AUDIT FOLLOWUP

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85B00552R001000040020-6
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 8
• Document Creation Date: December 20, 2016
• Document Release Date: November 13, 2007
• Sequence Number: 20
• Publication Date: September 29, 1982
• Content Type: MEMO

September- ZP', - 1982.
WASHINGTON, D.C: 209?
Circular,.-No.- A-50
Revised-.
ESTABLISHMENTS--
1. Pur ose. This Circular:- provides= the? policies and-: procedures
for use by- executi.vez agencies when considering" reports: issued- by
the Inspectors- General' other: executive- branch:- audit- organi---
zations,- the-Genera-l:. Accounting-.- Off ice:- (GAO-),., and non-Feder al.
auditors. where= followup=..iss necessary:: " -. .
2. Rescissions-. This=-revision-replaces and rescinds Circular No.
.A-50, Execu.ti.vee branch- action-: or r- General: Accounting Off.ice_
reports," Revised: dated-January 15,. 1979~ and--- incorporates_.
certain- provisions; previously set forth- in: Circular A-73,.. "Audit
of Federal operations'= and.. programs,"" Revised, dated.November 27,
1979.
53).
AuthoritL.
Budget. and :Accounting... Act.-of . 192-1, as:: amended. (31
b.. Section' 236.E of--': they Legis=lative Reorganization Act- of. 1970..
C. Supplemental. Appropriations- and Rescissions=Act-of.--1980
(P.L. 96-304).-.
d. Appropriations, Act-_of. 1981 (P-.L'. 96-526;).--
e. 4 CFR: 10.1-105-,. Federal.- Claims- Collection- Standards.
f o GAO_ Policy and Procedures- Manual for- Guidance of~ Federal.
Agencies- (Title 2:--Accounting)
4. Background:- The- principal;- objectives. vf. this revision- are:
a.. To specify the role of` the designated' audit followup
officials, and the-role of Inspectors- General with regard.to audit
followup.
b. To : s.trengtherr the, procedures' for. resolution-" of -audit
.
findings and corrective action--on- recommendations contained' in
audit. reports. issued by.-IGs, other audit organizations, and the.
GAO.
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EXECL TIVE"'OFFICE_ OF THEE PRESIDENT'
OFFJCE OF"MANAGEMENT' AND 'BUDGET'
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c. To clarify the applicability of the Circular to regulatory
and preaward audits.
d. To emphasize the importance of monitoring the
implementation of resolved audit recommendations in order to
assure that. promised corrective action is actually taken.
e. To improve accounting and collection controls over amounts
due the Government as a result of claims arising from audits.
5. Policy Audit followup is. an integral part of good
management., and is a shared responsibility of-agency management
officials..and auditors. -Corrective. action taken-by management on
resolved.f indingsand recommendations is essential to improving
the effectiveness and efficiency of Government operations. Each
agency shall establish systems to assure the prompt and proper
resolution and implementation of audit recommendations. These
systems. shall provide for a complete. record of action taken on
both monetary and non-monetary findings and recommendations.
6. Definitions.
a. Responses to Audit Reports -- Written comments by agency
officials indicating agreement or disagreement on reported
findings and recommendations. Comments indicating agreement on
final reports shall include planned corrective actions and, where
appropriate, dates for achieving actions. 'Comments indicating
disagreement shall explain fully the reasons for disagreement.
Where disagreement is based of' interpretation of law, regulation,
or the authority of officials to`take or not take action,.the
response must include the legal basis..
(1) For most audits, the point at which the audit -
organization and agency management or contracting officials agree
on action to be taken on reported findings and recommendations;
or,..in the event of disagreement, the point at which the audit
followup official determines the matter to be resolved. A report
may be considered resolved despite the right of persons outside
the agency to negotiate, appeal, or litigate. Resolution of a
report with respect to parties outside the Government does not
preclude further consideration of issues in the report by agency
management.
(2) For preaward'contract audits, the point at which
agreement is reached, a contract price negotiated, or proposed
award cancelled, . whichever. occurs first.
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(3) For GAO reports, the point at which the agency
responds to the Congress, as required by the Legislative Reorgani-
zation Act of 1970.
c. Corrective Action-- Measures taken to implement resolved
audit findings and recommendations.
d. Disallowed Costs ~-- An incurred cost questioned by the
audit organization t at management has agreed should not be
charged to. `she Government.
7. Responsibilities.
a. Agency Head. Agency heads are responsible for:
(1) Designating a top management official to oversee audit
followup, including resolution and corrective action.
