[Code of Federal Regulations]
[Title 7, Volume 15]
[Revised as of January 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR3052.510]

[Page 263-264]
 
                          TITLE 7--AGRICULTURE
 
                         CHAPTER XXX--OFFICE OF
                      THE CHIEF FINANCIAL OFFICER,
                        DEPARTMENT OF AGRICULTURE
 
PART 3052_AUDITS OF STATES, LOCAL GOVERNMENTS, AND NON-PROFIT 
ORGANIZATIONS--Table of Contents
 
                           Subpart E_Auditors
 
Sec. 3052.510  Audit findings.

    (a) Audit findings reported. The auditor shall report the following 
as audit findings in a schedule of findings and questioned costs:
    (1) Reportable conditions in internal control over major programs. 
The auditor's determination of whether a deficiency in internal control 
is a reportable condition for the purpose of reporting an audit finding 
is in relation to a type of compliance requirement for a major program 
or an audit objective identified in the compliance supplement. The 
auditor shall identify reportable conditions which are individually or 
cumulatively material weaknesses.
    (2) Material noncompliance with the provisions of laws, regulations, 
contracts, or grant agreements related to a major program. The auditor's 
determination of whether a noncompliance with the provisions of laws, 
regulations, contracts, or grant agreements is material for the purpose 
of reporting an audit finding is in relation to a type of compliance 
requirement for a major program or an audit objective identified in the 
compliance supplement.
    (3) Known questioned costs which are greater than $10,000 for a type 
of compliance requirement for a major program. Known questioned costs 
are those specifically identified by the auditor. In evaluating the 
effect of questioned costs on the opinion on compliance, the auditor 
considers the best estimate of total costs questioned (likely questioned 
costs), not just the questioned costs specifically identified (known 
questioned costs). The auditor shall also report known questioned costs 
when likely questioned costs are

[[Page 264]]

greater than $10,000 for a type of compliance requirement for a major 
program. In reporting questioned costs, the auditor shall include 
information to provide proper perspective for judging the prevalence and 
consequences of the questioned costs.
    (4) Known questioned costs which are greater than $10,000 for a 
Federal program which is not audited as a major program. Except for 
audit follow-up, the auditor is not required under this part to perform 
audit procedures for such a Federal program; therefore, the auditor will 
normally not find questioned costs for a program which is not audited as 
a major program. However, if the auditor does become aware of questioned 
costs for a Federal program which is not audited as a major program 
(e.g., as part of audit follow-up or other audit procedures) and the 
known questioned costs are greater than $10,000, then the auditor shall 
report this as an audit finding.
    (5) The circumstances concerning why the auditor's report on 
compliance for major programs is other than an unqualified opinion, 
unless such circumstances are otherwise reported as audit findings in 
the schedule of findings and questioned costs for Federal awards.
    (6) Known fraud affecting a Federal award, unless such fraud is 
otherwise reported as an audit finding in the schedule of findings and 
questioned costs for Federal awards. This paragraph does not require the 
auditor to make an additional reporting when the auditor confirms that 
the fraud was reported outside of the auditor's reports under the direct 
reporting requirements of GAGAS.
    (7) Instances where the results of audit follow-up procedures 
disclosed that the summary schedule of prior audit findings prepared by 
the auditee in accordance with Sec. 3052.315(b) materially 
misrepresents the status of any prior audit finding.
    (b) Audit finding detail. Audit findings shall be presented in 
sufficient detail for the auditee to prepare a corrective action plan 
and take corrective action and for Federal agencies and pass-through 
entities to arrive at a management decision. The following specific 
information shall be included, as applicable, in audit findings:
    (1) Federal program and specific Federal award identification 
including the CFDA title and number, Federal award number and year, name 
of Federal agency, and name of the applicable pass-through entity. When 
information, such as the CFDA title and number or Federal award number, 
is not available, the auditor shall provide the best information 
available to describe the Federal award.
    (2) The criteria or specific requirement upon which the audit 
finding is based, including statutory, regulatory, or other citation.
    (3) The condition found, including facts that support the deficiency 
identified in the audit finding.
    (4) Identification of questioned costs and how they were computed.
    (5) Information to provide proper perspective for judging the 
prevalence and consequences of the audit findings, such as whether the 
audit findings represent an isolated instance or a systemic problem. 
Where appropriate, instances identified shall be related to the universe 
and the number of cases examined and be quantified in terms of dollar 
value.
    (6) The possible asserted effect to provide sufficient information 
to the auditee and Federal agency, or pass-through entity in the case of 
a subrecipient, to permit them to determine the cause and effect to 
facilitate prompt and proper corrective action.
    (7) Recommendations to prevent future occurrences of the deficiency 
identified in the audit finding.
    (8) Views of responsible officials of the auditee when there is 
disagreement with the audit findings, to the extent practical.
    (c) Reference numbers. Each audit finding in the schedule of 
findings and questioned costs shall include a reference number to allow 
for easy referencing of the audit findings during follow-up.