Guide for audit, report writing etc.doc

Chapter 1. General Guidance
Audit Requirements: The Advanced Technology Program (ATP) is a cost-sharing program designed to
assist United States industry and businesses pursue high risk, enabling technologies with significant
commercial and economic potential. The statutory authority for ATP, 15 USC Sec. 278n, requires that
NIST establish procedures regarding financial reporting and auditing to ensure that cooperative
agreements are used for their specified purposes. Pursuant to the Inspector General Act of 1978, as
amended, 5 USC App., all audits of financial assistance are to be performed in accordance with
Government Auditing Standards issued by the Comptroller General of the United States. These audit
requirements can be met by conducting an audit of the ATP financial statement, "Schedule of Fund
Sources and Project Costs" and an examination-level attestation engagement of management's assertions
regarding compliance with laws and regulations.
The ATP financial statement will be audited using generally accepted auditing standards which have
been incorporated into the Government Auditing Standards. The examination-level compliance
attestation engagement will be conducted in accordance with Government Auditing Standards and the
standards contained in the Statement on Standards for Attestation Engagement (SSAE) No. 3,
Compliance Attestation, as amended by SSAE No. 9, Statement of Standards for Attestation
Engagement Nos. 1, 2, and 3, issued by the American Institute of Certified Public Accountants
(AICPA). A compliance attestation engagement, conducted in accordance with SSAE No. 3, as
amended, is a type of financial-related audit under Government Auditing Standards.
These guidelines are to be used by independent auditors to perform the required program-specific audits
of ATP recipients except when ATP recipients are required to comply with the Single Audit Act of 1996
and Office of Management and Budget (OMB) Circular A-133, "Audits of States, Local Governments
and Non-Profit Organizations." For recipients required to have annual audits in compliance with OMB
Circular A-133, these guidelines can be used to identify the allowability of specific cost elements and
other programmatic compliance requirements which may be tested.
These guidelines are not intended to be a complete manual of procedures, nor are they intended to
supplant the auditor's judgment of the work required to meet the audit's objectives. These guidelines
may not cover all circumstances encountered while performing the program-specific audit, similarly not
all procedures will apply to every situation. Auditors must use their professional judgment in
determining the work necessary to render the required opinions.
Different guidelines will be used by single companies from those used by joint venture participants
because of differing requirements for each of these types of award recipients. A single company is
defined by NIST as a small, medium, or large for-profit company. A single company can receive up to
$2 million of ATP funds over a period not to exceed three (3) years.
ATP funds may only be used to pay for direct costs for single company recipients. Single company
recipients are responsible for funding all of their overhead or indirect costs.
Small and medium size single companies are not required to provide a cost-share of direct costs,
however, they may pay a portion of the direct costs in addition to paying for all the indirect costs
allocated to the award. Large companies must cost-share at least 60 percent of the yearly total project
costs (direct and indirect costs). A large company is defined as any business, including any parent
company plus related subsidiaries, having annual revenues in excess of $2.721 billion. (Note that the
revenue requirement for defining a large company will likely change annually as reflected in the ATP
Proposal Kit). As with small and medium sized companies, ATP funds can only be used to pay for direct
costs. However, large companies may use their overhead/indirect costs allocated to the project to meet
their cost-share requirement.
All federal programs are assigned a number in the Catalog of Federal Domestic Assistance (CFDA). The
CFDA number for the Advanced Technology Program is 11.612.

Objectives: The opinions on the program financial statement and management's assertions regarding
compliance will be used as a tool by program managers and grant officials in meeting their
responsibilities for ensuring that federal funds are spent for their intended purposes and in accordance
with laws and regulations.
Frequency: ATP recipients shall have a program-specific audit performed in accordance with the
following schedule:
 For awards less than 24 months, a program-specific audit is required only at the end of the
project.
 For 2- and 3-year awards, a program-specific audit is required after the first year and at the end
of the project.
The program-specific audit is to cover the period elapsed since the last program-specific audit of the
company or since the project began if the audit is the initial audit. The NIST Grants Officer may amend
an award to extend the project period but provide no additional funding. This is known as a no-cost
extension. In the case of a no-cost extension to the first year of an award, the audit should include
project funds and project costs for the first year and the extension period.
Engagement Letter: A letter of engagement between the ATP recipient and the auditor conducting the
program-specific audit shall specifically include a provision that the auditor is required to provide the
Secretary of Commerce, the Office of Inspector General, and the U.S. General Accounting Office or
their representatives access to working papers or related documents. Access to working papers includes
making necessary photocopies.
Protection of Confidential Information: Certain information obtained in this engagement is exempt
from disclosure under the Freedom of Information Act (FOIA). Exempt from FOIA disclosure is
information on the ATP recipient's business operation and trade secrets.
Criteria: The auditor should review the cooperative agreement which stipulates all required award
terms and conditions including the applicable administrative requirements and cost principles. In
addition, the following documents should be available:
Department of Commerce Requirements
 Department of Commerce (DOC) Financial Assistance Standard Terms and Conditions.
 Financial Assistance Award (Form CD-450) and any amendment to the Financial Assistance
Award (Form CD-451) which incorporates the approved budget, as described on Form NIST-
1262, page 3.
 General Terms and Conditions - Advanced Technology Program.
 Special Award Conditions - Advanced Technology Program.
 Advanced Technology Program Proposal Preparation Kit (the kit in effect at the time the
proposal was submitted). The Kit includes the 1) Advanced Technology Program (ATP) Public
Law 100-418 as amended by Public Law 102-245, and 2) Advanced Technology Program
(ATP) Rule, Title 15, CFR Part 295.
Administrative Requirements (As Applicable)
 15 CFR Part 14, "Uniform Administrative Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals and Other Nonprofit Organizations and Commercial
Organizations," (DOC's implementation of OMB Circular A-110).
Cost Principles (As Applicable)

