2) Prepared By Client List.
The PBC list is the auditor’s list of documents it requires before the engagement. As noted
below, this list can be long, so make sure you set aside adequate time to put together the
do
cuments for the auditors.
When you think about what you need to do to be “audit ready” you can start with this list
below. The trainer recommends reconciling and preparing support documentation for each
account on the Statement of Net Position each month. If the Tribe/TDHE completes this
activity every month their books are going to be in order as the PBC list requires support
documents for many of the balance sheet accounts.
T
he items listed below are included in a typical PBC list for a client with a December 31,
year-end:
1. Planning:
a) A comparative trial balance, with balances at 12/31//2017 and 12/31/2018. – Excel
b) A PDF list of the 2018 Board members.
c
) Electronic copies of the Board minutes for the year under audit through the
scheduled date of the fieldwork.
d) Copies of budgets for the year.
e) Detailed memo regarding any outstanding legal issues we should be aware of
inc
luding the name and address of any attorneys which provided legal services
during the year.
f) Short memo regarding any change in operations from the prior year, e.g., any
additional grants received, or grants whic
h are no longer available to the
organization, any
increase or decrease in operations of the organization.
2. Cash:
a) PDF copies of December 31, 2018 bank statements and reconc
iliations.
b) PDF copies of January 31, 2018 bank statements.
c
) PDF copies of collateralization agreements and December 31 collateral statement, if
applicable.
3. Investments - (If The Tribe/TDHE Is
Approved To Invest IHBG Funds):
a) Schedule detailing all investment activity (sales, purchases, income, etc.) for the year
ended December 31, 2018 – Excel
b) PDF copies of the annual investment statements.
4. Accounts Receivable:
a) A/R aging schedule of accounts receivable as of December 31, 2018, reconciled to
trial balance.
b) An analysis of the allowance for doubtful accounts.
c) List of deposits for three months following the end of the year. (Jan – Mar, 2019)
5. Prepaid Items:
a) Schedule of prepaid balances with supporting documentation, such as copies of
checks and invoices. (Insurance policies, etc.)
6. Capital Assets:
a) Capital assets and depreciation summary – including a listing of all additions and/or
disposals of fixed assets and the supporting documentation, which includes check
copy, invoice and bill of sale.
7. Accounts Payable:
a) A listing of all accounts payable as of December 31, 2018 (an aged A/P will suffice);
including date paid and check number. The auditor will need to review all open
invoices.
b) Schedule of checks written from 12/31/2018 to the date of the audit fieldwork.
8. Accrued Payroll Liabilities:
a) The schedule of accrued payroll as of December 31, 2018.
b) Copies of all the IRS forms 941s and State Unemployment Reports.
c) Copies of any correspondence from the IRS and notices of penalties.
d) Schedules reconciling gross pay on the 941s to gross pay recorded on the trial
balance.
e) Annual Leave – Schedule of accrued leave by employee including names, pay rates
and ending accrued leave hours at December 31, 2018.
9. Grant Testing:
a) Copies of all grant awards, contracts, quarterly reports, drawdowns or any other
report for each grant.
b) Grant lead showing grant name, grant amount, grant period, CFDA number,
beginning grant receivable or deferred revenue balance, cash received during the
year, grant expenditures and grants receivable or deferred revenue – reconciled to
the balance sheet.
c) General ledger detail for each grant with expenses or grant receipts.
10. Long-Term Debt:
a) Schedule of any outstanding debt or notes payable as of December 31, 2018.
b) Copies of the debt agreements and amortization schedules.
11. Net Assets:
a) A schedule reconciling FY2017’s net position balance on the audited financials to
FY2018’s equity accounts in the trial balance.
