2001 Federal Register, 66 FR 64845; Centralized Library: U.S. Fish & Wildlife Service

[Federal Register: December 14, 2001 (Volume 66, Number 241)]
[Notices]
[Page 64845-64853]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de01-67]

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DEPARTMENT OF THE INTERIOR

Fish and Wildlife Service

RIN 1018-AH69

U.S. Fish and Wildlife Service Manual Chapters on Audits

AGENCY: Fish and Wildlife Service, Interior.

ACTION: Notice and request for comments.

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SUMMARY: The U.S. Fish and Wildlife Service (Service) plans to
establish policy on State audits accomplished by its Division of
Federal Aid by issuing U.S. Fish and Wildlife Service Manual Chapters
on the subject. The Service is requesting comments and suggestions on
the chapters as described below.

DATES: Comments must be received by February 12, 2002.

ADDRESSES: Comments should be addressed to Kris E. LaMontagne, Chief,
Division of Federal Aid, Attn: Audit Chapters, U.S. Fish and Wildlife
Service, 4401 North Fairfax Drive, Suite 140, Arlington, Virginia
22203. Send e-Mail comments to Fw9_Federal_Aid@fws.gov, with ``Audit
Chapter Comment'' in the subject line.

FOR FURTHER INFORMATION CONTACT: Doug Alcorn, Region 7 Chief, Division
of Federal Aid, U.S. Fish and Wildlife Service, Telephone: (907) 786-
3545.

SUPPLEMENTARY INFORMATION:

Background

Through the Federal Aid in Sport Fish and Wildlife Restoration
Program, the Service disburses funds to States in the form of grants to
restore and manage the Nation's fish and wildlife resources. The States
use the funds to conduct research, surveys and management; purchase and
restore habitat; operate fish hatcheries; build boat access sites; and
provide education, outreach and communications.
The Program is authorized by the Federal Aid in Sport Fish
Restoration Act, 16 U.S.C. 777 et seq., enacted in 1950 and the Federal
Aid in Wildlife Restoration Act, 16 U.S.C. 669 et seq., enacted in
1937. The Program's regulations can be found in Title 50 Code of
Federal Regulations, part 80, ``Administrative Requirements, Federal
Aid in Fish and Federal Aid in Wildlife Restoration Acts;'' Title 43
Code of Federal Regulations, part 12, ``Administrative and Cost
Principles for Assistance Programs;'' and other applicable regulations.
Various Office of Management and Budget (OMB) circulars, and guidance
in the form of Service policy also apply to these chapters.
Funds for the Program are derived from excise and import taxes on
fishing equipment, firearms, archery equipment and certain motorboat
fuels paid into the Sport Fish Restoration Account or the Federal Aid
to Wildlife Restoration Fund. The manufacturer or U.S. Customs (on
imports) collects these taxes and pays it to the U.S. Department of the
Treasury, who transfers the money to the Service for distribution to
the States.
Periodically the Service conducts audits of our State partners,
testing for compliance with applicable Acts, regulations, accounting
principles, and Service policy. The purpose of these proposed chapters
is to clarify the processes and guidelines for conducting an audit,
from beginning through close-out of the audit process and resolution of
any findings or other issues.
Generally our State partners are: The 50 States, the District of
Columbia, the Commonwealths of Puerto Rico and the Northern Mariana
Islands, Guam, the U.S. Virgin Islands, and American Samoa.
We are inviting comments on all chapters. Comments are welcome
regarding completeness of the content of material in chapters; clear,
easy to

[[Page 64846]]

understand language; any burden placed on any Division of the Service,
the Department of the Interior, or a State partner; or any other aspect
of these documents. Comments must be written, but e-mailed comments are
acceptable. The administrative record for this rule is available for
viewing, by appointment only, Monday through Friday, 9 a.m. to 3 p.m.,
in the Division of Federal Aid, 4401 North Fairfax Drive, Suite 140,
Arlington, Virginia 22203.
The draft chapters are as follows:

Chapter 1, Policy and Responsibilities for Grantee Audits, Part 417
Fish and Wildlife Service Manual (417 FW 1)

1.1 What Is the Purpose of This Chapter?

This chapter establishes policy and responsibilities for grantee
audits, defines terms associated with audits, and provides an overview
of the audit process. Other chapters in this Part (417) establish
policy and procedures for audit scoping and planning, conducting and
reporting, resolution, and appeals.

1.2 To What Program Does This Part Apply?

This Part applies to audits of grantees who receive grants through
the Federal Aid Program.

1.3 What Authorities Govern the Conduct of Grantee Audits?

A. OMB Circular A-50, Audit Followup

B. OMB Circular A-87, Cost Principles for State, Local and Indian
Tribal Governments

C. OMB Circular A-133, Audits of States, Local Governments, and Non-
Profit Organizations

D. 43 CFR 12, Uniform Administrative Requirements for Grants and
Cooperative Agreements to State and Local Governments

E. 50 CFR 80, Administrative Requirements, Federal Aid in Sport Fish
and Federal Aid in Wildlife Restoration Acts

F. Part 360 (Departmental Audits), Department Manual

G. Part 361(Audit Followup), Department Manual

H. Part 415 (Departmental Audits), Fish and Wildlife Service Manual

I. Government Auditing Standards (Yellow Book)

J. Wildlife and Sport Fish Restoration Programs Improvement Act of 2000

1.4 What Is the Service's Policy Regarding Grantee Audits?

We will:
A. Audit each grantee, once in each five-year period, as specified
in the Wildlife and Sport Fish Restoration Programs Improvement Act of
2000. The Regional Director notifies the grantee(s), in writing, of the
five-year audit schedule.
B. Provide adequate oversight and financial resources to ensure
timely audit completion.
C. Cooperate and coordinate fully with grantees, auditors, the
Office of the Inspector General (OIG), and Office of Financial
Management (PFM).