 Federal Acquisition Regulations (FAR) System, Part 31, "Contract Cost Principles and
Procedures."
 Office of Management and Budget (OMB), Circular A-21, "Cost Principles for Educational
Institutions."
 Office of Management and Budget (OMB), Circular A-122, "Cost Principles for Nonprofit
Organizations."
 45 CFR Part 74, Appendix E, "Principles for Determining Costs Applicable to Research and
Development Under Grants and Contracts with Hospitals."
Chapter 2. Reporting Requirements
Report Package: The report package should include the following:
 A Schedule of Fund Sources and Project Costs including disclosure notes prepared by the ATP
recipient. The schedule should include the most recently approved project budget. The budget
information is found on Form NIST-1262, page 3. Chapter 3 of these guidelines provides further
details on the preparation of the schedule. Appendix A provides an illustrative example.
 An opinion on the Schedule of Fund Sources and Project Costs of the ATP award. Chapter 4 of
these guidelines includes a discussion of the cost principles governing the project costs. The
auditor's opinion should be issued in accordance with the AICPA's Codification of Statement of
Auditing Standards, Section 623, Paragraph 22, Special Purpose Financial Presentation to
Comply with Contractual Agreement or Regulatory Provisions. Appendix B provides an
illustrative example.
 An opinion on management's assertions on the entity's compliance with specified requirements
applicable to the ATP program. The practitioner's opinion should be issued in accordance with
the AICPA's Statement on Standards for Attestation Engagements No. 3, Compliance
Attestation, as amended by SSAE No. 9, Amendments to Statement on Standards for Attestation
Engagements Nos. 1, 2, and 3. The management assertions are found in Chapter 5 of these
guidelines. Appendix C provides an illustrative example which includes management's
assertions as part of the first paragraph of the report. It is also acceptable to refer to a separate
report which includes management's assertions. This separate management report MUST
accompany the audit report package.
 A written communication of any reportable conditions or material weaknesses which were noted
in the audit of the Schedule of Fund Sources and Project Costs or during the compliance
attestation engagement that could adversely affect the entity's ability to report financial data or
comply with the specified compliance requirements. AICPA Statement of Auditing Standards
(SAS) No. 60, Communication of Internal Control Structure Related Matters Noted in an Audit,
requires these internal control deficiencies be communicated to management. These guidelines
require the communication be in writing. A report on the Internal Controls prepared in
accordance with Government Auditing Standards is not required for financial-related audits.
 A Schedule of Findings and Questioned Costs when applicable. This schedule will include all
material noncompliance with provisions of laws, regulations or the cooperative agreement. It
will also include all known questioned costs which are greater than $10,000 identified through
the audit of the Schedule of Fund Sources and Project Costs or in the examination of the
management assertions. Whenever possible, identified findings should be quantified. The
reported noncompliance and questioned costs should be developed with information necessary
to facilitate the audit resolution process (i.e., the size of the universe and corresponding dollar
amount, size and dollar amount of the sample, and number and corresponding dollar amount of
the instances of noncompliance). Because independent auditors do not disallow costs,
questioned costs are identified for possible disallowance by the Department of Commerce.
 A Corrective Action Plan when applicable. Management should describe the corrective action
taken or planned in response to the findings and questioned costs identified by the auditor. The
plan should also include the status of corrective actions taken on prior findings resulting from
other independent audits including audits performed by the Office of Inspector General or
Defense Contract Audit Agency.

Submission of Reports: The report package should be submitted within 90 days of the end of the
reporting period. The ATP recipient should submit with the report package the company's most recent
audited or reviewed financial statements. Two copies should be submitted to the Department of
Commerce. One copy should be submitted to the NIST Grants Officer at the following address:
National Institute of Standards & Technology
Grants Office - Advanced Technology Program
Cooperative Agreement No. ______________
100 Bureau Drive, Stop 3580
Building 411, Room 143
Gaithersburg, Maryland 20899-3580
The other copy should be forwarded to the Office of Inspector General at the following address:
U.S. Department of Commerce
Office of Inspector General
ATTN: ATP Program-Specific Audit Report Coordinator
401 West Peachtree Street, NW, Suite 2742
Atlanta, Georgia 30308
In the accompanying transmittal letter, please provide the name and phone number of the company's
designated contact person in the event of questions about the submitted reports.
Chapter 3. The Schedule of Fund Sources and Project Costs
The Schedule of Fund Sources and Project Costs as presented in Appendix A will be prepared by the
ATP recipient from the company's accounting records. The Schedule should report the latest approved
budget, for the period being audited, as identified on Form NIST-1262, page 3, and the actual fund
sources and project costs incurred for the reporting period. Project costs include costs allowable under
the applicable cost principles subject to all limitations and exclusions set forth in the award including the
award's special and general terms and conditions, and DOC's financial assistance standard terms and
conditions. In addition, the recipient should review the guidance included in ATP's Proposal Preparation
Kit for the allowability or valuation of a specific cost element. If the aforementioned documents are
silent on the accounting for a specific item of cost, then generally accepted accounting principles should
be used.
The ATP recipient should prepare adequate disclosure notes to describe the basis of the schedule's
presentation and any significant accounting policies used in preparing the schedule. In addition, the
notes should include a general description of the company receiving the ATP award, a general project
description, basic award terms such as the length of the award, the amount of federal funding, and the
recipient's required cost-share. When appropriate, disclosure notes should also include related party
transactions, subsequent events, and material questioned costs.
Chapter 4. The Auditor's Opinion on the Schedule of Fund Sources and Project Costs
Overview: The Schedule of Fund Sources and Project Costs is the ATP financial statement. This
program financial statement should be audited under generally accepted auditing standards incorporated
into Government Auditing Standards. The opinion on the Schedule of Fund Sources and Project Costs
should be prepared in accordance with the AICPA's Codification of Statement of Auditing Standards,
Section 623, Paragraph 22, Special-Purpose Financial Presentations to Comply with Contractual
Agreement or Regulatory Provisions.
The Schedule of Fund Sources and Project Costs is prepared in conformance with the terms of the award
and consistent with the cost principles which govern the expenditures of funds.

This presentation of project income and expenditures is referred to as an other comprehensive basis of
accounting. If material questioned costs are found while the auditor is forming an opinion of the ATP
financial statement or during the attestation engagement, the Schedule of Fund Sources and Project
Costs should remain unchanged and include the total project costs incurred, including the material
questioned costs. The costs questioned should be disclosed in the accompanying notes to the ATP
financial statement. With adequate note disclosure, the auditor can issue an unqualified opinion with an
explanatory paragraph following the opinion, as appropriate.
Cost Principles: There are federal cost principles for each type of recipient receiving federal assistance.
The cost principles applicable to the recipient are stated in the award document. Allowability of costs is
determined as follows:
For-profit
organizations -
Federal Acquisition Regulations
(FAR) Part 31, "Contract Cost
Principles and Procedures"
Non-profit
organizations -
OMB Circular A-122, "Cost
Principles for Nonprofit
Organizations"
Educational
organizations -
OMB Circular A-21, "Cost
Principles for Educational
Organizations"
Hospitals -
45 CFR Part 74, Appendix E,
"Principles for Determining
Costs Applicable to Research
and Development Under Grants
and Contracts with Hospitals"
ATP was created as a cost reimbursement research and development vehicle. NIST built the cost
reimbursement theory into the ATP regulation and cooperative agreements by requiring compliance with
applicable federal administrative requirements and cost principles. Reimbursement claims to NIST using
a basis other than cost (e.g. GSA schedule, commercial price, etc.) are not allowable under the terms of
ATP cooperative agreements. Single company recipients may only use actual costs incurred during the
award period as the basis for any claims.
Cost Limitations: The following costs are not allowable under the ATP program regardless of whether
they are allowable under the FAR or OMB cost principles:
 Profit, management fees, interest on borrowed funds, and facilities capital cost of money.
 Bid and Proposal costs, tuition costs, marketing surveys, or commercialization studies and
general business planning unless they are incorporated into a federally approved indirect cost
rate. However, a university participating in an ATP award as a subcontractor/subrecipient may
include tuition or other forms of compensation in lieu of wages paid to university students
working on ATP projects as provided in OMB Circular A-21, Section J.41.
 Direct charges for the construction of new buildings or extensive renovations of existing
buildings.
 Subcontract costs, if the subcontract is to another part of the same company or to another
company with identical or nearly identical ownership.
Refer to the ATP Proposal Preparation Kit for further details regarding the unallowable costs cited
above.
The award terms and conditions stipulate prior approval requirements. In addition to the prior approval
requirements specified in 15 CFR Part 14, the following are allowable ONLY IF prior approval is
obtained from the NIST Grants Officer:

