oversight

Chapter 2 - Reporting Requirement and Sample Reports

Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-01-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                                       2000.04 REV-2 Change 13


      CHAPTER 2          REPORTING REQUIREMENTS AND SAMPLE REPORTS

2-1 Background. This chapter discusses the reporting requirements that result from the
    performance of the financial statement and compliance audit conducted in accordance with
    the U.S. Department of Housing and Urban Development (HUD) Consolidated Audit
    Guide (referred to as “audit guide” throughout this chapter). First, such audits should be
    conducted in accordance with generally accepted auditing standards (GAAS), issued by the
    Auditing Standards Board of the American Institute of Certified Public Accountants
    (AICPA), and generally accepted government auditing standards, issued by the U.S.
    Government Accountability Office (GAO) (also referred to as the Yellow Book or
    GAGAS). Second, a compliance audit should be conducted in accordance with this audit
    guide of the entity’s compliance with applicable laws and regulations that could have a
    direct and material effect on a major HUD-assisted program. As part of this compliance
    audit, the auditor opines on compliance with requirements that could have a direct and
    material effect on each major program and reports on internal control over compliance.

     Certain entities subject to this audit guide are also required to have their financial statement
     audits conducted in accordance with the standards established by the Public Company
     Accounting Oversight Board (PCAOB). For those entities, certain reports illustrated in this
     chapter should be modified. For a notice on the use of PCAOB standards with GAGAS,
     refer to the GAO Web site (http://www.gao.gov).

2-2 Report Issuance. Items A-E of the audit report package described in paragraph 2-4 below
    are to be prepared and issued by the auditor to the auditee’s management and those charged
    with governance as appropriate. The report cover should clearly indicate the HUD
    program activities and period(s) audited. The auditor may issue the required reports
    separately or simultaneously to the auditee (refer to section 2-4 for additional information
    on the report package).

2-3 Report Distribution.

     A. HUD Management. The auditee is to file the audit report package (or portions
        thereof) with the applicable HUD management office electronically or by hardcopy
        according to the particular program requirements. Normally, the management office
        that should receive the report package is the office responsible for monitoring the
        auditee’s performance.

         1. Hardcopy Submission. Some program offices do not have the capability of
            receiving electronically submitted reports so a hardcopy is required to be submitted.
            Auditors should refer to the relevant program office guidance for current report
            submission capabilities and requirements. In a hardcopy submission, all parts of the
            audit report package must be included in the initial transmission to the HUD
            management office. In addition, an accompanying transmittal letter is to include
            the name, office address, and telephone number of the lead person conducting the

                                                2-1
                                                                                             1/2013
                                                                    2000.04 REV-2 Change 13


           audit, usually the engagement partner, and the auditor’s Federal employer
           identification number.

       2. Electronic Submission. Under the provisions of the Uniform Financial Reporting
          Standards regulation (24 CFR (Code of Federal Regulations) Part 5, Subpart H),
          some of the HUD program offices require that certain financial information derived
          from the auditee’s annual audit be submitted electronically to HUD via the Internet.
          At the time this chapter was published, audit reports for programs covered under
          chapters 3 and 7 of this audit guide required electronic submissions.
          Responsibilities for report submission rest with the auditee, but the auditor is
          required to attest that the electronic submission agrees with the report issued to the
          auditee. Auditors should refer to the relevant program office guidance for specific
          electronic report submission requirements.

    B. HUD Office of Inspector General. The report package is not to be submitted to the
       Office of Inspector General (OIG) unless it is specifically requested by OIG. However,
       if applicable and if the auditor is required by GAGAS or this audit guide to report fraud
       directly, the report on fraud is to be sent to OIG’s single audit coordinator at the
       following Email address:

                            HUDOIGSingleAuditCoordinator@hudoig.gov

       Please refer to paragraph 2-5 for more information.

2-4 Required Report Package. The following reports and schedules are required to be
    included in the report package.

