Single Audit Findings: Schedule of Findings Guide

The schedule of findings and questioned costs is the part of the single audit that federal agencies and pass-through entities read first. It is where a compliance problem becomes a record. 2 CFR 200.516 says what must be reported and what each finding must contain. A finding that omits a required element draws questions from the agency or pass-through entity, and a vague finding gives the auditee nothing to correct.

For the whole engagement, see the single audit walk-through. For how the findings reach the filing, see the due dates post.

What must be reported: seven categories

2 CFR 200.516(a) states that the auditor must report the following as an audit finding in the schedule of findings and questioned costs:

Significant deficiencies and material weaknesses in internal control over major programs, evaluated by compliance requirement type in the Compliance Supplement.
Material noncompliance with federal statutes, regulations or award terms for a major program, evaluated by compliance requirement type.
Known questioned costs when either known or likely questioned costs are greater than $25,000 for a type of compliance requirement for a major program, with information on prevalence and consequences.
Known questioned costs greater than $25,000 for a federal program that is not audited as a major program, when the auditor becomes aware of them, including during audit follow-up.
The circumstances behind any compliance opinion on a major program that is not unmodified, unless already reported as a finding.
Known or likely fraud affecting a federal award, unless already reported as a finding. Certain investigative or legal information need not be publicly reported.
Audit follow-up results showing that the summary schedule of prior audit findings materially misrepresents the status of any prior audit finding.

The $25,000 line applies per type of compliance requirement for a major program. A questioned cost, by the definition in 2 CFR 200.1, is an amount that in the auditor's judgment is noncompliant or suspected noncompliant with federal statutes, regulations or award terms, lacked adequate documentation at the time of the audit, or appeared unreasonable compared with what a prudent person would incur. An internal control deficiency alone does not create a questioned cost.

The eleven elements of a finding

2 CFR 200.516(b) requires that findings be presented with sufficient detail and clarity for the auditee to prepare a corrective action plan. Each finding includes:

Program identification. Assistance Listings title and number, award number and year, federal agency and pass-through entity. Where information is missing, the best available information goes in.
Criteria. The specific statute, regulation or award term that sets the expected standard.
Condition. What the auditor found, with the facts that support the deficiency.
Cause. Why the condition occurred, or what caused the gap from the criteria.
Effect. The potential impact, tied to the gap between condition and criteria.
Questioned costs. Known questioned costs by Assistance Listing number and award number, and how they were computed.
Undetermined amounts. Where costs are known to be questioned but the amount is not determined, the reason.
Prevalence and consequences. Whether the issue is isolated or systemic, the population and sample sizes, a dollar quantification and whether the sample was statistically valid.
Repeat finding status. Whether the finding repeats one from the immediately prior audit, with the prior reference numbers.
Recommendations. Steps to prevent recurrence.
Auditee views. The responses of the auditee's responsible officials.

Each finding also carries a reference number in the format required for the data collection form, so the schedule and the filing tie together.

Worked example

A nonprofit expends $2,300,000 under an Assistance Listing program that is tested as major. The auditor selects 40 payroll charges to the award and finds that 6 lack the time-and-effort documentation required for personnel costs.

Criteria: the personnel cost documentation requirements of 2 CFR Part 200, Subpart E, as applied to the award.
Condition: 6 of 40 sampled payroll charges, totaling $8,450, had no signed time record supporting the allocation to the award.
Cause: the finance team relied on budgeted percentages and did not reconcile them to actual effort.
Effect: federal reimbursement included costs without adequate support. Costs are subject to disallowance.
Questioned costs: $8,450 known. Likely questioned costs are projected at $46,500: the 15 percent sample error rate applied to $310,000 of payroll charged to the award. The computation is shown in the finding.
Prevalence: the 40 items were drawn from a population of 412 charges totaling $310,000 by random selection. The sample was statistically valid.
Repeat: not a repeat of a prior-year finding.
Recommendation: replace budget-based allocation with signed time records reconciled each period.
Auditee view: management concurs and adopts the recommendation by the next pay period.

This item is reported. Known questioned costs of $8,450 are below $25,000, but the projected likely amount of $46,500 exceeds it. Category 3 is measured on either known or likely costs, so the projection triggers the finding. The same facts support a control deficiency conclusion under category 1 and a noncompliance conclusion under category 2, each evaluated on its own.

Writing the condition and criteria

Four habits separate a usable finding from a weak one:

Quote the criteria exactly. Cite the section, such as a compliance requirement in the Compliance Supplement or a section of the award agreement. A finding that says "the entity did not follow federal rules" cannot be corrected.
State the condition in numbers. Use "6 of 40 items" and the dollar amount, not "several exceptions."
Separate cause from effect. Cause explains why it happened. Effect says what it means for the federal award. Mixing them leaves recommendations without a target.
Keep recommendations tied to cause. A recommendation that addresses a different problem than the cause listed is a reviewer comment waiting to happen.

Repeat findings and prior finding follow-up

2 CFR 200.516(b)(9) requires the finding to say whether it repeats a finding from the immediately prior audit and to identify the applicable prior-year reference numbers. The auditor reads the prior schedule of findings before fieldwork and lists each prior finding to test.

The follow-up mechanics sit with the auditee under 2 CFR 200.511. The auditee is responsible for follow-up and corrective action on all audit findings and prepares:

A summary schedule of prior audit findings reporting the status of each prior finding. For findings not fully corrected, it describes the reasons for recurrence and the planned corrective action.
A corrective action plan at the completion of the audit, as a separate document, naming the responsible contact person(s), the corrective action and the anticipated completion date for each finding.

The auditor tests the summary schedule. If follow-up shows that it materially misrepresents the status of a prior finding, the auditor reports that as a finding under 200.516(a)(7). Both documents go into the reporting package.

Review checklist for the engagement partner

Every finding carries all eleven elements and a reference number.
Questioned costs are stated by Assistance Listing and award number, with the computation.
The known and likely amounts are both tested against $25,000 for each type of compliance requirement for a major program.
Repeat findings cite prior reference numbers.
The prior-year schedule is traced to the current summary schedule of prior audit findings.
Finding numbers match the data collection form.

Sources

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Schedule of Findings and Questioned Costs: Writing Single Audit Findings Under 2 CFR 200.516