12. Additional Items:
a) Copies of any legal agreements, contracts, leases, or other official documents.
b) A copy of any new policies and procedures.
c) A copy of any on-site reviews from any granting agency.
d) Prepared by Tribe/TDHE (but managed by auditor): Completed grant confirmations
(on all open grants during the year), Human Rights and Department of Labor
confirmations, attorney confirmation. These should be printed on the Tribe/TDHE’s
letterhead, signed and mailed to the auditor or made ready to be picked up by the
auditor during fieldwork.
SCHEDULE OF EXPENDITURES
The preparation of the Schedule of Expenditures of Federal Awards (SEFA) [and State awards,
if any] is also the responsibility of the auditee. The SEFA is an important document because it is
the source document for the compliance portion of a single audit. The SEFA reports all Federal
grants with expenditures in your audit period. Individual Federal programs are grouped by
federal agencies to allow the user to identify grants by Federal funding source, and provides the
auditor information required to determine major programs.
1) Know all your Federal awards.
You should be able to identify ALL federal awards (examples: IHBG, Indian Community
Development Block Grant, and Tribal Transportation) received and expended during the
f
iscal year, and they should all be included on the SEFA schedule
.
The required elements of the SEFA include:
a. The Catalog of Federal Domestic Assistance (CFDA) title and number;
b. The award number and year;
c. The name of the federal agency; and
d. The name of the pass-through entity and the identifying award number assigned by
the pass-through entity, if applicable.
2) Prepare the Schedule of Expenditure of Federal Awards.[200.510(b)]
a) List individual Federal programs by Federal agency. For example, The US Department
of Housing and Urban Development includes the Indian Housing Block Grant (IHBG),
and t
he Indian Community Development Block Grant (ICDBG).
b) For Federal awards received as a subrecipient, the name of the pass-through entity and
identifying number assigned by the pass-through entity must be included. For example:
U.S. Department of Transportation: Passed through Bureau of Indian Affairs.
c) Provide total Federal awards expended for each individual Federal program and the
CFDA number or other identifying number when the CFDA information is not available.
For a cluster of programs also provide the total for the cluster.
d) Include the total amount provided to subrecipients from each Federal program.
e) If you have a loan or loan guarantee program such as Title VI Loan Guarantee, include
t
he loans made and amounts expended for the year.
f) Include notes that describe:
I. Basis of Presentation: Presented in accordance with Title 2 U.S. Code of Federal
Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards (Uniform Guidance).
II. Summary of Significant Accounting Policies: State whether expenditures are
recognized on the modified accrual or full accrual basis of accounting.
III. Statement about Pass Through awards. For example: Pass through identifying
numbers are presented where available. And, state if there are no amounts that
were passed through to subrecipients. Note whether or not the auditee elected to
use the 10% de minimis cost rate.
IV. Federal Loan Program: identify. Include the balance outstanding of Title VI Loans
at the end of the audit period and reconciliation of federal expenditures to t
he
f
inancial statements.
SAMPLE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Award
Number
CFDA
Number
Total Grant
Award
Eligible
Expenditures
US. Department of Housing and Urban Development (HUD):
Indian Housing Block Grant 55IT02XXXXX 14.867 525,000$ 530,622$
Indian Community Development Block Grant XXXXX02XXXX 14.862 150,000 150,000
675,000 680,622
Loan Guarantees:
Title VI Loans None 14.869 850,000 850,000
Total U.S. Department of Housing and Urban Development: 1,525,000 1,530,622
U.S. Department of Transportation
Tribal Transportation Plan XXXXXXXX1 20.205 265,000 207,363
Total U.S. Department of Transportation 265,000 207,363
U.S. Deparment of of Health and Human Services
Passed through Alaska Native Tribal Health Corporation:
Clean Waters and Sewer Infrastructure XXXXXXXX2 93.047 38,500 38,500
Direc
Childcare Program XXXXXXXX2 93.047 20,000 17,353
Total U.S. Department of Interior 58,500 55,853
U.S. Department of the Interior
Passed through Bureau of Indian Affairs:
BIA - Tribal Self-Government XXXXXXXX3 15.022 150,000 102,409
Total U.S. Department of the Interior 150,000 102,409
Total All Federal Financial Assistance 1,998,500$ 1,896,247$
Note 1. Basis of Presentation
Note 2. Summary of Significant Accounting Policies
Note 3.