    A. Independent Auditor’s Report on Financial Statements and Supplementary
       Information (See Section 2-6, Example A). This is the auditor’s report on the
       financial statements of the entity administering the HUD program and any
       supplementary information specified by the particular HUD program requirements. In
       addition to the auditor’s report on the financial statements, the auditor’s reporting on
       the supplementary information should be in accordance with AICPA AU-C section
       725, Supplementary Information in Relation to the Financial Statements as a Whole,
       and state whether that supplementary information is fairly stated in all material respects
       in relation to the financial statements as a whole (example A, paragraph 2-6). The
       reporting on supplementary information may be presented either in the report on the
       financial statements or in a separate stand-alone report.

    B. Independent Auditor’s Report on Internal Control Over Financial Reporting and
       on Compliance and Other Matters Based on an Audit of the Financial Statements
       Performed in Accordance With Government Auditing Standards (See Section 2-6,
       Example B). GAGAS states that when providing an opinion or disclaimer of an
       opinion on the financial statements, the auditor should also report on internal control

                                             2-2
                                                                                         1/2013
                                                                                 2000.04 REV-2 Change 13


          over financial reporting and on compliance with provisions of laws, regulations,
          contracts, or grant agreements that have a material effect on the financial statements. It
          also states that auditors should include a description of the scope of the auditor’s testing
          of internal control over financial reporting and of compliance with provisions of laws,
          regulations, contracts, or grant agreements. Auditors should also state in the reports
          whether the tests they performed provided sufficient, appropriate evidence to support
          opinions on the effectiveness of internal control and on compliance with provisions of
          laws, regulations, contracts, or grant agreements. GAGAS also states that the auditor
          should report, as applicable to the objectives of the audit:

              Significant deficiencies and material weaknesses in internal control over financial
               reporting.
              Instances of fraud and noncompliance with provisions of laws or regulations that
               have a material effect on the audit and any other instances that warrant the attention
               of those charged with governance.
              Noncompliance with provisions of contracts or grant agreements that has a material
               effect on the audit.
              Abuse that has a material effect on the audit.

      C. Independent Auditor’s Report on Compliance With Requirements That Could
         Have a Direct and Material Effect on Each Major HUD Program and on Internal
         Control Over Compliance Based on an Audit in Accordance With the HUD
         Consolidated Audit Guide (See Section 2-6, Example C).1 For HUD programs
         meeting the dollar thresholds for major programs established in chapter 1 of this audit
         guide, the auditor is required to express an opinion or disclaim an opinion on
         compliance with laws, regulations, and the provisions of contracts or grant agreements
         applicable to major HUD programs.2 The report on compliance with requirements
         applicable to major HUD programs expresses the auditor’s opinion (or disclaimer of
         opinion) on whether the auditee complied with the requirements that if noncompliance
         occurred, could have a direct and material effect on a major program. Additionally, the
         auditor should report any significant deficiencies and material weaknesses in internal
         control over compliance that were noted. AICPA AU-C section 935, Compliance
         Audits, provides requirements and guidance when reporting on compliance and internal
         control over compliance.

          GAAS and GAGAS set forth the minimum requirements for reporting noncompliance.
          To the extent that HUD requires additional reporting (for example, reporting immaterial

1
  This report is not required for entities having no major programs.
2
  Consistent with requirements for audits of entities subject to Office of Management and Budget Circular A-133,
separate reporting on compliance with respect to nonmajor HUD programs has been eliminated. Also, separate
reporting on compliance with specific requirements applicable to fair housing and nondiscrimination has been
eliminated. Auditors are reminded that under GAGAS, auditors continue to be responsible for reporting instances of
noncompliance that could have a material effect on the audit.

                                                       2-3
                                                                                                         1/2013
                                                                   2000.04 REV-2 Change 13


   findings and including any management letter in the submission), subsequent chapters
   in this audit guide describe the materiality thresholds required for reporting
   noncompliance, and the auditor should refer to each relevant chapter for guidance.

