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CDBG Audits

One of the primary financial management requirements implicit with the use of Federal funds is the annual audit. 2 CFR Part 200 Subpart F provides requirements for audits of governmental entities and nonprofit organizations.

Audit Requirements

An audit is an official examination and verification of accounts and records. Audits are an important part of effective financial systems, as they produce useful financial reports and verify the reliability of a grantee's financial management systems. Only an independent CPA, with a current license to practice in Colorado can perform an audit.

Failure to comply with the audit requirements can jeopardize the grantee's ability to draw grant funds and receive future grants.

Federal Requirements

The type and level of audit required by 2 CFR 200 Subpart F is based on the amount of Federal funds expended by an organization in a given fiscal year. Federal awards include financial assistance provided by the Federal government to the entire organization in the form of grants, loans, property, contracts, loan guarantees, etc.

Organizations that have expended more than $750,000 in Federal funds within a fiscal year are required to have a Single Annual Audit conducted. A single audit is an audit that includes both an entity's financial statements and its federal awards (from all applicable Federal programs).

Organizations that have expended less than $750,000 a year in federal funds are exempt from the audit requirement; however, financial records must be made available if requested.

The Audit Process

The Single Annual Audit must be performed by an independent public accountant in compliance with the Single Audit Act of 1997. The grantee is required to permit the independent auditor access to the records and financial statements of the jurisdiction as necessary.

Note: CDBG general administration funds may only be used for the proportional cost of an audit when it is required under 2 CFR 200 Subpart F.

All audits conducted in accordance with 2 CFR Part 200 must be performed in accordance with Generally Accepted Government Auditing Standards (GAGAS) (refer to 2 CFR 200.514(a)). According to the GAGAS standards, a financial audit should determine whether:

  • Financial information is presented in accordance with established or stated criteria;
  • The entity has adhered to specific financial compliance requirements; or
  • The entity's internal control structure over financial reporting and/or safeguarding assets is suitably designed and implemented to achieve control objectives.

In conducting an audit, the grantee must supply the following information to the auditor at the beginning of each audit:

  • A copy of the Assistance Agreement;
  • A copy of all claims/draws processed during the fiscal year;
  • A copy of the monitoring letter, if one was issued during or affecting the fiscal year being audited;
  • A copy of the community's most recent budget that includes the CDBG funds for the fiscal year; and
  • The location of the records for the CDBG project and the person to contact along with their telephone number.

The Audit Report

2 CFR Part 200, requires that audit reports issued upon completion of an audit include:

  • An opinion as to whether financial statements are presented fairly in all material respects in accordance with GAGAS.
  • An opinion as to whether the schedule of expenditures is presented fairly in all material respects in relation to the financial statements taken as a whole.
  • A report on internal controls related to financial statements and major programs.
  • A report on compliance with laws, regulations, and the provisions of contracts or grant agreements.
  • An opinion as to whether the auditee organization has complied with laws, regulations, and the provisions of contracts or grant agreements.
  • A schedule of findings and questioned costs, which include a summary of the auditor's results and all "audit findings."

The summary of audit results must include:

  • Type of report the auditor issued on financial statements;
  • A statement that reportable conditions in internal controls were disclosed by the audit (where applicable);
  • Statement on whether the audit disclosed any noncompliance which is material to the auditee’s financial statements;
  • Type of report the auditor issued on compliance for major programs;
  • Statement as to whether the audit disclosed any "audit findings";
  • Identification of major programs;
  • Dollar threshold used to distinguish between type A and type B programs; and
  • Statement as to whether the auditee qualifies as a low-risk organization.

Deadline and Submission

The submission of all audit information is the responsibility of the local government grantee. It is the grantee’s responsibility to ensure that completed audit reports are submitted to DOLA and the appropriate offices on a timely basis.

Federal Submission Requirements

Under 2 CFR Part 200, audits must be completed within nine (9) months from the end of the fiscal year.

DOLA is responsible for acquiring and reviewing audit reports for all CDBG grantees.  The audit report must be submitted to DOLA within 180 days of the fiscal year end.

According to 2 CFR 200 Subpart F, grantees must make copies of their audit available for public inspection, ensuring that protecting personally identifiable information is not included. Recipients of CDBG funds are required to submit one (1) copy of the audit report to DOLA.

If there are audit findings, the grantee should prepare a response to the findings and provide documentation for any questioned costs. The formal responses should be given to the auditor before the audit report is printed so that the responses are included in the back of the report. If the response is not included in the audit, then the grantee must prepare a letter of response (see Exhibit II-E) and submit it to the DOLA with the audit report. The Department will notify the grantee whether the response is sufficient.

If a grantee was given permission to use administrative requirements and/or cost principles other than those contained in this guidebook, a signed copy of the letter granting such permission from the state monitor is required with the audit's submission. Second, the audit must clearly define what administrative requirements and cost principles were used. Third, should there be any unresolved discrepancies; the state's decision is the final authority in the resolution of such discrepancies.

Please email your CDBG Program Manager or mail the annual audit report to the following:

CDBG Program Manager
Colorado Department of Local Affairs
1313 Sherman Street, Room 521
Denver, Colorado 80203

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