Indirect Cost Rate
Note 3. Pass Through Awards
Note 4. Federal Loan Program
NOTE 5. Reconciliation to the Financial Statements:
Expenditures reported in the schedule of expenditures of federal awards: 1,896,247$
Less: Title VI outstanding loan guarantees (850,000)
Total Federal Revenues per Basic Financial Statements 1,046,247
Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized
following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable
or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in
the normal course of business to amounts reported as expenditures in prior years.
Upnorth Tribe has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform guidance.
Pass through entity identifying numbers are presented where available. No amounts were passed through to
subrecipients.
The Title VI loan program listed above is administered directly by Upnorth Tribe, and balances and transactions relating to
these programs are included in Upnorth Tribe's basic financial statements. Loans outstanding at the beginning of the year
and loans made during the year are included in the federal expenditures presented at December 31, 2016. The ending
balance of Title VI Loans at December 31, 2016 was $765,011.
Upnorth Tribal Housing
Schedule of Federal Awards
Year Ended December 31, 2018
Federal Grant or Contract Title
The accompanying schedule of federal awards (the "Schedule") includes the federal award activity of Upnorth Tribe under
programs of the federal government for the year ended December 31, 2016. The information in this Schedule is
presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
Because the Schedule presents only a selected portion of the operations of Upnorth Tribe, it is not intended to and does
not present the basic financial statements of Upnorth Tribe.
Page 54
Sample Engagement Letter
SAMPLE ENGAGEMENT LETTER
Date, 2018
Client Name
Client Address
Client Address
Dear Ladies and Gentlemen:
You have requested that we audit the financial statements of the governmental activities, the business-
type activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information of Client Name, as of Date, 2017, and for the year then ended, and the
related notes to the financial statements, which collectively comprise Client Name’s basic financial
statements as listed in the table
of contents.
In addition, we will audit the entity’s compliance over major federal award programs for the period
ended Date, 2017. We are pleased to confirm our acceptance and our understanding of this audit
engagement by means of this letter. Our audits will be conducted with the objectives of our expressing
an opinion on each opinion unit and an opinion on compliance regarding the entity’s major federal
award programs.
Accounting principles generally accepted in the United States of America require that management’s
discussion and analysis, budgetary comparison information, the schedule of proportionate share of the
net pension liability and related ratios, and the schedule of required pension contributions be presented
to supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board, who considers it to
be an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. As part of our engagement, we will apply certain limited
procedures to the required supplementary information (RSI) in accordance with auditing standards
generally accepted in the United States of America. These limited procedures will consist primarily of
inquiries of management regarding their methods of measurement and presentation, and comparing
the information for consistency with management’s responses to our inquiries. We will not express an
opinion or provide any form of assurance on the RSI. The following RSI is required by accounting
principles generally accepted in the United States of America. This RSI will be subjected to certain
limited procedures but will not be audited:
x Management’s discussion and analysis
x Schedule of Proportionate Share of the Net Pension Liability and Related Ratios
x Schedule of Required Pension Contributions
Supplementary
information other than RSI will accompany Client Name’s basic financial statements. We
will subject the following supplementary information to the auditing procedures applied in our audit of
the basic financial statements and certain additional procedures, including comparing and reconciling
the supplementary information to the underlying accounting and other records used to prepare the
financial statements or to the financial statements themselves, and additional procedures in accordance
with auditing standards generally accepted in the United States of America. We intend to provide an
opinion on the following supplementary information in relation to the financial statements as a whole:
x List RSI opined on
Schedule of Expenditures of Federal Awards
We will subject the schedule of expenditures of federal awards to the auditing procedures applied in our
audit of the basic financial statements and certain additional procedures, including comparing and
reconciling the schedule to the underlying accounting and other records used to prepare the financial
statements or to the financial statements themselves, and additional procedures in accordance with
auditing standards generally accepted in the United States of America. We intend to provide an opinion
on whether the schedule of expenditures of federal awards is presented fairly in all material respects in
relation to the financial statements as a whole.