 Budget transfers among direct cost categories exceeding 10 percent of the total annual budget.
 Revisions to ownership and/or dissolution when a company is acquired by a foreign company.
 Changes in use of human and animal subjects.
 Construction costs of experimental research and development facilities provided that the
equipment or facilities are essential for carrying out the proposed scientific and technical project
and are approved by the NIST Grants Officer.
Direct Costs vs. Indirect Costs: Single company ATP recipients are reimbursed for allowable direct
costs only. Indirect costs for single companies are unallowable for reimbursement with Federal funds
and must be absorbed by the single companies. If indirect costs are not part of the cost-share
computation, the indirect costs are not required to be audited. Note, beginning with proposals submitted
on or after December 1997, large company recipients are required to cost-share at least 60 percent of the
yearly total project costs (direct and indirect costs). Indirect costs incurred by a large company and
allocable to the ATP award may be used to meet the company's cost-sharing requirement. If a large
company recipient includes indirect cost as part of their cost-share, the indirect costs are required to be
audited.
Small and medium size single companies' cost-sharing of any direct costs, and large single company
cost-sharing of direct and indirect costs are defined based on the company's proposal and approved
budget. The cost-sharing amount is made part of the award and must 1) meet the criteria stipulated in the
administrative requirements of 15 CFR Part 14, 2) be allowable under the applicable federal cost
principles, and 3) be subject to audit.
Costs claimed as indirect costs are subject to all the same limitations and prior approval requirements as
direct costs. In order to be reimbursed for indirect costs, a large company claiming indirect costs must
have an indirect cost rate or proposal approved by its federal cognizant agency,. The indirect cost rate
proposals provide a basis for allocating indirect costs to federal programs. They should be submitted by
the company to its cognizant federal agency within 90 days of receiving an ATP award.
Indirect costs must be calculated in accordance with an approved indirect cost proposal or a negotiated
indirect cost rate. Indirect cost rates are normally negotiated based on the entities' fiscal year. Regardless
of any approved indirect cost rate applicable to the award, the maximum dollar amount of allocable
indirect costs will not exceed the line item for indirect costs contained in the approved budget.
Audit Objectives: Determine whether the ATP award funds (federal and committed non-federal award
funds) were expended only for allowable activities in conformance with provisions of the applicable cost
principles, limitations or exclusions set forth in the cooperative agreement award, applicable terms and
conditions incorporated in the award, (i.e., Special Award Conditions, ATP General Terms and
Conditions and DOC Financial Assistance Standard Terms and Conditions).
Suggested Audit Procedures: These procedures are provided to assist the auditors in planning and
performing tests of the ATP award. Auditor judgment is necessary to determine whether the suggested
audit procedures are sufficient to achieve the stated audit objective. The following are the suggested
audit procedures for determining the allowability of costs in accordance with the cost principles:
 Obtain the latest approved budget (Form NIST-1262, page 3) for the project period under audit.
 Test that the costs claimed are within the approved budget.
 Test that the costs are actual costs incurred for the ATP award in accordance with the applicable
cost principles and not budgeted or projected amounts.
 Test that the cost conforms to any limitations or exclusions set forth in the cooperative
agreement award, applicable terms and conditions incorporated in the award, i.e., Special Award
Conditions, ATP General Terms and Conditions and DOC Financial Assistance Standard Terms
and Conditions.
 Test that the cost conforms with the allocability provisions of applicable cost principles.

 Ascertain that the cost has been given consistent accounting treatment within and between
accounting periods. Consistency in accounting requires that costs incurred for the same purpose,
in like circumstances, be treated as either direct costs only or indirect costs only with respect to
final cost objectives.
 Test on a sample basis that the cost charged to ATP is a net cost, i.e., all applicable credits,
volume or cash discounts, refunds, rental income, trade-ins, scrap sales, etc., have been
subtracted.
 Examine on a sample basis the underlying documentation, (e.g., time and attendance payroll
records, time and effort records for employees charged to more than one activity, approved
purchase orders, vendor invoices, canceled checks, etc.) and determine that the cost is correctly
charged as to project, account, amount and period.
 For wages, salaries and fringe benefits, test on a sample basis that the employee's total
compensation is consistent with established company practices for that category of employee.
 Test, on a sample basis, that charges for fringe benefits including sick leave, vacation leave, life
and health insurance, and pension plans are supported by a plan and the allocations are based on
the benefits received by different classes of employees within the organization.
11. Test, on a sample basis, that depreciation is not being claimed on assets or a portion of the assets
purchased with federal funds.
Steps 12 through 14 are for companies providing indirect cost as a required cost-share.
12. Test the indirect cost pools allocable to the ATP award to ascertain that the pools include only
allowable costs in accordance with applicable cost principles.
13. When DOC is the cognizant agency, test that the methodology used in allocating costs to ascertain if
it produces an equitable distribution of costs.
14. If the company has a negotiated indirect cost rate, select a sample of claims for reimbursement and
verify that the rates used are in accordance with the rate agreement, that rates were applied to the
appropriate bases, and that amounts claimed were the product of applying the rate to the applicable base.
Chapter 5. The Attestation Engagement
Overview: The practitioner is required to obtain written assertions from management as part of the
compliance attestation engagement performed in accordance with the AICPA's Statement on Standards
for Attestation Engagement (SSAE) No. 3, Compliance Attestation, as amended by SSAE No. 9,
Amendments to Statement on Standards for Attestation Engagements Nos. 1, 2, and 3. The written
assertion may be provided to the practitioner in a representation letter or may be presented in a separate
report that will accompany the practitioner's report. When a separate management report does not
accompany the practitioner's report, the first paragraph of the report should also contain a list of
management's assertions.
In addition to the five specific assertions that follow, management's written representations should
include the general matters required by paragraph 67 of SSAE No. 3, as amended. Management's
representations are an integral part of the engagement. Materiality relates to each specific management
assertion.
Management Assertions, Compliance Requirements and Suggested Examination Procedures:
1. Matching or Cost-sharing
Management Assertion. The cost-share established in the budget of the ATP award has been met. The
funds claimed as cost-share are not from a subcontractor or other federal sources and were not used as
matching or cost-sharing funds on other federally supported activities. The funds claimed as cost-share