   Significant deficiencies, material weaknesses, and material instances of noncompliance
   are required to be identified in the body of the report on compliance and internal control
   over compliance (which can be accomplished by a brief description and a reference to
   related finding numbers) and detailed in a separate schedule of findings, questioned
   costs, and recommendations, using the elements of a finding as outlined in GAGAS and
   the additional requirements set forth in this audit guide (see subsection D below and
   example D in paragraph 2-6). The auditee should provide its response to each finding,
   as outlined in subsection D below, which the auditor includes in the schedule of
   findings, questioned costs, and recommendations. It is the auditee’s responsibility to
   include the action taken or to be taken in a corrective action plan issued apart from and
   outside the audit report (see paragraph 2-4.G below and example F in paragraph 2-6).
   The corrective action plan is not to be included in or as a part of the schedule of
   findings, questioned costs, and recommendations.

D. Schedule of Findings, Questioned Costs, and Recommendations (See Section 2-6,
   Example D). This schedule, prepared by the auditor, is to be included in the audit
   report package when findings are presented. It is to be arranged in two parts:
   “Corrective Action Not Started or in Process” or “Corrective Action Completed.” This
   distinction is based on management’s representation included in the management
   representation letter. If the audit resulted in no findings, the schedule of findings,
   questioned costs, and recommendations should still be included in the audit report
   package and should include only the following statement:

         Our audit disclosed no findings that are required to be reported herein
         under the HUD Consolidated Audit Guide.

   Regardless of whether the auditee has started correcting the deficient condition stated in
   the finding, is in the process of correcting it, or has corrected it, the auditor is to include
   the finding in the report with all required elements, and the auditee is to include the
   information in the corrective action plan. The auditor should not delay the issuance of
   the report so that the auditee can correct the deficient conditions.

   1. Corrective Action Not Started or in Process. Many times when the auditee is
      presented with draft findings, management will start to take action to correct the
      deficient condition. When this action is underway before the report’s issuance, the
      auditee should include a description of the actions completed and the actions
      remaining to be taken in management’s response section of the finding.

   2. Corrective Action Completed. Many times when the auditee is presented with
      draft findings, management will start to take action and complete that action,

                                           2-4
                                                                                          1/2013
                                                                                       2000.04 REV-2 Change 13


                  correcting the deficient condition before the issuance of the auditor’s report. When
                  this occurs, the auditee should include a description of the action taken and
                  completed in the management’s response section of the finding. The auditor’s
                  recommendation section should follow the auditee’s comment section, and in it, the
                  auditor should state whether he or she confirmed that the auditee completed the
                  corrective action as stated in the response. If the auditor has validated the
                  corrective action, the auditor may include any additional recommendations he or
                  she believes necessary based on the validation of that action.

              3. Reporting When Using the “Group Project-Based Sample” Method. As
                 outlined in chapter 3, the auditor may use the “group project-based sample” method
                 when the owner or management agent owns several projects. When the auditor
                 elects to use this sampling method, if a condition is noted that is to be reported in a
                 finding in the report or a comment in the management letter or other written auditor
                 communication, it must be reported in all audit reports for all projects that were in
                 the population from which the sample was drawn.

              4. Content of Finding. Each finding must include all of the following information as
                 appropriate:3

                  a. Numbering the Findings. Each finding is to be numbered using the year
                     followed by a consecutive number (201X-1, 201X-2, 201X-3, etc.).

                  b. Questioned Costs. Each finding must identify known questioned costs of items
                     resulting from errors or noncompliance that are quantifiable. Identification of
                     these costs should not be limited to only those costs that potentially are to be
                     repaid. If costs are not quantifiable or are unknown, the auditor should so state
                     and indicate the reasons for that determination.

                  c. Information on Universe and Population Size. Each finding must include the
                     description and size of the universe and population and information to provide a
                     proper perspective for judging the prevalence and consequences of the audit
                     findings (for example, whether the audit findings represent an isolated instance
                     or a systemic problem). When appropriate, the instances identified should be
                     related to the universe and the number of cases examined and quantified in
                     terms of dollar value.

                  d. Sample Size Information. If the error was discovered as a result of a sampling
                     procedure, the size and dollar amount of the sample selected and tested must be
                     included.



