Is a Favorable Audit Really Worth Its Weight?

October 12, 2011 | By Jerry Ashworth | Post a Comment

My father-in-law has an old, countrified saying, often expressed in his Tennessee twang, that goes, “You pays your money, you takes your chances.” In essence, buyer beware!

This same principle applies to grantees as they hire an audit firm to conduct a Circular A-133 single audit of their program. If a grantee hires a competent auditor, the auditor may discover a greater number of findings, but once these are resolved, the grantee will be compliant with federal laws and regulations. However, if it hires a firm that is not as competent and doesn’t know the program as well, the audit may have fewer findings, but some deficiencies may be missed. This may prove less costly at first, but the grantee is vulnerable of not being compliant.

At a recent conference hosted by the Association of Educational Federal Finance Administrators, Michael Brustein, Esq., partner with the Washington, D.C. law firm Brustein and Manasevit, told attendees that there is a growing trend among grantees that want to put the focus on program success rather than program compliance. However, he warned that even if a grantee had the most successful grant program, if it lacked compliance with federal laws and regulations, it may have to return grant funds.

Brustein said that Department of Education Office of Inspector General auditors are aware of program requirements and can audit programs to ensure compliance. However, Circular A-133 single audits of ED grantees by nonfederal audit firms have been “uneven at best.” He even questioned the “fundamental conflict” that arises when the auditee pays for the audit. “Does this create incentives for the auditor to render a favorable opinion?” he asked.

Brustein brought up many interesting points about program compliance versus program success at the AEFFA conference. An article on the presentation with more details will be coming November issue of the Single Audit Information Service.

Which would you rather focus your program resources on — program success or program compliance? Do auditors really have an incentive to render a favorable opinion of the auditee in an effort to protect long-term relationships with the client? Let us know your reaction.


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