ES, IG-00-021, Goodman & Company LLP Audit of Old Dominion University Research Foundation for Fiscal Year Ended June 30, 1998

GOODMAN & COMPANY LLP AUDIT OF
OLD DOMINION UNIVERSITY RESEARCH
FOUNDATION FOR FISCAL YEAR ENDED JUNE 30, 1998
IG-00-021

Executive Summary

Introduction

The Old Dominion University Research Foundation (Foundation) of Norfolk, Virginia, a nonprofit corporation, is the designated fiscal and administrative agent for Old Dominion University. The Foundation's purpose is to promote the educational objectives of Old Dominion University by encouraging, advancing, and conducting research in scientific and other fields.
The Department of Health and Human Services (HHS) is the cognizant audit agency for the Foundation. HHS granted the National Aeronautics and Space Administration (NASA), a Federal funding agency to the Foundation, permission to perform a quality control review of the Goodman & Company, L.L.P. audit of the Foundation's fiscal year ended June 30, 1998.⁽¹⁾ Office of Management and Budget (OMB) Circular A-133⁽²⁾ requires the audit. The Foundation reported total direct fiscal year Federal expenditures for NASA of $4,447,883 and total direct expenditures of $11,981,595 in fiscal year 1998.
Appendix A provides details on the single audit requirements.

Objectives

The objective of our report review is to determine whether the report the Foundation submitted to the Federal Audit Clearinghouse⁽³⁾ meets the applicable reporting standards and OMB Circular A-133 reporting requirements.
The objectives of our quality control review are to determine whether Goodman & Company, L.L.P. conducted the audit in accordance with applicable standards and whether the audit meets the auditing and reporting requirements of OMB Circular A-133. See Appendixes B and C for details on the objectives, scope, and methodology.

Results of Review

On September 8, 1998, Goodman & Company, L.L.P. issued its audit report on the Foundation. The report and the working papers contained deficiencies.

Reported A-133 Results. Goodman & Company, L.L.P. auditors (1) identified no findings; (2) questioned no costs; and (3) issued an unqualified opinion⁽⁴⁾ on the financial statements, Schedule of Expenditures of Federal Awards,⁽⁵⁾ and major program compliance.⁽⁶⁾ The auditors also found no instances of noncompliance in the financial statement audit that are required to be reported under generally accepted government auditing standards.⁽⁷⁾ Finally, the auditors noted no matters involving internal controls relating to the financial statement or major programs that are considered to be material weaknesses.⁽⁸⁾

Audit Quality Review Results. The Goodman & Company, L.L.P. audit work does not meet the applicable auditing guidance and requirements contained in (1) OMB Circular A-133 and its related Compliance Supplement, (2) generally accepted government auditing standards, and (3) generally accepted auditing standards. As a result, Federal agencies and others cannot rely on the Foundation's audit report to administer Federal awards. The deficiencies are detailed in Finding A. These deficiencies may also affect the FY 1999 audit (Finding C).

Report Quality Review Results. The Foundation's audit report does not meet the applicable auditing and reporting guidance and regulatory requirements contained in OMB Circular A-133. The Foundation did not include notes to the Schedule of Expenditures of Federal Awards as required by OMB Circular A-133. Disclosing this information assists the report user in determining the appropriate procedures for reconciling the report expenditures to the Federal records. The deficiencies are detailed in Finding B.

Quality Control Review Referral

Based on the results of our audit report review and quality control review, we determined that the Goodman & Company, L.L.P. audit work meets the President's Council on Integrity and Efficiency's definition of a referable action under the Council's Position Statement 4, "IG [Inspector General] Quality Control Referral Procedures." Therefore, we will refer the staff assigned to this audit to the Virginia Board for Accountancy and the American Institute of Certified Public Accountants (AICPA). Appendix D contains a definition of a referable action and the rationale for our referral of Goodman & Company, L.L.P.

Recommendations

We recommend that Goodman & Company, L.L.P.:

Reperform the fiscal year 1998 audit in accordance with OMB Circular A-133 and its related Compliance Supplement at no additional cost to the Federal Government.
Provide training in OMB Circular A-133 requirements for the assigned staff.

We also recommend that the Board of Trustees, Old Dominion University Research Foundation, prepare the related notes to the Schedule of Expenditures of Federal Awards as required by OMB Circular A-133 and determine whether the fiscal year 1999 audit must be reperformed.

Management's Response

Goodman & Company, L.L.P. concurred with the recommendations and planned corrective actions to resolve all deficiencies. Goodman & Company, L.L.P. will reperform the fiscal years 1998 and 1999 audits after its staff is trained in the government auditing standards and the OMB Circular A-133 requirements. The complete text of the response is in Appendix F.
The Board of Trustees concurred with the recommendations. The Board will provide notes to the Schedule of Expenditures of Federal Awards after Goodman & Company, L.L.P. reperforms the fiscal year 1998 audit. The Board will also review the fiscal year 1999 audit to determine whether the same deficiencies exist. The complete text of the response is in Appendix G.

Evaluation of Management's Response

We consider management's comments and planned corrective actions responsive to the intent of the recommendations. The recommendations are resolved but will remain open until the agreed-to corrective actions are completed.

FOOTNOTES

1. The Norfolk, Virginia, office of Goodman & Company, L.L.P., performed the single audit for the Foundation's fiscal years ended June 30, 1998, and June 30, 1999.

2. "Audits of States, Local Governments, and Non-Profit Organizations." Appendix A contains details on the requirements of the Circular.

3. The Single Audit Act Amendments of 1996, §7504(c), requires the Office of Management and Budget to establish the Federal Audit Clearinghouse to receive the Circular A-133 audit reports.