Data Collection Form
Prior to the completion of our engagement, we will complete the sections of the Data Collection
Form that are our responsibility. The form will summarize our audit findings, amounts and
conclusions. It is management’s responsibility to submit a reporting package including financial
statements, schedule of expenditure of federal awards, summary schedule of prior audit findings
and corrective action plan along with the Data Collection Form to the federal audit
clearinghouse. The financial reporting package must be text searchable, unencrypted, and
unlocked. Otherwise, the reporting package will not be accepted by the federal audit
clearinghouse. We will assist you in the electronic submission and certification. You may
request from us copies of our report for you to include with the reporting package submitted to
pass-through entities.
The Data Collection Form is required to be submitted within the earlier of 30 days after receipt
of our auditors’ reports or nine months after the end of the audit period, unless specifically
waived by a federal cognizant or oversight agency for audits. Data Collection Forms submitted
untimely are one of the factors in assessing programs at a higher risk.
Audit of the Financial Statements
We will conduct our audit in accordance with auditing standards generally accepted in the
United States of America (U.S. GAAS), the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States of
America, the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200,
Uniform Administrative Requirements, Cost Principles, and Audit requirements for Federal
Awards (Uniform Guidance), and in accordance with any state or regulatory audit requirements.
Those standards and the Uniform Guidance require that we plan and perform the audit to obtain
reasonable assurance about whether the basic financial statements are free from material
misstatement. An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to error, fraudulent financial reporting, misappropriation of
assets, or violations of laws, governmental regulations, grant agreements, or contractual
agreements. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
Because of the inherent limitations of an audit, together with the inherent limitations of internal
control, an unavoidable risk that some material misstatements or noncompliance may not be detected
exists, even though the audit is properly planned and performed in accordance with U.S. GAAS and
Government Auditing Standards of the Comptroller General of the United States of America and, if
applicable, in accordance with any state or regulatory audit requirements.
In making our risk assessments, we consider internal control relevant to the entity’s preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. However, we will communicate to you in writing concerning any significant deficiencies
or material weaknesses in internal control relevant to the audit of the financial statements that we have
identified during the audit.
We will issue a written report upon completion of our audit of Client Name’s basic financial statements.
Our report will be addressed to the governing body of Client Name. We cannot provide assurance that
unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modify
our opinions, add an emphasis-of-matter or other-matter paragraph(s), or withdraw from the
engagement.
In accordance with the requirements of Government Auditing Standards, we will also issue a written
report describing the scope of our testing over internal control over financial reporting and over
compliance with laws, regulations, and provisions of grants and contracts, including the results of that
testing. However, providing an opinion on internal control and compliance over financial reporting will
not be an objective of the audit and, therefore, no such opinion will be expressed.
Audit of Major Program Compliance
Our audit of Client Name’s major federal award program(s) compliance will be conducted in accordance
with the requirements of the Single Audit Act, as amended; and the Uniform Guidance, and will include
tests of accounting records, a determination of major programs in accordance with Uniform Guidance,
and other procedures we consider necessary to enable us to express such an opinion on major federal
award program compliance and to render the required reports. We cannot provide assurance that an
unmodified opinion on compliance will be expressed. Circumstances may arise in which it is necessary
for us to modify our opinion or withdraw from the engagement.