1.5 What Are the Objectives of the Federal Aid Program Grantee Audit?

The Federal Aid Audit Program supplements single statewide audits
performed according to the requirements of OMB Circular A-133 (see 417
FW 6). The objectives of Federal Aid grantee audits are to:
A. Promote economy, efficiency, and effectiveness in administration
of programs and operations.
B. Aid in the prevention and detection of fraud and abuse in
programs and operations.
C. Assure financial integrity, accountability, and financial
controls of the Federal Aid Program in accordance with generally
accepted accounting principles.
D. Assure compliance with applicable Federal laws, rules, and
regulations.

1.6 Who Is Responsible for Administering the Federal Aid Audit
Program?

A. Director
(1) Oversees the Federal Aid Audit Program.
(2) Makes the final decision on internal Service disagreements
associated with resolving audit findings and preparing Corrective
Action Plans (CAP).
(3) Makes the final decision on all grantee appeals to the Service.
B. Regional Directors
(1) Ensure that Federal Aid Program staff receive the training
necessary to oversee audits.
(2) Provide information to the auditor on Region-specific issues
proposed for audit.
(3) Provide guidance and interpret laws, rules, regulations, and
policies for the auditor during an audit.
(4) Work with the grantee and auditor throughout the audit to
resolve issues as they arise and to identify those issues with
potential national implications.
(5) Negotiate with grantees to develop corrective actions to
resolve audit findings. Approve, distribute, and monitor implementation
of the CAP.
(6) Request closeout of the audit when the grantee has resolved all
findings.
(7) Maintain records pertaining to grantee audits, including the
CAP and all appeals.
C. Assistant Director--Migratory Birds and State Programs
(1) Ensures consistent interpretation and application of rules,
regulations, and laws concerning the Federal Aid Audit Program.
(2) Establishes the national audit schedule pursuant to the
Wildlife and Sport Fish Restoration Programs Improvement Act of 2000.
(3) Coordinates Washington Office review of the CAP prior to
signature by the Regional Director.
(4) Provides an objective representation of issues when there is a
disagreement between the Regional Director and the Assistant Director
on the CAP.
(5) Evaluates the Federal Aid Audit Program for efficiency,
timeliness, and effectiveness prior to initiating each national audit
cycle. The Assistant Director produces a written report at least once
every five years, for the Director identifying issues and making
recommendations for improving the Audit Program.
D. Chief, Division of Federal Aid (Washington Office)
(1) Advises the Assistant Director--Migratory Birds and State
Programs on scheduling of grantee audits. Coordinates audits and
provides an independent auditor to conduct the audit.
(2) Ensures that audits are in accordance with Federal policies,
regulations, and laws.
(3) Identifies national audit training needs and makes training
available. Ensures that appropriate Washington Office Federal Aid
Program staff receive the training necessary to oversee audits.
(4) Establishes the scope of the Audit Program in accordance with
Government Auditing Standards (Yellow Book).
(5) Provides technical assistance on audit issues to the Regional
Office staff and the Assistant Director--Migratory Birds and State
Programs prior to and during the development of the CAP's.
(6) Coordinates with the Chief, Division of Policy and Directives
Management and the OIG to determine appropriate means of responding to
audit-related Freedom of Information Act (FOIA) requests and for
distributing final audit reports and final CAP's.
E. Chief, Division of Policy and Directives Management
(1) Oversees activities of the Service Audit Liaison Officer, who,
in turn,

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serves as liaison to PFM and OIG regarding Federal Aid grantee audit
followup.
(2) Advises Service officials on audit liaison matters.
(3) Tracks the implementation of audit recommendations and reports
to the Directorate and PFM on grantee audit followup.

1.7 Who Maintains Audit Resolution Files?

The Regional Director is responsible for maintaining audit
resolution files in accordance with the Service's records schedule. The
office or Region that administers the grant being audited will maintain
the following documents in the audit resolution file:
A. All audit-related correspondence, incoming and outgoing.
B. OIG final audit report.
C. Approved CAP for both tracked and nontracked audit findings.
D. Documentation provided by the grantee and used by the Regional
Director to verify that the grantee resolved each finding or
implemented the auditor's recommendation.
E. Documentation that the audit has been officially closed out.

