HomeMy WebLinkAboutResolution No. 2012-02he dly of
KE AL ALASKA
Suggested by: Administration
CITY OF KENAI
RESOLUTION NO. 2012 -02
A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA ACCEPTING A
GRANT AWARD FROM THE STATE OF ALASKA, DEPARTMENT OF ENVIRONMENTAL
CONSERVATION - DIVISION OF WATER IN THE AMOUNT OF S1,557,000 AND
REQUIRING A LOCAL MATCH OF 5667,286 FOR THE REPLACEMENT OF A WATER
MAIN ALONG THE KENAI SPUR HIGHWAY AND TO INSTALL AN INTERTIE BETWEEN
THE KENAI SPUR HIGHWAY AND LAWTON DRIVE WATER MAINS.
WHEREAS, the City has received a grant from the State of Alaska, Department of
Environmental Conservation - Division of Water for the replacement of aging water
main along the Kenai Spur Highway and to install an intertie between the Kenai Spur
Highway and Lawton Drive water mains; and
WHEREAS, this is a 70% municipal matching grant in the amount of $1,557,000
requiring a local match of $667,286 for total project cost of $2,224,286; and
WHEREAS, by acceptance of this grant, the Kenai. City Council agrees to accept
responsibility for the City to operate and maintain the proposed water utility
improvements and the attached terms and conditions of the grant offer.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI,
ALASKA, the City accepts the grant award for Kenai - Water Transmission Main Phase
III (MMG# 47552).
BE IT FURTHER RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, the
City agrees to accept responsibility for the City to operate and maintain the proposed
water utility improvements and the attached terms and conditions of the grant offer.
PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 18th day of
January, 2012.
S°ndr:ti Mbdigh, ' y Clerk
PAT PORTER, MAYOR
"Village with a Past, Ci y with a Future"
MEMO:
210 Fidalgo Avenue, Kenai, Alaska 99611 -7794
Telephone: 907 - 283 -7535 / FAX: 907 - 283 -3014
TO: City Council
IRFROM: Rick Koch
DATE: December 28, 2011
SUBJECT: Resolution 2012 -02, Acceptance of Alaska Department of
Environmental Conservation (ADEC) Municipal Matching Grant (MMG)
The purpose of this correspondence is to discuss and recommend Council approval of
Resolution 2012 -02.
The project funded by this MMG is to replace approximately 3,200 lineal feet of aging 10" AC
water transmission main, construct 2,500 lineal feet of new distribution main in the Swires
Road right -of -way, and other related improvements.
The grant is for $1,557,000, requiring a local match of $667,286 (30 %), resulting in total
estimated project costs of $2,224,286.
masenuco
1IIIE'
1992
The funding source for the local match is the Water and Sewer Fund. The fund balance for the
Water and Sewer fund is approximately $1 million, or the amount identified as required to be
on -hand to respond to two catastrophic incidents. The local funding for this project will be
generated by the proposed increase in water and sewer fees beginning in FY 2013. This project
is scheduled for design in FY 2013 with construction in FY 2014 and FY 2015.
Thank you for your attention in this matter. If you have any questions, please contact me at
your convenience.
DEPT. OF ENVIRONMENTAL CONSERVATION
DIVISION OF WATER
MUNICIPAL GRANTS as LOANS PROGRAM
Mr. Rick Koch
City Manager
City of Kenai
210 Fidalgo Avenue
Kenai, AK 99611
Dear Mr. Koch:
r r SEAN PARNELL, GOVERNOR
555 Cordova Street
Anchorage, AK 99501
PHONE: (907) 269 -7502
FAX: (907) 269 -7509
http: / /www.state.ak.us /dec
December 7, 2011
Grant Offer: Kenai - Water Transmission Main Phase III (MMG #47552)
G (OF
received
DEC 1 9 "II (f/7Frrtcie5i`�:.
In accordance with AS 46.03.030, the Department of Environmental Conservation
(Department) is pleased to offer the City of Kenai (Grantee) a grant of funds not to
exceed $1,557,000. This grant will design and construct approximately 2,500 linear
feet of 10 -inch distribution main, replace approximately 3,200 linear feet of failing
10 -inch AC pipe, install needed appurtenances, and provide other related upgrades.
This work is needed to replace failing AC pipe which is the sole connection to the
water production facilities meeting the EPA arsenic rule, add redundancy to the
system, and extend service to residential areas served by wells contaminated with
arsenic.
The estimated cost of this project, as provided by the grantee, is $2,225,000.
However, the grant amount is limited to the available appropriation of $1,557,000,
and, pursuant to AS 46.03.030(e), 70 percent of eligible project costs. Therefore,
eligible project costs under this agreement are limited to a total of S2,224,286 (70
percent of this amount is equal to the funding provided by this agreement).
This grant will be administered by the Department using funds which were included
in the State fiscal year 2012 capital budget bill (SB #46) allocation for this project.
This offer is expressly conditioned upon the Grantee accepting the offer and agreeing
to comply with the terms and limitations contained herein, in
2 AAC 45.010 (enclosed), in 18 AAC 73 (enclosed), and is based upon estimated
eligible project costs as itemized below:
Total Estimated
Eligible Project Costs
1.
Administrative
30,000
2.
Engineering Planning & Design
166,000
3.
Construction Eng. & Management
199,000
City of Kenai
MMG #47552
Page 2 of 5
4.
Construction
1,658,000
5.
Contingencies
172,000
6.
Total Estimated Eligible Costs
$ 2,225,000
7.
State Grant
$ 1,557,000
Adjustment of expenditures within the budgeted cost items is allowed, however, if
actual project costs exceed the total estimated eligible costs, a revised grant
application must be submitted before additional funding can be committed. If actual
project costs are less than the estimated costs, the grant will be reduced to the
extent necessary to comply with the percentage limitation set forth in this offer.
Grant payments will be made when expenses have been incurred and documentation
has been provided to the Department along with the payment request form, unless a
payment schedule is established as a special condition of this grant. Payments will
normally be made monthly, but no more frequently than twice per month. All
requests for payment must be submitted on the enclosed Request for Payment form.
GENERAL GRANT CONDITIONS
1. Plan Approval: The Grantee agrees to obtain plan and specification approval from
the Department in accordance with 18 AAC 73.020 prior to issuing a Notice to
Proceed with Construction to a contractor.
2. Contract Award and Contractor Bonding Requirements:
a. The Grantee agrees to bid construction contracts exceeding $50,000.
Adequate time (not less than 30 days) shall be allowed between the date of formal
advertisement and the date the bids must be submitted.
b. The Grantee agrees to submit procedures for award of construction contracts
of less than $50,000 to the Department for prior approval when means other than
the competitive bidding process are proposed.
c. The Grantee must require the contractor to furnish performance and payment
bonds in accordance with AS 36.25.010.
d. If local or federal ordinances or regulations also apply to the contract award or
contractor bonding requirements for this project, the most stringent requirements
shall apply.
e. The Grantee agrees to provide the Department with a summary of itemized bid
tabulations, a copy of the Notice to Proceed, and a copy of the construction
contract.
3. Change Orders: The Grantee agrees that all project change orders will be
submitted to the Department for approval in accordance with 18 AAC 73.020(e).
City of Kenai
MMG #47552
Page 3 of 5
4. Project Completion: The Grantee agrees to provide sufficient local funding to
match State and federal grant assistance and to ensure the completion of a
properly functioning project in accordance with 18 AAC 73.020(j).
5. Operation and Maintenance: The Grantee agrees to operate and maintain the
completed project.
6. Titles and Easements: The Grantee agrees to obtain all titles and easements
necessary to provide clear title or authority to construct and maintain the
proposed project.
7. Eligibility: The Grantee acknowledges that disbursement of progress payments
by the State does not constitute acceptance of any item as an eligible project cost
until all project costs are audited and determined to be eligible. Ineligible project
costs must be included in the final audit report.
8. Inspection: The Grantee agrees to allow, at any reasonable time, Department
inspection of all project work and audit of related records and data for which this
grant is offered.
9. Records: The Grantee agrees to maintain project accounts and records which
verify the grant eligibility of project expenditures. These accounts and records
shall be kept apart from non -grant eligible local records and from those records
maintained for the purpose of other State or federal grant programs involved in
the project.
10. Progress Reports: The Grantee agrees to submit progress reports on the proposed
project with each payment request or at a minimum, quarterly.
11. Project Start Date: The department will in its discretion, withdraw an accepted
grant if construction has not been started within one year after the date of the
offer was extended in accordance with 18AAC 73.030 (1).
12. Project End Date: Funds made available to a grantee under a fully executed
signed grant agreement by the department shall be expended within two (2) years
from the effective offer date. The Department may cancel the project and seek to
have the funds re- appropriated for other projects. An extension may be granted
by the department upon written request and good cause shown by the grantee.
13. Remaining Funds after Project Completion: If the entire grant amount is not
utilized for the original scope of work, the Department may seek to have the
remaining funds re- appropriated for other projects on priority list.
14. Americans with Disabilities Act: The Grantee must certify that projects and
services provided under this grant are made available to the general public in
compliance with the Americans with Disabilities Act of 1990.
City of Kenai
MMG #47552
Page 4 of 5
15. Discrimination: The Grantee agrees to administer this grant in a non-
discriminatory manner. No person shall be discriminated against based on race,
religion, color, national origin, gender or disability.
16. Damages: The Grantee shall hold and save the Department, its officers, agents,
and employees harmless from liability of any kind, including costs and expenses,
for or on account of any and all suits or damages of any nature, sustained by any
person or persons or property, by virtue of performance of the grantee, or any
person or entity acting in place of or for the Grantee for this project.
17. Grant Cancellation: The Grantee acknowledges the right of the Department to
rescind this grant and seek recovery of payments already made if the Grantee has
provided incorrect or misleading information to the Department or if a grant
condition contained herein or in 18 AAC 73 is violated. This grant offer may be
terminated at any time it is in the best interest of the State to do so.
SPECIAL GRANT CONDITIONS
None.
Please carefully review this grant offer, the related grant conditions, and the enclosed
regulations. If satisfactory, sign and return the original, along with a formal resolution
accepting the grant enacted by the Kenai City Council.
In the resolution the Grantee must agree to accept responsibility to operate and
maintain the proposed water utility improvements and agree to the terms and
conditions of this grant offer.
Acceptance of the grant is required within six months to prevent revocation of the
offer. No progress payments can be made until this grant offer is signed by the
Grantee and returned to the Department. Nothing in this offer, whether or not
accepted, may be deemed to constitute a contractual obligation on the part of the
Department until a resolution of acceptance has been received.
The Department is pleased to offer this assistance to the people of Kenai.
Sincerely,
Michelle Bonnet
Director
Enclosures: 2 AAC 45.010
18 AAC 73.010 Construction Grant Project Eligibility
Request for Payment
cc: Senator Thomas Wagoner
Representative Mike Chenault
Accepted on behalf of the by:
Typed Name
City of Kenai
MMG #47552
Page 5of5
Title Date
Signature
Grantee
STATE OF ALASKA
MUNICIPAL GRANTS PROGRAM
REQUEST FOR PAYMENT
Grantee Address
Project Name Grant Type:
Grant No. Grant Period covered under this Payment Request
Pay Request No. Final Pay Request: Check box if all project expenses are declared below.
SUMMARY OF EXPENSES CLAIMED
COST
CLASSIFICATION
Awarded Grant
Amount
Cumulative Past
Pay Requests
Current Pay
Request
Total Eligible
Expenditures
1. Administration
2. Legal
3. Engineering Design
4. Engineering Construction
5. Construction
6. Equipment
7. Other
8. Contingencies
9. Total ADEC Eligible
Costs
10. Other Funding Sources
11. ADEC Eligible Grant
(Percentage of Line 9):
500/0 70% 85%
I certify to the best of my knowledge and belief that the amount of this reimbursement is in accordance with the terms of the
grant offer; that this request for payment represents the correct ADEC Grant share due which has not been previously paid;
and that the work has been completed in accordance with approved Plans and Specifications. The subject project is now
approximately °/0 complete.
Typed or printed name Title
Signature
Date
G AW arerAFACILITIES \FCo-MUnicipal Grants and Loans AdminAMGL Forms - blank \MMG Blank FormsVPay Request w % Form.doc
DEPARTMENT OF
ENVIRONMENTAL CONSERVATION
18 AAC 73
CONSTRUCTION GRANTS
As amended through November 24, 1994
Walter J. Hickel
Governor
John A. Sandor
Commissioner
Register 132, January 1995 ENVIRONMENTAL. CONSERVATION
CHAPTER 73. CONSTRUCTION GRANTS
Section
10. Construction grant project eligibility
20. Terms and conditions of grant awards
30. Application procedures
40. State grant share
50. Grant payment procedures
60. Definitions
18 AAC 73.010. CONSTRUCTION GRANT PROJECT ELIGIBILITY. (a) An
Alaska municipality, or a combination of municipalities, may apply to the department, if money
is available, for a grant for a public
(1) water quality enhancement project;
(2) water supply, treatment, or distribution system;
(3)
wastewater collection, treatment, or discharge system; or
(4) solid waste processing, disposal, or resource recovery system.
(b) Grants administered under this chapter are available for new construction, including
replacement, upgrade, expansion, and extension of service lines_
(c) Grants administered under this chapter are not available for
(1) the operation, maintenance, and repair of an existing system; or
(2) the construction of a storm sewer system, unless the system
(A) is part of an approved water quality enhancement project; or
(B) separates storm water runoff from a sanitary sewer system.
