Federal Emergency Relief Funds (and other federal funds awarded to tribes) are subject to the Single Audit Act and regulations found at 2 CFR Part 200, Subpart F – Audit Requirements. What is an audit? An audit examines the recipient’s financial reports, financial statements, federal award transactions and expenditures, the general management of its operations, internal control systems, and federal assistance it received during the audit period. The audit is divided into two main components: (1) compliance; and (2) financial. The Compliance Component covers the study and understanding (planning stage) and the testing and evaluation of the recipient with respect to its use of federal financial assistance funds, operation of programs, and compliance with regulations and laws. The Financial Component is exactly like a financial audit of the recipient that includes the audit of the financial statements and accompanying notes. Depending on the recipient, the audit can be simple and straightforward, or it could be complex and troublesome. For these reasons, the Single Audit Act requires auditors to perform a compliance audit of the recipient to determine whether there is a high or low risk that the recipient does not comply with laws and regulations, identify federal programs, and evaluate the programs. The audit will include an audit of federal assistance and programs.
Audit readiness means having a sound accounting system in place that complies with the Generally Accepted Accounting Principles (GAAP) that provides for accurate monthly, quarterly, and annual financial reports. It means having a sound grant (and contract) management program that ensures compliance with grant/contract terms and conditions. It means having sound internal control systems regulated by management policies and procedures (financial management, procurement management, property management, personnel management, record keeping). This course provides an overview of the above functional areas; and provides recommendations on how tribes may adopt these systems to be better prepared for audits, and to avoid audit findings and questioned costs.