20020 AUDIT COORDINATION
(Revised 08/06)
General
AB 861, Chapter 1167, Statutes of 1981 (GC 12430), provides that all audit activities of the State Controller's Office, the Bureau of State Audits, and the Department of Finance shall be coordinated so that duplication of auditing effort may be minimized. This coordination is achieved through the AB 861 committee composed of the State Controller, the State Auditor, and the Director of the Department of Finance. The committee meets on an as-needed basis to coordinate audit coverage and minimize audit duplication.
To prevent duplication of the annual financial audit conducted by the BSA, GC 8546.4(e) prescribes that except for those state agencies that are required by state law to obtain an annual audit, no state entity shall encumber funds appropriated by the Legislature for the purpose of funding annual financial audits that may be covered by the single audit performed by the BSA.
In addition, GC 8546(e) states that no state entity shall enter into a contract for a financial or compliance audit without prior written approval of the Director of the DOF and the State Controller.
Internal Audit Coordination
GC 12430 assigns the Director of the DOF the primary responsibility of coordinating state internal audit entities. This coordination activity will not affect audit activities that are an integral part of an entity's functions; such as regulatory and tax auditors, or other auditors who work directly with selected industries or taxpayers.
To help coordinate internal auditing, the DOF, as required by GC 13405(d), has developed an internal control audit guide, as well as supplemental audit guides applicable to institutional stores and trust operations. Copies of these guides may be obtained from the OSAE, or electronically at the OSAE web page at www.dof.ca.gov/fisa/osae/osaehome.htm.
The DOF also issues Audit Memos on an as-needed basis. These memos may establish uniform policy, interpretations, procedures or technical requirements, or provide advice or information. Copies are available from the OSAE, or electronically at the OSAE web page at www.dof.ca.gov/fisa/osae/osaehome.htm.
In addition, the DOF may coordinate the implementation of internal audit standards by conducting Quality Assurance Reviews of internal audit units.
Single Audit Coordination
Pursuant to the Federal Single Audit Act of 1984 and the Single Audit Act Amendment of 1996, the Federal Office of Management and Budget has issued Circular A-133. This circular sets standards for the audits of states, local governments, and non-profit organizations expending federal awards.
At the state level, California meets the federal requirements through the BSA's annual single audit of the general purpose financial statements included in the SCO's Annual Report to the Governor.
As part of its annual audit of the State, the BSA requests the Director of the DOF to make certain representations regarding the State's financial operations. To allow the DOF to submit a single representation letter to the BSA, each entity head is required to submit annually to the DOF a representation letter on the entity's operations. A sample representation letter can be obtained from the OSAE. The "as of" date for the representation letter will be communicated annually to the agencies by the OSAE. These letters are compiled into a single representation letter that the DOF submits to the BSA for the State's annual single audit.
In conjunction with the single audit, the SCO submits an audit inquiry letter to the Attorney General requesting information on pending or threatened litigation. This information is then forwarded to the BSA.
Federal Audit Coordination
To ensure that federal audit requests are coordinated in accordance with GC Section 12430, state agencies shall immediately notify the Director of the Department of Finance, the State Auditor, and the State Controller, when they are required to obtain federally required audits as stated in GC 8546.4(d). The three audit agencies shall coordinate the procurement by state agencies of the federally required audits, including any negotiations with cognizant federal agencies.