The Uniform Guidance requires that we also plan and perform the audit to obtain reasonable assurance
about whether the entity has complied with applicable laws and regulations and the provisions of
contracts and grant agreements applicable to major federal award programs. Our procedures will
consist of determining major federal programs and performing the applicable procedures described in
the U.S. Office of Management and Budget OMB Compliance Supplement for the types of compliance
requirements that could have a direct and material effect on each of the entity’s major programs. The
purpose of those procedures will be to express an opinion on the entity’s compliance with requirements
applicable to each of its major programs in our report on compliance issued pursuant to the Uniform
Guidance.
Also, as required by the Uniform Guidance, we will perform tests of controls to evaluate the
effectiveness of the design and operation of controls that we consider relevant to preventing or
detecting material noncompliance with compliance requirements applicable to each of the entity’s
major federal award programs. However, our tests will be less in scope than would be necessary to
render an opinion on these controls and, accordingly, no opinion will be expressed in our report.
We will issue a report on compliance that will include an opinion or disclaimer of opinion regarding the
entity’s major federal award programs, and a report on internal controls over compliance that will
report any significant deficiencies and material weaknesses identified; however, such report will not
express an opinion on internal control.
Management’s Responsibilities
Our audit will be conducted on the basis that management and those charged with governance
acknowledge and understand that they have responsibility:
1. For the preparation and fair presentation of the financial statements in accordance with
accounting principles generally accepted in the United States of America;
2. For the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether
due to error fraudulent financial reporting, misappropriation of assets, or violations of laws,
governmental regulations, grant agreements, or contractual agreements;
3. For safeguarding assets;
4. For identifying all federal awards expended during the period;
5. For preparing the schedule of expenses of federal awards (including notes and noncash
assistance received) in accordance with the Uniform Guidance requirements;
6. For the design, implementation, and maintenance of internal control over compliance;
7. For identifying and ensuring that the entity complies with laws, regulations, grants, and
contracts applicable to its activities and its federal award programs;
8. For following up and taking corrective action on reported audit findings from prior periods and
preparing a summary schedule of prior audit findings;
9. For following up and taking corrective action on current year audit findings and preparing a
corrective action plan for such findings;
10. For submitting the reporting package and data collection form to the appropriate parties;
11. For making the auditor aware of any significant vendor relationships where the vendor is
responsible for program compliance;
12. To provide us with:
a. Access to all information of which management is aware that is relevant to the
preparation and fair presentation of the financial statements, and relevant to federal
award programs, such as records, documentation, and other matters;
b. Additional information that we may request from management for the purpose of the
audit; and
c. Unrestricted access to persons within the entity from whom we determine it necessary
to obtain audit evidence.
13. For adjusting the financial statements to correct material misstatements and confirming to us in
the management representation letter that the effects of any uncorrected misstatements
aggregated by us during the current engagement and pertaining to the current year period(s)
under audit are immaterial, both individually and in the aggregate, to the financial statements as
a whole; and
14. For confirming your understanding of your responsibilities as defined in this letter to us in your
management representation letter.
15. With respect to any nonattest services we perform, management is responsible for
a. Making all management decisions and performing all management functions;
b. Assigning a competent individual to oversee the services;
c. Evaluating the adequacy of the services performed;
d. Evaluating and accepting responsibility for the results of the services performed; and
e. Establishing and maintaining internal controls, including monitoring ongoing activities.
With regard to the supplementary information referred to above, you acknowledge and understand
your responsibility (a) for the preparation of the supplementary information in accordance with the
applicable criteria, (b) to provide us with the appropriate written representations regarding
supplementary information, (c) to include our report on the supplementary information in any
document that contains the supplementary information and that indicates that we have reported on
such supplementary information, and (d) to present the supplementary information with the audited
financial statements, or if the supplementary information will not be presented with the audited
financial statements, to make the audited financial statements readily available to the intended users of
the supplementary information no later than the date of issuance by you of the supplementary
information and our report thereon.
As part of our audit process, we will request written confirmation concerning representations made to
us in connection with the audit.
