Current through Register Vol. 39, No. 6, September 16, 2024
(a) The recipient's financial management
systems shall provide for audits to be made by the recipient or at the
recipient's direction, in accordance with the following:
(1) The recipient shall provide for an audit
of its CDBG program on an annual basis for any fiscal year in which twenty-five
thousand ($25,000) or more in CDBG funds are received in accordance with the
annual independent audit procedures set forth in
G.S.
159-34;
(2) The CDBG program audit shall be performed
in conjunction with the regular annual independent audit of the recipient and
shall contain an examination of all financial aspects of the CDBG program as
well as a review of the procedures and documentation supporting the recipient's
compliance with applicable statutes and regulations;
(3) CDBG program funds may only be used to
pay for the CDBG portion of the audit costs if more than three hundred thousand
dollars ($300,000) in all Federal Programs are used;
(4) The recipient shall submit the Annual
Audit Report to the Division, including the information identified in Paragraph
(b) of this Rule, along with an Annual Performance Report as required by Rule
.1101 of this Subchapter; and
(5)
The Division may require separate closeout audits to be prepared by the
recipient in accordance with Paragraph .0913(e) of this Section.
(b) Audits shall comply with the
requirements set forth in this Paragraph:
(1)
Audits shall include, at a minimum, an examination of the systems of internal
control, systems established to insure compliance with laws and regulations
affecting the expenditure of grant funds, financial transactions and accounts,
and financial statements and reports of recipient organizations;
(2) Financial statements shall include
footnotes, comments which identify the statements examined, the period covered,
identification of the various programs under which the recipient received CDBG
funds, and the amount of the awards received;
(3) Audits shall be made in accordance with
the GENERAL ACCOUNTING OFFICE STANDARDS FOR AUDIT OF GOVERNMENTAL
ORGANIZATIONS, PROGRAMS, ACTIVITIES AND FUNCTIONS, THE GUIDELINES FOR FINANCIAL
AND COMPLIANCE AUDITS OF FEDERALLY ASSISTED PROGRAMS, any compliance
supplements approved by the Federal Office of Management and Budget (OMB), and
generally accepted auditing standards established by the American Institute of
Certified Public Accountants;
(4)
The audit shall include the auditor's opinion as to whether the financial
statements are fairly presented in accordance with generally accepted
accounting principles. If an unqualified opinion cannot be expressed, the
auditor shall state the nature of the qualification;
(5) The auditors' comments on compliance and
internal control shall:
(A) Include comments
on weaknesses in and noncompliance with the systems of internal control,
separately identifying material weaknesses;
(B) Identify the nature and impact of any
noted instances of noncompliance with the terms of agreements and those
provisions of State or Federal laws and regulations that could have a material
effect on the financial statements and reports;
(C) Contain an expression of positive
assurance with respect to compliance with requirements for tested items and
negative assurance for untested items;
(D) Comment on the accuracy and completeness
of financial reports and claims for advances or reimbursement to Federal
agencies;
(E) Comment on corrective
action taken or planned by the recipient;
(6) Work papers and reports shall be retained
for a minimum of five years from the date of the audit report unless the
auditor is notified in writing by the Division of the need to extend the
retention period based on changes in Federal regulations. The audit work papers
shall be made available upon request to the Division and the General Accounting
Office or its designees;
(7) If
during the course of the audit, the auditor becomes aware of irregularities in
the recipient organization the auditor shall promptly notify the Division and
recipient management officials about the level of involvement. Irregularities
include such matters as conflicts of interest, falsification of records or
reports, and misappropriation of funds or other assets;
(8) Selection of an independent auditor shall
be in accordance with Rule .0908 of this Section.
(c) A "single audit," in which the regular
independent auditor will perform an audit of all compliance aspects for all
federal grants along with the regular financial audit of the recipient, is
permissible. Where feasible, the recipient shall use the same auditor so that
the audit will include the financial and compliance work under a single plan in
the most economical manner.
(d)
Small audit firms and audit firms owned and controlled by socially and
economically disadvantaged individuals shall have the maximum practicable
opportunity to participate in the performance of contracts awarded with CDBG
funds. Recipients shall take the following affirmative action to further this
goal:
(1) Assure that small audit firms and
audit firms owned and controlled by socially and economically disadvantaged
individuals as defined in P.L. 95-507 are used to the
fullest extent practicable;
(2)
Make information on forthcoming opportunities available, and arrange time
frames for the audit so as to encourage and facilitate participation by small
or disadvantaged firms;
(3)
Consider in the contract process whether firms competing for larger audits
intend to subcontract with small or disadvantaged firms;
(4) Encourage contracting with small or
disadvantaged audit firms which have traditionally audited government programs,
and in such cases where this is not possible, assure that these firms are given
consideration for audit subcontracting opportunities;
(5) Encourage contracting with consortiums of
small or disadvantaged audit firms when a contract is too large for an
individual small or disadvantaged audit firm; and
(6) Use the services and assistance, as
appropriate, of the Small Business Administration, and the Minority Business
Development Agency of the U.S. Department of Commerce in the solicitation and
utilization of small or disadvantaged audit firms.
(e) All records, data, audit reports and
files shall be maintained in accordance with Rule .0909 of this Section, unless
otherwise stated in this Rule.
(f)
The provisions of this Rule do not limit the authority of the Department to
make audits of recipients' organizations.
Authority
G.S.
143B-10;
143B-431;
159-34;
42 U.S.C.A.
5304(d)(2),(e);
24 C.F.R. 44.6;
24 C.F.R.
85.36(e);
24 C.F.R. 570.492;
Eff. April 1, 19983;
Amended Eff. June 1, 1994; June 1, 1993;
September 1, 1990; May 1, 1988;
Temporary Amendment Eff. January 1,
2001;
Amended Eff. August 1, 2002;
Pursuant to
G.S.
150B-21.3A, rule is necessary without
substantive public interest Eff. March 6,
2018.