1.8 What Are the Definitions for Terms Used in This Part?

A. Appeal
A deliberative process that the grantee initiates when he/she does
not agree with the Regional Director's determinations, corrective
actions, or the resolutions contained in the CAP.
B. Audit
Examination of Federal Aid Program grantees conducted by the
Department of the Interior, OIG, other Federal agencies, and
independent public accountants.
C. Auditor
The OIG's designee to conduct the audit.
D. Corrective Action
Specific action(s) to resolve an audit finding in a manner
consistent with the Service determination.
E. Corrective Action Plan
Management's two-part plan for addressing all audit findings and
implementing all recommendations contained in audit reports. The first
part addresses all audit findings and recommendations identified in the
OIG's transmittal memorandum with the final audit report. The second
part, called the addendum, addresses all other audit findings in the
final audit report not specifically identified in the OIG's transmittal
memorandum. The audit resolution plan in each part contains four
components: Auditor's Findings and Recommendations, Service
Determination, Corrective Action, and Resolution.
F. Draft Audit Report
Any report prepared by the auditor for review and comment by the
Service or the grantee prior to issuance of the final audit report by
the OIG.
G. Engagement Letter
The official notification of a pending audit from the auditor to
the grantee.
H. Entrance Conference
The meeting involving the auditor, the Service, the grantee, and
others, if needed, that officially begins the onsite portion of the
audit.
I. Exit Conference
The meeting involving the auditor, the Service, the grantee, and
others, if needed, to review the draft audit report and end the field
audit.
J. Federal Aid Program
A Program that administers the responsibilities of the Secretary of
the Interior under the Federal Aid in Sport Fish Restoration Act,
Federal Aid in Wildlife Restoration Act, Clean Vessel Act, Coastal
Wetlands Act, the Partnerships for Wildlife Act, and other Acts that
establish grant programs. The Service's Division of Federal Aid
fulfills these responsibilities.
K. Field Audit
Work that the auditor performs while on the grantee's premises or
project sites.
L. Final Action
The completion of all actions, including documentation, necessary
to implement a specific audit recommendation and resolve an audit
finding.
M. Final Audit Report
The auditor's final report of findings for an audit of a grantee,
issued by the OIG. It includes the auditor's recommendations, the
grantee's response to the draft audit report, and the auditor's
rejoinder.
N. Grantee
The entity to which the Service awards a grant and who is
accountable for use of the Federal funds provided.
O. Office of Financial Management
The Department of the Interior organization under the Assistant
Secretary--Policy, Management and Budget that tracks audit
recommendations to final action.
P. Office of the Inspector General
The Department of the Interior organization responsible for
conducting, supervising, and coordinating audits, investigations, and
other activities in the Department designed to promote economy and
efficiency or prevent and detect fraud, waste, and abuse.
Q. Planning
Helps to ensure that we conduct audits in an economical and
efficient manner.
R. Rejoinder
The auditor's answer to the grantee's response to an audit finding
and recommendation.
S. Resolution
A process to address and resolve each finding and recommendation in
the audit report.
T. Scoping
The process to identify programmatic and financial elements to be
audited.
U. Service Audit Liaison Officer
The Washington Office representative that serves as the point of
contact for certain followup activities pertaining to grantee audits.
V. Service Determination
The Service decision to sustain (accept) or not sustain (reject)
the auditor's finding and recommendation.
W. Single Audit Report
An audit of a grantee completed in accordance with the requirements
of the Single Audit Act of 1984 and OMB Circular A-133. These audits
are separate from Federal Aid Program specific audits (grantee audits).
X. We/Us
As used throughout this Part, the terms we or us refer to the Fish
and Wildlife Service.

1.9 What Phases Are Included in a Federal Aid Program Grantee Audit?

A. Scoping and Planning, Part 417 Fish and Wildlife Service Manual,
Chapter 2 (417 FW 2)
During the scoping phase, the auditor identifies programmatic and
financial elements to be audited, establishes the period to be audited,
identifies issues of potential concern, and ensures that the audit
meets Government standards. The planning phase helps to ensure a
nationally consistent, effective, and timely audit process. Audit
planning

[[Page 64848]]

establishes the audit schedule, identifies who will conduct the audit,
identifies point(s) of contact, sets milestones, and describes
logistical requirements.
B. Conducting and Reporting, Part 417 Fish and Wildlife Service Manual,
Chapter 3 (417 FW 3)
The audit conduct and reporting phase helps to ensure independent
examination of grantees consistent with Government auditing standards.
C. Resolution, Part 417 Fish and Wildlife Service Manual, Chapter 4
(417 FW 4)
The audit resolution phase ensures that all findings and
recommendations are tracked and resolved in a timely and efficient
manner.
D. Appeals, Part 417 Fish and Wildlife Service Manual, Chapter 5 (417
FW 5)
The appeals process allows a grantee to appeal Service
determinations, corrective actions, or resolutions.
E. Single Audit Act Audits, Part 417 Fish and Wildlife Service Manual,
Chapter 6 (417 FW 6)
Policy for resolving findings from audits conducted under the
Single Audit Act.

Chapter 2, Scoping and Planning, Part 417 Fish and Wildlife Service
Manual (417 FW 2)

2.1 What Is the Purpose of This Chapter?

This chapter describes the audit scoping and planning processes.
See 417 FW 1 for authorities, responsibilities, and definitions. Other
chapters in this Part establish policy and procedures for audit
conducting and reporting, resolution, and appeals.

2.2 What Is Audit Scoping?

This process identifies the programmatic and financial elements to
be audited.

2.3 Who Determines the Scope of an Audit?

The Chief, Division of Federal Aid (Washington Office) establishes
the overall scope of grantee audits nationwide. Through discussions
with the grantee and the auditor, Regional Directors help define the
scope of specific audits. However, the auditor, supplementing and
building upon other audits of the grantee, is responsible for
identifying the depth and coverage of the audit.

2.4 What Could an Audit Include?

An audit may include one or more of the following components.
A. A financial compliance component to determine if:
(1) A grantee properly conducts financial operations,
(2) Financial reports conform with generally accepted accounting
principles, and
(3) Operations comply with applicable laws and regulations.
B. A component to determine whether or not the grantee accomplished
the work approved in the grant.
C. An economy and efficiency component to determine whether or not
the grantee efficiently and economically managed resources; e.g.,
personnel, property, space, etc.