(d) A project to construct a public water supply system is eligible for a grant under this
chapter only if the area to be served has either a sewage disposal system or a department -
approved construction plan and schedule for a sewage disposal system. An approved sewage
disposal system may include onsite disposal if the system conforms with standards established in
18 AAC 72.
Register 132, January 1995 ENVIRONMENTAL CONSERVATION
(e) A project to construct sewage collection lines, trunk lines, interceptors, force mains,
or pump stations is eligible for a grant under this chapter only if adequate sewage treatment
facilities exist, or will exist, after the project is complete. For purposes of this subsection, an
"adequate sewage treatment facility" is one that conforms, or is on an approved schedule to
conform, with the standards established in 18 AAC 70 and 18 AAC 72 and that has sufficient
capacity to treat the increase in flow that will result from the project for which a grant is sought
(0 Grant - eligible costs may be incurred up to 120 days before the date of the state grant
offer. Grant - eligible costs include construction, equipment, engineering, legal, and
administrative expenses that are incurred as a direct result of the project, or that are otherwise
directly attributable to the project, with the following conditions:
(1) if approved by the department, the costs of engineering design, construction
management, inspections, and actual construction performed in -house are eligible for grant
reimbursement; force account labor and equipment charge rates must be approved by the
department before expenses are incurred against the grant; force account rates may include
salaries except as provided in (g) of this section, benefits, and vacation and sick leave, and must
be submitted in a format specified by the department;
(2) the capital costs of landfill operating equipment are eligible for grant
reimbursement; the department will determine the eligibility of equipment costs, based on the
size and type of equipment required to perform the work and the percentage of time the
equipment is to be used for activities other than operation of the landfill;
(3) the costs of preparing project - specific facility plans and feasibility studies,
plalming reports, as -built drawings, and operation and maintenance manuals are eligible for grant
reimbursement; and
(4) for a water quality enhancement project, the costs of preparing reports,
testing, research, education, enforcement, and cleanup programs directed toward discovering or
solving potential or existing water pollution problems are eligible; before a grant will be made
for these expenditures, a grantee must have a department - approved program plan.
(g) Grant - ineligible costs include expenditures associated with acquisition of land and
rights -of -way; purchase of privately -owned water, wastewater, and solid waste facilities; interest
and financing; formation of local improvements districts; operation, maintenance, or system
repair; preparation of grant applications; salaries of existing administrative staff working
normally - scheduled hours; and vehicles used to collect and transport solid waste from its point of
generation to a point of disposal. Notwithstanding the provisions of this subsection, the following
costs are eligible for grant reimbursement:
(I) the cost of land when used for a solid waste landfill site or as an integral part
of a treatment process;
Register 132, January 1995 ENVIRONMENTAL CONSERVATION
(2) portable compaction units, if part of a solid waste transfer system, and the
vehicles necessary to transport these units to a landfill or processing site;
(3) the cost of a one -time closure of a solid waste disposal site or conversion of a
disposal site to a landfill that meets the standards in 18 AAC 60; eligible costs may include
fencing, access roads, covering of waste, signs, scales, trenches, and monitoring wells, but not
cover material in excess of the amount generated during construction of the facility; and
(4) water and sewer service connections, but only for those portions constructed
on public property or within a utility easement reserved in the public domain.
(Eff. 12/10/77, Register 64; am 6/11/81, Register 78; am 12/23/88, Register 108;
am 11/24/94, Register 132)
Authority: AS 46.03.02000)
AS 46.03.030
AS 46.03.090
AS 46.03.720
18 AAC 73.020. TERMS AND CONDITIONS OF' GRANT AWARDS. (a) The
grantee shall submit plans and specifications that define a proposed project under this chapter to
the department for review and approval before the start of construction. A project will not be
eligible for a grant under this chapter if the grantee issues a notice to proceed with construction to
a contractor before obtaining departmental approval of construction -ready plans and
specifications.
(b) The department will review plans and specifications based on generally accepted
engineering design standards, including those specified in 18 AAC 60, 18 AAC 72, and
18 AAC 80. The department will, in its discretion, waive the requirements to prepare project -
specific facility plans and feasibility studies, planning reports, as -built drawings, and operations
and maintenance manuals for less complex projects.
(c) The grantee shall obtain the services of a registered engineer to inspect work
performed under contract and to supervise or direct work performed under force account
procedures approved by the department under 18 AAC 73.010(f)(1).
(d) The plans and specifications for a construction project receiving grant assistance
under this chapter must be prepared and signed by a registered engineer.
(e) The grantee shall submit copies of all change orders to the department for approval.
Change orders need not be submitted before work begins. A change order is eligible for grant
reimbursement only if approval is obtained before the department conducts the project field
audit.
Register 132, January 1995 ENVIRONMENTAL CONSERVATION
(0 Construction contracts for work that is estimated to exceed $50,000 in cost may be
awarded only through a competitive bidding process with at least 30 days advertising before
award, unless an alternative method is approved by the department. Construction contracts for
less than $50,000 may be negotiated if the department approves the grantee's solicitation and
negotiating procedures.
(g) The grantee shall submit to the department, for review and concurrence, a tabulation
of all bids received, a complete copy of the lowest bid, a copy of the notice to proceed with
construction, and a copy of the construction contract. The contract must be awarded to the
lowest responsive, responsible bidder, unless the department waives this requirement. The
department will withhold grant payments pending review of and concurrence with the bid
tabulation, the notice to proceed, and construction contract.
(h) Project sites, materials, and records are subject to inspection and audit by the
department. The department will give adequate notice to the grantee and will schedule
inspections at a reasonable time.
(i) A grantee shall maintain project accounts and records supporting the grant eligibility
of project expenditures. These records must clearly separate eligible and ineligible project costs.
The grantee shall maintain project accounts and records until the project field audit has been
performed and the findings of and exceptions to the audit have been resolved.
(j) The grantee, by accepting grant assistance under this chapter, agrees to construct and
operate a system or construct a project awarded a grant under this chapter in accordance with the
approved plans and specifications. Failure to meet the requirements of this subsection may result
in withdrawal of grant assistance.
(k) The department will, in its discretion, include other terms and conditions in a grant
offer that it considers necessary to ensure compliance with this chapter.
(l) The grantee shall submit to the department for review and concurrence copies of all
professional services contracts associated with the project. A professional services contract need
not be submitted before work begins under that contract. A professional services contract is
eligible for grant reimbursement only if concurrence is obtained before the department conducts
the project field audit. (Eff. 12/10/77, Register 64; am 6/11/81,
Register 78; am 11/24/94, Register 132)
Authority: AS 46.03.02000)
AS 46.03.030
AS 46.03.090
AS 46.03.720
Register 132, January 1995 ENVIRONMENTAL CONSERVATION
18 AAC 73.030. APPLICATION PROCEDURES. (a) A grantee shall submit a grant
application package that consists of the following:
(1) a completed grant application request on a form provided by the department;
(2) a narrative statement of the general nature of the project that identifies project
scope, location, and costs;
(3) a copy of any other state or federal grant application or notice of grant award
to be used for financing the project;
(4) a copy of a contract between the grantee and the architectural and engineering
consultant who will be performing work on the project if available; this contract may be
submitted at a later date and is not required to receive a grant; and
(5)
for a water quality enhancement project, a program plan that describes
(A) the project to be funded;
(B) why the project is needed;
(C) how the project will enhance the waters involved;
(D) how the project will be accomplished;
(E) an estimate of project cost, with a projection of future costs caused by
or related to the project; and
(F) the specific results expected from the project.
(b) Repealed November 24, 1994.
(c) The department will make a grant offer for eligible project costs after it
(1) reviews and approves the grant application under the criteria established in
this chapter;
(2) determines that the costs for which a gran t is requested are reasonably
necessary to complete the project; and
(3) determines that there is enough financing to complete the project.
Register 132, January 1995 ENVIRONMENTAL CONSERVATION
(d) The grantee shall submit a resolution accepting the grant offer, adopted by the
governing body of the municipality, or by the governing body of each municipality if the project
is a joint venture of municipalities. In the resolution, the municipality must agree to accept
responsibility to operate and maintain the proposed water, wastewater, or solid waste processing,
disposal, or resource recovery system or to conduct the water quality enhancement project and
must agree to the terms and conditions of the grant offer. No action by the department will be
considered as creating a contractual obligation on the part of the state until the resolution has
been submitted to the department.
(e) The department will, in its discretion, withdraw any grant offer that is not accepted
within 180 days after the date the grant offer is extended.
(f) The department will, in its discretion, withdraw an accepted grant if construction has
not been started within one year after the date the grant offer was extended.
(Eff. 12/10/77, Register 64; am 6/11/81, Register 78; am 12/13/88, Register 108; am 11/24/94,
Register 132)
Authority: AS 46.03.020(10)
AS 46.03.030
1.8 AAC 73.040. STATE GRANT SHARE. (a) For the purpose of calculating grant
share percentages under AS 46.03.030(e), the department will use population figures determined
by the Department of Community and Regional Affairs, based on the most recent figures
available from the United States Bureau of the Census or other reliable population data. If a
grant application is made by a borough or unified municipality on behalf of a city, service
district, or other entity within the borough or unified municipality, the grant percentages will be
based on the population of the borough or unified municipality.
(b) If the award of a grant under AS 46.03.030(e) would result in a grantee obtaining
financing in excess of 100 percent of eligible costs, the state grant will be limited to the amount
required to complete 100 percent financing of eligible project costs.
(c) A grantee may match the state grant share with any combination of
(1) local money;
(2) federal money; and
(3) state money other than money received under this chapter or
AS 37.06. (Eff. 12/10/77, Register 64; am 6/11/81, Register 78; am 12/23/88; Register 108; am
11/24/94, Register 132)
Authority: AS 46.03.020(10)
AS 46.03.030
Register 132, January 1995 ENVIRONMENTAL CONSERVATION
18 AAC 73.050. GRANT PAYMENT PROCEDURES. (a) The department will
make progress payments in conformity with the procedures established in this section. The
grantee shall request payments on forms provided by the department and shall include supporting
documentation as part of each payment request.
(b) A request for final payment of the grant must be accompanied by a final cost
statement and certification by the grantee that the system is complete and operable or that the
project is complete. Expenses incurred or reported after this certification will not be eligible for
reimbursement under the grant. After reviewing a request for final payment, the department will
process a payment equal to 90 percent of total eligible reported costs, less any progress payments
made under (a) of this section. The department will withhold 10 percent of the grant payment
pending an audit under (c) of this section. For good cause shown, the department will, in its
discretion, waive the requirement to withhold the final 10 percent of a grant.
(c) Final payment of the grant will be based upon actual eligible project costs, as
determined by audit and will be limited to those costs reported on the final payment request. The
department will, in its discretion, waive the requirement for an audit under this subsection.
(d) Before final payment is made,
(1) the grantee shall submit to the department a copy of the as -built dra
the completed project prepared by the grantee under 18 AAC 60, 18 AAC 72, or
18 AAC 80; and
gs of
(2) the department will, in its discretion, conduct a final project inspection to
determine construction compliance with the as- built drawings submitted under (a) of this section.
(Eff. 12/10/77, Register 64; am 6/11/81, Register 78; am 11/24/94, Register 132)
Authority: AS 46.03.02000)
AS 46.03.030
AS 46.03.090
AS 46.03.720
18 AAC 73.060. DEFINITIONS. Unless the context indicates otherwise, in this chapter
(1) "as -built drawings" means the original plans and specifications prepared for
construction or installation and approved by the department, corrected to reflect how a facility
was actually constructed or installed;
(2) "change order" means a written order to the contractor authorizing
(A) an addition, deletion, or revision in the work within the scope of the
contract documents; or
Register 132, January 1995 ENVIRONMENTAL CONSERVATION
(B) an adjustment in contract price or time;
(3) "construction-ready" means plans and specifications that are signed and sealed
by a registered engineer and are ready for bidding purposes;
(4) "department" means the Department of Environmental Conservation;
(5) "eligible project costs" means those project costs that conform to the
requirements of AS 46.03.030(d) and this chapter;
(6) "final cost statement" means an itemized list of all eligible and ineligible
project costs and a statement of total funding for the project;
(7) "force account" means work performed by the grantee with its employees;
(8) "grantee" means a municipality, or combination of municipalities, that has
received a construction grant offer under this chapter;
(9) "registered engineer" means an engineer registered under
AS 08.48.21
(10) "sanitary sewer system" means pipelines or conduits, pumping stations, and
force mains, and all other appurtenant construction, devices, and appliances used to convey
human or industrial waste to a point of treatment and discharge;
(11) "start of construction" means the effective date set out in a notice to proceed
with construction issued to a contractor;
(12) "storm sewer system" means pipelines or conduits, pumping stations, and
force mains, and all other appurtenant construction, devices, and appliances used for conveying
storm water drainage and runoff to a point of ultimate disposal or discharge;
(13) "water supply system" means any source of water, intake works, collection
system, treatment works; storage facility, or distribution system from which potable water is
available for two or more individual dwellings or business establishments.
(Eff. 12/10/77, Register 64; am 6/11/81, Register 78; am 12/23/88, Register 108; am 11/24/94,
Register 132)
Authority: AS 46.03.020(10)
AS 46.03.030
AS 46.03.090
AS 46.03.720
-8-
Register 132, January 1995 ENVIRONMENTAL CONSERVATION
Editor's notes. - AS 46.03.900 contains additional definitions that apply to
this chapter.
-9-
State of Alaska
Audit Guide
and
Compliance Supplement
for
State Single Audits
Department of Administration
Division of Finance
May 2011
TABLE OF CONTENTS
SECTION 1 - INTRODUCTION 3
Overview 3
Intent of the Guide 3
Effective Date 3
Purpose for the State Single Audit Regulation 2 AAC 45.010 - .090 4
Definitions 4
Future Improvements 5
SECTION 2 - REQUIREMENTS 6
State Single Audit and Major Program Thresholds 6
Total Adjusted Expenditures Computation 6
Federal Pass - through Funds 6
State Programs identified in 2 AAC 45.010 (m) 7
Non -cash State Financial Assistance 7
Professional Standards 7
Audit Requirements 8
SECTION 3 - REPORTING 9
Reporting Package 9
Schedule of State Financial Assistance 10
Auditor's Reports 11
Example: Schedule of Findings and Questioned Costs 13
Summary Schedule of Prior Audit Findings and Corrective Action Plan 14
Example: Summary Schedule of Prior Audit Findings 15
Example: Corrective Action Plan 16
Illustrative Auditor's Reports 17
SECTION 4 - SUBMITTING SINGLE AUDITS 35
Where to Send Audits 35
What to Submit for a Complete Reporting Package 35
Listing of State of Alaska Agencies 36
SECTION 5 - QUESTIONS AND ANSWERS 37
SECTION 6 - REPRINT OF 2 AAC 45 44
SECTION 7 - COMPLIANCE SUPPLEMENT 49
Compliance Supplement Overview 49
Granting Agency Contact List 49
General Compliance Requirements 51
Page 2 May 2011
SECTION 1 - INTRODUCTION
OVERVIEW
The State of Alaska Audit Guide and Compliance Supplement for State Single
Audits (the Guide) has been prepared to assist entities and auditors with state single
audit preparation. It contains two major sections:
• Audit Guide: Covers general information, audit, and reporting requirements. It
is prepared by the single audit coordinator's office with the State of Alaska. This
office is located in the Department of Administration, Division of Finance.
