4.10 Audit and Audit Resolutions

4.10.1 Audit and Audit Resolution

Effective date: May 1, 2024

Background

A local Workforce Development Board (WDB) or subrecipient¹ organization that expends $750,000 or more in federal funds during its fiscal year to operate one or more programs must have a single or program-specific audit conducted. Any local WDB or subrecipient organization that expend less than $750,000 of federal funds in a year is exempt from the audit requirements for that year, but records must be available for review or audit by appropriate officials of the federal agency or pass-through entity.²

Audit Requirements

Subrecipients that are units of government or nonprofit organizations that expends $750,000 or more in federal funds during its fiscal year to operate one or more programs must have a single or program-specific audit that:³

• Is on an annual basis, coinciding with the subrecipient's normal fiscal year.
• Is an agency-wide audit that includes financial and compliance coverage of the DWD-DET programs within its scope; and
• Complies with Uniform Guidance.

Auditee Responsibility

An auditee may simultaneously be a recipient⁴, a subrecipient, and a contractor⁵ depending on the substance of its agreements with Federal awarding agencies and pass-through entities.

The responsibilities of a local WDB or a subrecipient organization as an auditee are as follows:

• The local WDB or subrecipient organization must procure the services of an auditor in accordance with local WDB procurement policies and Uniform Guidance procurement standards.⁶
• The local WDB or subrecipient organization must prepare its financial statement in compliance with Audit Requirements⁷ as outlined in the Uniform Guidance.⁸
• The local WDB or subrecipient organization must follow up on any audit findings.^{9 10}
• The local WDB must have an audit conducted within 9 months from the end of a fiscal year.¹¹
• The local WDB must ensure that its subrecipients are conducting annual fiscal audits.¹²
• Audits performed under these guidelines are due to DWD-DET nine months from the end of the fiscal period or 30 days from completion of the audit, whichever is sooner.¹³
• Single audit must be conducted using the scope established in Uniform Guidance.¹⁴
• An auditor's report must be designed using the criteria established in Audit Requirements as outlined in the Uniform Guidance.¹⁵

Audit Submission To The Granting Agencies

All local WDBs are required to submit completed audit reports¹⁶ to DWD-DET nine months from the end of the fiscal period or 30 days from completion of the audit, whichever is sooner.¹⁷

Audit reports are to be submitted via email to: finance@dwd.wisconsin.gov

If there are no findings in the audit reports and no further action is required, DWD-DET will issue a closeout letter.

If there are findings in the audit report related to WIOA, DWD-DET will follow the Audit Resolution process stated below.

DWD-DET Audit Resolution Process

The submission of a local WDBs final Audit Report which contains findings initiates DWD-DET's audit resolution process. Upon receipt of the audit report, DWD-DET will issue a letter to the subrecipient indicating the corrective action¹⁸ needed. The subrecipient will have 30 days to respond to this letter. Based on the subrecipient's response to the corrective action letter, DWD-DET will issue a Statement of Findings and Determinations. Any debts due to audit disallowance are established at this point.

Stand-In Costs

During the audit resolution process, the auditee may propose the use of stand-in costs to substitute for the disallowed costs¹⁹. The use of stand-in costs is an audit resolution activity. Stand-in costs are usable as substitutes for unallowable costs identified in an audit report. Stand-in costs result when an Operators and Service Providers expend non-federal funds on WIOA programs. To be considered, stand-in costs must be incurred for allowable WIOA costs that were reported as uncharged WIOA program costs, included within the scope of the audit, and accounted for in the auditee's financial system. The stand-in cost must have been expended in support of the same title and program year as the costs they propose to replace, and the costs must not cause a violation of the cost limitations and requirements.²⁰ Stand-in costs must be actual expenses paid with nonfederal funds. Cash match in excess of the required match may also be considered for use as stand-in costs.

Subrecipient Audit Resolution

Federal awards expended as a recipient or subrecipient are subject to audit requirements.²¹

All local WDBs must obtain and review the audit report of their subrecipients to ensure compliance with the requirements of the Uniform Guidance. The local WDB must have an audit resolution process in place for its subrecipients.²² The audit and audit resolution process for subgrantees is independent of the process between DWD-DET and subrecipients.

Local WDBs must:

• Verify subrecipients meet audit requirements.
• Prepare management decisions²³ on subrecipient audit findings.²⁴
• Pursue debt collection.²⁵

DWD-DET Reviews

In addition to the required annual audits, DWD-DET subrecipients shall be subject to preliminary fiscal reviews, financial and compliance audits. DWD-DET reserves the right to conduct other audits and investigations in accordance with applicable federal and state laws or regulations.

Audit Costs

The DWD-DET subrecipient shall be responsible for the cost of the audit.

• ¹ 2 CFR 200.1 “Subrecipient”
• ² 2 CFR 200.501(d)
• ³ 2 CFR 200.501(a)
• ⁴ 2 CFR 200.1 “Recipient”
• ⁵ 2 CFR 200.1 “Contractor”
• ⁶ 2 CFR 200.508(a)
• ⁷ 2 CFR 200.501
• ⁸ 2 CFR 200.510
• ⁹ 2 CFR 200.1 “Audit finding”
• ¹⁰ 2 CFR 200.511
• ¹¹ 2 CFR 200.507(c)(1)
• ¹² 20 CFR 683.210(b)
• ¹³ 2 CFR 200.512(a)(1)
• ¹⁴ 2 CFR 200.514
• ¹⁵ 2 CFR 200.515
• ¹⁶ 2 CFR 200.512(c)
• ¹⁷ 2 CFR 200.512(a)(1)
• ¹⁸ 2 CFR 200.1 “Corrective action”
• ¹⁹ 2 CFR 200.1 “Disallowed costs”
• ²⁰ 2 CFR 200.403
• ²¹ 2 CFR 200.501(f)
• ²² 20 CFR 683.420(a)(1)(i)
• ²³ 2 CFR 200.521
• ²⁴ 2 CFR 200.521(c)
• ²⁵ 20 CFR 683.420(a)