2.5 What Steps Are Involved In Audit Scoping?

A. Pre-Audit Coordination
After consulting with the Chief, Division of Federal Aid
(Washington Office), the Regional Director, and the grantee about the
appropriate time frames for the audit, the auditor schedules a pre-
audit coordination meeting with the Regional Director to: (1) Define
the period of the audit, identify specific concerns, and (2) to become
familiar with grants that were active during the audit period.
B. Coordination With State Auditor
The auditor contacts the audit agency or group that performed the
Statewide audit to obtain access to audit work papers. The auditor
reviews prior audits of the grantee's program to: (1) Aid in
identifying issues to be evaluated, (2) obtain a general understanding
of the grantee's accounting and internal control systems; and (3) avoid
duplication of effort.
C. Engagement Letter
The auditor is responsible for notifying a grantee of a pending
audit. The auditor sends an engagement letter to the grantee, with a
copy to the Regional Director, at least 30 calendar days prior to the
audit entrance conference. This letter informs the grantee of the audit
objectives, the audit period, the key program elements being audited,
the information and documents the grantee must make available, and the
logistical needs for conducting the field audit.

2.6 Can a Grantee Appeal the Scope of An Audit?

No. An audit is an independent examination of the grantee's Federal
Aid Program.

2.7 Will the Auditor Review Past Audit Findings?

Yes. Using Government Auditing Standards, the auditor is required
to review corrective actions from prior audits to determine if the
grantee has implemented them or if additional actions are needed.

2.8 Can the Scope of the Audit Change?

Yes. The scope of the audit may change when new information becomes
available as the audit progresses. We expect the depth and coverage of
work to change throughout the course of the audit. This is a routine
aspect of the audit, not a change in scope. The most significant change
in scope that we normally encounter is the need to change the period
being audited.

2.9 Who Can Change the Audit Period?

The auditor provides a written recommendation to change the audit
period to the Chief, Division of Federal Aid (Washington Office). The
Chief, in consultation with the Regional Director, determines whether
or not to change the audit period. The Regional Director provides the
grantee written notification of any change in the period and the reason
for the change.

2.10 What Is Audit Planning and Why Do It?

Audit planning helps to ensure that we have a nationally
consistent, effective, and timely audit process. Audit planning
establishes the audit schedule, identifies who will conduct the audit,
identifies point(s) of contact for the grantee, sets audit milestones,
and describes logistical requirements. The auditor coordinates with the
grantee and Service representatives during audit planning.

2.11 Who Ensures That Audit Planning is Accomplished?

The Assistant Director--Migratory Birds and State Programs ensures
collaboration among Service staff, the auditor, and the grantee by
monitoring audit progress through the Chief, Division of Federal Aid
(Washington Office).

2.12 What Steps Does Audit Planning Involve?

A. Grantee's Initial Reply to the Auditor
The grantee will acknowledge the auditor's engagement letter within
30 calendar days providing as much information as possible. See
paragraph 2.13.

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B. Consultation With the Service
Prior to starting the field audit, the auditor meets with Service
Regional Federal Aid staff to discuss specific program audit concerns.
Regional Federal Aid staff solicit grantee input during this process.

2.13 What Is the Content of the Grantee's Initial Reply to the
Engagement Letter?

The grantee acknowledges the auditor's engagement letter by
providing a written response, including as much requested data as is
practical at that time. The grantee notifies the auditor of any
information that is not available and estimates the date when the
information will be available or explains why he/she cannot provide the
information. Auditor review of data prior to arriving onsite will help
to ensure a more timely and efficient onsite audit with minimal
disruption of the grantee's normal operations.

Chapter 3, Conducting and Reporting on Grantee Audits, Part 417
Fish and Wildlife Service Manual (417 FW 3)

3.1 What Is the Purpose of This Chapter?

This chapter provides procedures for conducting and reporting on
audits of Federal Aid Program grantees. See 417 FW 1 for authorities,
responsibilities, and definitions. Other chapters in this Part
establish policy and procedures for audit scoping and planning,
resolution, and appeals.

3.2 What Is the Objective of the Conduct and Reporting Phase?

To ensure independent examination of grantees consistent with
Government auditing standards. This examination results in a final
audit report issued by the OIG.

3.3 What Steps Does the Conducting and Reporting Phase Involve?

A. Audit Entrance Conference
This meeting marks the official beginning of the field audit.
B. Field Audit
Field audits usually take three to four months to complete,
including site visits. The auditor, the grantee, and the Regional
Director communicate regularly to resolve potential audit findings and
recommendations before the auditor prepares the draft audit report.
C. Draft Audit Report
Following the field audit, the auditor prepares a draft audit
report for review by the Chief, Division of Federal Aid (Washington
Office) and the Regional Director. This review may result in revisions
or requests for further audit work before the draft audit report is
provided to the grantee.
D. Audit Exit Conference
After the auditor releases the draft audit report, he/she schedules
an audit exit conference with the Regional Director and the grantee.
This conference provides an opportunity for the grantee and Service
representatives to ask for or provide further clarification as well as
to address any other concerns. The conclusion of the conference marks
the completion of the field audit.
E. Auditor Issues Draft Audit Report to OIG
The auditor includes both the grantee's response and the auditor's
rejoinder in the draft audit report, and submits the report to the OIG
for review and approval.
F. OIG's Final Audit Report
If the OIG accepts the auditor's draft audit report, the OIG
assigns an OIG number to the audit report and issues the report to the
Regional Director.