(2) Assuring that management officials throughout the
agency understand the value of the audit process and are respon-
sive to audit recommendations.
b. Management Officials. Agency management officials are -
responsible for receiving and analyzing audit reports, providing-
timely responses to the audit organization, and taking corrective
action where appropriate. Where management officials disagree
with an audit recommendation, the matter shall be resolved by a
higher level management official or by the followup official.
c. Audit Followup Official. The audit followup official has
personal responsibility for ensuring that-(1) systems of audit
followup, resolution, and corrective action are documented and in
place, (2) timely responses are made to all audit reports, (3)
disagreements are resolved, (4) corrective actions are actually -
taken, and (5) semi-annual reports required by paragraph 8.a.(8)
below-are sent to the head of the agency.
d. Inspectors General. Inspectors General-or other audit
officials are responsible for (1) making independent audits and
investigations of their agencies' programs, operations, activi-
ties, and functions; (2) overseeing the work of non-Federal
auditors performed in connection with Federal programs; and (3)
reviewing responses to audit reports and reporting significant
disagreements to the audit followup official.
e. CorLtroller.General. The Comptroller General is the head
.of the GAO,--a legislative branch agency responsible for auditing
and evaluating programs,. activities, and financial operations of
the executive branch.
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8. Action Requirements.
a. Follow-u Systems.. Agencies shall assign high priority to*
the resolution o audit recommendations and to.corrective action.
Systems for resolution. and corrective action must meet the
following.. s andards.::
(S=) Provide- for appointment of a- top. level audit followup
official
(2) Require-prompt resolution - and. corrective actions on
audit recommendations. Resolution shall.be.'made. within. a maximum.
of six months after issuance- of a final report- or,: in .the- case of
audits performed. by- non-Federal auditors, six-months. after receipt
of the- report by the- Federal: Government., Corrective--action should.
proceed as-.rapidly as possible.-.
(3)- Specify-.criterja for. proper resolution and corrective
action on-;audit recommendations, whether- resolution-is in favor of
the auditor- or an auditee. These criteria should provide for
written plans for-corrective action with specified action dates,
where appropriate.-..
(4) Maintain- accurate. records of- the status of- audit
reports or, recommendations; through the entire process. of
resolution and corrective action. Such records shall include-
appropriate accounting and collection-controls over- amounts
determined to be due the Government.
(5) Provide- a. means: to assure- timely- responses to audit
reports an& to resolve major-disagreements between the audit. .
organization and agency management or contracting officials. The
process should. provide-sufficient time to permit resolution to
take place within. the- six. month limit. .
(6) Assure that resolution actions are consistent with
law, regulation,. and Administration policy; and include written
justification containing, when applicable, the legal basis for
decisions not.. agreeing with..the. audit.. recommendation.
(7) Provide-for coordinating resolution and corrective
action on-recommendations involving more than one program, agency,
or level of Government..
(8) Provide semi-annual. reports to the agency head on the
status of all unresolved" aud it 'reports over six months old, the
reasons therefor; and a timetable for their resolution; the number
of reports-or- recommendations resolved during the period; the
amount of disallowed costs; and collections, offsets, write-offs,
demands for-payment and other monetary benefits resulting from
audits. These reports should include an update on the status of
previously reported unresolved -audits. .
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(9)- Provide for periodic analysis of audit
recommendations, resolution, and corrective action, to.determine
trends and system-wide problems, and to recommend solutions.
(10) Assure that performance appraisals of appropriate
officials reflect effectiveness in resolving and implementing
audit recommendations.
7i) Provide for an evaluation of whether the audit--
followup- -system results in efficient, prompt, and proper
resolution. and corrective action on audit recommendations. The
first evaluation will bemade within-one year of the date of this.
Circular, and evaluations will be made periodically thereafter.
b. Special Requirements. The following additional-`
requirements apply~,to General Accounting Office reports:
(1) Draft:`Reports..-The GAO normally issues draft reports
to agencies for their review and comment;' so that final reports
may incorporate agency views. In accordance with 31 USC 53(f)(1),
agencies-shall provide comments on draft GAO reports within 30
days of-issuance. -However, the-law provides that, if an agency
cannot respond to a report within 30 days, the agency may request
additional time from GAO to comment.
-(2)'Final Reeorts. The GAO issues final reports to the
Congress or the head of an agency. Agencies are required to
respond to these reports in accordance with instructions contained
in paragraphs (3)_and (4) below.
(3) Statements to the Office.of Management and.Budget.
-The agency head will submit a statement to the Director of OMB
.-within 60 calendar days after formal transmittal of a GAO report
to the agency when at least one of the following applies:
(a) The report contains a specific recommendation for
the head. of the agency;
(b) The report contains financial statements
accompanied by either a qualified audit opinion or a disclaimer of
VP J_I11VI, j .
(c) The report indicates a violation of the
Antideficiency Act which has not been reported to the appropriate
authorities;
(d) The report indicates a violation of other laws;
(e) When requested to comment by.0MB.
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The agency statement should identify the GAO report by number and
date (i.e., GAO/GGD-82-00, dated January.30, 1982), and be
submitted in duplicate. It should inform the OMB. of the agency.
views on the findings and recommendations made by the GAO. It
should also identify any action taken, or planned, in response to
each significant finding or recommendation.
If the agency response to a draft GAO report-accurately and
adequately reflects its.-current views, a copy of those, comments
will be sufficient. .
When corrective action is incomplete, still under study, or
planned, the agency will include a statement of when it expects
action to be completed,, and will report on corrective action of ter
it is completed.-....,
The agency should include in its statement 'to OMB copies of
statements required by Section 236 of the Legislative.
