Sneak Preview: Using the “No Harm” Defense for Audit Findings

July 30, 2014 | By Jerry Ashworth | Post a Comment

xsass_bookshot(The following was excerpted from an article in the Single Audit Information Service.) During its spring forum in Washington, D.C., last month, the law firm of Brustein and Manasevit, PLLC provided insights about preparing for a federal audit or monitoring visit, including an audit resolution defense strategy called “no harm to the federal interest.”

The strategy is based upon performance, a focus of the uniform grant guidance, also referred to as the super-circular or omni-circular. Those who use the “no harm” defense during audit resolution would acknowledge an audit violation, but would pursue a resolution that does not involve repayment of funds. Auditees who have grant programs with successful performance despite the audit finding may be in a position to use the “no harm” defense.

During their presentation, attorneys Brette Kaplan and Steven Spillan discussed an Education Department, Office of Inspector General report examining noncompliance findings from 27 ED OIG final audit reports that included what the OIG termed “pervasive noncompliance issues,” such as inadequate policies and procedures (34 times), no policies and procedures (15 times), not understanding the regulations and guidance (10 times) and policies in place but not followed (5 times).

“If you know what the auditors are looking for, you can be prepared,” added Spillan. “The 2014 Circular A-133 Compliance Supplement is a road map to preparing for your audit visit — a one-stop shop.”

“Before an auditing or monitoring visit, make sure you resolve any prior areas of noncompliance,” advocated Kaplan. “If you are not able to bring an unresolved finding into compliance before the visit, develop a corrective action plan to ensure compliance in a timely manner.”

Particular audit violations that ED and other federal agencies deem significant include issues with time and effort, unallowable expenses, maintenance of effort, procurement irregularity, lack of appropriate record keeping, record retention problems, late or missing reports, inaccuracies or inconsistencies in reports, unresolved audits of subrecipients and lack of reliable performance data.

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