3.4 What Is An Audit Entrance Conference?

The auditor schedules this conference in consultation with the
grantee and the Regional Director to mark the official beginning of the
field audit. Participants include the auditor and representatives from
the grantee and the Region. The auditor will explain the audit
objectives and process, address logistical needs, establish a tentative
schedule, and answer questions.

3.5 Who Provides Technical Guidance to the Auditor on Interpretation
and Application of Federal Aid Program Rules and Regulations?

The Regional Director provides guidance and interprets laws, rules,
regulations, and policies for the auditor during the conduct of the
audit. The Assistant Director--Migratory Birds and State Programs
ensures consistent interpretation and application of rules,
regulations, and laws nationwide.

3.6 Will the Auditor Issue Status Reports?

Yes. During the field audit, the auditor provides monthly status
reports to the Regional Director and the Chief, Division of Federal Aid
(Washington Office). The status report contains a brief description of
preliminary findings and how the audit is progressing.

3.7 How Does the Service Process Monthly Status Reports?

The Regional Director forwards a copy of the status report to the
grantee and maintains a copy in the audit file. If the Regional
Director or the Chief, Division of Federal Aid (Washington Office), has
a concern about potential findings by the auditor, he/she contacts the
Assistant Director, the auditor, or the grantee to deal with the
issue(s) as soon as practicable. If the Regional Director or the Chief
believe that an issue is of national concern, he/she notifies the
Assistant Director--Migratory Birds and State Programs. The Assistant
Director determines the appropriate action for national application and
issue resolution and issues written guidance to the Regional Directors
where the issue is relevant.

3.8 Is the Service Required To Share Monthly Status Reports?

No. The auditor's monthly status reports are proprietary, and we
will share these reports with the grantee only.

3.9 Will the Auditor Consult With the Service on Potential Findings
While the Audit is in Progress?

Yes. The auditor must report all potential findings to the Regional
Director as soon as possible or at least monthly in the status reports.
However, in the case of illegal activity or suspected fraud, the
auditor must immediately report such findings to the OIG.--Division of
Investigations without notice to the Service.

3.10 Can Audit Findings Be Resolved While the Field Audit is Still in
Progress?

Yes. When practical and feasible, we work with grantees to resolve
audit findings while the auditor is still onsite so that he/she can
verify and document the resolution in audit work papers, and report the
resolution in the final audit report. The auditor must document all
reportable conditions, including those resolved during the audit, to
meet Government Auditing Standards.

3.11 Will the Service Have An Opportunity To Review Audit Findings
Before the Draft Audit Report is Available to the Grantee?

Yes. Following the field audit, the auditor prepares a draft audit
report for review by the Assistant Director--Migratory Birds and State
Programs and the Regional Director. We have 30 calendar days from
receipt of the draft audit report to complete this review. This review
may result in revisions or request for further audit work. After the

[[Page 64850]]

review is complete, the Regional Director will provide the draft audit
report to the grantee at least 30 calendar days prior to the audit exit
conference.

3.12 Who Schedules the Audit Exit Conference and When Does It Occur?

The auditor schedules the audit exit conference with the Service
and the grantee, to occur on a mutually agreeable date. This conference
is a formal opportunity for the grantee and the Service to request or
provide further clarification on the potential findings and to address
any other concerns relating to the conduct of the audit and the draft
audit report. Participants include the auditor and representatives of
the Service and the grantee.

3.13 Can Audit Findings Change as a Result of the Exit Conference?

Yes. The auditor takes information received during the exit
conference under advisement. The auditor may modify the findings or
recommendations before submitting the draft audit report to the OIG.

3.14 Will the Grantee Have An Opportunity To Review and Respond to
Audit Findings and Recommendations Before the Auditor Submits the Draft
Audit Report to the Office of Inspector General for Approval?

Yes.
A. After the exit conference, the grantee has 30 calendar days to:
(1) Concur with the audit findings and recommendations, or
(2) Disagree with audit findings or recommendations, and provide
additional information, if appropriate, to support the grantee's
position on specific audit findings.
B. The auditor will summarize the grantee's response in the final
report and include the complete text of the grantee's response as an
attachment. The grantee may ask the Regional Director for additional
review time. This written request must include supporting
justification. The Regional Director responds to the grantee's request
and instructs the auditor and the grantee accordingly, in writing.

3.15 Will the Auditor Respond to the Grantee's Written Comments on
Draft Audit Findings and Recommendations?

Yes. The auditor answers the grantee in the draft audit report in
the auditor's rejoinder.

3.16 When Is the Auditor's Report Submitted to the OIG?

After the grantee's response and the auditor's rejoinder are
incorporated, the auditor submits the draft audit report to the OIG.

3.17 Who Issues the Final Audit Report and To Whom Is It Issued?

After reviewing the auditor's draft audit report, the OIG issues
the final audit report to the Regional Director via a transmittal
memorandum. The auditor sends copies of the report to the Chief,
Division of Federal Aid (Washington Office), the Service Audit Liaison
Officer, and all other Regional Directors.

3.18 Who Provides the Final Audit Report to the Grantee?

The Regional Director transmits a copy of the final audit report to
the grantee within 10 working days of receipt of the report from the
OIG.