meet the definition provided in 15 CFR Part 14 Section 23 and conform to the limitations in 15 CFR
Part 295.2(l).
Compliance Requirement - The ATP statute and implementing regulations require that large companies
receiving an award as a single company must cost-share at least 60 percent of the yearly total project
costs (direct and indirect costs). Section 295.2(l) of the ATP implementing regulations has defined the
term "matching funds or cost-sharing" to mean that portion of project costs not borne by the federal
government. Sources of revenue to satisfy the required cost-share include cash and in-kind
contributions. In-kind contributions shall be valued in accordance with 15 CFR Part 14 Section 23. ATP
restricts the total value of in-kind contributions that can be used to satisfy the cost-share by requiring
that such contributions not exceed 30 percent of the non-federal share of total project costs.
Subcontractors may not contribute towards the cost-share requirement. An ATP recipient cannot use
funds received from other federal programs to meet the required cost-share of the ATP award. .
Suggested Examination Procedures
a. Ascertain the cost-share provided by the ATP recipient. Determine whether the recipient met
the required cost-share specified by their approved budget.
b. Ascertain that the cost-share provided did not come from a subcontractor to the project or
from other federal sources.
c. Inquire of management whether the costs charged to the ATP project have been used to meet
cost-sharing or matching requirements of other federally supported activities.
d. If in-kind contributions are part of the cost-share, trace these contributions to the company's
accounting and summary records to determine that the value of the in-kind contribution is in
accordance with 15 CFR Part 14 Section 23 and does not exceed the limitations imposed by 15
CFR Part 295.2(l).
2. Property Management
Management Assertion. Equipment acquired with the ATP funds has been accounted for in accordance
with federal property management standards found in 15 CFR Part 14 Sections 30-37.
Compliance Requirement - Title to equipment acquired using federal financial assistance vests with the
recipient. The recipient agrees to use the equipment for the authorized purpose of the project as long as
it is needed and will not encumber the asset. There are no requirements pertaining to equipment with a
cost of less than $5,000. NIST has disposition authority as described in 15 CFR Part 14 Section 34.
Equipment records shall be maintained, a physical inventory of equipment taken at least once every two
years and reconciled to the equipment records, an appropriate control system should be used to
safeguard equipment, and equipment shall be adequately maintained.
While title to property and equipment vests with the recipient, the recipient has no cost basis in the
assets purchased with government funds. The recipient's fixed asset system, therefore, must clearly
identify that federal funds are the source of funding for the assets. The company is neither entitled to a
depreciation deduction on their corporate tax return nor the R & D credit based on federal expenditures
under this program.

a. Ascertain that the recipient has a fixed asset system to identify equipment purchased,
including the source of funds for equipment, percentage of federal ownership, location, cost and
other pertinent information.
b. Ascertain that a physical inventory is conducted at least once every two years.
c. Inquire as to the disposal of ATP funded equipment during the award period. Ascertain
whether disposition instructions were requested from NIST and, if so, were they followed. If
disposition instructions were not requested, did the disposition of property meet the
requirements of 15 CFR Part 14, Section 34.
3. Procurement and Suspension and Debarment
Management Assertion. Federal procurement standards described in 15 CFR Part 14 Sections 40-48
have been incorporated into the purchasing policies and adhered to for ATP award expenditures.
Contracts and subawards have not been made to any organizations or its principals listed in the "List of
Parties Excluded From Federal Procurement or Nonprocurement Programs," issued by General Service
Administration.
Compliance Requirement - The purpose of federal procurement requirements is to provide to the
maximum extent practical open and free competition. Recipients will use their own written procurement
procedures provided these procedures conform to federal law and regulations identified in 15 CFR Part
14 Sections 40-48.
Recipients are prohibited from contracting with or making subawards under covered transactions to
parties that are suspended or debarred or whose principals are suspended or debarred.
Covered transactions include procurement contracts for goods or services equal to or in excess of
$100,000 and all nonprocurement transactions (e.g., subawards to subcontractors/ subrecipients).
Requirements for suspension and debarment are contained in 15 CFR Part 26.
a. Review the recipient's written procurement policies. Verify that the policies comply with
applicable federal requirements. If the previous program-specific audit did not disclosed any
problems with the recipient's procurement policies, then examine only changes to those policies
since the previous audit.
b. Test a representative sample of procurement transactions. Evaluate whether the contract files
maintain sufficient detail to document the significant history of the procurement, including the
rationale for method of procurement, selection of contract type, contractor selection or rejection,
and the basis of contract price.
c. Inquire about the rationale for any procurement with limited competition and ascertain if the
limitation was justified.
d. Review correspondence to determine that documentation for procurement transactions
exceeding $100,000 was submitted to the NIST Grants Officer for approval if any of the
following conditions exist: 1) the award was made by noncompetitive negotiation, 2) only a
single bid or offer was received, 3) the award was made to other than the apparent low bidder, or
4) a brand name product was specified.
e. Test a sample of procurement contracts and subawards and ascertain if they were awarded to
suspended or debarred parties included on GSA's List of Parties Excluded from Federal
Procurement or Nonprocurement Programs.

4. Federal Reporting
Management Assertion. The amounts in the quarterly financial status reports and the requests for
advance or reimbursement agree with the underlying accounting records and summary records.
Compliance Requirement - Quarterly financial status report (SF 269) and requests for advance or
reimbursement (SF 270) are required. The financial status report and claims for advance reimbursement
contain information that can be reconciled to the accounting records from which the Schedule of Fund
Sources and Project Costs was prepared. A report of federal cash transactions (SF 272) is required if
federal funds are provided under a cash advance.
a. Test that required reports are filed on a timely basis.
b. Obtain an understanding of the recipient's procedures for preparing and reviewing the
financial status reports and the request for advance or reimbursement.
c. Select a sample of financial status reports and requests for advance or reimbursement to
determine that the reports are prepared according to DOC instructions. For the sample, trace
significant data to supporting documentation (e.g., summary worksheets, ledgers, etc.) and
determine all material differences between financial reports and the company's accounting
records.
d. Review the company's system for monitoring payment requests from
subcontractors/subrecipients. Test controls which limit payments to reimbursement of actual
costs. .
e. Review significant adjustments made to the general ledger accounts or other accounting
records affecting the ATP award and evaluate for propriety. Ascertain whether amended federal
reports were submitted for these adjustments.
5. Subcontractors/Subrecipients
Management Assertion. The agreements entered into with subcontractors/subrecipients, as defined
below, require that the subcontractors/subrecipients adhere to federal laws and regulations as specified
by the ATP award and sanctions are specified for the subcontractor's/subrecipient's noncompliance.
Compliance Requirement - The ATP recipient is ultimately responsible to NIST for funds passed to a
subcontractor/subrecipient. For the purpose of these guidelines, a subcontractor/ subrecipient is defined
as an organization which receives a portion of the financial assistance from the ATP recipient and assists
the recipient in meeting the project's goals. This definition does not include the procurement of goods
and services.
The ATP recipient should include in each agreement with its subcontractors/subrecipient the
requirement for adherence to the federal laws and regulations as required by NIST's Advanced
Technology Program. Subcontractors/subrecipients are required to have an audit performed in
accordance with the ATP Program-Specific Audit Guidelines if the subcontractor/subrecipient has
received more than $300,000 under an ATP award.
a. Test the agreements to determine that the ATP recipient required adherence to federal laws,
regulations and provisions of the cooperative agreement.

b . Ascertain whether the ATP recipient received the subcontractor's/subrecipient's audit reports
and the ATP recipient required the subcontractor/subrecipient to take timely corrective actions
on deficiencies identified in the audits.
c. When audit reports are not required from subcontractors/subrecipients, review the ATP
recipient's monitoring procedures to ascertain if the subcontractor/ subrecipient used federal
funds for authorized purposes and what action was taken in response to findings.
d. Test the agreements to determine that there are sanctions in place for noncompliance with
laws and regulations as specified by the ATP award and if noncompliance was found that the
sanctions were enforced.
Appendix A
Schedule of Fund Sources
and Project Costs
for NIST's Cooperative Agreement
70NANB#H####
CFDA 11.612
For the Period of xx/xx/xx - xx/xx/xx
Approved
Budget
Actual Receipts &
Project Costs
Fund Sources
ATP Award Funds
Recipient's Contribution
Program Income
Other
Total Fund Sources
Direct Project Costs
Direct Costs
Project Salaries
Technical
Administrative
Fringe Benefits
Technical
Administrative
Travel
Equipment
Materials/Supplies
Subcontracts
Other
Total Direct Costs
Total Indirect Costs(1)
.
Total Project Costs
1. Include indirect costs if indirect costs are claimed as part of a required cost-share.