® Compliance Supplement: Contains both the general compliance requirements,
which are prepared by the single audit coordinator's office; and the specific
requirements, which are prepared by the various State of Alaska agencies
administering the state financial assistance programs.
INTENT OF THE GUIDE
To a significant extent, the State of Alaska Audit Guide and Compliance
Supplement for State Single Audits is intended to parallel the federal Single Audit Act
Amendments of 1996, and federal Office of Budget and Management (Federal OMB)
Circular A -133 Audits of States and Local Governments, and Non - Profit Organizations
(June 2007 Revision).
EFFECTIVE DATE
This Guide is effective for audits of fiscal years beginning July 1, 2010 and after, and
supersedes the State of Alaska Audit Guide and Compliance Supplement for State
Single Audits issued in May 2010.
NONE OF THE MATERIAL IN THIS GUIDE SUPERSEDES OR REDUCES FEDERAL
AUDIT REQUIREMENTS.
Page 3 May 2011
PURPOSE FOR THE STATE SINGLE AUDIT REGULATION 2 AAC 45.010 - .090
The intent of the adoption and subsequent revisions to Alaska's single audit regulation 2
AAC 45 is to parallel the federal Single Audit Act Amendments of 1996 and OMB
Circular A -133 to a significant extent. This enables the State to receive audits
conducted for the federal government that also meet state agency information needs,
resulting in an efficient and effective method of gathering information.
State single audits are intended to meet the basic audit needs for all state agencies in a
non - duplicative way. However, single audits do not entirely eliminate the possibility that
some additional or different audit work may still be conducted on state awards. In some
cases, agencies may need to conduct or request a program evaluation. Any follow -up
work should build on the original single audit work.
Prior to the single audit regulation:
• Entities were frequently subject to multiple audits that were time - consuming,
duplicative, and incomplete.
• The overall state view was narrowed to a department level and some grants were
never audited.
Reasons for the state single audit regulation:
• To promote accountability of state financial assistance.
• To increase the efficiency of the monitoring process.
DEFINITIONS
Audit Period — The entity's fiscal year in which the entity expended financial
assistance.
Department — Refers to the single audit coordinator's office in the Department of
Administration, Division of Finance (the department). The department receives copies
of all single audit reporting packages. After reviewing the reporting packages for timely
submission; inclusion of required opinions, reports, and schedules; and conformance
with professional standards, the department will distribute them to the appropriate state
agencies.
Entity (Recipient) - An organization receiving financial assistance from the State of
Alaska. "Entity" does not include the University of Alaska or any other state agency, a
for - profit entity, or a non United States based entity.
Financial Assistance - State grants, contracts, provider agreements, cooperative
agreements, all forms of state financial assistance to an entity, and all forms of state
financial assistance provided through an entity to a third party. Financial assistance
does not include:
• Public assistance provided under AS 47.
• Goods or services purchased for the direct administration or operation of state
government.
Page 4 May 2011
® Moneys advanced to an entity under one or more state loan programs.
® Power cost equalization payments made to an electric cooperative on behalf of
its customers.
® Amounts received under state loan programs.
a Scholarships, loans or other tuition aid provided to students, but paid to an
educational institution on their behalf.
• For a third party, "financial assistance" does not include goods purchased from
the third party for direct administration or operation of the entity that received
financial assistance.
Known Questioned Costs — Those questioned costs specifically identified by the
auditor in the audit conducted under 2 AAC 45.
State Single Audit - Audits required under 2 AAC 45.010. Entities expending state
financial assistance in amounts described in 2 AAC 45,010 are required to submit audits
to the Department of Administration. Please refer to Section 6 for a complete reprinting
of 2 AAC 45.
Subrecipient — An entity that receives state financial assistance passed through from
the original recipient. The subrecipient is responsible to meet the requirements of the
assistance program.
Vendor — An entity that receives a procurement contract for goods or services from a
recipient. Vendor contracts are usually a result of a competitive bidding process. A
vendor's responsibility is to meet the requirements of the procurement contract.
FUTURE IMPROVEMENTS
We appreciate your assistance in identifying improvements for future updates to the
State of Alaska Audit Guide and Compliance Supplement for State Single Audits.
Please direct your comments to:
Colleen M. Campbell, Single Audit Coordinator
State of Alaska, Department of Administration
Division of Finance
PO Box 110204
Juneau, AK 99811 -0204
Phone: (907) 465 -4666
Fax: (907) 465-2169
E -mail: single.audit csplaska.gcv
State Single Audit Website: http: l/ fin. admin .state.ak.us /dof /ssaiindex.isp
Page 5 May 2011
SECTION 2 - REQUIREMENTS
STATE SINGLE AUDIT AND MAJOR PROGRAM THRESHOLDS
State Single Audit Threshold: Unless additional audit requirements are imposed by
state or federal law, a recipient of state financial assistance that expends a cumulative
total equal to or greater than $500,000 during the entity's fiscal year is required to
submit an annual single audit. Please refer to the following section, "Total Adjusted
Expenditures Computation" to calculate the cumulative total grant funds.
Audit emphasis must focus on the most important areas. Because it is impractical to
audit all programs of every entity and still keep the single audit emphasis on materiality
and efficiency, auditors are required to evaluate administration of "major programs."
Major Program Thresholds: Major program categories for state financial assistance
during an entity's fiscal year are as follows:
Program
Expenditures
$ 50,000
$ 75,000
$100,000
$300,000
Total Adjusted Expenditures
for All State Financial
Assistance
Less than $1 million
$ 1 to $ 5 million
$ 5 to $20 million
$20 to $50 million
TOTAL ADJUSTED EXPENDITURES COMPUTATION
For the purpose of determining whether or not the state single audit and major program
thresholds have been met, follow these steps:
Step #1: Start with the total expenditures from ALL financial assistance programs.
Step #2: Deduct any: direct federal funding, federal pass- through funds, and any
financial assistance from state programs identified in 2 AAC 45.010(m).
Step #3: Add in any non -cash State financial assistance.
Step #4: The remaining amount will be the Total Adjusted Expenditures for the
purpose of determining whether the State single audit and major program
thresholds have been met.
FEDERAL PASS- THROUGH FUNDS
Federal money passed to an entity by the State of Alaska is NOT considered to be state
financial assistance.
Page 6 May 2011
STATE PROGRAMS IDENTIFIED IN 2 AAC 45.010 (M)
Financial assistance in the following form is excluded from the threshold calculation per
2 AAC 45.010(m). However, under 2 AAC 45.010(n), the excluded financial assistance
in 2 AAC 45.010(m) is not exempt from compliance testing if the entity meets the
threshold requirements under 2 AAC 45.010(b). Please refer to Section 6 for a
complete reprinting of 2 AAC 45 and the specific statute citations.
• Community revenue sharing money provided under AS 29.60.850- 29.60.879.
• Aviation fuel tax money provided under AS 43.40.010.
• Electric and telephone cooperative gross revenue tax refunds provided under
AS 10.25.570.
• Alcoholic beverage license fee refunds provided under AS 04.11.610.
• Fisheries tax refunds provided under AS 29.60.450, AS 43.75.130, and AS
43.77.060.
• PERS/TRS relief funding under money appropriated to pay employer
unfunded liability attributable to the entity under AS 14.25 and AS 39.35.
• Money expended for projects that are solely managed, supervised, and
controlled by the Alaska Energy Authority under AS 44.83 and turned over to
the grantee at the conclusion of the project.
NON -CASH STATE FINANCIAL ASSISTANCE
State non -cash financial assistance such as free rent, donated property, or donated
surplus property shall be valued at fair market value at the time of receipt or the
assessed value provided by the state agency. Non -cash financial assistance values
must be included in the total adjusted expenditures computation for the fiscal year in
which it was received.
PROFESSIONAL STANDARDS
Auditors must comply with the current standards contained in and /or issued by:
• American Institute of Certified Public Accountants (AICPA)
• Government Auditing Standards
• Governmental Accounting Standards Board (GASB)
• The Alaska Administrative Code 2 AAC 45
• The 2011 State of Alaska Audit Guide and Compliance Supplement for
State Single Audits
Page 7 May 2011
AUDIT REQUIREMENTS
State Single Audit Requirements under 2 AAC 45.010: An entity that meets the state
single audit threshold is required to have an independent auditor conduct an audit for
the entire operations of the entity,
The audit must be conducted according to the audit standards effective at the time of
review for the audit period. Current audit standards are identified in the previous
section, "Professional Standards."
The audit package must include the reports listed in Section 3 — Reporting.
Page 8 May 2011
SECTION 3 - REPORTING
REPORTING PACKAGE
An entity that meets the state single audit requirements is required to submit a reporting
package that includes the following:
• Audited financial statements and notes to the financial statements.
• Schedule of State Financial Assistance.
• Auditor's reports - In an effort to make the reports understandable and to
reduce the number of reports issued, the following format of reports is
required:
o Opinions (or disclaimers of opinions) on the financial statements and
the Schedule of State Financial Assistance.
o Report on Internal Control over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing
Standards.
o Report on Compliance with Requirements that could have a Direct and
Material Effect on each Major Program and on Internal Control over
Compliance in Accordance with the State of Alaska Audit Guide and
Compliance Supplement for State Single Audits.
• Schedule of Findings and Questioned Costs. See example on page 13.
• Summary Schedule of Prior Audit Findings (as applicable). See example on
page 15.
• Corrective Action Plan (as applicable). See example on page 16.
• Copy of any management letter issued by the auditor (as applicable).
UNTIL THE DEPARTMENT OF ADMINISTRATION RECEIVES SUFFICIENT COPIES OF
ACCEPTABLE AUDIT REPORTS, INCLUDING THE ITEMS NOTED ABOVE (AS APPLICABLE)
THE AUDITEE HAS NOT MET THE AUDIT REQUIREMENT.
Page 9 May 2011
SCHEDULE OF STATE FINANCIAL ASSISTANCE
For each financial assistance award, the following information is required:
1. Name of state agency administering the award.
2. Program name and award number.
3. Expenditures for audit period.
4. Identification of major state programs.
The Schedule of State Financial Assistance should also include total overall
expenditures as well as expenditures subtotaled by program and by each awarding
agency. Any other information, such as the following, may be included to make the
schedule easier to read:
• Award Period
• Award Amount
• Beginning Revenues Receivable (deferred revenue)
• Receipts for Audit Period
• Ending Revenues Receivable (deferred revenue)
Page 10 May 2011
AUDITOR'S REPORTS
In general, auditor's opinions and reports must include the following:
1. Opinions on financial statements and Schedule of State Financial
Assistance
a An opinion (or disclaimer of opinion) on whether the financial statements are
presented fairly in all material respects in conformity with accounting
principles generally accepted in the United States of America.
a An opinion on whether the Schedule of State Financial Assistance is fairly
stated in all material respects, in relation to the financial statements taken as
a whole.
2. Internal Control Related to Financial Statements and Internal Control
Related to Major Programs
Reports must describe the scope of testing of internal control and the results
of the tests and, where applicable, must refer to the separate Schedule of
Findings and Questioned Costs. It is not expected that the auditor will test
internal control structure policies and procedures on which there is no intent
to rely for purposes of expressing an opinion on compliance or the financial
statements.
3. Compliance with Laws, Regulations, and the Provisions of Contracts or
Grant Agreements, Noncompliance that Could Have a Material Effect on the
Financial Statements and Each Major Program
Reports must include an opinion or disclaimer of opinion, on whether the
auditee complied with laws, regulations, and the provisions of applicable
contracts or grant agreements; noncompliance with which could have a direct
and material effect on the financial statements and each major program. As
applicable, the report must refer to the separate Schedule of Findings and
Questioned Costs.
4. Schedule of Findings and Questioned Costs — (See example on page 13)
A Schedule of Findings and Questioned Costs, which includes the following three
components:
a. A summary of the auditor's results, which shall include:
1) The type of report the auditor issued on the financial statements of
the auditee.
2) A statement indicating if any significant deficiencies in internal control
were disclosed by the audit of the financial statements and whether
any such conditions were material weaknesses.
3) A statement as to whether the audit disclosed any noncompliance
which is material to the financial statements.
4) A statement indicating if any significant deficiencies in internal control
over state major program were disclosed by the audit and whether
any such conditions were material weaknesses.
Page 11 May 2011
5) The type of report the auditor issued on compliance for major state
programs.
6) The dollar threshold used to distinguish state major programs.
b. Findings related to the financial statements which are required to be reported
in accordance with generally accepted government auditing standards
(GAGAS ).
c. Findings and questioned costs related to state awards.
1) Audit findings should be presented in sufficient detail for the auditee
to prepare a corrective action plan and take corrective action and for
State agencies to arrive at a management decision.
2) The following specific information shall be included, as applicable, in
audit findings:
a. A reference number assigned to each audit finding.
b. Identification of the state award(s) and grant number(s) for
which noncompliance was found.
c. The criteria or specific requirement upon which the audit
finding is based, including statutory, regulatory, or other
citation.
d. The condition found, including facts that support the
deficiency identified in the audit finding.
e. Identification of questioned costs for state awards that exceed
$5,000 in the aggregate for all tested transactions for financial
assistance being audited.
f. Information to provide proper perspective for judging the
prevalence and consequences of the audit finding.
g. The possible asserted effect to provide sufficient information
to the auditee and state agency to permit them to determine
the cause and effect to facilitate prompt and proper corrective
action.
h. Recommendations for corrective action to prevent future
occurrences of the deficiency.
3) Audit findings which relate to the same issue should be presented as
a single audit finding.
4) Audit findings which relate to both the financial statements and state
awards should be reported in both sections of the schedule.
However, the reporting in one section of the schedule may be in
summary form with a reference to a detail report in the other section
of the schedule.
Page 12 May 2011
Name of Entity
EXAMPLE: SCHEDULE OF FINDINGS AND QUESTIONED COSTS
For the Fiscal Year Ended June 30, 201x
SECTION I — SUMMARY OF AUDITOR'S RESULTS
Financial Statements
Type of auditor's report issued: Unqualified
Internal Control over financial reporting:
• Material weakness(es) identified? n Yes O. No
none
• Significant deficiency (ies) identified? ❑ Yes reported
• Noncompliance material to financial statements? —I Yes ® No
State Financial Assistance
Type of auditor's report issued on compliance for major programs: Unqualified
Internal control over major programs:
• Material weakness(es) identified? Yes ® No
none
• Significant deficiency (ies) identified? ® Yes ❑ reported
Dollar threshold used to distinguish a state major program: $75,000
I
[ SECTION II – FINANCIAL STATEMENT FINDINGS`.
