Federal Assistance Manual Chapter 5-80

CHAPTER 5-80 AUDIT RESOLUTION

• 5-80-00 Purpose
  
• 5-80-10 Policy
  
• 5-80-20 Procedures

5-80-00 PURPOSE

This chapter outlines the OSM responsibilities for resolving audit findings related to OSM grants to States and Tribes. These audits are generally performed through the single audit process.

5-80-10 POLICY

It is OSM's policy to resolve all audits in a timely and proper manner. All audits shall be resolved within 60 days of receipt by the RCC/FO. Within the 60-day period, 30 calendar days are allocated for the grantee to respond to the audit findings. The remaining 30 days are used to review the grantee response, develop an appropriate resolution, have it approved by the official authorized to sign the grant awards, and inform the grantee and the Office of Strategic Planning and Budget of the resolution.

5-80-20 PROCEDURES

1. Receiving the audit report.
   1. DOI OIG receives a copy of an audit report from the cognizant Federal agency for that State or Tribe.

   2. DOI OIG logs in the report, and reviews and accepts the audit. They forward a copy to OSM's Office of Strategic Planning and Budget.

   3. The Office of Strategic Planning and Budget reviews the report and forwards it to the appropriate RD for review. If a response is required, the report is entered into the audit tracking system.

   4. The RD forwards the audit report to the grants specialist who is responsible for that State or Tribe.

2. Resolving audit findings.
   1. Letter requesting grantee response:
      1. The grants specialist shall prepare a letter to the grantee asking them to respond to the audit findings. The letter should be signed by the official authorized to sign the grant award. The letter should include a list or summary of the findings to be resolved, and a copy of the relevant portion of the audit report. The grantee shall have 30 days after receipt of the letter to send their response. The grants specialist should confirm the date the grantee receives this letter, through use of certified mail or a documented telephone conversation. The grants specialist should stay in contact with the grantee throughout the 30-day response period and provide technical assistance as needed.

      2. The grantee may request an extension of the 30-day response period. The request must be fully justified, must provide an explanation of the unusual circumstances which prevent a timely response, and must include a schedule for the final response. The RCC/FO may choose to approve or disapprove this request. If approval will delay resolution of the audit beyond the 60-day period, the grants specialist must notify the Office of Strategic Planning and Budget of the reason for the extension and the anticipated audit resolution date.

      3. The grantee's response shall state whether they concur or disagree with each finding or recommendation. If they concur, the grantee should specify how and when they will implement corrections and system changes, and return the funds for any disallowed costs. If they dispute a finding or recommendation, they should justify their position and offer any alternative information or supporting documentation. The response should be sent to the grants specialist.

      4. If the grantee does not respond by the 30-day deadline, the grants specialist may proceed on the basis of the available information to recommend resolution actions and prepare the decision letter to be signed by the authorized official.

   2. Review of grantee's response
      1. In evaluating the grantee's response, the standard to be applied is whether the costs are allowable, documented, and reasonable and justified. Factors such as the good faith of the organization, successful accomplishment of program objectives or the grantee's ignorance of requirements should not be used as a basis for allowing costs which are unallowable. If a cost is not allowable, the official authorized to sign the grant award is not authorized to waive collection of the disallowance.

      2. The auditor's findings may have been based on estimates or statistical sampling of a few documents, with the findings projected to the total population. If the grantee presents an alternative sampling methodology or analysis, the grants specialist may choose to accept it.

      3. When expenditures are questioned because the grantee failed to request advance agency approval, but the action would have been approved had it been requested, the official authorized to make such approvals may allow the questioned costs.

      4. If the information submitted by the grantee is inadequate or inconclusive, the grants specialist may recommend disallowance of the entire questioned amount, or may work with the grantee to obtain more information as discussed in the next section.

   3. Meetings and discussions
      1. If the grantee's response is inadequate or inconclusive, the grants specialist may contact the grantee and request additional information or a revised response.

         Alternatively, the grants specialist may perform an on-site review using grantee records to acquire needed information. The grants specialist should consider the specific questions involved to determine if additional OSM staff with specialized skills will be needed for this review. However, consideration must be given to the requirements for timely resolution of audits. If these actions will result in a delay of audit resolution beyond the 60-day period, the grants specialist must notify the Office of Strategic Planning and Budget of the reason for the delay and the anticipated audit resolution date.

      2. OSM and grantee officials may meet to develop acceptable actions and schedules to resolve audit concerns or to design needed changes in procedures and systems. Written meeting notes should be kept. Agreements developed in these meetings should be included in the decision letter resolving the audit.

      3. It is desirable to obtain grantee concurrence with all aspects of a proposed resolution. When possible, OSM should discuss plans to require changes in grantee processes or systems with the State or Tribe prior to including them in an audit decision.

      4. Either before or after issuance of the decision letter, the RCC/FO may meet with the grantee to negotiate an extended payment plan for disallowed costs. If the decision letter has already been completed, a written agreement confirming the payment plan should be signed by the grantee and the OSM official authorized to sign grant awards. A copy of the approved payment plan shall be sent to DFM for collection.

   4. Decision package
      1. After full consideration of the grantee's responses and other pertinent information obtained, the grants specialist shall make a recommendation on whether or not to allow any questioned costs, and what corrective actions will be required to respond to administrative findings. The grants specialist shall complete an Audit Decision Form, and prepare a transmittal cover letter to convey the decision to the grantee.
         1. The Audit Decision Form is Exhibit X5-80-1 in this chapter. This form will be used to document all decisions made to resolve the audit. The form is signed by the grants specialist and by the official authorized to sign grant awards. Two original forms shall be signed, one for the grantee and one for OSM's audit resolution file. For each finding, the form shall:
            1. Summarize the initial finding.
               