3
    All elements may not be relevant for findings that are internal control deficiencies only.

                                                            2-5
                                                                                                        1/2013
                                                                                 2000.04 REV-2 Change 13


               e. Noncompliance Information. The number of instances of noncompliance in
                  the sample and the dollar amount of the noncompliance must be included.

               f. Condition.4 The condition is the situation that exists. It is determined and
                  documented during the audit.

               g. Criteria. Criteria are the laws, regulations, contracts, grant agreements,
                  standards, measures, expected performance, defined business practices, and
                  benchmarks against which performance is compared or evaluated. Criteria
                  identify the required or desired state or expectation with respect to the program
                  or operation.     Criteria provide a context for evaluating evidence and
                  understanding the findings.

               h. Cause. The cause identifies the reason or explanation for the condition or the
                  factor or factors responsible for the difference between the situation that exists
                  (condition) and the required or desired state (criteria), which may also serve as a
                  basis for recommendations for corrective action(s). Common factors include
                  poorly designed policies, procedures, or criteria; inconsistent, incomplete, or
                  incorrect implementation; or factors beyond the control of program
                  management. Auditors may assess whether the evidence provides a reasonable
                  and convincing argument for why the stated cause is the key factor or factors
                  contributing to the difference between the condition and the criteria.

               i. Effect or Potential Effect. The effect is a clear, logical link to establish the
                  impact or potential impact of the difference between the situation that exists
                  (condition) and the required or desired state (criteria). The effect or potential
                  effect identifies the outcomes or consequences of the condition. When the audit
                  objectives include identifying the actual or potential consequences of a
                  condition that varies (either positively or negatively) from the criteria identified
                  in the audit, “effect” is a measure of those consequences. Effect or potential
                  effect may be used to demonstrate the need for corrective action in response to
                  identified problems or relevant risks.

               j. Recommendations. Recommendations are the auditor’s written suggestions for
                  specific auditee action to correct a deficient condition, prevent recurrence of the
                  condition, or alleviate the adverse effects of a condition. Each recommendation
                  for each finding is to be consecutively lettered (a, b, c, etc.) and prefixed with
                  the finding number. For example, two recommendations to finding 1 would be


4
  The definitions of condition, criteria, cause, and effect or potential effect are taken from the December 2011
revision of the Yellow Book. Additional information on the content of a finding is set forth in the Yellow Book and
can be obtained at the GAO Web site (http://www.gao.gov).



                                                       2-6
                                                                                                          1/2013
                                                               2000.04 REV-2 Change 13


           201X-1-a, 201X-1-b, and two recommendations to finding 2 would be
           201X-2-a, 201X-2-b.

       k. Reporting Views of Responsible Officials. Auditors should obtain and report
          the views of responsible officials concerning the findings, conclusions, and
          recommendations, which should include the auditee’s planned corrective
          action(s). GAGAS provide additional guidance on this finding element. This
          element of a finding reported in the schedule of findings, questioned costs, and
          recommendations is different from the separate corrective action plan the
          auditee is required to prepare, which is described further in paragraph 2-4.G.

E. Management Letter. Certain chapters in this audit guide require the auditor to
   communicate all nonmaterial noncompliance to management in writing.                    A
   management letter or other type of written auditor communication to management may
   be used to report such noncompliance. If auditors issued or intend to issue a
   management letter (or other similar written communication) for this purpose, their
   report is to refer to that communication by name and the actual or planned date of
   issuance. Note that a management letter should not be used to report material findings
   that were resolved before the audit report was issued. Such findings are to be reported
   as findings in the auditor’s report (by reference to finding numbers) and on the schedule
   of findings, questioned costs, and recommendations under the category “Corrective
   Actions Completed.”