4. An unqualified opinion means that the financial statements are presented fairly in all material respects, expenditures of Federal funds are presented fairly in relation to the financial statements taken as a whole, and the auditee has complied with all applicable laws, regulations, and contract provisions that could have a direct and material effect on each major program.

5. The Schedule of Expenditures of Federal Awards is a schedule showing the amount of annual Federal award expenditures by Federal agency for each program, grant, or contract.

6. Major program compliance refers to an assessment of the auditee's compliance with laws, regulations, and provisions of contracts or grant agreements that could have a direct and material effect on each major program.

7. These standards are broad statements of the auditors' responsibilities, promulgated by the Comptroller General of the United States.

8. The American Institute of Certified Public Accountants (AICPA) Statement of Position 98-3, Appendix D, defines a material weakness as "... the condition in which the design or operation of one or more of the internal control components [control environment, risk assessment, control activities, information and communication, and monitoring] does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions."

View Complete Report.

Introduction	The Old Dominion University Research Foundation (Foundation) of Norfolk, Virginia, a nonprofit corporation, is the designated fiscal and administrative agent for Old Dominion University. The Foundation's purpose is to promote the educational objectives of Old Dominion University by encouraging, advancing, and conducting research in scientific and other fields. The Department of Health and Human Services (HHS) is the cognizant audit agency for the Foundation. HHS granted the National Aeronautics and Space Administration (NASA), a Federal funding agency to the Foundation, permission to perform a quality control review of the Goodman & Company, L.L.P. audit of the Foundation's fiscal year ended June 30, 1998.⁽¹⁾ Office of Management and Budget (OMB) Circular A-133⁽²⁾ requires the audit. The Foundation reported total direct fiscal year Federal expenditures for NASA of $4,447,883 and total direct expenditures of $11,981,595 in fiscal year 1998. Appendix A provides details on the single audit requirements.
Objectives	The objective of our report review is to determine whether the report the Foundation submitted to the Federal Audit Clearinghouse⁽³⁾ meets the applicable reporting standards and OMB Circular A-133 reporting requirements. The objectives of our quality control review are to determine whether Goodman & Company, L.L.P. conducted the audit in accordance with applicable standards and whether the audit meets the auditing and reporting requirements of OMB Circular A-133. See Appendixes B and C for details on the objectives, scope, and methodology.
Results of Review	On September 8, 1998, Goodman & Company, L.L.P. issued its audit report on the Foundation. The report and the working papers contained deficiencies. Reported A-133 Results. Goodman & Company, L.L.P. auditors (1) identified no findings; (2) questioned no costs; and (3) issued an unqualified opinion⁽⁴⁾ on the financial statements, Schedule of Expenditures of Federal Awards,⁽⁵⁾ and major program compliance.⁽⁶⁾ The auditors also found no instances of noncompliance in the financial statement audit that are required to be reported under generally accepted government auditing standards.⁽⁷⁾ Finally, the auditors noted no matters involving internal controls relating to the financial statement or major programs that are considered to be material weaknesses.⁽⁸⁾ Audit Quality Review Results. The Goodman & Company, L.L.P. audit work does not meet the applicable auditing guidance and requirements contained in (1) OMB Circular A-133 and its related Compliance Supplement, (2) generally accepted government auditing standards, and (3) generally accepted auditing standards. As a result, Federal agencies and others cannot rely on the Foundation's audit report to administer Federal awards. The deficiencies are detailed in Finding A. These deficiencies may also affect the FY 1999 audit (Finding C). Report Quality Review Results. The Foundation's audit report does not meet the applicable auditing and reporting guidance and regulatory requirements contained in OMB Circular A-133. The Foundation did not include notes to the Schedule of Expenditures of Federal Awards as required by OMB Circular A-133. Disclosing this information assists the report user in determining the appropriate procedures for reconciling the report expenditures to the Federal records. The deficiencies are detailed in Finding B.
Quality Control Review Referral	Based on the results of our audit report review and quality control review, we determined that the Goodman & Company, L.L.P. audit work meets the President's Council on Integrity and Efficiency's definition of a referable action under the Council's Position Statement 4, "IG [Inspector General] Quality Control Referral Procedures." Therefore, we will refer the staff assigned to this audit to the Virginia Board for Accountancy and the American Institute of Certified Public Accountants (AICPA). Appendix D contains a definition of a referable action and the rationale for our referral of Goodman & Company, L.L.P.
Recommendations	We recommend that Goodman & Company, L.L.P.: Reperform the fiscal year 1998 audit in accordance with OMB Circular A-133 and its related Compliance Supplement at no additional cost to the Federal Government. Provide training in OMB Circular A-133 requirements for the assigned staff. We also recommend that the Board of Trustees, Old Dominion University Research Foundation, prepare the related notes to the Schedule of Expenditures of Federal Awards as required by OMB Circular A-133 and determine whether the fiscal year 1999 audit must be reperformed.
Management's Response	Goodman & Company, L.L.P. concurred with the recommendations and planned corrective actions to resolve all deficiencies. Goodman & Company, L.L.P. will reperform the fiscal years 1998 and 1999 audits after its staff is trained in the government auditing standards and the OMB Circular A-133 requirements. The complete text of the response is in Appendix F. The Board of Trustees concurred with the recommendations. The Board will provide notes to the Schedule of Expenditures of Federal Awards after Goodman & Company, L.L.P. reperforms the fiscal year 1998 audit. The Board will also review the fiscal year 1999 audit to determine whether the same deficiencies exist. The complete text of the response is in Appendix G.
Evaluation of Management's Response	We consider management's comments and planned corrective actions responsive to the intent of the recommendations. The recommendations are resolved but will remain open until the agreed-to corrective actions are completed.