            2. Summarize the grantee response.
               
            3. Summarize any discussion or any other pertinent factors.
               
            4. State the final decision.
               
            5. Identify any disallowed costs.
               
            6. Identify any corrective actions to be taken by the grantee and the schedule to implement them.
               
            7. Identify any OSM follow-up reviews or actions.

            The form shall also identify total disallowed costs and present a plan for collecting them.

         2. A cover letter will be used to transmit the Audit Decision Form to the grantee (see Exhibit X5-80-2 for sample letter). The letter is prepared by the grants specialist and signed by the official authorized to sign grant awards. The cover letter shall:
            1. Identify the audit number.
               
            2. Refer to the enclosed Audit Decision Form.
               
            3. Specify payment procedure, address and due date for any amounts owed. The due date should be set to allow 30 days after the grantee's receipt of the decision.
               
            4. Identify any revised cost reports to be submitted.
               
            5. Summarize appeal procedures.
               
            6. State that resolution is final unless questioned by DOI OIG.
               
            7. Identify OSM contact for further assistance.

      2. The signed cover letter and Audit Decision Form shall be distributed as follows:
         1. Original cover letter and original Audit Resolution Form to grantee. Confirmation of the date the grantee receives these items shall be obtained.

         2. Copy of cover letter and original Audit Resolution Form to the RCC/FO audit resolution file.

         3. Copies of cover letter and Audit Resolution Form to the official grant file for each grant affected.

         4. Copies of cover letter and Audit Resolution Form to the Office of Strategic Planning and Budget

         5. If any disallowed costs are to be collected, copy of cover letter to DFM.

3. Appeals
   1. When the grantee does not concur with the decision on an audit finding, whether fiscal or administrative, the decision may be formally appealed to the Director of the appropriate Regional Coordinating Center. The grantee must send an appeal letter within 30 days after receipt of the decision letter. The appeal letter must provide the reasons for contesting the audit decision and provide all information necessary for review of the appeal.

   2. The RD should assign a coordinator for the audit appeal process. The coordinator should not have been involved in the initial decisions being appealed.

   3. Within 3 days of receipt of an appeal, the coordinator shall provide the grantee with confirmation that it received the appeal letter. If the appeal involves disallowed costs, the coordinator shall notify DFM that an appeal has been filed and collection procedures should be suspended.

   4. The coordinator should obtain comments on the appeal from the grants specialist and the authorized official who signed the initial audit decision, and from all other interested OSM parties. The coordinator shall provide to the RD all information needed to decide the appeal.

   5. The RD shall make an initial decision on the appeal within 30 days of receiving the appeal. This initial decision should not be transmitted to the grantee. The decision must be sent to the Office of Strategic Planning and Budget for review prior to becoming final. An additional 30 days is provided for this coordination and review process. The final decision is due to the grantee within 60 days of receiving the appeal.

   6. If the initial or the final decision cannot be issued within 60 days of receiving the appeal, the appeal coordinator shall notify the grantee and the Office of Strategic Planning and Budget of the reason for the delay and the revised decision date.

   7. If the grantee does not concur with the appeal decision, the decision may be appealed to the Director of OSM for final resolution.

4. Follow-up Actions

   In the event that the audit findings or the resolution decision call for a follow-up review to confirm that corrective actions have been implemented, the review should be scheduled and performed as soon as feasible for the review topic. The grants specialist shall notify the official authorized to sign grant awards and the Office of Strategic Planning and Budget of the results of the follow-up review.

5. Audit Close-out

   Upon repayment of all identified disallowed costs and implementation of all required corrective actions, the RCC/FO shall send a letter to the Office of Strategic Planning and Budget stating that the audit resolution is complete so the audit can be closed out in the audit tracking system.

EXHIBIT X5-80-1

Audit Decision Form

1. Audit Control Number:

2. Grantee:

3. Audit findings resolved: (For each audit finding resolved, show the finding number, the grant number(s), the original finding, the amount of costs questioned, the grantee's response, the resolution decision, and the amount of costs disallowed. Use the letter "A" below for the first finding resolved, and add another letter for each additional finding. Expand this section or use additional pages as needed.)

A.

4. Total amount of costs disallowed: $      

Collection plan: (Fully describe all elements of plan, including schedule for payment(s).)

5. Signatures:

Signature, Title and Date:

Signature, Title and Date:

EXHIBIT X5-80-2

Sample Cover Letter to Grantee

Dear:

The purpose of this letter is to inform you of our resolution of the "Single Audit of the State of _______, for the period ending _______", dated ________.

Enclosed is the Audit Decision Form detailing the resolution of each audit finding relating to the OSM grants.

The disallowed costs resulting from this audit total $_____. Please send a check in this amount payable to the Office of Surface Mining to the following address by no later than [date]. If payment is not received by OSM prior to this date, interest charges will begin.

[grants specialist or payment address]

Please prepare revised [final] cost reports for grants [numbers], and send them to the following address by no later than [date].

[report address]

If you wish to appeal any of these decisions, an appeal letter must be sent to the following address by [due date].

Director, Regional Coordinating Center

[address]

You may consider this resolution to be final unless notified otherwise by this office. In the event that the Department of Interior, Office of Inspector General questions any of these decisions, the audit resolution may be reopened.

If you have any questions or we may be of any assistance, contact [grants specialist] at _________.

Thank you for your assistance with this audit resolution.

Sincerely,

[official authorized to sign grants]

FEDERAL ASSISTANCE MANUAL
January 2, 1998