The (name of entity) did not have any findings that relate to the financial statements.
SECTION III: STATE AWARD FINDINGS AND QUESTIONED COSTS
Finding 201x -1: Deadline for State Single Audit. State Program Name, Grant 1x -xxx.
Criteria: 2 AAC 45.010(b) states an entity that expends a cumulative total of
$500,000 or more shall submit an audit report for the audit period by..."
the earlier of 30 days after the entity receives its audit report for the audit
period; or nine months after the end of the audit period" or a later date
agreed upon in writing and advance of the date in this section.
Condition: This (name of entity) did not engage a qualified audit firm within the
required timeline to complete and submit the audit in a timely manner.
Questioned Costs: None.
Context: The audit firm was engaged to perform an audit in accordance with the 2
AAC 45 more than nine months after the audit period.
Effect: This (name of entity) is not in compliance with 2 AAC 45.010 (b)(1).
Cause: This (name of entity) did not have controls in place to identify the
requirements of the state single audit threshold.
Recommendation: This (name of entity) should implement controls to identify the source of
funding awards. When necessary, the grantee should engage a qualified
audit firm in order to the audit to be completed and submitted within the
required timeframe.
Page 13 May 2011
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS AND CORRECTIVE ACTION PLAN
The auditee is responsible for follow -up and corrective action on all audit findings,
significant deficiencies, material weaknesses and recommendations included in the
audit report.
Corrective Action Plan - (See example on page 16)
The auditee is required to submit a corrective action plan for each of the current year
audit findings. Each finding or condition should be concisely addressed; however, the
plans should contain adequate information for state agencies to evaluate and monitor
the recipient's intended actions. As a part of the evaluation process, state grantor
agencies may require additional information or clarification of intended actions.
Corrective action plans should include the following:
® Comments on Findings, Significant Deficiencies, Material Weaknesses, and
Auditor's Recommendations. The auditee should provide a statement of
concurrence or non - concurrence with the findings, significant deficiencies,
material weaknesses, and auditor's recommendations. If the auditee does not
agree with a finding, significant deficiency, material weakness, or
recommendation, specific information should be provided to explain its position.
® Actions Taken or Planned. The auditee should describe actual or planned
actions that will correct all deficiencies identified in the report, the name(s) of the
contact person(s) responsible for the corrective action and projected dates for
completion of the corrective action. If the auditee believes a corrective action is
not required, a statement describing the reasons should be included.
Summary Schedule of Prior Audit Findings - (See example on page 15)
As part of this responsibility, the auditee is required to submit a summary schedule of
the prior year's audit findings even if findings have been resolved. The auditee
should provide an update on the status of corrective actions taken on prior findings,
including dates, when the findings were resolved or the planned completion date for
resolving the findings. This summary must also include the status of findings from any
previous audits if those findings were reported as unresolved in the prior year audit
period.
Reference Numbers Required
The Summary Schedule of Prior Audit Findings and the Corrective Action Plan must
include the reference numbers the auditor assigned to the audit findings in the Schedule
of Findings and Questioned Costs.
Page 14 May 2011
Name of Entity
EXAMPLE: SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
For the Fiscal Year Ended June 30, 201x
Finding: 08 -1, Segregation of duties.
This finding has been resolved. Duties have been separated as much as possible and
alternative controls have been implemented to compensate for lack of separation.
Finding: 09 -1, Timely submission of progress reports.
This finding has been resolved. Progress reports are submitted when due, even if there
is no financial activity during the reporting period.
Finding: 09 -2, Failure to reconcile bank accounts.
This finding is still unresolved. It is repeated as finding 10 -2 for the year ended June 30,
201x.
Finding: 09 -3, Grant reimbursement not requested on a timely basis.
This finding has been resolved. Grant reimbursements were requested on a timely
basis during the year ended June 30, 201x.
Page 15 May 2011
Name of Entity
EXAMPLE: CORRECTIVE ACTION PLAN
For the Fiscal Year Ended June 30, 201x
Financial Statement Findings
Finding: 2010 -1 Segregation of Duties
Name of Contact Person: Name, Title
Corrective Action: The duties will be separated as much as possible and
alternative controls will be used to compensate for lack
of separation. The accounting staff will become more
involved in providing these controls.
Proposed Completion Date: November 1, 201x
State Award Findings and Questioned Costs
Finding: 2010 -2 Late submission of financial reports
Name of Contact Person: Name, Title
Corrective Action: The program coordinator will be responsible for
submitting quarterly and year -end financial reports
within 15 working days of the quarter or year end.
Proposed Completion Date: The above procedure was implemented August 1,
201x.
Page 16 May 2011
ILLUSTRATIVE AUDITOR'S REPORTS
This section contains examples of reports issued under generally accepted auditing
standards and Government Auditing Standards, based on the guidance found in
Statement of Auditing Standards No. 117, effective for audits for periods ending on or
after June 15, 2010.
• Example 1: Unqualified Opinions on Basic Financial Statements Accompanied
by Required Supplementary Information and Supplementary Information — State
or Local Governmental Entity
• Example 2: Unqualified Opinion on Financial Statements - Not - For - Profit Entity
• Example 3: Report on Internal Control over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards (No Material
Weaknesses Identified, No Significant Deficiencies Identified, No Reportable
Instances of Noncompliance or Other Matters Identified)
• Example 4: Report on Internal Control over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards (Material
Weaknesses and Significant Deficiencies and Reportable Instances of
Noncompliance, and Other Matters Identified)
• Example 5: Report on Compliance with Requirements that Could Have a Direct
and Material Effect on Each Major Program and on Internal Control over
Compliance in Accordance with the State of Alaska Audit Guide and
Compliance Supplement for State Single Audits (Unqualified Opinion on
Compliance; No Material Weaknesses or Significant Deficiencies in Internal
Control over Compliance Identified)
• Example 6: Report on Compliance with Requirements that Could Have a Direct
and Material Effect on Each Major Program and on Internal Control over
Compliance in Accordance with the State of Alaska Audit Guide and
Compliance Supplement for State Single Audits (Qualified Opinion on
Compliance; Material Weaknesses and Significant Deficiencies in Internal
Control over Compliance Identified)
Page 17 May 2011
Example 1: Unqualified Opinions on Basic Financial Statements
Accompanied by Required Supplementary Information and Supplementary
Information — State or Local Government Entityl
Independent Auditor's Report
[Addressee]
We have audited the accompanying financial statements of the governmental activities,
the business -type activities, the aggregate discretely presented component units, each
major fund, and the aggregate remaining fund information of the City of Example, Any
State, as of and for the year ended June 30, 20x1, which collectively comprise the City's
basic financial statements as listed in the table of contents. These financial statements
are the responsibility of the City of Example's management. Our responsibility is to
express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards2, issued by the Comptroller General of the United
States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. [Optional: An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the City's internal control over financial reporting. Accordingly, we express no such
opinion.]3 An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and the significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the respective financial position of the governmental activities, the business -
type activities, the aggregate discretely presented component units, each major fund,
and the aggregate remaining fund information of the City of Example, Any State, as of
June 30, 20x1, and the respective changes in financial position and cash flows, where
applicable, thereof for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
in accordance with Government Auditing Standards, we have also issued our report
dated [date of report] on our consideration of the City of Example's internal control over
financial reporting and on our tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial reporting
and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance.5 That report is an integral part
Page 18 May 2011
of an audit performed in accordance with Government Auditing Standards and should
be considered in assessing the results of our audit.
The [identify accompanying required supplementary information, such as
management's discussion and analysis and budgetary comparison information] on
pages XX through XX and XX through XX are not a required part of the basic financial
statements but are supplementary information required by accounting principles
generally accepted in the United States of America.6 We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the required supplementary information.
However, we did not audit the information and express no opinion on it.7
Our audit was conducted for the purpose of forming opinions on the financial statements
that collectively comprise the City of Example's basic financial statements. The
accompanying Schedule of State Financial Assistance is presented for purposes of
additional analysis and is not a required part of the basic financial statements.8 9 The
Schedule of State Financial Assistance is required by the State of Alaska Audit Guide
and Compliance Supplement for State Single Audits. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.10
[Signature]
[Date]
Copyright 2011, by the American Institute of Certified Public Accountants, Inc. All rights reserved.
Reprinted with permission.
1 Refer to the AICPA Audit and Accounting Guide State and Local Governments for additional guidance on reporting
on a government's basic financial statements. In particular, appendix A to chapter 14 of that guide describes
conditions that may make modifications of the standard report necessary and illustrates several of those
modifications, such as reference to the work of other auditors.
2 For financial audits performed in accordance with Government Auditing Standards, chapters 1 -5 of Government
Auditing Standards, July 2007 revision, apply. The standards applicable to financial audits are the general, fieldwork,
and reporting standards described in chapters 3 - 5 of Government Auditing Standards.
3 This optional wording may be added in accordance with Interpretation No. 17, "Clarification in the Audit Report of
the Extent of Testing on Internal Control Over Financial Reporting in Accordance With Generally Accepted Auditing
Standards," of AU Section 508, Reports on Audited Financial Statements (AICPA, Professional Standards, vol. 1, AU
sec. 9508 par .85 -.88), which provides reporting guidance for audits of nonissuers. Interpretation No. 17 also
addresses how auditors may expand this report to explain that their consideration of internal control was sufficient to
provide the auditor sufficient understanding to plan the audit and determine the nature, timing and extent of tests to
be performed, but was not sufficient to express an opinion on the effectiveness of the internal control. If this optional
wording is added, in an audit of a governmental entity, the remainder of the paragraph should read as follows:
"An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinions."
` If the financial statements include organizational units that are not required to have a Government Auditing
Standards audit, the auditor should consider modifying this scope paragraph.
Page 19 May 2011
5 This sentence should be modified if the auditor is providing an opinion on internal control over financial reporting or
on compliance in the Government Auditing Standards report.
The auditor may identify the body requiring the information, which in this situation is the Governmental Accounting
Standards Board.
7 Generally accepted accounting principles require that the financial statements of state and local governments be
accompanied by a management's discussion and analysis, and may require that they be accompanied by other
required supplementary information (RSI). The auditor may be required to or choose to report on that information.
This example assumes such reporting. AU section 558At, Required Supplementary Information (AICPA, Professional
Standards, vol. 1); AU section 551 At, Reporting on Information Accompanying the Basic Financial Statements in
Auditor- Submitted Documents (AICPA, Professional Standards, vol. 1); and the AICPA Audit and Accounting Guide
State and Local Governments contain guidance on the auditor's responsibilities for and reporting on RSI.
t SAS No. 119 was issued in February 2010. This SAS addresses and clarifies the auditor's responsibility when
engaged to opine on whether supplementary information is fairly stated, in all material respects, in relation to the
financial statements as a whole. The SAS is effective for audits of financial statements for periods beginning on
or after December 15, 2010. Early implementation is permitted. Upon its effective date, SAS No. 119, along with
SAS No. 118, will supersede the requirements and guidance in AU section 551A.
*SAS No. 120, Required Supplementary Information (AICPA, Professional Standards, vol. 1, AU sec. 558), was
issued in February 2010. This SAS addresses and clarifies the auditor's responsibility in relation to information
supplementary to the basic financial statements when that is required by a designed accounting standard setter
to accompany such financial statements. The SAS is effective for audits of financial statements for periods
beginning on or after December 15, 2010. Early implementation is permitted. Upon its effective date, SAS No.
120 will supersede the requirements and guidance in AU section 558A, Required Supplementary Information
(AICPA, Professional Standards, vol. 1).
a If the financial statements are accompanied by supplementary information other than RSI (known as SI), the auditor
may be required to or choose to report on that information. This example assumes such reporting. AU Section 550A,
Other Information in Documents Containing Audited Financial Statements (AICPA, Professional Standards, vol. 1);
AU section 551A; and the AICPA Audit and Accounting Guide State and Local Governments contain guidance on the
auditor's responsibilities for and reporting on SI. In addition, in an audit in accordance with 2 AAC 45, the financial
statements should be accompanied by a supplementary schedule of state financial assistance and the auditor should
report whether that schedule is presented fairly in all material respects in relation to the financial statements taken as
a whole. See footnotes * (below) and t (above) for information related to recently issued SASs that will replace the
guidance discussed in this footnote.
* SAS No. 118, Other Information in Documents Containing Audited Financial Statements (AICPA, Professional
Standards, vol. 1, AU sec. 550), was issued in February 2010. This SAS addresses and clarifies the auditor's
responsibility in relation to other information in documents containing audited financial statements and the
auditor's report thereon. The SAS is effective for audits of financial statements for periods beginning on or after
December 15, 2010. Early implementation is permitted. Upon its effective date, SAS No. 118 will supersede the
requirements and guidance in AU Section 550A, Other Information in Documents Containing Audited Financial
Statements (AICPA, Professional Standards, vol. 1), and along with SAS No. 119, Supplementary Information in
Relation to the Financial Statements as a Whole (AICPA, Professional Standards, vol. 1, AU sec. 551), the
requirements in AU section 551A, Reporting on Information Accompanying the Basic Financial Statements in
Auditor - Submitted Documents (AICPA, Professional Standards, vol. 1).
The reference to the Schedule of State Financial Assistance should be deleted if the Schedule of State Financial
Assistance is not presented with the basic financial statements (that is, a separate single audit package is issued). In
such a circumstance, the required reporting on the schedule may be incorporated in the report issued to meet the
requirements of the State of Alaska Audit Guide and Compliance Supplement for State Single Audits. See
example 5 (note 46) for additional guidance.
10 When reporting on SI, the auditor should consider the effect of any modifications to the report on the basic financial
statements (for example, a qualified opinion, a modification as to consistency because of a change in accounting
principle, or a reference to the report of other auditors). Furthermore, if the report on SI is other than unqualified, this
paragraph should be modified. AU sec. 551A, paragraphs .09 —.11 and .13 -.14 provide guidance for reporting in
these circumstances.