F. Schedule of the Status of Prior Audit Findings, Questioned Costs, and
   Recommendations. This schedule is to be prepared by the auditee and is to be
   included in the audit report package. This schedule must be prepared by the auditee in
   connection with the audit for the year following the year that an audit report package
   was issued with audit findings. The schedule should address all findings that were in
   the prior year report, including whether any questioned costs were paid or otherwise
   resolved by HUD. A description of the prior audit finding, along with the current
   status, should be included for each finding. If a finding is no longer relevant, the
   schedule should note the reason(s). See example E in paragraph 2-6 for an illustrative
   schedule of the status of prior audit findings.

   The auditor should inquire about any audits, attestations, studies, or reviews conducted
   by HUD OIG, HUD management, a contract administrator, or any other Federal agency
   that directly relate to the current year audit of the entity’s financial statements. Any
   findings from such reviews should also be included by the auditee in this schedule even
   if corrective action has already occurred. A description of the prior audit finding,
   along with the current status, should be included for each finding. The auditor may rely
   on management’s representation as to reports issued during the audit period. The
   auditor does not have to independently confirm the completeness of all reports listed by
   the auditee with outside sources.


                                         2-7
                                                                                     1/2013
                                                                      2000.04 REV-2 Change 13


         The auditor should follow up on prior audit findings reported by the auditee, perform
         procedures to assess the reasonableness of the schedule, and report as a current year
         finding when the auditor concludes that the schedule materially misrepresents the status
         of any prior audit finding. If uncorrected, the finding should be repeated as a current
         finding and so stated on the schedule of the status of prior audit findings with the
         finding referenced to the current finding number.

     G. Corrective Action Plan. A corrective action plan (CAP) is to be prepared by the
        auditee, and it should be transmitted to HUD as a separate part of the audit report
        package. The CAP is to be a separate and distinct document from the views of
        responsible officials included with each finding in the schedule of findings, questioned
        costs, and recommendations. Using the format in example F, paragraph 2-6, the auditee
        official is to describe the corrective action(s) taken or planned in response to the current
        year finding(s) identified by the auditor. It should include task(s), subtask(s), and
        date(s) for the completion of the action. If funds need to be returned to the program
        from non-Federal sources, the plan should include information on the method of
        reimbursement, source of funds, and repayment schedule.

         When the schedule of the status of prior audit findings identifies prior findings as
         unresolved or “open,” the CAP should include comments on the corrective action taken
         and the action that will be taken on the open prior findings (see example E, paragraph
         2-6, for an illustrative schedule of the status of prior audit findings).

         The auditee is to express its agreement or disagreement with the content of the finding,
         and if the auditee disagrees with the finding, it is to fully explain the points of that
         disagreement with specific information to support its position. If the information is
         voluminous, an appendix may be attached to the audit report package.

         Also, the auditee is to express its agreement or disagreement with each
         recommendation. If there is disagreement with the recommended course of action, the
         auditee should explain the points of that disagreement and propose an alternative action
         that would accomplish the same goal.

         In addition to the above CAP requirements related to reported findings, the Office of
         Lender Activities requires the submission of a CAP as a separate part of the audit report
         package for all issues included in a management letter when such a letter is issued for
         audits that are performed under chapter 7 of this audit guide.

