[Code of Federal Regulations]

[Title 32, Volume 1]

[Revised as of July 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 32CFR34.16]



[Page 213]

 

                       TITLE 32--NATIONAL DEFENSE

 

              CHAPTER I--OFFICE OF THE SECRETARY OF DEFENSE

 

PART 34_ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH 

FOR-PROFIT ORGANIZATIONS--Table of Contents

 

                    Subpart B_Post-award Requirements

 

Sec.  34.16  Audits.



    (a) Any recipient that expends $500,000 or more in a year under 

Federal awards shall have an audit made for that year by an independent 

auditor, in accordance with paragraph (b) of this section. The audit 

generally should be made a part of the regularly scheduled, annual audit 

of the recipient's financial statements. However, it may be more 

economical in some cases to have the Federal awards separately audited, 

and a recipient may elect to do so, unless that option is precluded by 

award terms and conditions, or by Federal laws or regulations applicable 

to the program(s) under which the awards were made.

    (b) The auditor shall determine and report on whether:

    (1) The recipient has an internal control structure that provides 

reasonable assurance that it is managing Federal awards in compliance 

with Federal laws and regulations, and with the terms and conditions of 

the awards.

    (2) Based on a sampling of Federal award expenditures, the recipient 

has complied with laws, regulations, and award terms that may have a 

direct and material effect on Federal awards.

    (c) The recipient shall make the auditor's report available to DoD 

Components whose awards are affected.

    (d) The requirement for an annual independent audit is intended to 

ascertain the adequacy of the recipient's internal financial management 

systems and to curtail the unnecessary duplication and overlap that 

usually results when Federal agencies request audits of individual 

awards on a routine basis. Therefore, a grants officer:

    (1) Shall consider whether the independent audit satisfies his or 

her requirements, before requesting any additional audits; and

    (2) When requesting an additional audit, shall:

    (i) Limit the scope of such additional audit to areas not adequately 

addressed by the independent audit.

    (ii) Coordinate the audit request with the Federal agency with the 

predominant fiscal interest in the recipient, as the agency responsible 

for the scheduling and distribution of audits. If DoD has the 

predominant fiscal interest in the recipient, the Defense Contract 

Management Command (DCMC) is responsible for monitoring audits, ensuring 

resolution of audit findings, and distributing audit reports. When an 

additional audit is requested and DoD has the predominant fiscal 

interest in the recipient, DCMC shall, to the extent practicable, ensure 

that the additional audit builds upon the independent audit or other 

audits performed in accordance with this section.

    (e) There may be instances in which Federal auditors have recently 

performed audits, are performing audits, or are planning to perform 

audits, of a recipient. In these cases, the recipient and its Federal 

cognizant agency should seek to have the non-Federal, independent 

auditors work with the Federal auditors to develop a coordinated audit 

approach, to minimize duplication of audit work.

    (f) Audit costs (including a reasonable allocation of the costs of 

the audit of the recipient's financial statement, based on the relative 

benefit to the Government and the recipient) are allowable costs of DoD 

awards.



[63 FR 12204, Mar. 12, 1998, as amended at 70 FR 49477, Aug. 23, 2005]