Page 20 May 2011
Example 2: Unqualified Opinion on Financial Statements — Not - for- Profit
Entity' 1
Independent Auditor's Report
[Addressee]
We have audited the accompanying statement of financial position of Example NPO as
of June 30, 20x1, and the related statements of activities and cash flows12 for the year
then ended. These financial statements are the responsibility of Example NPO's
management. Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards,13 issued by the Comptroller General of the United
States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. [Optional: An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Example NPO's internal control over financial reporting. Accordingly, we express no
such opinion.J14 An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and the significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.15
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Example NPO as of June 30, 20x1, and the changes
in its net assets and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report
dated [date of report] on our consideration of Example NPO's internal control over
financial reporting and on our tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial reporting
and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance.16 That report is an integral
part of an audit performed in accordance with Government Auditing Standards and
should be considered in assessing the results of our audit.17
Our audit was conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying schedule of state financial assistance
is presented for purposes of additional analysis as required by the State of Alaska
Audit Guide and Compliance Supplement for State Single Audits and is not a
Page 21 May 2011
required part of the basic financial
to the auditing procedures applied
our opinion, is fairly stated, in all
statements taken as a whole.19
[Signature]
[Date]
statements.18 Such information has been subjected
in the audit of the basic financial statements and, in
material respects, in relation to the basic financial
Copyright 2011, by the American Institute of Certified Public Accountants, Inc. All rights reserved.
Reprinted with permission.
Refer to the AICPA Audit and Accounting Guide Not - for -Profit Organizations for additional guidance on reporting on
the financial statements of a not -for- profit entity. In addition to the situations discussed in that guide, auditors may
need to modify the report on the financial statements to refer to the work of other auditors, using the guidance in AU
section 543, Part of Audit Performed by Other Independent Auditors (AICPA, Professional Standards, vol. 1).
i2 Each of the statements presented, which may include a statement of functional expenses, should be identified in
the introductory paragraph.
13 See footnote 2.
14 See footnote 3. If this optional wording is added, in an audit of a nongovernmental entity, the remainder of the
paragraph would read as follows:
"An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion."
15 See footnote 4.
16 See footnote 5.
17 If the financial statements are accompanied by RSI or SI (for example, a comparison of actual and budgeted
expenses), the auditor may be required to or choose to report on that information in one or more paragraphs following
this paragraph. AU section 550A; AU section 551A; and AU section 558A contain guidance on the auditor's
responsibilities for and reporting on RSI and SI. See also footnote 10.
18 See footnotes 8 and 9.
i9 See footnote 10.
Page 22 May 2011
Example 3: Report on Internal Control over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance With Government Auditing Standards (No
Material Weaknesses Identified, No Significant Deficiencies Identified, No
Reportable Instances of Noncompliance or Other Matters Identified)
[Addressee]
We have audited the financial statements20 of Example Entity as of and for the year
ended June 30, 20x1, and have issued our report thereon dated August 15, 20x1.2 We
conducted our audit in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards,22 issued by the Comptroller General of the United
States.23
Internal Control over Financial Reporting24 25
In planning and performing our audit, we considered Example Entity's internal control
over financial reporting as a basis for designing our auditing procedures for the purpose
of expressing our opinion on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of Example Entity's internal control over
financial reporting. Accordingly, we do not express an opinion on the effectiveness of
Example Entity's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not
allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct misstatements on a timely basis. A material
weakness is a deficiency, or combination of deficiencies, in internal control, such that
there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose
described in the first paragraph of this section and was not designed to identify all
deficiencies in internal control over financial reporting that might be deficiencies,
significant deficiencies or material weaknesses. We did not identify any deficiencies in
internal control over financial reporting that we consider to be material weaknesses, as
defined above.
Compliance and Other Matters26
As part of obtaining reasonable assurance about whether Example Entity's financial
statements are free of material misstatement, we performed tests of its compliance with
certain provisions of laws, regulations, contracts, and grant agreements, noncompliance
with which could have a direct and material effect on the determination of financial
statement amounts. However, providing an opinion on compliance with those provisions
was not an objective of our audit, and accordingly, we do not express such an opinion.
Page 23 May 2011
The results of our tests disclosed no instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards.
We noted certain matters that we reported to management of Example Entity in a
separate letter dated August 15, 20X1. 27
This report is intended solely for the information and use of management, [identify the
body or individuals charged with governance], others within the entity, and the State of
Alaska and is not intended to be and should not be used by anyone other than these
specified parties.28
[Signature]
[Date] 29
Copyright 2011, by the American Institute of Certified Public Accountants, Inc. All rights reserved.
Reprinted with permission.
20 As explained in the AICPA Audit and Accounting Guide State and Local Governments, the auditor generally
expresses or disclaims an opinion on a government's basic financial statements by providing an opinion or disclaimer
of opinion on each opinion unit required to be presented in those financial statements. For audits of governmental
entities, the first sentence in this report would be modified to reflect the opinion units that have been reported on. In
addition, the first sentence under the heading "Internal Control over Financial Reporting" would be revised to refer to
"our opinions" instead of "our opinion." An illustration of the revised wording for the first sentence follows:
"We have audited the financial statements of the governmental activities, the business -type activities, the
aggregate discretely presented component units, each major fund, and the aggregate remaining fund
information of Example Entity as of and for the year ended June 30, 20x1, which collectively comprise
Example Entity's basic financial statements and have issued our report thereon dated August 15, 20x1."
21 Describe any departure from the standard report (for example, a qualified opinion, a modification as to consistency
because of a change in accounting principle, or a reference to the report of other auditors).
22 See footnote 2.
23 If the financial statements include organizational units that are not required to have a Government Auditing
Standards audit, the auditor should consider modifying this scope paragraph.
24 Government Auditing Standards permits, but does not require, auditors to express an opinion on internal control
over financial reporting or on compliance if sufficient work was performed.
25 This report sequences the reporting on internal control over financial reporting before the reporting on compliance
and other matters. Auditors may present the internal control and compliance sections of the Government Auditing
Standards report in whichever sequence better meets their needs.
26 Other matters are certain findings of fraud or abuse. As per industry practice, the reference to "other matters" in
both the heading and the following paragraph typically appears in all reports, even if the report does not present or
refer to findings of fraud or abuse or even if the only findings of fraud or abuse are presented in or referred to from the
section on internal control over financial reporting.
21 Government Auditing Standards requires the auditor to communicate in writing to officials of the audited entity
violations of provisions of contracts or grant agreements or abuse that have an effect on the financial statements that
is less than material but more than inconsequential. Paragraph 5.09 of Government Auditing Standards requires the
reference illustrated in this paragraph if the auditor has issued a management letter reporting such matters. This
reference does not preclude the auditor from including other discussions or recommendations in the management
letter.
Page 24 May 2011
28 This paragraph conforms to AU section 532, Restricting the Use of an Auditor's Report (AICPA, Professional
Standards, vol. 1). See AU section 532 for additional guidance on restricted -use reports.
29 Because this report relates to the audit of the financial statements, and is based on the generally accepted auditing
standards audit procedures performed, it is subject to the provisions of AU section 530, Dating of the Independent
Auditor's Report (AICPA, Professional Standards, vol. 1). Therefore, it should be dated the same date as the auditor's
report on the financial statements, which per paragraph .01 of AU section 530 is "no earlier than the date on which
the auditor obtains sufficient appropriate audit evidence."
Page 25 May 2011
Example 4: Report on Internal Control over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance With Government Auditing Standards (Material
Weaknesses and Significant Deficiencies and Reportable Instances of
Noncompliance, and Other Matters Identified)
[Addressee]
We have audited the financial statements30 of Example Entity as of and for the year
ended June 30, 20x1, and have issued our report thereon dated August 15, 20x1.31 We
conducted our audit in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards,32 issued by the Comptroller General of the United
States.33
Internal Control over Financial Reporting34 as
In planning and performing our audit, we considered Example Entity's internal control
over financial reporting as a basis for designing our auditing procedures for the purpose
of expressing our opinion on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the Example Entity's internal control over
financial reporting. Accordingly, we do not express an opinion on the effectiveness of
Example Entity's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose
described in the preceding paragraph and was not designed to identify all deficiencies in
internal control over financial reporting that might be significant deficiencies or material
weaknesses and therefore, there can be no assurance that all deficiencies, significant
deficiencies, or material weaknesses have been identified. However, as described in
the accompanying schedule of findings and questioned costs, we identified certain
deficiencies in internal control over financial reporting that we consider to be material
weaknesses [and other deficiencies that we consider to be significant deficiencies].36
A deficiency in internal control exists when the design or operation of a control does not
allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct misstatements on a timely basis. A material
weakness is a deficiency, or a combination of deficiencies, in internal control such that
there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected on a timely basis. We
consider the deficiencies described in the accompanying schedule of findings and
questioned costs to be material weaknesses. (List the reference numbers of the related
findings, for example, 20X1 -1, 20X1 -3, and 20X1 -4].
[A significant deficiency is a deficiency or a combination of deficiencies in internal
control that is less severe than a material weakness, yet important enough to merit
attention by those charged with governance. We consider the deficiencies described in
the accompanying schedule of findings and questioned costs to be significant
Page 26 May 2011
deficiencies. List the reference numbers of the related findings, for example, 20X1 -2
and 20X1 -5.)j
Compliance and Other Matters38
As part of obtaining reasonable assurance about whether Example Entity's financial
statements are free of material misstatement, we performed tests of its compliance with
certain provisions of laws, regulations, contracts, and grant agreements, noncompliance
with which could have a direct and material effect on the determination of financial
statement amounts. However, providing an opinion on compliance with those provisions
was not an objective of our audit, and accordingly, we do not express such an opinion.
The results of our tests disclosed instances of noncompliance or other matters that are
required to be reported under Government Auditing Standards and which are described
in the accompanying schedule of findings and questioned costs as items [list the
reference numbers of the related findings, for example, 20x1 -2 and 20x1 -51.
[NOTE: The referenced findings should include reportable: a) instances of
noncompliance; and b) fraud or abuse that is not the result of a significant deficiency.]
We noted certain matters that we reported to management of Example Entity in a
separate letter dated August 15, 20x1.3
Example Entity's response to the findings identified in our audit is described in the
accompanying schedule of findings and questioned costs. We did not audit Example
Entity's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of management, [identify the
body or individuals charged with governance], others within the entity, and the State of
Alaska and is not intended to be and should not be used by anyone other than these
specified parties.40
[Signature]
[Date] 41
Copyright 2011, by the American Institute of Certified Public Accountants, Inc. All rights reserved.
Reprinted with permission.
i0 See footnote 20.
31 See footnote 21.
32 See footnote 2.
33 See footnote 23.
34 See footnote 24.
35 See footnote 25.
Page 27 May 2011
as If no significant deficiencies are identified, the text within the brackets is omitted from the report.
a' See footnote 36.
38 See footnote 26.
39 See footnote 27.
40 See footnote 28.
41 See footnote 29.
Page 28 May 2011
Example 5: Report on Compliance with Requirements that Could Have a
Direct and Material Effect on Each Major Program and on Internal Control
over Compliance in Accordance with State of Alaska Audit Guide and
Compliance Supplement for State Single Audits (Unqualified Opinion on
Compliance; No Material Weaknesses or Significant Deficiencies in Internal
Control over Compliance Identified)
Independent Auditor's Report
[Addressee]
Compliance42
We have audited Example Entity's compliance with the types of compliance
requirements described in the State of Alaska Audit Guide and Compliance
Supplement for State Single Audits that could have a direct and material effect on
each of Example Entity's major state programs for the year ended June 30, 20x1.
Example Entity's major state programs are identified in the accompanying schedule of
state financial assistance. Compliance with the requirements of laws, regulations,
contracts, and grants applicable to each of its major state programs is the responsibility
of Example Entity's management. Our responsibility is to express an opinion on
Example Entity's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally
accepted in the United States of America; the standards applicable to financial audits
contained in Government Auditing Standards,43 issued by the Comptroller General of
the United States; and State of Alaska Audit Guide and Compliance Supplement for
State Single Audits. Those standards and the State of Alaska Audit Guide and
Compliance Supplement for State Single Audits require that we plan and perform
the audit to obtain reasonable assurance about whether noncompliance with the types
of compliance requirements referred to above that could have a direct and material
effect on a major state program occurred. An audit includes examining, on a test basis,
evidence about Example Entity's compliance with those requirements and performing
such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion. Our audit does not provide a
legal determination of Example Entity's compliance with those requirements.
In our opinion, Example Entity complied, in all material respects, with the compliance
requirements referred to above that could have a direct and material effect on each of
its major state programs for the year ended June 30, 20x1. However, the results of our
auditing procedures disclosed instances of noncompliance with those requirements,
which are required to be reported in accordance with the State of Alaska Audit Guide
and Compliance Supplement for State Single Audits and which are described in the
accompanying schedule of findings and questioned costs as items [list the reference
numbers of the related findings, for example, 20x1 -3 and 20x1 -6].44
Page 29 May 2011
Internal Control over Compliance
Management of Example Entity is responsible for establishing and maintaining effective
internal control over compliance with the requirements of laws, regulations, contracts,
and grants applicable to state programs. In planning and performing our audit, we
considered Example Entity's internal control over compliance with the requirements that
could have a direct and material effect on a major state program to determine the
auditing procedures for the purpose of expressing our opinion on compliance and to test
and report on internal control over compliance in accordance with the State of Alaska
Audit Guide and Compliance Supplement for State Single Audits, but not for the
purpose of expressing an opinion on the effectiveness of internal control over
compliance. Accordingly, we do not express an opinion on the effectiveness of
Example Entity's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a
control over compliance does not allow management or employees, in the normal
course of performing their assigned functions, to prevent, or detect and correct
noncompliance with a type of compliance requirement of a state program on a timely
basis. A material weakness in internal control over compliance is a deficiency, or
combination of deficiencies, in internal control over compliance, such that there is a
reasonable possibility that material noncompliance with a type of compliance
requirement of a state program will not be prevented, or detected and corrected, on a
timely basis.
Our consideration of internal control over compliance was for the limited purpose
described in the first paragraph of this section and was not designed to identify all
deficiencies in internal control over compliance that might be deficiencies, significant
deficiencies or material weaknesses. We did not identify any deficiencies in internal
control over compliance that we consider to be material weaknesses, as defined
above.45
Example Entity's responses to the findings identified in our audit are described in the
accompanying schedule of findings and questioned costs. We did not audit Example
Entity's responses and, accordingly, we express no opinion on the responses. 46
This report is intended solely for the information and use of the management, others
within the entity [identify the body or individuals], and the State of Alaska and is not
intended to be and should not be used by anyone other than these specified parties.47
[Signature]
[Date]
Copyright 2011, by the American Institute of Certified Public Accountants, Inc. All rights reserved.
Reprinted with permission.
Page 30 May 2011
d2 This report sequences the reporting on compliance before the reporting on internal control over compliance.
Auditors may present the internal control over compliance and compliance sections of this report in whichever
sequence better meets their needs.
