is a partnership of the National Association of Community Health Centers, the Corporation for National and Community Service, and eighteen community health centers across the country. AmeriCorps members reach out to the medically underserved and provide outreach and support services for low-income families. The Community HealthCorps underwent an Inspector General audit from September 2004 to December 2004.

Citation

Patnosh, Josh. Don't Be Afraid of the Big, Bad Audit. Community HealthCorps. April 19, 2005.

Outcome

The Inspector General Audit of Community Health Corps' AmeriCorps program went smoothly for the auditors and Community Health Corps staff. The success of the audit prompted Community Health Corps to be selected as a presenter on surviving an audit at the 2005 AmeriCorps*Direct Best Practices Conference.