2-5 Reporting on Fraud or Equity Skimming. On occasion during the course of an audit
    performed in accordance with this audit guide, the auditor may conclude that fraud either
    has occurred or is likely to have occurred. In the case of an audit performed under chapter
    3 or 4 of this audit guide, fraud could include equity skimming, which is the willful misuse
    of any part of the rent, assets, proceeds, income, or other funds derived from the project
    covered by the mortgage, business agreement, regulatory agreement, or other type of

                                               2-8
                                                                                            1/2013
                                                                     2000.04 REV-2 Change 13


     agreement for any purpose other than to meet actual or necessary expenses of the project.
     For a common understanding of what equity skimming is, please refer to appendix B of
     chapter 3.

     When such acts are noted, the auditor should follow the requirements of GAGAS in
     considering what to report and the extent to which information should be included in
     publically available reports. In circumstances in which GAGAS requires the auditor to
     report directly to HUD, the auditor should direct such reporting to the HUD OIG single
     audit coordinator.

     GAGAS specifies that when entity management fails to satisfy legal or regulatory
     requirements to report fraud to external parties specified in law or regulation, the auditor
     should first communicate the failure to report such information to those charged with
     governance. If the audited entity still does not report this information to the specified
     external parties as soon as practicable after the auditor’s communication with those charged
     with governance, the auditor should report the information directly to the specified external
     parties.

     However, many entities subject to audit under this audit guide lack an appropriate
     governance structure, and the auditor may, in effect, be reporting management’s failure to
     the same individuals responsible for the fraud. In such cases, the auditor is required to
     report the matter directly to HUD by contacting the single audit coordinator, preferably
     before the auditor leaves the audit site.

     Auditors are encouraged to initially communicate with the single audit coordinator to
     facilitate resolution as to the information to be included in the audit reporting package,
     report format, documentation requested to be transmitted to the single audit coordinator
     outside the report, and the distribution of the report.

2-6 Illustrative Reporting Examples. Included below are illustrations of the auditor’s reports
    issued in connection with audits conducted in accordance with this audit guide. The
    illustrations also present examples of the other items typically issued in connection with an
    audit conducted in accordance with this audit guide and submitted as part of or along with
    the audit report package as stated in this chapter, including a schedule of findings,
    questioned costs, and recommendations; a schedule of the status of prior audit findings; and
    a CAP. These illustrations are not meant to be all inclusive. Auditors should exercise
    professional judgment in tailoring their reports to the circumstances of individual audits.

     The letters A-F below correspond to the letters of the examples that follow.

     A. Independent auditor’s report on financial statements and supplementary information.




                                              2-9
                                                                                          1/2013
                                                             2000.04 REV-2 Change 13


B. Independent auditor’s 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.

C. Independent auditor’s report on compliance with requirements that could have a direct
   and material effect on each major HUD program and on internal control over
   compliance based on an audit in accordance with the HUD Consolidated Audit Guide.

D. Schedule of findings, questioned costs, and recommendations.

E. Schedule of the status of prior audit findings, questioned costs, and recommendations
   (an auditee responsibility).

F. Corrective action plan (an auditee responsibility and, as noted in paragraph 2-4.D,
   transmitted as a separate part of the audit report package).




                                       2-10
                                                                                 1/2013
                                                               2000.04 REV-2 Change 13


                                                                            Example A

Independent Auditor’s Report on Audited Financial Statements and Supplementary
                                 Information




                      This page is intentionally left blank.
                     Reporting examples will be provided in
                      a subsequent revision to this chapter.




                                      2-11
                                                                                1/2013
                                                                  2000.04 REV-2 Change 13


                                                                               Example B

 Independent Auditor’s 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




                         This page is intentionally left blank.
                        Reporting examples will be provided in
                         a subsequent revision to this chapter.




                                         2-12
                                                                                   1/2013
                                                                 2000.04 REV-2 Change 13


                                                                              Example C

 Independent Auditor’s Report on Compliance With Requirements That Could Have a
Direct and Material Effect on Each Major HUD Program and on Internal Control Over
Compliance Based on an Audit in Accordance With the HUD Consolidated Audit Guide




                        This page is intentionally left blank.
                       Reporting examples will be provided in
                        a subsequent revision to this chapter.