3.19 Who Can Distribute the Final Audit Report to the Public?

The OIG originates the final audit report and is responsible for
distribution. The Regional Director may, with permission from the OIG,
distribute this report to the public, but only after the grantee has
received the report. The grantee may release the report at its
discretion.

3.20 Will You Post the Final Audit Report on the Internet?

The Chief, Division of Federal Aid (Washington Office) will
coordinate with the Chief, Division of Policy and Directives
Management, and the OIG to determine if posting a specifically
requested document on the Internet is appropriate.

Chapter 4, Audit Resolution, Part 417 Fish and Wildlife Service
Manual (417 FW 4)

4.1 What Is the Purpose of this Chapter?

This chapter establishes policy and procedures for tracking and
resolving findings and implementing recommendations from audits of
Federal Aid Program grantees. See 417 FW 1 for authorities,
responsibilities, and definitions. Other chapters in this Part
establish policy and procedures for audit scoping, planning, conducting
and reporting, and appeals.

4.2 When Does Audit Resolution Begin?

The formal audit resolution process begins on the date the OIG
issues the final audit report. However, the Regional Director will work
with the grantee while the audit is in progress to resolve issues that
the auditor identifies. Exhibit 1 provides the maximum time frames for
each phase of the audit resolution process.

4.3 What Is the Purpose of the OIG's Transmittal Memorandum?

The OIG's transmittal memorandum transmits the final audit report
to the Service and is the document of record for identifying the audit
findings that we must address specifically in the CAP and report to the
OIG.

4.4 Who Prepares the CAP?

The Regional Director and the grantee negotiate the terms of the
CAP through written and oral discussions of the auditor's findings and
recommendations, the grantee's response, the auditor's rejoinder, and
the Service's determination. The Regional Chief, Division of Federal
Aid, in coordination with the grantee and the Washington Office
Division of Federal Aid, prepares the CAP for the Regional Director's
signature.

4.5 How Much Time Does the Service Have To Prepare a CAP?

The Service has 90 calendar days from the date the OIG issues the
final audit report to resolve all audit findings with the grantee and
to prepare the CAP.

4.6 Can the Service Request Additional Time To Prepare the CAP?

Either we or a grantee may need additional time to gather
information necessary to develop the CAP. Requests are made as follows:
A. If the grantee needs an extension, he/she must notify the
Regional Director in writing at least 15 calendar days prior to the 90
calendar day deadline and provide a justification for the extension.
B. We can make one request to the OIG for 30 additional calendar
days to prepare the CAP. If the Regional Director requests additional
time, he/she will explain why the additional time is necessary and
provide a copy of the request to the grantee.

4.7 What Are the Content and Format for a CAP?

A. Include a cover page that clearly identifies the grantee
audited, the years audited, and the report number. Obtain this
information from the title of the OIG's final audit report.
B. The CAP contains two parts. The first part addresses all audit
findings and recommendations that the OIG identifies in the transmittal
memorandum. The second part, called the addendum, addresses any other
findings in the final audit report. Each part contains:
(1) Auditor's Findings and Recommendations. The OIG reports these
for resolution. The OIG's transmittal memorandum identifies questioned
costs or procedures and the auditor's recommendations that we must
address in the CAP. It assigns titles and numbers to the auditor's

[[Page 64851]]

recommendations for tracking in the CAP.
(2) Service Determination. The Service sustains (accepts) or does
not sustain (rejects) the auditor's finding and recommendation.
Sustained recommendations from the final audit report must result in
planned corrective actions. If the Regional Director does not sustain
an audit finding, he or she explains the basis, including legal
citations, for that determination. The CAP addresses both sustained and
nonsustained findings.
(3) Corrective Action. This component identifies specific
corrective action(s) to resolve the finding consistent with the Service
Determination. It specifies necessary actions, target dates, and the
person responsible for carrying out each action. It also specifies how
the grantee should implement the corrective actions to resolve the
issues.
(4) Resolution. This component describes documentation that we
require of the grantee to verify implementation of the corrective
action(s) and target dates.

4.8 Who Must Review and Concur With the CAP?

The Assistant Director--Migratory Birds and State Programs will
review the draft CAP and decide whether to concur or not concur within
30 calendar days from the date the Region forwards the CAP to the
Washington Office.

4.9 What Happens if the Assistant Director Does Not Concur With the
Region's Draft CAP?

The Assistant Director will work with the Regional Director to
resolve any disagreements with the CAP. If they cannot resolve their
differences, the Director will make the final decision. The Assistant
Director may request a 30 calendar day extension from the OIG if needed
and if we have not requested a previous extension.

4.10 Who Reviews and Concurs With the CAP at the Department Level?

The Assistant Secretary for Policy, Management and Budget is the
audit followup official for the Department of the Interior and makes
final determination on audit resolution. The Office of Financial
Management (PFM) is the Departmental office delegated authority by the
Assistant Secretary to deal with audit resolution. The PFM notifies the
Director whether or not it concurs with the Service's determination.

4.11 Are All Audit Recommendations Tracked by the Department?

No.
A. The OIG identifies the recommendations that we must resolve and
describes them in the final audit report transmittal memorandum. If we
have not resolved the identified recommendations within the 90 calendar
days specified in the memorandum (or 120 calendar days if an extension
has been granted), the OIG will refer them to PFM for tracking. The PFM
reports back to the OIG when those recommendations are resolved.
B. Nontracked audit recommendations are all other recommendations
in the final audit report. We do not report resolution of nontracked
recommendations to the OIG. However, the Regional Director is
responsible for resolving all audit recommendations-both tracked and
nontracked.