Reorganization Act of 1970. See paragraph -(4) below. These
statements may be used to satisfy the initial reporting
requirements to OMB. The'statements should be accompanied by any
additional information.not provided to the. Congress, but required
by this section of the Circular.
(4) Statements to Congressional. Committees. In accordance
with Section 216 of the Legislative Reorganization Act of 1970,
when a GAO report contains recommendations to the head of an .
agency, the agency shall:
(a) Submit a written statement to the Senate Committee
on Governmental Affairs and the House Committee' on Government
Operations, no later than 6-0 days after the -date of such report.
This statement will. report the action taken or to be taken by the.
agency with respect to the recommendations to the head of the
agency. ..
(b) Submit a written statement to the Committees on
Appropriations of the Senate and the House of Representatives,. in
connection with the first request for appropriations for that
agency submittel to the Congress more than 60 days after the date
of the GAO report. This statement-will report the action taken or
to be taken by the agency with respect to the recommendations to
the head of the agency.
Two copies of the above statements will be submitted on the same
date to the OMB and the GAO.
(5) Advance Clearance and/or Coordination Requirements.
Agency statements to Congressional committees, Undivz ua Members
of Congress or the GAO, will be subject to advance coordination
and/or clearance by OMB when the statement: .
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- (1) Expresses views on proposed or pending legislation.
See Circular A-19, ",Legislative coordination and clearance.".-
? (2) Deals. with other agencies, or with executive branch
budget policies.
Requests for advance clearance and/or coordination will be addressed
to the Director, OMB,?and will be-forwarded in duplicate. Clearance
action will -be completed prior to transmittal -of the statement.
9. Applicability to Regulatory-Audits. The requirements for
resolution and corrective action contained in paragraph 8.a. shall
be applied to. those reports of agency. units responsible for
regulatory or inspection. activities involving the review. of
financial matters that may result in:
(a) Pines or penalties;
(b) Assessments,or-.price adjustments;.or
(c)-:.Other monetary recoveries , by. the Government..:
The agency audit followup official shall ensure that appropriate
followup systems are in place for these units. Separate subsystems
may be used.
10. Applicability to Preaward Contract Audits. Audit reports
involving recommendations on contractor estimates-of future costs
are subject to the provisions of this Circular. However, since such
reports generally are resolved iby negotiation of a contract price,
they are not subject to the time limits or reporting requirements
.set-forth in paragraphs 8.a.(2),
(5),
and
(8). The requirement
for
records on the status of reports
set
fort
h in paragraph
8.a.(4)
may
be met by records maintained in
official
contract files.
11. Accounting and Collection Controls. In order to ensure
>effertive recovery action, each agency will establish accounting and
collection controls for amounts due the Government as a result of
resolved audit findings.and recommendations. Unless otherwise
-required by statute, all claims arising from audit disallowances
shall be collected in accordance with the-Federal Claims Collection
Standards.
(a) Recording Receivables. Amounts due the Government shall be
recorded promptly as accounts receivable on completion of the acts
which entitle an agency to collect such amounts. For example, on
matters where the auditor has the authority to make final
determinations, such determinations are to be recorded as
receivables at the time the audit report is issued. Audit
recommendations that are subject to management concurrence will be
recorded as accounts receivable within 30 days of being resolved.
The recording of the receivable is to be accomplished even though
the decision to collect is subject to administrative appeal or
'litigation,, by persons. outside the agency.
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b. Interest Char, es. -Interest on -audit-related debts shall
begin.=to accrue. no- later than 30 days from the date the auditee is
notified of the debt. To discourage unwarranted appeals,. interest
shall continue-. to 'accrue while an appeal is underway. The
interest rate applied shall be.that prescribed by the Treasury
Fiscal Requirements Manual (I TFRM 6-8000).
c. Allowance for Uncollectable Amounts.` Consideration shall
be given to the potential for collecting audit-related debts. An
allowance a.c unt shall be established to reflect the amount of
receivables.:.estimated-to be uncollec-table... - -
d. Payment of Debts.:-Procedures should. be established to
-assure that the payment of audit-related debts does not result in
charges to other Federal programs or.in'a reduced level-of program
activity....'
e- Exception. There may. be instances where a, portion of the.
funds on a grant, contract, or other agreement are held back: (1)
as a safeguard against overpayment-; (2) pending completion,. final
inspection or approval of work; or (3) in accordance with other
provisions of a grant or contract. In. such instances, it is not.-
necessary to record a receivable, since disallowed costs maybe
offset against undisbursed funds in the grant or contract
audited.
12. OMB Responsibility. OMB will continue to work with agency
.audit followup officials and Inspectors General'to.ensure that the
provisions of this Circular are implemented.
13. Information Contact. Inquiries should be directed to the OMB
Financial Management Division at 395-3993 or to `the OMB Debt
Collection Staff at 395-39674-'
14, Sunset Review Date. This Circular shall have an independent
policy review to ascertain its effectiveness three years from the
date of issue.
David A. Stockman
Director
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