Head Start Performance Standard 1301.12


Role of the Independent AuditorNWAHSHS will arrange for an annual audit of the Agency's financial statements to be conducted by an independent accounting firm. The independent accounting firm selected by the Board of Directors will be required to communicate directly with the Agency's Board Chair upon the completion of their audit.

Audited financial statements, including the auditor's opinion thereon, will be submitted and presented to the Board of Directors by the independent accounting firm at a scheduled Governing Board Meeting.

How Often to Review the Selection of the AuditorNWAHSHS shall review the selection of its independent auditor in the following circumstances:

1. Anytime there is dissatisfaction with the service of the current firm2. When a fresh perspective and new ideas are desired3. Every 5 years to ensure competitive pricing and a high quality of service (this is not a requirement to change auditors every five years; simply to re-evaluate the selection)

Selecting an AuditorThe selection of an accounting firm to conduct the annual audit is a task that should be taken very seriously. The following factors shall be considered by NWAHSHS in selecting an accounting firm:

1. The firm’s reputation in the nonprofit community2. The depth of the firm’s understanding of and experience with not-for-profit agencys and Federal reporting requirements under OMB Circular A-1333. The firm’s demonstrated ability to provide the services requested in a timely manner4. The ability of firm personnel to communicate with Agency personnel in a professional and congenial manner

If NWAHSHS decides to prepare and issue a written Request for Proposal (RFP) to be sent to prospective audit firms, the following information shall be included:

1. Period of services required2. Type of contract to be awarded (fixed fee, cost basis, etc.)3. Complete description of the services requested (audit, management letter, tax returns, etc.)4. Identification of meetings requiring their attendance, such as staff or Board of Director meetings5. Agency chart of NWAHSHS6. Chart of account information7. Financial information about the Agency8. Copy of prior year reports (financial statements, management letters, etc.)9. Identification of need to perform audit in accordance with OMB Circular A 13310. Other information considered appropriate11. Description of proposal and format requirements12. Due dates of proposals13. Overview of selection process (i.e., whether finalists will be interviewed, when a decision shall be made, etc.)14. Identification of criteria for selection

Minimum Proposal Requirements from prospective CPA firms shall be:1. Firm background2. Biographical information (resumes) of key firm member who will serve NWAHSHS3. Client references4. Information about the firm's capabilities5. Firm's approach to performing an audit6. Copy of the firm’s most recent quality/peer review report, including any accompanying letter of findings7. Other resources available with the firm8. Expected timing and completion of the audit9. Expected delivery of reports10. Cost estimate including estimated number of hours per staff member11. Rate per hour for each auditor12. Other information as appropriate

In order to narrow down the proposals to the top selections, the Fiscal Officer shall meet with the prospective engagement teams from each proposing firm to discuss their proposal. Copies of all proposals shall be forwarded to each member of the Governing Board. After the Fiscal Officer narrows down the field of prospective auditors to three firms, final interviews of each firm are conducted by the Finance/Audit Committee, who makes the final recommendation to the Board of Directors for approval.

Preparation for the Annual AuditNWAHSHS shall be actively involved in planning for and assisting with the Agency’s independent accounting firm in order to ensure a smooth and timely audit of its financial statements. In that regard, the Accounting Department shall provide assistance to the independent auditors in the following areas:

Planning - The Fiscal Officer is responsible for delegating the assignments and responsibilities to accounting staff in preparation for the audit. Assignments shall be based on the list of requested schedules and information provided by the independent accounting firm.

Involvement - Agency staff will do as much work as possible in order to assist the auditors and, therefore, reduce the cost of the audit.

Interim Procedures - To facilitate the timely completion of the annual audit, the independent auditors may perform selected audit procedures prior to the Agency’s year-end. By performing significant portions of audit work as of an interim date, the work required subsequent to year-end is reduced. Agency staff will provide requested schedules and documents to assist the auditors during any interim audit fieldwork.

Throughout the audit process, NWAHSHS will make every effort to provide schedules, documents and information requested by the auditors in a timely manner.

Concluding the AuditUpon receipt of a draft of the audited financial statements of NWAHSHS from its independent auditor, the Fiscal Officer shall perform a detailed review of the draft, consisting of the following procedures:

1. Carefully read the entire report for typographical errors2. Trace and agree each number in the financial statements and accompanying footnotes to the accounting records and/or internal financial statements of NWAHSHS3. Review each footnote for accuracy and completeness

Any questions or errors noted as part of this review shall be communicated to the independent auditor in a timely manner and resolved to the satisfaction of the Fiscal Officer. Upon agreement of the audit report, the agency will prepare a corrective action plan for each finding. It shall also be the responsibility of the Fiscal Officer to review and respond in writing to all management letter or other internal control and compliance report findings and recommendations made by the independent auditor.

The draft audit will be submitted to the Governing Board for review and approval (1304.50(d)(1)(viii) & 1304.50(g)(2).

The final audit once approved by the Governing Board will be posted on the agency web site.

The complete audit-reporting package including the Single Audit Clearinghouse form (SF-SAC) should be sent to: Please refer to the guidance provided on pages 4 and 5 for clarification.

In addition, copies should be sent to:Janice Pruitt, Grants Management Team LeaderHHS/Administration for Children & Families1301 Young Street, Room 937Dallas, TX 75202

Basil N. Gray, Audit ManagerOffice of Quality Assurance Audit Section700 Main StreetDonaghey Plaza SouthP.O. Box1437 - Slot S270Little Rock, AR 72203-1437

Charitable RegistrationConsumer ProtectionPublic Protection Division Office of the Arkansas Attorney General323 Center Street, Suite 200 Little Rock, Arkansas 72201