4.12 How Are Nontracked Audit Recommendations Resolved?

The Regional Director negotiates and documents resolution of
nontracked recommendations in the CAP addendum. The addendum follows
the same format as part 1 of the CAP. The Regional Director retains the
addendum and tracks corrective actions outlined therein. Resolution and
issue closure documentation must meet the same standards as those
described for part 1. These records are retained in Regional Federal
Aid audit files. A grantee may appeal the actions contained in the CAP
addendum by initiating the process described in 417 FW 5.

4.13 How Much Time Does the Grantee Have To Implement the CAP?

The corrective action for each finding has a specific deadline as
negotiated during development of the CAP. A grantee may request
additional time from the Regional Director. The request must be in
writing and justify the time requested. The Regional Director responds
in writing within 10 working days and copies the Chief, Division of
Federal Aid (Washington Office). The Chief notifies the Audit Liaison
Officer of the change.

4.14 Who Monitors Implementation of the CAP?

The Regional Director monitors, tracks, and documents
implementation of the CAP and keeps the Director, through the Chief,
Division of Policy and Directives Management, informed of
implementation progress.

4.15 Who Forwards the CAP to the OIG?

Within 2 weeks of the Washington Office decision, the Regional
Director signs and forwards the CAP,
A. Excluding the addendum, to the OIG, and
B. Including the addendum, to the grantee for implementation, and
provides a copy to the Chief, Division of Federal Aid (Washington
Office).

4.16 Who Can Distribute the CAP to the Public?

The Regional Director originates the CAP and makes it available to
the public upon request, but only after the grantee has received a
copy. A grantee may release a copy of the CAP at his or her discretion.

4.17 Will You Publish a Copy of the CAP on the Internet?

4.18 How Can a Final CAP Be Modified?

The final CAP may only be modified by the Director of the Service
or the Secretary, Department of the Interior as the result of an appeal
completed in accordance with Part 417 FW 5 or 50 CFR 80.7 except that
deadlines for implementation of corrective actions may be changed upon
written approval by the Regional Director in accordance with paragraph
4.13 and after consultation with the Chief, Division of Federal Aid
(Washington Office).

4.19 Can a Grantee Appeal a Service Determination or Corrective Action
in the Final CAP?

Yes. A grantee may appeal a Service determination, corrective
action, or resolution contained in the final CAP by the appeals process
described in 417 FW 5.

4.20 Are Status Reports Required During Implementation of the CAP?

If the PFM requires us to submit status reports on specific
corrective actions, we will request status reports from the grantee.

4.21 How Is an Audit Closed?

The Regional Director sends a memorandum to the Director
documenting that final action is complete (all corrective actions have
been implemented) and requesting the audit be closed. The memorandum is
routed through the Chief, Division of Federal Aid (Washington Office)
and the Chief, Division of Policy and Directives Management for review
and concurrence. When all concerns are

[[Page 64852]]

satisfied, the Service Audit Liaison Officer forwards the memorandum to
PFM. If PFM concurs that all action has been implemented, PFM notifies
the Service Audit Liaison Officer that the audit is closed. The Service
Audit Liaison Officer notifies the Chief, Division of Federal Aid
(Washington Office) who conveys the message of acceptance and audit
closure to the appropriate Regional Director. The Regional Director
notifies the grantee after the PFM concurs that the audit findings are
resolved and closed.

Time Frames

Audit Resolution Process for Federal Aid Grant Audits

Note: The OIG allows 90 calendar days for bureaus to prepare a
corrective action plan. The number of days indicated below is the
established maximum time period for each resolution phase.

------------------------------------------------------------------------
Responsible
Calendar day organization Action/comments
------------------------------------------------------------------------
1............................. OIG OIG issues final
audit report.
(Resolution time
tracking process
starts.)
2-45.......................... RO/State/ WO (FA) RO prepares draft CAP
in coordination with
State and WO
Division of Federal
Aid. Submits the
draft CAP to the AD-
MBSP, attention: FA.
(RO must complete
action with 45
calendar days from
OIG issuance of
final report.)
46--75........................ WO (FA/AD-MBSP) FA reviews the draft
CAP and submits to
the AD-MBSP for
concurrence and
return to the RO.
(WO must complete
action within 30
calendar days of
date that RO
forwards report to
WO.)
76--90........................ AD-MBSP/D OIG If disagreement
exists between the
RO and WO, the AD-
MBSP forwards the
draft CAP to the
Director for
decision and
formally requests a
30-day extension
from the OIG. (WO
must complete action
prior to 90-day
resolution time
frame.)
76--120....................... RO RO prepares final CAP
for Regional
Director signature.
RO transmits
original to OIG with
copies to the WO and
the State within 2
weeks of WO
decision. (RO must
complete action
within 2 weeks of WO
decision.) *
90-120........................ OIG OIG reviews the final
CAP and notifies PFM
that either:
--Recommendations are
placed in tracking
with PFM, or
--FWS has failed to
resolve the audit.
120+.......................... PFM/FWS PFM works with FWS to
track audit until
all resolution
actions are
complete.
------------------------------------------------------------------------
* Appeal Process: If the Region cannot resolve the audit, the State may
appeal to the Director, Fish and Wildlife Service (see 417 FW 6).