We understand that your employees will prepare all confirmations we request and will locate any
documents or invoices selected by us for testing.
If you intend to publish or otherwise reproduce the financial statements and make reference to our
firm, you agree to provide us with printers’ proofs or masters for our review and approval before
printing. You also agree to provide us with a copy of the final reproduced material for our approval
before it is distributed.
Audit Administration, Fees, and Other
We expect to begin our audit on approximately Date, 2018 and to issue our reports no later than Date,
2019.
CPA is the engagement partner for the audit services spec
ified in this letter. Mr. CPA’s
responsibilities include supervising CPA & Co. services performed as part of this engagement
and signing or authorizing another qualified firm representative to sign the audit report.
Our fee for these services is estimated to be $$$, which will include out-of-pocket costs (such as report
reproduction, word processing, postage, travel, copies, telephone, etc.). The fee estimate is based on
anticipated cooperation from your personnel and the assumption that unexpected circumstances will
not be encountered during the audit. If significant additional time is necessary, we will discuss it with
you and arrive at a new fee estimate before we incur the additional costs. Our invoices for these fees
will be rendered each month as work progresses and are payable on presentation. In accordance with
our firm policies, work may be suspended if your account becomes overdue and may not be resumed
until your account is paid in full. If we elect to terminate our services for nonpayment, our engagement
will be deemed to have been completed upon written notification of termination, even if we have not
completed our report(s). You will be obligated to compensate us for all time expended and to reimburse
us for all out-of-pocket costs through the date of termination.
Other Matters
During the course of the engagement, we may communicate with you or your personnel via fax
or e-mail, and you should be aware that communication in those mediums contains a risk of
misdirected or intercepted communications.
The audit documentation for this engagement is the property of CPA & Co. and constitutes
confidential information. However, we may be requested to make certain audit documentation
available to federal agencies and the U.S. Government Accountability Office pursuant to
authority given to it by law or regulation, or to peer reviewers. If requested, access to such audit
documentation will be provided under the supervision of CPA & Co.’s personnel. Furthermore,
upon request, we may provide copies of selected audit documentation to these agencies and
regulators. The regulators and agencies may intend, or decide, to distribute the copies of
information contained therein to others, including other governmental agencies. We agree to
retain our audit documentation or work papers for a period of at least five years from the date of
our report.
Further, we will be available during the year to consult with you on financial management and
accounting matters of a routine nature.
During the course of the audit, we may observe opportunities for economy in, or improved
controls over, your operations. We will bring such matters to the attention of the appropriate
level of management, either orally or in writing.
We agree to retain our audit documentation or work papers for a period of at least five years
from the date of our report.
At the conclusion of our audit engagement, we will communicate to the board the following
significant findings from the audit:
x Our view about the qualitative aspects of the entity’s significant accounting practices;
x Significant difficulties, if any, encountered during the audit;
x Uncorrected misstatements, other than those we believe are trivial, if any;
x Disagreements with management, if any;
x Other findings or issues, if any, arising from the audit that are, in our professional
judgment, significant and relevant to those charged with governance regarding their
oversight of the financial reporting process;
x Material, corrected misstatements that were brought to the attention of management as
a result of our audit procedures;
x Representations we requested from management;
x Management’s consultations with other accountants, if any; and
x Significant issues, if any, arising from the audit that were discussed, or the subject of
correspondence, with management.
In accordance with the requirements of Government Auditing Standards, we have attached a
copy of our latest external peer review report of our firm for your consideration and files.
Please sign and return the attached copy of this letter to indicate your acknowledgment of, and
agreement with, the arrangements for our audit of the financial statements compliance over
major federal award programs including our respective responsibilities.
We appreciate the opportunity to be your financial statement auditors and look forward to
working with you and your staff.
CPA, CPA
Principal
RESPONSE:
This letter correctly sets forth the understanding of Client Name.
By:_______________________________
Title:_____________________________
Date:_____________________________