Appendix B
Independent Auditor's Report on
The Schedule of Fund Sources and Project Costs
for NIST ATP Cooperative Agreement Number 70NANB#H####
For the Period of xx/xx/xx to xx/xx/xx
Independent Auditor's Report
[Addressee]
We have audited the accompanying Schedule of Fund Sources and Project Costs of [ single company ]
as of [date of this report]. This Schedule of Fund Sources and Project Costs is the responsibility of [
single company's] management. Our responsibility is to express an opinion on the Schedule of Fund
Sources and Project Costs based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government
Auditing Standards issued by the Comptroller General of the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the Schedule of Fund
Sources and Project Costs are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the Schedule of Fund Sources and Project
Costs. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Schedule of Fund Sources and Project
Costs. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Schedule of Fund Sources and Project Costs was prepared for the purpose of
complying with the award requirements of the ATP cooperative agreement number 70NANB#H####
entered into by [single company] and the U.S. Department of Commerce as described in Note X. This
Schedule was prepared in conformance with the award requirements which is a comprehensive basis of
accounting other than generally accepted accounting principles.
In our opinion, the Schedule of Fund Sources and Project Costs referred to above presents fairly, in all
material respects,(2)
the source of funds and project costs of [single company ] for the period [year end
(date)/period from (date) to (date)] in conformity with the basis of accounting described in Note X.
This report is intended solely for the information and use of the audit committee, management and the
U.S. Department of Commerce and should not be used for any other purpose.
[Signature]
[Date]
Appendix C
Opinion on Management's Assertions on Compliance
with Specified Requirements Applicable to the
NIST Advanced Technology Program
Cooperative Agreement Number 70NANB#H####
Independent Accountant's Report
[Addressee]
We have examined management's assertions, that [single company] complied with the following
specified requirements, relative to the Company's Schedule of Fund Sources & Project Costs for the
NIST ATP Cooperative Agreement No. 70NANB#H#### for the period from [date] to [date] (list

compliance requirements as shown below or attach management assertions in accompanying
management report).
 The cost-share established by the budget in the ATP award has been met. The funds claimed as
cost-share are not from a subcontractor or other federal sources and were not used as matching
or cost-sharing funds on other federally supported activities. The funds claimed as cost-share
meet the definition provided in 15 CFR Part 14, Section 23 and conform to the limitations in 15
CFR Part 295.2(l).
 Equipment acquired with the ATP funds has been accounted for in accordance with federal
property management standards found in 15 CFR Part 14 Sections 30-37.
 Federal procurement standards described in 15 CFR Part 14 Sections 40-48 have been
incorporated into the purchasing policies and adhered to for ATP award expenditures. Contracts
and subawards have not been made to any organizations or its principals listed in the "List of
Parties Excluded From Federal Procurement or Nonprocurement Programs," issued by General
Service Administration.
 The amounts in the quarterly financial status reports and the requests for advance or
reimbursement agree with the underlying accounting records and summary records
 The agreements entered into with subcontractors/subrecipients, as defined below, require that
the subcontractors/subrecipients adhere to federal laws and regulations as specified by the ATP
award and sanctions are specified for the subcontractor's/subrecipient's noncompliance.
Management is responsible for [single company's] compliance with those requirements. Our
responsibility is to express an opinion on management's assertions about [single company's] compliance
based on our examination.
Our examination was conducted in accordance with Government Auditing Standards, issued by the
Comptroller General of the United States; attestation standards established by the American Institute of
Certified Public Accountants; and the NIST Program-Specific Audit Guidelines for Advanced
Technology Program (ATP) Cooperative Agreements with Single Companies, issued by the U.S.
Department of Commerce, Office of Inspector General, dated May 1999 and, accordingly, included
examining, on a test basis, evidence about [single company's] compliance with those requirements and
performing such other procedures as we considered necessary in the circumstances. We believe that our
examination provides a reasonable basis for our opinion. Our examination does not provide a legal
determination on [single company's] compliance with specified requirements.
In our opinion, management's assertions that [single company ] complied with the aforementioned
requirements relative to the [single company's] ATP Award Cooperative Agreement No.
70NANB#H#### during the [year ended (date)/period from(date) to (date)] are fairly stated, in all
material respects.(3)
This report is intended solely for the information of the audit committee, management, and the U.S.
Department of Commerce and is not intended to be and should not be used by anyone other than these
specified parties.
[Signature]
[Date]
____________________
1. Include indirect costs if indirect costs are claimed as part of a required cost-share.
2. The auditor should modify the standard report and issue a qualified, adverse or disclaimer of
opinion, as appropriate, in the following circumstances:

 The ATP recipient does not adjust the Schedule of Fund Sources and Project Cost or disclose
the material questioned costs in the accompanying notes.
 In forming an opinion on the Schedule of Fund Sources and Project Costs the extent of other
potentially unallowable costs in transactions not tested should be considered.
3. The practitioner should modify the standard report if any of the following conditions exist:
 There is a material noncompliance with specified requirements. (SSAE No.3, as amended, para.
58-65).
 There is a matter involving a material uncertainty (SSAE No. 3, as amended, paragraph 66).
 There is a restriction on the scope of the engagement (SSAE No. 2, as amended, paragraphs 55-
58).
 The practitioner decides to refer to the report of another practitioner as the basis, in part, for the
practitioner's report (SSAE No. 2, as amended, paragraphs 59 and 60).
Audit Guide For Audit Committees of Small Nonprofit Organizations
A publication of the Virginia Society of Certified Public Accountants (VSCPA).
Table of Contents
 Introduction
 Selecting the audit committee
 The task of the audit committee
 The audit program
 Internal controls
 Some reasons for a good system of
internal control
 The proper authorization of activities
and expenditures
 Determination of the physical existence
of assets
 Ascertaining that returns and reports
are filed in a timely fashion
 Conclusion
 Appendix
Introduction | Top
There is almost no literature to guide the audit committee of the small nonprofit organization (NPO) in
the performance of its function. Articles and other publications on the audit of NPOs are written for the
practicing accountant in terms the lay person would have difficulty understanding.
This guide is intended to assist the audit committees of small NPOs to perform limited review of their
organizations' financial statements. The audit committee cannot replace the CPA in the audit of an NPO,
and perhaps the material in this guide will convey the importance of securing professional assistance.
Nevertheless, for every museum, symphony foundation or family service organization that has adequate
funds to retain the services of a CPA, there are scores of small churches, service clubs, literary groups
and similar organizations that lack the funds for an outside audit.
This guide should help an NPO board of directors control financial activities until they reach the stage
when a professional audit is possible. It will also emphasize the importance of internal controls in
safeguarding the assets of the NPO.
Selecting the audit committee | Top
The audit committee can play a critical role in maintaining the integrity of the NPO's financial reporting.
Volunteers should be selected from the board or general membership with the following qualities needed
for serving on this committee:

