1. A not-for-profit organization has hired you to conduct an audit. The audit has been requested by the organization's board of directors. A mission of the organization is to provide for the education of children in an economically distressed area of the city. In fulfilling its mission, the organization operates a Head Start program, a K-3 elementary school, and an after-school kids program. To help fund its mission, the organization receives funds from several sources, including federal programs. The federal programs and the amount of funding expended from each program for the fiscal year are as follows:
Program Funds Expended
Title I $374,891
National School Lunch Program 32,562
National School Breakfast Program 11,821
Head Start 482,002
TRIO-Student Support Services 261,085
Child and Adult Care Food Program 37,639
Required:
Use the Catalog of Federal Domestic Assistance (CFDA) Web site (www.cfda.gov), OMB Circular A-133 Compliance Supplement (www.whitehouse.gov/OMB/circulars) and what we learned this week to answer the following questions.
a. What federal departments are sponsoring the listed programs?
b. OMB allows "cluster programs" to be considered as a single program when conducting the risk-based approach to selecting programs for audit under the single audit. Of the programs listed, which (if any) are part of the same cluster?
c. Which programs would be considered Type A programs or Type B programs and why?
d. Based on provided information, which programs would you select for audit and why?
e. If the not-for-profit has received an unqualified opinion in each of the last two years and the Head Start program was selected for audit in both years, would the programs you select for audit change? If not, why not? If so, what programs would you select and why?
f. If you found out that a new manager with no previous experience was now in charge of Title I Program, would your answer to part c change? If so how?
g. Reading the objectives of the programs identified, you will notice a common underlying objective. Since the ability to obtain funds depends on meeting this underlying objective, it should be considered a major compliance issue for the auditor. What is the objective? What compliance item is particularly affected by this underlying objective?