Legend:
AD-MBSP--Assistant Director--Migratory Birds and State Programs
D--Director
FA--Division of Federal Aid, WO
FWS--Fish and Wildlife Service
OIG--Office of the Inspector General
PFM--Office of Financial Management (Department)
RD--Regional Director
RO--Regional Office
State--State fish and game agency
WO--Washington Office

Chapter 5, Audit Appeals, Part 417 Fish and Wildlife Service Manual
(417 FW 5)

5.1 What Is the Purpose of This Chapter?

This chapter establishes policy and procedures for appealing audit
findings or corrective actions for Federal Aid Program grantee audits.
See 417 FW 1 for authorities, responsibilities, and definitions. Other
chapters in this Part establish policy and procedures for audit
scoping, planning, conducting and reporting, and resolution.

5.2 Who May Appeal?

A grantee impacted by a CAP may appeal Service determinations,
corrective actions, or resolutions in the CAP.

5.3 How Much Time Does the Grantee Have To Appeal?

A grantee must file a written appeal to the Director within 21
calendar days from the date the Regional Director approved the CAP.

5.4 What Does the Appeal Contain?

The appeal must:
A. Specify which Service determinations, corrective actions, or
resolutions they are appealing.
B. Provide information as to why an appeal is being made and
include justification and citations supporting their position. This
justification supplements information that the grantee provided in the
original response to the audit findings.
C. Include a brief summary of prior discussions or negotiations
with the Service on the action being appealed.

5.5 Who Makes the Final Decision on an Appeal to the Service?

The Director makes the final decision on each appeal after
consultation with technical experts. The Director will work with the
grantee(s), appropriate Service Region(s), Washington Office staff, and
others as needed to resolve the appeal within 30 calendar days after
receipt of all pertinent documents.

5.6 Can a Grantee Appeal the Service Director's Decision?

Yes. A grantee may appeal the Service Director's decision within 30
days of the date of mailing of the adverse decision. It must be
directed to the Department of the Interior, Director, Office of
Hearings and Appeals. The Director, Office of Hearings and Appeals, an
Ad Hoc Appeals Board appointed by that Director, or an Administrative
Law Judge of that office, will review the record, hold a hearing on all
or part of the record, or listen to oral arguments, and make
disposition of the appeal. Such an appeal should be made pursuant to 43
CFR 4.700--4.704.

Chapter 6, Single Audit Act Report Resolution, Part 417 Fish and
Wildlife Service Manual (417 FW 6)

6.1 What Is the Purpose of This Chapter?

This chapter establishes Service policy for resolving findings and
implementing recommendations from audits of Federal Aid Program
grantees under the Single Audit Act. See 417 FW 1 for authorities,
responsibilities, and definitions.

[[Page 64853]]

6.2 To what Program Does This Chapter Apply?

This chapter applies to Single Audit Act audits of grantees that
receive funds through the Federal Aid Program. These audits are
separate from the Federal Aid Program specific audits.

6.3 Is the Service Responsible for Resolving All Audit Findings?

No. We are only responsible for resolving findings,
recommendations, and questioned costs that directly relate to funds
that we provide to the grantee.

6.4 Does the OIG Notify the Service When Audits Are Completed?

The OIG will provide excerpts from the Single Audit Report to the
Director or Regional Director if there are issues that we must address.
The OIG's transmittal memorandum will identify the specific findings
and questioned costs that we must resolve. The OIG does not notify us
if the Single Audit Report contains no findings directly related to
funds that we provide to the grantee.

6.5 What happens When the Service Receives a Single Audit Report?

A. OIG Provides Report to Washington Office
The Service Audit Liaison Officer:
(1) Notifies the Chief, Division of Federal Aid (Washington Office)
and other Service offices, as needed, that we have received a Single
Audit report that contains findings that we must resolve.
(2) Forwards the documents to the Chief, Division of Federal Aid
(Washington Office) for review and transmittal to the appropriate
Regional Director for action.
B. OIG Forwards Reports to the Regional Office
The Chief, Division of Federal Aid (Regional Office) will notify
and provide a copy to the Chief, Division of Federal Aid (Washington
Office) and the Service Audit Liaison Officer. The Service Audit
Liaison Officer will coordinate with other affected offices, as
necessary.

6.6 How Much Time Does the Service Have To Respond to the Single Audit
Report?

The OIG establishes a deadline in the transmittal memorandum
submitted with the Single Audit Report. The Regional Director may, with
concurrence of the Assistant Director--Migratory Birds and State
Programs, request that the OIG provide additional time for response.
The request will include a justification for the extension.

6.7 How Are Findings Resolved?

The Regional Director is responsible for overseeing and monitoring
the Service response to Single Audit Reports in accordance with
procedures in 417 FW 4.

6.8 Who Maintains Single Audit Report Resolution Files?

The Regional Director will maintain all files related to resolution
of Single Audit Act audit findings. These files will include, but not
be limited to:
A. Copies of all relevant correspondence.
B. Single Audit Report and OIG transmittal memorandum.
C. Service response to OIG's transmittal memorandum.
D. CAP and revised corrective actions, when appropriate.
E. Documentation that the grantee has resolved the audit findings
and questioned costs in accordance with approved corrective actions.

6.9 Can the Grantee Appeal a Corrective Action?

Yes. Grantees may appeal using the procedures outlined in 417 FW 5.

Dated: November 2, 2001.
Joseph E. Doddridge,
Assistant Secretary for Fish and Wildlife and Parks.
[FR Doc. 01-30905 Filed 12-13-01; 8:45 am]
BILLING CODE 4310-55-P