 a familiarity with how organization activities are reflected in the financial statements;
 some understanding of the auditing process; or
 lacking the above, at least a natural curiosity and an inquiring mind.
Consideration should be given to individuals with experience in business such as bankers, internal
auditors, retired CPAs, corporate officers, etc.
The task of the audit committee | Top
You have been appointed to the audit committee of Goodworks, Inc. You accept the assignment with
some trepidation, as your experience with business matters has been limited to balancing your own
checkbook.
Goodworks receives contributions of approximately $50,000 per year, and it uses these funds to assist
runaway teen-agers. It employs one part-time social worker. The board of directors considered engaging
a CPA to audit its records but decided that the cost of an audit would not be justified.
The above scenario is probably replicated hundreds of times each year by literary groups, churches,
historical societies and other NPOs. The following material won't tell you how to eliminate the need for
an audit by a CPA, and it may even make the need for such an audit more obvious.
The audit committee should be concerned with the following things, at a minimum:
 the adequacy of internal control (a system in which the operating or recording function can be
broken down into elements that are performed by different people, each checking the work of
the others)
 the accuracy of the records and the reports to the governing body (usually the board of directors)
 the proper authorization of activities and expenditures
 the determination of the physical existence of assets
 a review of the tax-exempt status and identification of any activities that may endanger it
 ascertaining that payroll taxes, licenses, sales taxes, other taxes and corporate reports are
properly filed in a timely manner.
In developing the audit program, the adequacy of the internal accounting controls is an influencing
factor. For example, if all disbursements in a small NPO are authorized separately by the board,
recorded in the minutes by the secretary, supported with invoices approved by the president, and paid by
checks signed by the treasurer and one other officer, the number of these transactions to be reviewed can
be minimized.
However, the committee would be required to satisfy itself that the internal control procedures outlined
above actually were being followed.
When an NPO does not have a good system of internal control, it is extremely difficult to determine that
all transactions have been properly recorded. Under these circumstances, substantive tests should be
performed. Executives of NPOs have been known to inflate their income by failing to record all
liabilities. Checking cash disbursements in the months following the end of the period might uncover
this manipulation.
Confirmation of balances with creditors also would identify unrecorded liabilities. Tests of bank
reconciliations, reviews of minutes, comparisons of current and previous financial reports and of the
period's transactions with the budget are examples of substantive procedures that can prove evidence of
the completeness of financial statement account balances.
The audit program | Top

The procedure followed by the audit committee (the audit program) will vary with the type of NPO, its
volume of income and the complexity of its operations.
The committee should develop a written plan for each account balance or class of transaction selected
for examination.The plan should indicate the relationship to the financial statement assertions and audit
objectives. An example of this would be the examination by a committee of a museum store that
maintains an inventory of merchandise. The committee desires to gather evidence as to the existence of
the inventory listed as an asset on the balance sheet.
The following is an example of how audit objectives would be developed.
Account: Museum shop inventory
Financial statement assertion Audit objective
existence or occurrence inventories included in the balance sheet
physically exist
completeness inventory quantities include all products,
materials, and supplies on hand
inventory quantities include all products,
materials and supplies owned by the client that
are in transit or stored at outside locations
inventory listings are accurately compiled in the
inventory accounts
rights and obligations The entity has legal title or similar rights of
ownership to the inventory
valuation or allocation inventories are properly stated at cost (except
when market is lower)
presentation & disclosure inventories are properly classified in the balance
sheet as current assets
Internal controls | Top
The adequacy of internal controls should be of primary concern to the audit committee. Lack or
inadequacy of internal controls can make the task of even the CPA auditor extremely difficult and, in
some cases, almost impossible. Volunteers often are so dedicated to the mission of the NPO that they
feel that running the organization in a businesslike fashion may not be compatible with this mission.
Regarding the hypothetical Goodworks, Inc., we were told that the organization employed one part-time
social worker. Imagine this individual collecting the funds, disbursing the funds, recording the financial
transactions, signing the checks, recording the minutes of the board meetings and preparing financial
reports.
This would be an example of a complete lack of internal control. To correct this, each one of these
functions really should be performed by a different volunteer.
Common sense must be applied in considering internal controls as well as the other areas being
reviewed by the audit committee.

If Goodworks, Inc., received all of its funds from one source, internal control of receipts would be a
simple matter. A review of receipts would involve verification with the sole source of these funds. If the
only expenses were rent and the social worker's salary, internal control and a review of these items
would not present any difficulty. But if funds were received from hundreds of donors, then internal
control of receipts becomes critical. Whatever the situation, internal control must be examined and
improved if found lacking.
Some reasons for a good system of internal control | Top
 to prevent loss through theft l to prevent an "honest" employee from making a mistake that can
ruin his or her life
 responsibility of the board to safeguard the assets of the NPO
 to assure that all transactions are properly authorized and recorded (See appendix for examples
of internal control for cash receipts and cash disbursements.
The proper authorization of activities and expenditures | Top
The budget and the board of directors' minutes are the usual source of verification of NPOs' activities in
a broad sense. Additionally, the corporate charter and bylaws should be reviewed to determine that all
activities comply and that the designated individuals are performing their proper functions. A review or
test of specific transactions should be included in the audit program;
Determination of the physical existence of assets | Top
Verification of bank balances, an actual count of securities owned and a count of merchandise are some
of these procedures. An examination of deeds and tax assessments is another procedure applicable when
real property is owned by an NPO. Securing appraisals of art owned might be appropriate in the case of
a museum or art organization.
Ascertaining that returns and reports are filed in a timely fashion | Top
An NPO has the same obligation to file tax returns and corporate reports as a for-profit organization.
Failure to comply with these requirements will expose the NPO to possible fines or penalties. At its
planning meeting the audit committee should prepare a list of these taxes and reports. This might include
the following:
 payroll taxes if wages are paid
 sales taxes and licenses
 Form 990, Return of Organization Exempt From Income Tax, if gross receipts each year are
normally more than $25,000
 annual corporate report to be filed with the state.
Conclusion | Top
The preceding material is only a limited discussion of the complex requirements to perform an audit of
an NPO. For example, insurance and bonding should be reviewed by a professional in the field.
But it is hoped that this guide will aid the audit committee to perform its review of the organization's
financial statements and operations in a relevant manner. The committee should satisfy itself that
income and expenditures are being classified in a consistent manner; otherwise comparisons of financial
reports over the years will have limited significance.
Appendix | Top
Some suggested controls for cash disbursements:

