[Federal Register Volume 66, Number 241 (Friday, December 14, 2001)]
[Notices]
[Pages 64845-64853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-30905]


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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 [email protected], 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.

[[Page 64849]]

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?

    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.

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