                                        2-13
                                                                                  1/2013
                                                                     2000.04 REV-2 Change 13


                                                                                     Example D

                           Schedule of Findings, Questioned Costs,
                                   and Recommendations

Option 1: If the audit resulted in no findings, the schedule should still be included in the
audit report package and should include only the following statement:

Our audit disclosed no findings that are required to be reported herein under the HUD
Consolidated Audit Guide.

Option 2: If the audit resulted in findings to be reported, the following is the format that is
to be used. See paragraph 2-4.D for the content and categorization of findings.

1. Corrective Actions Not Started or in Process.

Finding 201X-1.

Each finding is to be listed and must contain the required information contained in paragraph 2-
4.D.4, Content of Finding. The numbering of the findings and recommendations related to each
finding is to follow the requirements in paragraphs 2-4.D.4.a and j.

Recommendations:

     201X-1-a.

     201X-1-b.

Management comments:

2. Corrective Action Completed.

Finding 201X-2.

Each finding is to be listed and contain the required information contained in paragraph 2-4.D.4,
Content of Finding. The numbering of the findings and recommendations related to each finding
is to follow the requirements in paragraphs 2-4.D.4.a and j.

Recommendations:

     201X-2-a.

     201X-2-b.

Management comments:


                                              2-14
                                                                                          1/2013
                                                                          2000.04 REV-2 Change 13


                                                                                       Example E

 Schedule of the Status of Prior Audit Findings, Questioned Costs, and Recommendations

The auditee is to list all findings from the prior period audit reporting package in which
corrective action was in process or not started. In addition, this schedule is to contain findings
that were contained in reports issued by HUD OIG, other Federal agencies, HUD management,
or a contract administrator from the beginning of the period covered by the audit to the date of
the auditor’s fieldwork completion. Only findings that are relevant to the current year’s audit
should be included.

With respect to items included in the prior period audit reporting package, the auditor is to
perform procedures to assess the reasonableness of the schedule and report as a current year
finding when the auditor concludes that the schedule materially misrepresents the status of any
prior audit finding.

1. The auditee is to identify the prior audited fiscal period of this entity.

Audit Report, dated [insert date of report], for the period ended [insert date], issued by [insert
name of independent auditor]

       If there were no open findings from the prior audit report, so state, and if there
       were, the following format is to be used:

   Finding 201X-1. Nonproject Costs Were Charged to the Project (Questioned Costs
                   $125,000)

   Status:    The $125,000 has been returned to the project, and the entity’s system of
              distributing costs has been corrected. The entity reviewed all cost accounts up
              to the time that the system was changed and refunded the project an additional
              $55,250. The finding was closed by HUD management on July 9, 2011.

   Finding 201X-2. The Required Documentation With Regard to Eligibility Was Not
                   Obtained for Tenants Receiving Rent Supplements

   Status:   The project has not obtained the required documentation from third-party
             sources, nor has the project reimbursed the appropriate programs. The amount
             of the rent supplements received for these tenants for the prior audit period was
             $15,350. The finding remains open.

   Finding 201X-3. Separate Security Deposit Bank Accounts Were Not Established for
                   Each of the Five Projects and Interest Earned Was Not Included in the
                   Project’s Income and Not Distributed to the Tenant in Accordance with
                   State Law



                                                 2-15
                                                                                           1/2013
                                                                        2000.04 REV-2 Change 13


     Status:   The owner established the five separate bank accounts but continued to take the
               interest earned on security deposit investments into the project income account.
               The owner did not take any action to credit the tenants for the interest earned as
               required by State law. The interest portion of this finding remains open and is
               repeated as current finding 201X-2.

2. The auditee should identify findings from audit, attestation, or other studies (source
document) performed by HUD, another Federal agency, or a contract administrator during the
period described above that directly relate to the subject matter of the current year audit and
include them in this section of the schedule of the status of prior audit findings.