 Checks should be prenumbered, used in sequence with adequate controls over supplies of blank
checks.
 Checks should be prepared by persons other than those who approve invoices.
 Checks should be prepared from original vendor invoices with attached copies of purchase
orders, invoices and receiving reports and presented for signature with these attached.
 Checks should be entered in the disbursement journal exactly as they have been prepared.
 The governing board should authorize all check signers.
 Signing of blank checks should not be permitted.
 An officer or executive director should receive the unopened bank statement before turning it
over to a person, other than one who handles the receipt and disbursement of cash, for
reconciliation. This officer should review the bank reconciliation, then date and initial it.
Some suggested controls for cash receipts:
 Incoming mail should be opened and listed by persons other than those with access to cash
receipts journals and accounts receivable records.
 A person with no access to cash should compare cash receipts records and authenticate deposit
slips with mail listing.
 Checks should be stamped "For Deposit Only" by the person opening the mail.
 Prenumbered receipts should be given for contributions, gifts, etc.
 Cash receipts should be entered in journals by persons other than those opening mail and listing
receipts.
 Receipts of checks and cash should be deposited each day intact.
 Individuals handling cash should not make entries to the general ledger or subsidiary ledgers.
 The NPO board should authorize bank accounts and the signers of checks annually.
 Individuals handling cash should be bonded.
Audit Report Writing Guide
Essential Communication Books for Auditors
Search the AuditNet site
From the External Audit Directorate of the Audit and Review Branch, Canadian PSC

This guide establishes some guidelines for the design, style and content of the reports published by the
External Audit Directorate of the Audit and Review Branch, PSC, in order to make them useful and
easy to read.
Table of Contents
Introduction
Audit Report Users
Audit Purposes
Communication Channels
Readership
Motivation
Outline
Design
Background
Visual Appeal
Reading Efficiency
Design Techniques
Format Specifications
Summary
Writing Style
Definition
Terminology
Sentence Length
Passive Voice
Intensifiers
Bullets
Summary
Report Content
Outline
Structure
Model
Level of Detail
Commentary
Wrap-up and Conclusion
Wrap-up
Conclusion
Bibliography
Appendices
A - Quotations and Bibliography - A Practical Guide
B - Elimination of Stereotypes
Introduction
This guide establishes some guidelines for the design, style and content of the reports published by the
External Audit Directorate of the Audit and Review Branch, PSC, in order to make them useful and easy
to read.

Audit Report Users
Audit reports must meet the varying information needs of users: the clients, the auditee and their
representatives. The clients are: the President of the Public Service Commission and the Secretary of the
Treasury Board. The auditee is the Deputy Head of the department being audited.
The representatives are: managers and specialists responsible for personnel functions in the client
organizations and departments.
Audit Purposes
The primary purpose of a personnel audit is to inform clients whether the department adheres to the
conditions for exercising the authorities delegated under the Financial Administration Act, the Public
Service Employment Act and personnel policies and procedures flowing from those acts.
Personnel audits also identify for clients the need to create or change policies and procedures, advise
departmental representatives on better ways to administer the personnel functions and recognize and
reinforce activities that correct shortfalls, exceed client standards and suggest and recommend corrective
actions when personnel functions do not meet clients' standards.
In addition, audits have the ultimate goal of improving personnel management in the Public Service.
Communication Channels
Audit teams use a number of channels to influence the quality of personnel management: informal
suggestions to client representatives during the planning phase and to departmental staff during on-site
reviews; formal briefings and discussions with responsible officers on the findings; briefing notes and
operational unit reports to managers and specialists; a formal report to the clients, the auditee and their
officers; a letter to the deputy head, summarizing the main topics of the report. This guide covers the
formal audit report only.
Readership
To be effective, administrative documents should focus on the needs of a defined readership. In the case
of audit reports, there are a variety of readers with quite different needs:
 executives with a general knowledge of personnel systems and terminology who are mainly
interested in results in their areas of accountability
 the auditee's senior personnel officer who must respond to audit recommendations
 specialists concerned mostly with findings in their area of expertise. Audit report writers must
therefore take into account the needs of these various readers and the information already
provided through briefings and operational unit reports.
Note: Audit reports are not written for professional auditors.
Motivation
With the exception of consummate bureaucrats, most readers are going to read as little as possible. They
are desensitized to printed material due to the sheer volume that crosses their desks each day. There is
competition for their attention and time. In addition, there is evidence that the level of literacy is not all
it could be, even in university graduates. Recognizing these barriers is the first step in developing
effective audit reports.
This guide describes an approach that will encourage the target audience to read audit reports and take
action to improve personnel management and resource use in the Public Service.
Outline
To help make audit reports attention-getting, readable and credible, the following sections cover: report
design, writing style, report content (title page, table of contents, summary, introduction, findings,
appendices), wrap-up and bibliography.

Return to Table of Contents
Design
Background
In the Introduction, we mentioned the intense competition for reader attention and time. Report writers
can control three factors critical to gaining and keeping attention: design, writing style and content.
Design may be the key to attracting readers - particularly the reader who is not motivated. Once
attention is captured, writing style and content should be able to maintain this attention.
Effective design increases visual appeal and reading efficiency.
Visual Appeal
An audit report has visual appeal when it looks professional and easy to read. That means the reader
should develop positive feelings about the report at first glance.
The talent and effort that have obviously gone into the report's appearance send strong signals to readers.
It tells them the subject is important. It also tells them the readership is important enough to warrant a
quality product. There is a big difference between a memo and the annual report of the Commission.
Audit reports should be closer in appearance to the annual report.
Reading Efficiency
An audit report should not appear long, dull or tedious. The proposed design is interesting, featuring
plenty of white space and easy-on-the-eyes lettering. The design encourages the potential audience to
read.
Efficient reports use design techniques to make it easy to find a particular piece of information and
increase reading speed, comprehension and retention.
Design Techniques
The following techniques have been selected to enhance the visual appeal and reading efficiency of
audit reports:
 type size and style are easy to read
 line length is limited to 4.5 inches for eye travel that is not tiring
 blocks of text are limited to 8 lines or so to prevent skipping and to provide frequent rest points
 the amount of white space is not only more comforting to the eyes but also provides the reader
with room for notes
 the location of page numbers, headings and subheadings helps readers to search for specific
information; the standard format quickly becomes familiar and is easy to scan
 in addition to providing information, the header and footer lines "frame" the text
 complete topics are placed on one page wherever possible
 the text is laser-printed off desktop publishing software
 capital letters are not used for emphasis or to highlight key words and phrases because they slow
up the reader
 the text is unjustified with flush left and ragged right margins, to encourage smooth eye flow
 there are no broken words at the end of lines
 there are no broken sentences at the end of pages
 there are no single lines on the top or the bottom of a page.

Format Specifications
Format is the shape, size and arrangement of text on the page. For ease of use, the format described here
is available through the Directorate computer system.
This guide identifies the following elements of format:
Fonts: body: Times Roman 12.5pt (serif); recommendations and compliments: bold; headers and
footers: not bold - headers: Helvetica 14pt (sans serif) - footers: Helvetica 9pt (sans serif). "Styles" exist
for headers and footers.
Margins: top and bottom margins: 0.5" and 0.4"; left and right margins: 1.25" with the binding set at
0.25". This results in an inside margin of 1.5" and an outside margin of 1.0".
Spacing: single space between lines; 2 space ahead of bullets; double spacing between topics.
Tabs: Tabs are set at: 2.8", 3.0" and 3.2".
Printing: The Branch will produce a camera-ready copy of the audit report. The report will then be
printed back-to-back, and bound.
Summary - Design
This section describes design techniques that will help audit teams produce efficient audit reports. The
following two sections deal with writing style and content - the keys to effective reports.
"Have something to say, and say it as clearly as you can. That is the only secret of style." (Matthew
Arnold)
"To me, style is the outside of content, and content is the inside of style, like the outside and the inside
of the human body: both go together, they can't be separated." (Jean-Luc Godard)
"Too much of a good thing is worse than none at all." (English Proverb)
Writing Style
Definition
For audit report purposes, style is defined as the way content is written. Generally, style consists of tone,
vocabulary, syntax and grammar.
Good style presupposes a writer who knows the subject well, and also: who the readers will be, what is
important to the readers and what the readers need to do after reading the material.
Purpose
This guide is not intended to train auditors in the basics of style. That can be accomplished through
courses and on-the-job coaching. What this guide can do is provide auditors with a standard for editing
their own reports, sort of an audit guide to writing style.