43 The standards applicable to financial audits are the general, fieldwork, and reporting standards described in
chapters 3 -5 of Government Auditing Standards.
" When there are no such instances of noncompliance identified in the schedule of findings and questioned costs,
the last sentence would be omitted.
45 There may be instances in which it would be appropriate to report on the schedule of state financial assistance in
this report (that is, a separate single audit package is issued). In such a circumstance, a new section would be added
immediately following this paragraph. For audits of not - for - profit organizations, the wording of the new section is as
follows:
Schedule of State Financial Assistance
We have audited the basic financial statements of Example Entity as of and for the year ended June 30, 20x1,
and have issued our report thereon dated August 15, 20x1. Our audit was performed for the purpose of
forming an opinion on the basic financial statements taken as a whole. The accompanying schedule of state
financial assistance is presented for purposes of additional analysis as required by State of Alaska Audit
Guide and Compliance Supplement for State Single Audits and is not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures applied in the audit of the basic
financial statements and in our opinion, is fairly stated, in all material respects, in relation to the basic financial
statements taken as a whole.
For audits of governmental entities, the wording of this new section is as follows:
Schedule of State Financial Assistance
We have audited the financial statements of the governmental activities, the business -type activities, the
aggregate discretely presented component units, each major fund, and the aggregate remaining fund
information of Example Entity as of and for the year ended June 30, 20x1, and have issued our report thereon
dated August 15, 20x1. Our audit was performed for the purpose of forming our opinions on the financial
statements that collectively comprise Example Entity's basic financial statements. The accompanying
schedule of state financial assistance is presented for purposes of additional analysis as required by State of
Alaska Audit Guide and Compliance Supplement for State Single Audits and is not a required part of the
basic financial statements. Such information has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to
the basic financial statements taken as a whole.
When reporting on the supplementary information, the auditor should consider the effect of any modifications to the
report on the basic financial statements (for example, a qualified opinion, a modification as to consistency because of
a change in accounting principle, or a reference to the report of other auditors). Furthermore, if the report on
supplementary information is other than unqualified, this paragraph should be modified accordingly. Guidance for
reporting in these circumstances is described in AU section 551, paragraphs .09 -.11 and .13 -.14, Reporting on
Information Accompanying the Basic Financial Statements in Auditor- Submitted Documents (AICPA, Professional
Standards, vol. 1).
46 If there are no findings referred to in this report (or identified in the schedule of findings and questioned costs), this
paragraph should be omitted.
47 This paragraph conforms to AU Section 532, Restricting the Use of an Auditor's Report (AICPA, Professional
Standards, vol. 1). See AU section 532 for additional guidance on restricted -use reports.
Page 31 May 2011
Example 6: Report on Compliance with Requirements that Could Have a
Direct and Material Effect on Each Major Program and on Internal Control
over Compliance in Accordance with the State of Alaska Audit Guide and
Compliance Supplement for State Single Audits (Qualified Opinion on
Compliance; Material Weaknesses and Significant Deficiencies in Internal
Control over Compliance Identified)
Independent Auditor's Report
[Addressee]
Compliance0.e
We have audited Example Entity's compliance with the types of compliance
requirements described in the State of Alaska Audit Guide and Compliance
Supplement for State Single Audits that could have a direct and material effect on
each of Example Entity's major state programs for the year ended June 30, 20x1.
Example Entity's major state programs are identified in the accompanying schedule of
state financial assistance. Compliance with the requirements of laws, regulations,
contracts, and grants applicable to each of its major state programs is the responsibility
of Example Entity's management. Our responsibility is to express an opinion on
Example Entity's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally
accepted in the United States of America; the standards applicable to financial audits
contained in Government Auditing Standards,49 issued by the Comptroller General of
the United States; and the State of Alaska Audit Guide and Compliance Supplement
for State Single Audits. Those standards and the State of Alaska Audit Guide and
Compliance Supplement for State Single Audits require that we plan and perform
the audit to obtain reasonable assurance about whether noncompliance with the types
of compliance requirements referred to above that could have a direct and material
effect on a major state program occurred. An audit includes examining, on a test basis,
evidence about Example Entity's compliance with those requirements and performing
such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion. Our audit does not provide a
legal determination of Example Entity's compliance with those requirements.
As described in item(s) [list the reference numbers of the related findings, for example,
20x1 -10 and 20X1 -4] in the accompanying schedule of findings and questioned costs,
Example Entity did not comply with requirements regarding [identify the type(s) of
compliance requirement] that are applicable to its [identify the major state program].
Compliance with such requirements is necessary, in our opinion, for Example Entity to
comply with the requirements applicable to that program.
In our opinion, except for the noncompliance described in the preceding paragraph,
Example Entity complied, in all material respects, with the compliance requirements
Page 32 May 2011
referred to above that could have a direct and material effect on each of its major state
programs for the year ended June 30, 20x1.52
Internal Control over Compliance
Management of Example Entity is responsible for establishing and maintaining effective
internal control over compliance with the requirements of laws, regulations, contracts,
and grants applicable to state programs. In planning and performing our audit, we
considered Example Entity's internal control over compliance with requirements that
could have a direct and material effect on a major state program to determine the
auditing procedures for the purpose of expressing our opinion on compliance and to test
and report on internal control over compliance in accordance with the State of Alaska
Audit Guide and Compliance Supplement for State Single Audits, but not for the
purpose of expressing an opinion on the effectiveness of internal control over
compliance. Accordingly, we do not express an opinion on the effectiveness of the
Entity's internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose
described in the preceding paragraph and was not designed to identify all deficiencies in
internal control over compliance that might be significant deficiencies or material
weaknesses or therefore, there can be no assurance that all deficiencies, significant
deficiencies, or material weaknesses have been identified. However, as discussed
below, we identified certain deficiencies in internal control over compliance that we
consider to be material weaknesses and other deficiencies that we consider to be
significant deficiencies.51
A deficiency in internal control over compliance exists when the design or operation of a
control over compliance does not allow management or employees, in the normal
course of performing their assigned functions, to prevent, or detect and correct,
noncompliance with a type of compliance requirement of a state program on a timely
basis. A material weakness in internal control over compliance is a deficiency, or
combination of deficiencies, in internal control over compliance, such that there is
reasonable possibility that material noncompliance with a type of compliance
requirement of a state program will not be prevented, or detected and corrected, on a
timely basis. We consider the deficiencies in internal control over compliance described
in the accompanying schedule of findings and questioned costs as items [list the
reference numbers of the related findings, for example 20X1 -8 and 20X1 -9] to be
material weaknesses.
A significant deficiency in internal control over compliance is a deficiency, or a
combination of deficiencies, in internal control over compliance with a type of
compliance requirement of a state program that is less severe than a material weakness
in internal control over compliance, yet important enough to merit attention by those
charged with governance. We consider the deficiencies in internal control over
compliance described in the accompanying schedule of findings and questioned costs
as items [list the reference numbers of the related findings, for example 20X1 -6 and
20X1 -7] to be significant deficiencies.52 53
Page 33 May 2011
Example Entity's responses to the findings identified in our audit are described in the
accompanying schedule of findings and questioned costs. We did not audit Example
Entity's responses and, accordingly, we express no opinion on the responses.
This report is intended solely for the information and use of management, others within
the entity [identify the body or individuals], and the State of Alaska and is not intended
to be and should not be used by anyone other than these specified parties.54
[Signature]
[Date]
Copyright 2011, by the American Institute of Certified Public Accountants, Inc. All rights reserved.
Reprinted with permission.
45 See footnote 42.
45 See footnote 43.
5° When other instances of noncompliance are identified in the schedule of findings and questioned costs as required
by the State of Alaska Audit Guide and Compliance Supplement for State Single Audits, the following sentence
should be added:
"The results of our auditing procedures also disclosed other instances of noncompliance with those
requirements, which are required to be reported in accordance with the State of Alaska Audit Guide and
Compliance Supplement for State Single Audits and which are described in the accompanying schedule
of findings and questioned costs as items [list the reference numbers of the related findings, for example,
20x1 -3 and 20x1 -6]."
51 If no significant deficiencies were identified, this sentence would read as follows:
"However, as discussed below, we identified certain deficiencies in internal control over compliance that we
consider to be material weaknesses."
52 See footnote 45.
53 If no significant deficiencies were identified, this paragraph would be deleted.
54 See footnote 47.
Page 34 May 2011
SECTION 4 - SUBMITTING SINGLE AUDITS
WHERE TO SEND AUDITS
Centralized Collection of Audits: The department provides the service of collecting
and reviewing audits required from entities. This includes state single audits for state
financial assistance and federal single audits for recipients of federal pass- through
monies distributed by a state agency.
Send Audit Packages to:
Single Audit Coordinator
State of Alaska, Department of Administration
Division of Finance
P.O. Box 110204
Juneau, AK 99811 -0204
WHAT TO SUBMIT FOR A COMPLETE REPORTING PACKAGE
Be sure to include the audited financial statements and all applicable items of a
complete reporting package as described on page nine. See the following page for a
list of state agencies that may appear on the Schedule of State Financial Assistance.
Number of Copies:
Note: School districts have an additional requirement to send a complete reporting package,
including management letter, directly to Department of Education & Early Development.
After receipt and review of the complete reporting package, the single audit
coordinator's office will distribute the audit package to the appropriate state agencies.
If you have questions, please contact the Single Audit Coordinator at
(907) 465 -4666.
Page 35 May 2011
State Single Audit
Federal Single Audit
Federal and State Single
Audits Bound Together
•
1 copy for Each
State of Alaska
agency listed on the
•
1 copy for Each State
of Alaska agency listed
on the Schedule of
•
1 copy for Each State of
Alaska agency listed on
either the Schedule of
Schedule of State
Expenditures of
Expenditures of Federal
Financial Assistance
Federal Awards
Awards or Schedule of
PLUS
PLUS
State Financial Assistance
•
1 copy for single
•
1 copy for single audit
PLUS
audit archives
archives
•
1 copy for single audit
archives
Note: School districts have an additional requirement to send a complete reporting package,
including management letter, directly to Department of Education & Early Development.
After receipt and review of the complete reporting package, the single audit
coordinator's office will distribute the audit package to the appropriate state agencies.
If you have questions, please contact the Single Audit Coordinator at
(907) 465 -4666.
Page 35 May 2011
LISTING OF STATE OF ALASKA AGENCIES
The following is a listing of State of Alaska agencies that may have programs subject to
the State Single Audit requirements. Please refer to the compliance supplements in this
Guide for more detailed information on individual programs and their audit
requirements.
• Alaska Court System
• Alaska Energy Authority (AEA)
• Alaska Housing Finance Corporation (AHFC)
• Department of Administration (DOA)
• Department of Commerce, Community & Economic Development (DCCED)
• Department of Corrections (DOC)
• Department of Education & Early Development (DEED)
• Department of Environmental Conservation (DEC)
• Department of Fish & Game (DFG)
• Department of Health & Social Services (DHSS)
• Department of Labor & Workforce Development (DLWD)
• Department of Law (LAW)
• Department of Military & Veterans Affairs (DMVA)
• Department of Natural Resources (DNR)
• Department of Public Safety (DPS)
• Department of Revenue (DOR)
• Department of Transportation & Public Facilities (DOT /PF)
• Surplus Property (Department of Administration, General Services Division)
Page 36 May 2011
SECTION 5 - QUESTIONS AND ANSWERS
This section is designed to clarify issues or requirements of the state single audit.
1. Will state agencies withhold money from their awards to cover the cost of a
single audit, or should the recipient do this?
Answer State agencies are not responsible for withholding money for the cost
of a single audit. Recipients of state financial assistance are responsible for
the budgeting and payment of audit services.
2. How will recipients know if they should plan for the cost of a single audit
before the end of the fiscal year?
Answer. It is important to continuously track receipt and expenditure of state
financial assistance and federal pass- through funds. The recipient should
budget for an audit. Then, if it becomes clear that the audit is not necessary,
the money can be used as otherwise allowed in the grant agreements.
3. What money can be used to pay the cost of a state single audit?
Answer. Audit costs are legitimate costs of administering state financial
assistance. Audit costs can be direct or indirect costs depending on the award
agreement or policies established by the state granting agency. It is important
that audit costs be fully documented. Costs apportioned to state programs
need to be supported with schedules or other documentation showing how the
allocation was applied. Generally, auditors will evaluate the reasonableness of
that allocation.
4. How will recipients that have not budgeted for the single audit costs pay
for it?
Answer Planning ways to meet audit expenses is an important element in
good business management. The recipient of state financial assistance that
has not earmarked money for an audit will have to absorb the payment from
other unrestricted funds. Failure to set aside money to pay for audits is not
a valid excuse for failing to have an audit performed.
5. What if an audit is not completed within nine months after fiscal year end?
Answer: Contact the single audit coordinator to request an extension. The
single audit coordinator will review the request, the past history of the grantee
in submitting timely audit packages, and other relevant facts. The single audit
coordinator's office will notify the recipient, applicable state agencies and CPA
firm, if provided, whether the extension request was granted or denied.
6. What is the penalty for noncompliance or not conducting the single audit?
Answer The state single audit regulation does not establish any penalties
aside from the penalties already established in law, regulation, or specifically in
an award agreement. State agencies will view noncompliance as potential
Page 37 May 2011
evidence that the recipient may not be able to properly administer awards.
This could affect future awards.
7. Are all certified public accountants qualified to perform an audit under 2
AAC 45.010?
Answer. 2 AAC 45 requires an audit to be conducted by an independent
auditor according to Government Auditing Standards, which requires
auditors to have continuing professional education related to government
auditing requirements and auditing organizations to have an external quality
control (peer) review. Grantees having an audit under 2 AAC 45 should
ensure, prior to contracting with the firm, that the prospective audit firm has a
current license and satisfies the peer review requirements.
8. How do I submit a state single audit?
Answer: For submission information, see page 35 — Submitting Single Audits.
9. How many copies of single audits need to be submitted?
Answer: See page 35 - Submitting Single Audits.
10. Must the corrective action plan address findings required to be reported by
Government Auditing Standards?
Answer Yes. State single audit regulations require that written comments be
provided on any findings, questioned costs, significant deficiencies, material
weaknesses, and recommendations contained in the audit report.
11.If an auditee does not have any noncompliance to be reported, does a
Schedule of Findings and Questioned Costs have to be included in the
reporting package for a state single audit?
Answer Yes.