Audit Report issued on [insert date of report], by HUD OIG [or name of report issuer], titled
[insert title of report]

Finding 1 -

Status -

OR

There were no reports issued by HUD OIG or other Federal agencies or contract administrators
during the period covered by this audit.

3. The auditee is to list any deficiency listed in letters or reports (source documents) issued by
HUD management as a result of any reviews of the entity’s activity that relates to the audit
objectives and during the period described above.

HUD management report was issued on [insert date of report], and is titled [list title of
report].

Finding 1 -

Status -

OR

There were no letters or reports issued by HUD management during the period covered by this
audit.

Note:      The finding or recommendation numbers and the format of those numbers that are to
           be displayed on this schedule are the ones used in the source documents.

           The auditor may rely on management’s representation as to reports issued during the
           audit period. The auditor does not have to independently confirm the completeness of
           all the reports listed by the auditee with outside sources.




                                                2-16
                                                                                             1/2013
                                                                      2000.04 REV-2 Change 13


                                                                                       Example F
                                     Corrective Action Plan

The corrective action plan is an important document with which the auditee can demonstrate its
willingness to correct the deficient condition noted in the audit findings. This plan will form the
basis for HUD to work with the auditee to reach agreement on the actions to be taken to address
the audit recommendations and timeframes for implementation.

The auditor should determine whether the auditee agrees or disagrees with the content of the
findings, and if there is a disagreement, the auditor should request that the auditee fully explain
the points of that disagreement with specific information to support its position. If the
information is voluminous, an appendix may be attached to the audit report package.

The auditor should also determine whether the auditee agrees or disagrees with each
recommendation. If there is disagreement with the recommended course of action, the auditee
should explain the basis for that disagreement and propose an alternative action that would
accomplish the same goal.

The following is a recommended format to be followed by the auditee for preparing a corrective
action plan:



**********************************************************

                                     Corrective Action Plan

Name of auditee:

HUD auditee identification number:

Name of audit firm:

Period covered by the audit:

CAP prepared by
            Name:

            Position:

            Telephone number:




                                               2-17
                                                                                           1/2013
                                                                     2000.04 REV-2 Change 13


A. Current Findings       on    the   Schedule      of   Findings,   Questioned    Costs,   and
   Recommendations.

   1. Finding 201X-1.

    a. Comments on the Finding and Each Recommendation.

       The auditee is to provide a statement of concurrence or nonconcurrence with each
       finding. The auditee is also to provide a statement of agreement or disagreement with
       each recommendation in the finding.

    b. Action(s) Taken or Planned on the Finding

       The auditee should detail actions taken or planned to correct each finding identified in
       the report. Appropriate documentation should be submitted for actions taken. For
       planned actions, the auditee should provide the projected date for completion of all
       required action. The auditee should provide information on the task(s), subtask(s) and
       projected completion date(s) for the correction of the deficient condition and repayment
       of funds if appropriate. The names of the auditee officials or supervisor responsible for
       completing the proposed task(s) and subtask(s) should also be identified. If the auditee
       believes a corrective action is not required, a statement describing the reasons should be
       included.

   2. Finding 201X-2 through X.

    a. Comments on the Finding and Each Recommendation

    b. Action(s) Taken or Planned on Each Finding

B. Status of Corrective Actions on Findings Reported in the Prior Audit Schedule of
   Findings, Questioned Costs, and Recommendations.

   The auditee should comment on the status of corrective actions taken on all prior findings
   that were reported as open or action not completed on the auditor’s prior schedule of
   findings, questioned costs, and recommendations and remain open. The auditee should also
   update the planned date(s) for completion of task(s) and subtask(s) and the responsible entity
   supervisor or official(s) to complete the task(s) or subtask(s). In addition, documentation
   should be submitted in support of any portions of the action plan that the auditee considers
   completed.




                                             2-18
                                                                                          1/2013