12.A state single audit is not required of the current year. The prior year state
single audit contained audit findings. Do the prior year findings need to be
addressed in the current year audit?
Answer. No. The affected state agency(s) will continue to work directly with
the grantee on the resolution of the prior year findings.
13.Do school districts reports have any special submission requirements?
Answer. Yes. School districts should follow the guidelines on page 35, for
submitting single audits; with the additional requirement of sending a copy of
the reporting package to the Commissioner of the Department of Education
and Early Development.
AS 14.14.050 requires the school board of each school district to send a copy
of their audit report and management letter to the Commissioner of Education
and Early Development by November 15. Send the Commissioner of
Education and Early Development's copy to:
Page 38 May 2011
Alaska Department of Education & Early Development
Education Support Services
Attn: Meridith Boman
801 West 10`h Street, Suite 200
P.O. Box 110500
Juneau, AK 99811 -0500
e -mail: meridith.bornan(a alaska.gov
14. How does the state determine if an audit meets audit standards?
Answer. The single audit coordinator's office will review audit reports for
conformance with professional standards; inclusion of required opinions,
reports, and schedules; timely completion; and sufficient number of copies.
Audits reports will be forwarded to each state agency that granted financial
assistance, for review to ensure all awards were included; findings are clear
and understandable; and planned corrective actions appear adequate.
15.lf an audit report is found deficient, what procedures will be used to notify
the parties involved; and who will resolve the issues?
Answer. The single audit coordinator's office will notify the entity (copy to the
auditor and applicable granting agencies) of a deficient reporting package
within four weeks of receipt of the audit. Within 30 days of this notification, the
entity is required to provide the requested information and /or documents.
If a revision or further information is required by the auditors, the notification
will be sent to the auditor with a copy sent to the entity and applicable granting
agencies. The auditor will have 30 days to submit revised reports or other
requested information.
Audits are not in compliance with the timely submission requirement of
the single audit regulation until deficiencies are resolved. The entity
should maintain contact with the state granting agency(s) and the single audit
coordinator's office while deficiencies are being resolved.
The single audit coordinator's office will mediate disagreements between the
auditor, recipient, and the state granting agency(s).
16.What is an entity's responsibility when awarding a subrecipient(s) an
amount equal to or greater than the audit threshold?
Answer. The original entity receiving state financial assistance is responsible
for ensuring that third parties comply with the state single audit requirements.
The entity is required to provide the subrecipient with specific information
regarding the award and its requirements. The entity must have an effective
system for monitoring the subrecipient. As applicable, the entity must ensure
that appropriate corrective action is taken within six months after disclosure of
a third party's noncompliance with state statute or regulation, or financial
assistance agreement.
Page 39 May 2011
17.Are auditors required to evaluate the entity's system for monitoring
subrecipient compliance with 2 AAC 45.010?
Answer. Yes.
113.Are private firms contracted to provide products such as office furnishings
considered third party subrecipients that are subject to the single
requirements?
Answer. No.
19.What is the difference between a subrecipient and a vendor?
Answer: A subrecipient is an entity that receives state financial assistance
passed through from the original recipient. The subrecipient is responsible to
meet the requirements of the assistance program.
A vendor is an entity that receives a procurement contract for goods or
services from a recipient. Vendor contracts are usually a result of a competitive
bidding process. A vendor's responsibility is to meet the requirements of the
procurement contract.
20.What is the determining factor in deciding whether a third party is a
subrecipient or a vendor?
Answer. The test for a subrecipient relationship is whether the organization
receives state financial assistance to carry out a program.
21.Are contracts or agreements negotiated between the state and local
governments, such as Transfer of Responsibility Agreements, included
under single audit requirements?
Answer Yes, provided the local government has met the audit threshold
specified in the single audit regulation.
22.We understand that federal financial assistance includes loans and loan
guarantees. Are loans under state programs categorized as state financial
assistance and subject to audit?
Answer. No.
23. How do entities determine state major programs when their fiscal year has
a different yearend than the state?
Answer. Major program and audit thresholds are based on the entity's fiscal
year.
Page 40 May 2011
24. When an entity changes its yearend, how should it treat the stub period for
purposes of the state single audit?
Answer A state single audit of the stub period is required if the stub period is
longer than six months, or if it was audited by itself. If the stub period is less
than six months and not audited separately, it should be included in the
succeeding year's single audit.
25.Are auditors required to do compliance testing for financial assistance
programs that are excluded from the state single audit threshold
computations?
Answer. Yes, if such programs are determined to be major state programs.
The exclusion applies only for the audit threshold computation, not compliance
testing.
26.11 the Compliance Supplement does not contain requirements for a
particular program, does that mean this program does not need to be
audited for compliance?
Answer. No. The auditor should determine compliance requirements from the
award document, and applicable laws and regulations. Auditors can contact
the agency representatives indicated on page 50, Single Audit Contacts.
27.What requirements apply to federal pass- through money?
Answer Federal pass - through money received from state agencies remains
classified as federal financial assistance. Federal compliance and audit
requirements apply to this money. The requirements for federal single audits
are contained in the Single Audit Act Amendments of 1996 and U.S. OMB
Circular A -133.
28. What are the federal audit and major program thresholds?
Answer. U.S. OMB Circular A -133, Revised June 27, 2003, changed the
federal audit threshold for fiscal years ending after December 31, 2003 as
follows:
• Audit Threshold - A recipient of federal awards that expends a
cumulative total equal to or greater than $500,000 during the entity's
fiscal year is required to submit a federal single audit. A program
audit may be performed if the entity had expenditures under only one
federal program and is not subject to any other requirements to have a
financial statement audit. (Subject to more detailed requirements —
See U.S. OMB Circular A -133).
® Major Federal Programs - Major federal programs are determined on
a risk -based approach. The risk -based approach includes
consideration of current and prior audit experience; oversight by
federal agencies and pass- through entities; and inherent risk of the
federal program. The determination is subject to a variety of
exceptions and limitations described in U.S. OMB Circular A -133.
Page 41 May 2011
29.On which schedule should federal pass- through money be shown?
Answer Only on the Schedule of Expenditures of Federal Awards.
Federal funds passed through the State of Alaska should be clearly
identified on the federal schedule by both federal and state agencies.
30.A state single audit was not required, but a federal single audit was
required. Should the federal single audit be submitted to the single audit
coordinator's office?
Answer: Yes, if the recipient expended federal financial assistance passed
through the State of Alaska, during the audit period. See page 35, Submitting
Single Audits.
31.Does the single audit coordinator's office need a copy of the Data
Collection Form SF -SAC?
Answer No. This is a federal form required to be submitted with audit
reporting packages sent directly to the U.S. Bureau of the Census. For further
information, go to the federal clearinghouse website:
http:l /h arvester.census.cov /sac
32.How can recipients keep the kind of accounting and other records
necessary to comply with the requirements under the single audit
regulation and financial assistance agreements?
Answer Good business practice requires that documentation be created and
retained. These extremely important records can demonstrate to an external
reviewer /auditor that claimed expenditures complied with the terms of a
financial assistance agreement. This documentation could include - but is not
limited to - such things as approved timesheets, vendor invoices, canceled
checks, periodic financial and program reports, and an accounting system that
adequately identifies costs to programs.
Recipients of state financial assistance are responsible for keeping organized
records. It is not the responsibility of the auditor to organize the recipient's
financial records. Poorly organized financial records increase audit costs.
Experience has shown that one of the most frequent problems reported in state
single audits is lack of supporting documentation. When supporting documents
cannot be produced, auditors usually report "questioned costs." State
agencies may take actions to recover questioned costs from recipients.
Page 42 May 2011
33. What are "questioned costs ?"
Answer Auditors report expenditures that may not be allowable charges to
state programs as "questioned costs." State agencies determine whether
charges will be allowed. Questioned costs usually fall in one of five categories:
® Unallowable - Costs specifically not allowed under the general and
specific requirements or conditions of a program.
® Ineligible - Costs which would otherwise be allowable except the
amounts involved were paid on behalf of an individual who is not
eligible.
® Undocumented - Costs for which detailed documentation does not
exist.
® Unapproved - Costs for which the program requires approval and the
auditor cannot find evidence of approval, or costs not provided for in
an approved budget.
® Unreasonable - Costs incurred that may not reflect the actions of a
prudent person, or the assignment of an unreasonably high valuation
to in -kind contributions.
Page 43 May 2011
SECTION 6 - REPRINT OF 2 AAC 45
Alaska Administrative Code Title 2 Administration
Chapter 45. Grant Administration
Section
10. Audit requirements
60. (Repealed)
70. Applicability
Section
80. Exemptions from financial assistance
85. Waiver of audit requirements
90. Definitions
2 AAC 45.010. AUDIT REQUIREMENTS.
(a) A state agency that enters into a financial assistance agreement to provide financial
assistance to an entity shall, in coordination with any other state agencies providing financial
assistance to that entity, require that entity to submit to the department an audit of the recipient
entity if that entity is subject to an audit under this section. The audit must be conducted and
submitted as described in this section. In order to ensure compliance with this subsection, a
state agency must include the audit requirements of this section in any financial assistance
agreement subject to this subsection.
(b) An entity that expends financial assistance with a cumulative total of $500,000 or more
during the entity's fiscal year shall submit an audit report for the audit period to the department,
by
(1) the earlier of
(A) 30 days after the entity receives its audit report for the audit period; or
(B) nine months after the end of the audit period; or
(2) a later date than the date calculated under (1) of this subsection, if
(A) the state agency that provides the financial assistance agrees to the change of
date; and
(B) the agreement under (A) of this paragraph is made in
(i) writing; and
(ii) advance of the date calculated under (1) of this subsection.
(c) An audit required by this section must be conducted by an independent auditor, according to
the following audit standards effective at the time of review for the audit period:
(1) Government Auditing Standards, July 2007 Revision, adopted by the comptroller
general of the United States, and adopted by reference;
(2) generally accepted auditing standards, as accepted by the American Institute of
Certified Public Accountants in the Codification of Statements on Auditing Standards in
effect as of January 1, 2009 for the type of entity being audited, adopted by reference;
(3) State of Alaska Audit Guide and Compliance Supplement for State Single Audits, May
2010 revision, prepared by the department, adopted by reference.
(d) The audit required under this section must report on the following:
(1) the system of internal controls of the entity and the auditor's identification of significant
deficiencies and material weaknesses of the entity, using the applicable standards set
out in (c) of this section;
Page 44 May 2011
(2) the entity's compliance with applicable state statutes and regulations and applicable
financial assistance agreements affecting the expenditure of the financial assistance;
the report must identify findings and known questioned costs that exceed $5,000 in the
aggregate for all transactions of expenditures tested for the financial assistance being
audited;
(3) the entity's financial statements;
(4) the schedule of state financial assistance;
(5) the schedule of findings and questioned costs.
(e) As part of the audit report required under this section, the entity must provide
(1) written comments on any
(A) findings;
(B) known questioned costs;
(C) significant deficiencies, including material weaknesses; and
(D) recommendations contained in the audit report;
(2) the entity's plan for corrective action, if any findings are identified or any
recommendations are made in the audit report;
(3) the status of the entity's implementation of any plans for corrective actions related to
(A) the audit reports required under this section for the fiscal year before the audit
period; and
(B) unresolved findings of audit reports required by this section for audit periods before
those specified in (A) of this paragraph; and
(4) a written explanation of the reasons why corrective action will not be taken if the entity
does not intend to take corrective action on the findings and recommendations in any
audit report required by this section.
(f) An audit report required under this section need not evaluate the effectiveness of a program
funded by financial assistance. However, a program evaluation or financial monitoring may be
conducted by the state agency or requested of the entity by the state agency that entered into
the financial assistance agreement.
(g) An audit required by this section must cover the entire operations of the entity.
(h) An entity shall provide the department with sufficient copies of each audit report to allow
submission of a copy to each state agency providing financial assistance to the entity. The
department will determine if auditing standards have been met and will forward a copy of the
audit to the appropriate state agencies. The department will coordinate the assignment of the
resolution to one state agency, if the exceptions concern more than one state agency. The
applicable state agency providing financial assistance to the entity must meet its responsibilities
under other law for ensuring compliance with the audit report.
(i) Unless additional audit requirements are imposed by state or federal law, a state agency
that provides financial assistance to an entity shall accept the audit required by this section in
satisfaction of any other audit requirement. If additional audit work is necessary to meet the
needs of a state agency, the audit work must be based on the audit required by this section.
Nothing in this subsection authorizes a state agency to seek payment from the entity for the
additional audit work.
Page 45 May 2011
(j) A third party that receives financial assistance through an entity, in an amount described in
this section, is subject to the applicable requirements of this section. An entity that disburses
$500,000 or more in state financial assistance to a third party shall ensure that the third party
complies with the requirements of this section. That entity shall also ensure that appropriate
corrective action is taken within six months after a third party's noncompliance with an
applicable state statute or regulation, or financial assistance agreement, is disclosed.
(k) Repealed 07/01/98.
(I) For purposes of this section, if an entity has not identified its fiscal year, that entity's fiscal
year is July 1 through June 30.
(m)Financial assistance in the following form is not included when calculating whether an entity
meets the threshold monetary requirement under (b) of this section:
(1) community revenue sharing money provided under AS 29.60.850 — 29.60.879;
(2) repealed 3/31/2008;
(3) aviation fuel tax money provided under AS 43.40.010;
(4) electric and telephone cooperative gross revenue tax refunds provided under AS
10.25.570;
(5) alcoholic beverage license fee refunds provided under AS 04.11.610;
(6) fisheries tax refunds provided under AS 29.60.450, AS 43.75.130, and AS 43.77.060;
(7) PERS /TRS relief funding under money appropriated to pay employer unfunded liability
attributable to the entity under AS 14.25 and AS 39.35.
(8) money expended for projects that are solely managed, supervised, and controlled by
the Alaska Energy Authority under AS 44.83 and turned over to the grantee at the
conclusion of the project.
(n) Financial assistance in a form listed in (m) of this section is not exempt from compliance
testing if the entity meets the threshold monetary requirement under (b) of this section.
(o) Repealed 7/1/98. (Eff. 8/1/85, Register 95; am 6/29/90, Register 114; am 7/1/98, Register
146; am 3/31/2008, Register 185; am 8/1/2008, Register 187; am 1/1/2011, Register 196)
Authority: AS 37.05.020 AS 37.05. 190
2 AAC 45.060. EXTERNAL QUALITY REVIEW OF AUDIT ORGANIZATION.
Repealed. (Eff. 7/1/98, Register 146; repealed 3/31/2008, Register 185)
2 AAC 45.070. APPLICABILITY.
(a) The amended version of this chapter, effective January 1, 2011, applies to an audit for an
audit period that begins or continues after January 1, 2011.
(b) An entity may agree to be subject to the provisions of the amended version of this chapter,
effective January 1, 2011, for an audit period beginning on or after July 1, 2009 and ending on
or before December 31, 2010, by voluntarily submitting
(1) an audit that complies with those provisions; or
(2) a statement that an audit is not required under the provisions of 2 AAC 45.010(b). (Eff.
7/1/98, Register 146; am 3/31/2008, Register 185; am 8/1/2008, Register 187; am
1/1/2011, Register 196)
Authority: AS 37.05.020 AS 37.05.190
Page 46 May 2011
2 AAC 45.080. EXEMPTIONS FROM FINANCIAL ASSISTANCE.
(a) For purposes of this chapter, "financial assistance" does not include the following:
(1) public assistance provided under AS 47;
(2) goods or services purchased for the direct administration or operation of state
government;
(3) moneys advanced to an entity under one or more state loan programs;
(4) power cost equalization payments made to an electric cooperative on behalf of
its customers;
(5) scholarships, loans, or other tuition aid provided to students, but paid to an
education institution on their behalf.
(b) In addition to the exemptions set out in (a) of this section, for a third party, "financial
assistance" does not include goods purchased from the third party for direct administration or
operation of the entity that received financial assistance. (Eff. 7/1/98, Register 146)
Authority: AS 37.05.020 AS 37.05.190
2 AAC 45.085. WAIVER OF AUDIT REQUIREMENTS.
(a) No later than 30 days after the due date of an entity's audit, the entity may submit a written
request to the commissioner under this section for a waiver of the requirements for an audit
under 2 AAC 45.010 for good cause.
(b) A written request submitted under this section must state the reasons for the request for
waiver and good cause. Good cause exists under this section if
(1) the financial assistance expended by the entity was under close state agency
management and supervision;
(2) an audit will not likely promote the public interest because
(A) the audit will be duplicative of existing audited information;
(B) an alternative source of externally verified information from an independent source
provides sufficient assurance that the financial assistance was expended properly.
(c) For the purposes of this section, an entity's lack of funding to purchase an audit is not good
cause for waiver of an audit under this section.
(d) No later than 30 days after receiving a written request for a waiver under this section, the
commissioner will issue a written decision regarding the request for waiver. The written
decision will document the basis for any grant or denial of waiver under this section. The
commissioner's decision will be mailed or delivered to the entity and will constitute the final
administrative decision on the request.
(e) In this section, "commissioner" means the commissioner of administration. (Eff. 1/1/2011,
Register 196)
Authority: AS 37.05.020 AS 37.05.190
2 AAC 45.090. DEFINITIONS.
For purposes of this chapter, unless the context otherwise requires,
(1) "audit period" means the entity's fiscal year in which the entity expended financial
assistance;
(2) "entity" does not include
(A) the University of Alaska or any other state agency;
(B) a for - profit entity; and
(C) a non United States based entity;
Page 47 May 2011
(3) "financial assistance" means state grants, contracts, provider agreements, cooperative
agreements, and all forms of state financial assistance to an entity; "financial
assistance" includes all forms of state financial assistance provided through an entity to
a third party;
(4) "known questioned costs" means those questioned costs specifically identified by the
auditor in the audit conducted under this chapter;
(5) repealed 3/31/2008;
(6) "department" means the Department of Administration;
(7) "significant deficiencies" has the meaning given in Section 5.11a. of the Government
Auditing Standards adopted by reference in 2 AAC 45.010(c). (Eff. 7/1/98, Register
146; am 3/31/2008, Register 185)
Authority: AS 37.05.020 AS 37.05.190
Page 48 May 2011
SECTION 7 - COMPLIANCE SUPPLEMENT
COMPLIANCE SUPPLEMENT OVERVIEW
This section describes general and specific compliance requirements, which if not met,
could have a material effect on the auditee's combined financial statements and /or state
programs.
Each requirement is accompanied by suggested audit procedures for testing
compliance. These are intended to be suggestions and are not the only or necessarily
the best audit procedures, nor are they mandatory. Auditors should apply professional
judgment in determining the audit procedures that are necessary to adequately
measure an entity's compliance.
General Requirements: Some constitutional or statutory requirements are applicable
to all or most state assistance programs and should be considered in all financial and
compliance audits.
Specific Requirements: These requirements are applicable to specific state
programs. Specific Requirements are organized in five categories:
® Types of service allowed or unallowed
• Eligibility
• Matching, level of effort, or earmarking requirements
® Reporting requirements
• Special tests and provisions
Auditors are not relieved of responsibility for compliance testing of programs not
included in specific requirements or compliance supplement sections. Auditors should
review the award, grant agreement, regulations, or enabling legislation to determine
whether there are special conditions that need to be considered.
GRANTING AGENCY CONTACT LIST
Questions regarding specific requirements for a program should be directed to the
granting agency's contact person. See the following page for a list of the current Single
Audit Contacts.
Page 49 May 2011
SINGLE AUDIT CONTACTS
SINGLE AUDIT COORDINATOR: COLLEEN CAMPBELL
Department of Administration, Division of Finance, P.
Phone: 465 - 4666 Fax 465 -2169
O. Box 110204, Juneau. AK 99811 -0204
E-mail:
single.auditAalaska.00v (MS 0204)
Administration
Gary Zepp -- 465 -5653 / Fax 465 -2194
Division of Administrative Services
P.O. Box 110208, Juneau, AK 99811
earv.zeppealaska.gov (MS 0208)
Labor and Workforce Development
Bill Endicott -- 465 -5982 / Fax 465 -2107
Office of the Commissioner
P.O. Box 21149, Juneau, AK 99802 -1149
william.endicott@alaska.eov (MS 0700)
Administration, Surplus Property
Jim Jobkar —257-9632/ Fax 279 -4976
Dept of Admin, Division of General Services
2400 Viking Drive, Anchorage, AK 99501 -1778
jim.iobkar(c�r alaska.00v
Law
Matt vanSteenwyk -- 465 -3676 / Fax 465 -5419
Division of Administrative Services
P.O. Box 110300, Juneau, AK 99811
matt.vansieenwyk aialaska.gov (MS 0300)
Alaska Court System
Rhonda McLeod -- 264 -8215 / Fax 264 -8292
Office of the Administration Director
820 W 4th Ave, Anchorage, AK 99501 -2005
rmcleod(a courts.state.ak.us
Military & Veteran's Affairs
Stephanie Church -- 465 -4736 / Fax 465 -4605
Division of Administrative Services
P.O. Box 110900, Juneau, AK 99811
steohanie.church(Dalaska.gov (MS 0900)
Commerce, Community & Economic Development
Karmen Bowman -- 465 -5445 / Fax 465 -5863
Division of Administrative Services
P.O. Box 110803, Juneau, AK 99811
karmen.bowman(5alaskagov (MS 0800)
Natural Resources
Bill Andrews -- 465 -3503 / Fax 465 -2102
Division of Support Services
400 Willoughby Ave., Juneau, AK 99801 -1724
bill.andrews(at?alaska.gov (MS 1000)
Corrections
Kevin Worley -- 465 -4641 / Fax 465 -3253
Division of Administrative Services
P.O. Box 112000, Juneau, AK 99811
kevin.woriev(a7alaska.gov (MS 2000)
Public Safety
Chyenne Schmidt -- 465 -5501 / Fax 463 -5039
Division of Administrative Services
P.O. Box 111200, Juneau, AK 99811
chyenne.schmidt@alaska.sov (MS 1200)
Education and Early Development
Heidi Reichl -- 465 -8682 / Fax 463 -5279
Division of Education Support Services
P.O. Box 110500 Juneau, AK 99811
heidizeichl(Jalaska.00v (MS 0500)
Revenue
Brook Larson -- 465 -3671 / Fax - 465 -1685
Division of Administrative Services
P.O. Box 110410, Juneau, AK 99811
brook.larson(; ,alaska.gov (MS 0410)
Environmental Conservation
Joanna McDowell -- 465 -5289 / Fax 465 -5097
Division of Administrative Services
410 WilloughbyAve. #105 Juneau, AK 99801 -1795
ioanna.mcdowell alas o‘ (MS 1800)
Transportation & Public Facilities
Bob Janes -- 465 -2080 / Fax 586 -8365
Office of the Commissioner / Internal Review
3132 Channel Drive, Juneau, AK 99801 -7898
bob.janes(alaska.gov (MS 2500)
Fish & Game
Barbara Mason -- 465 -6069 / Fax 465 -6078
Division of Administrative Services
P.O. Box 22526, Juneau, AK 99811 -5526
barbara.rnason(xalaska.gov (MS 1100)
Alaska Energy Authority
Amy Adler -- 771 -3013 / Fax 771 -3044
Finance Department
813 West Northern Lights Blvd, Anchorage, AK 99503
aadler @ aidea.orq
Health & Social Services
Bob Wright -- 465 -3121 / Fax 463 -5149
Finance and Management Services
P.O. Box 110602, Juneau, AK 99811
robert.wrightcealaska.gov (MS 0650)
Alaska Housing Finance Corporation
Christie George -- 330 -8270 / Fax 338 -2585
Planning and Program Development Department
P.O. Box 101020, Anchorage, AK 99510 -1020
aagorge{cvahfc.state.ak.u.s
Page 50
May 2011
GENERAL COMPLIANCE REQUIREMENTS
Public Purpose Compliance Requirement: Article IX, Section 6 of the Alaska
Constitution requires all appropriations of public money or transfer of public property to
accomplish a public purpose.
Suggested Audit Procedures: Evaluate expenditures to determine that they
accomplish a public purpose.
Civil Rights Compliance Requirement: Alaska Statute 18.80.200 and federal civil
rights laws prohibit discrimination against a person because of race, religion, color,
national origin, sex, age, physical or mental disability, marital status, change in marital
status, pregnancy, or parenthood.
Suggested Audit Procedures:
1. Obtain representation and /or attorney letters to determine whether any civil rights
suits have been adjudicated or are pending.
2. During the fiscal year for each program, determine the:
a) Number of complaints filed with federal, state and /or local agencies responsible
for ensuring nondiscrimination.
b) Status of unresolved complaints or investigations.
c) Actions taken on resolved complaints or completed investigations.
Minimum Wages Compliance Requirement: Alaska Statute 23.10.065 requires
employers to meet minimum wage requirements.
Suggested Audit Procedure: Review payroll records for compliance.
Prevailing Wages Compliance Requirement: Alaska Statute 36.05.010 requires
certain projects meet the provisions of AS 36 Public Contracts. To the extent that such
provisions apply to the project that is the subject of an assistance agreement, the
recipient shall pay the current prevailing rates of wage to employees.
Suggested Audit Procedures:
1. Identify the programs involving construction activities.
2. Review construction contracts and subcontracts and determine whether they contain
provisions requiring the payment of prevailing wages.
3. For the selected construction contracts and subcontracts, determine whether the
audited entity immediately notified the Alaska Department of Labor & Workforce
Development under AS 36.05.035 of the:
a) Amount and effective date of the contract
b) identity of the contractor and all subcontractors
c) Site or sites of construction
d) Project description
Page 51 May 2011
Workers' Compensation Compliance Requirement: As required by AS 23.30,
recipients of state financial assistance and their contractors shall provide and maintain
workers' compensation insurance.
Suggested Audit Procedures:
1. Examine project records to determine whether workers' compensation insurance
was provided as required.
2. Determine whether any Department of Labor & Workforce Development actions
regarding insufficiency of workers' compensation are proposed or pending.
3. Examine insurance policy to determine whether it provides Alaska benefits for
employees hired in Alaska.
Contractors' Bonds Compliance Requirements: Alaska Statute 36.25.010 specifies
that except as provided in AS 44.33.300, before a contract exceeds $100,000 for the
construction, alteration, or repair of a public building; or public work of the state or
political subdivision of the state is awarded, the contractor shall furnish performance
and payment bonds.
Suggested Audit Procedures:
1. Review the recipient's system designed to ensure that contractors meet bonding
requirements.
2. Review project records for evidence that contractors met bonding requirements.
Political Activity Compliance Requirement: Alaska Statute 37.05.321 states grant
funds may not be used for influencing legislative action. A grant or earnings from a grant
made under AS 37.05.315 - .317 (grants to municipalities, grants to named recipients,
and grants to unincorporated communities), may not be used for the purpose of
influencing legislative actions; or for travel in connection with influencing legislative
action unless pursuant to a specific request from a legislator or legislative committee.
Suggested Audit Procedures:
1. Test the expenditures and related records for indications of lobbying activities,
publications, or other materials intended for influencing legislation, or similar type
costs.
2. Test whether the above costs, if any exist, are charged directly or indirectly to state -
assisted programs.
3. Test the personnel and payroll records, and identify persons whose responsibilities
or activities include political activity.
Retention and Inspection of Records Compliance Requirements: A recipient of
state financial assistance shall maintain and make available records of expenditure for
those funds. As a minimum, the expenditure records shall be maintained until audits
required under 2 AAC 45.010 are completed and noncompliance findings are resolved.
Suggested Audit Procedure: Determine whether prior audit recommendations were
resolved and if not; determine that pertinent records are still available for inspection.
Page 52 May 2011
Responsibility for Third Parties Compliance Requirement: Per 2 AAC 45.010, a
recipient of state financial assistance that disburses financial assistance to a third
party(s) in an amount equal to or greater than the audit threshold is required to ensure
that the third party(s) complies with audit requirements. The recipient entity must also
ensure that appropriate corrective action is taken within six months after disclosure of a
third party's noncompliance with state statute or regulation, or financial assistance
agreement.
Suggested Audit Procedures:
1. Determine whether the recipient entity has established a system for notifying third
parties of their responsibilities, and that the system is being used.
2. Determine that the recipient entity has established a system to ensure third party
compliance.
3. Determine whether the recipient entity has established a system to ensure that
appropriate corrective action is taken within six months after a third party's
noncompliance is disclosed.
Audit Requirements Compliance Requirement: Per 2 AAC 45.010, recipients of
state financial assistance that meet the audit threshold are required to submit an audit
to the single audit coordinator's office. See section 2 of this Guide, Requirements -
State Single Audit and Major Program Thresholds.
Suggested Audit Procedure: Refer to information in the "Audit Guide" section of this
publication.
Page 53 May 2011