Guidelines
The following guidelines are not presented in order of importance. For those readers interested in
pursuing the subject in greater depth, the bibliography lists a number of excellent references.
Terminology
Audit reports must transmit information with precision - precision that starts with consistent
terminology. When reviewing reports, look for inconsistencies such as the following examples of
interchangeable terms: personnel administration, human resources management and personnel
management; objective, purpose and goal; staffing and resourcing; personnel disciplines, functions,
activities, areas, aspects and practices.
Inconsistent terminology demonstrates an unprofessional approach in business writing. It may cause
readers to interrupt their reading rhythm to interpret the changed term and misunderstand the message.
The results are particularly noticeable in managers with only a general knowledge of personnel functions
and terminology.
Sentence Length
Another style element that can blur the precision and clarity of text is long sentences. Some
grammarians recommend a limit of 15 to 18 words in business writing. In editing reports, one should
look closely at sentences with more than 20 words. There may be room for improvement. The following
example from the second paragraph of a section on Sub-delegation of Staffing Authority demonstrates
the clarity of shorter sentences.
One sentence: "The roles, responsibilities and accountability mechanisms of managers and staffing
officers are clearly defined in the departmental training course on sub-delegation which was given to all
managers about to receive sub-delegated staffing authority." (33 words)
Two sentences: "All managers who were to receive sub-delegated authority attended the departmental
staffing course. The course defines the roles, responsibilities and accountability of managers and staffing
officers." (13 words in each)
Literary writers can use longer sentences without worrying about clarity. But they do not have to write
audit reports!
Passive Voice
No shortfall in style produces dull, tiresome reading faster than the passive voice. The short example
that follows demonstrates the difference between passive and active sentences.
Passive: "Based on the information available, no irregularity of operation was found."
Active: "The audit team found no evidence of irregularity in the available information."
Better Still: "The audit team found no irregularity."
When reviewing reports, look for a subject - verb - object (agent - action - object) sequence. If it is not
there, consider a rewrite.
Intensifiers
Intensifiers are words like: clearly, special, key, well, reasonable, significant and very. Their use should
be limited because they frequently lack precision, reflect personal values and fill space for no real
purpose.
Intensifiers raise questions such as "significant compared to what?" and "clearly according to whose
criteria?"

Bullets
Report writers can use bullets as punctuation in front of points to break up dense text and shorten
sentences, focus attention, save words and improve logic and flow.
The use of bullets is highly recommended when findings are lists of standards, samples, activities, facts
and results.
Example
Without Bullets: "The Department possesses control mechanisms such as a clearly identified
responsibility centre, consultative committees for target groups and an Affirmative Action Steering
Committee. These mechanisms which include action plans and reporting systems adequately ensure the
effectiveness of employment equity programs."
With bullets: "The Department has mechanisms to ensure effective employment equity programs,
including:
 an identified responsibility centre
 action plans and reporting systems
 consultative committees for target groups
 an Affirmative Action Steering Committee."
This guide takes every opportunity to demonstrate the use of bullets. The nature of audit reports makes
the technique particularly useful in enhancing clarity and readability.
Summary - Writing Style
Writing style has many other elements not included in this guide: tone, word economy, and rhythm are
just a few. However, the elements covered here have one thing in common. They can be evaluated
against readily observable criteria. Branch audit reports should be reviewed for the use of consistent
terminology, crisp sentences, the active voice, appropriate intensifiers and bullets.
Report Content
Outline
The sections on Design and Writing Style described ways audit reports can gain and hold attention and
promote efficient reading.
To a large degree, a report's content is responsible for its effectiveness. In addition to logic, two
elements enhance effectiveness, consistent structure and level of detail.
Structure
Personnel audit reports include the following sections: title page, table of contents, summary (including
the recommendations), introduction, findings and appendices.
Cover and Title Page
Audit reports use a standard cover, with a window showing: the title: "Staffing Audit" or "Personnel
Management Audit", the department's name and the report's date of issue (month and year). These items
are repeated at the bottom of each page. The title page also indicates the names of the audit team
members.

Table of Contents
The table lists the sections and sub-sections with page numbers as follows: summary and
recommendations, introduction, findings (by audit field) amd appendices (as required).
Summary
The summary gives a quick overview of the state of the department at the time of the audit in light of the
main issues covered by the report. It does not normally exceed three pages, including the
recommendations.
Where a basic personnel function is not included in the audit, a note of explanation should be included.
Sub-headings should be limited to paragraphs of approximately eight lines.
Recommendations should be listed under a lead statement such as: (example) "We recommend that the
Deputy Minister: amend...; establish...; implement..."
Recommendations should be stand-alone statements that can be read out of context and still make sense
- particularly to a non-personnel executive or manager. Example: "We recommend that the Deputy
Minister" put in place a mechanism for monitoring staffing activities and take appropriate corrective
action.
Introduction
Since readers will read the summary, the introduction should not repeat details. It should include the
following elements:
Context: This sub-section briefly describes conditions in the audit entity during the period under
review; for instance: the entity's role, size and organization especially with regard to human resource
management; significant pressures on personnel management during the period under review - events
such as the following should be noted: organizational changes - personnel disruptions - changes in roles
and programs; results of internal audits or follow-up to our previous audits, if applicable.
Purpose: This sub-section is a short description of what functions and special programs were audited
and the clients' authorities.
Scope: The scope lists the period under review, the issues covered in each function and program, the
locations visited and the on-site dates.
Methodology: This section briefly describes sampling, data collection techniques and the basis for
auditors' opinions. It also identifies any weaknesses in the methodology to allow the client and auditee to
make informed decisions as a result of the report.
Findings: Findings constitute the main part of an audit report. They result from the examination of each
audit issue in the context of established objectives and clients' expectations. The model illustrates how
the various elements of findings are to be presented.
Appendices: Appendices can be used when they are essential for understanding the report. They usually
include comprehensive statistics, quotes from publications, documents, etc. and references.
MODEL
Level of Detail
The depth of coverage for issues should normally reflect the significance of the findings.
Situations representing a high degree of risk or indicating shortcomings that are serious enough to justify
a recommendation should be treated extensively.

Specific initiatives that the auditors wish to mention as examples should be described in detail, while
issues where the department meets the expectations and there is nothing specific to mention should be
dealt with briefly.
Commentary
Where a recommendation and a compliment are made under the same issue, they should be in separate
paragraphs. Otherwise, they may confuse the reader and reduce the impact of one or the other.
Statistics need to be used consistently throughout the report. Sample size and error rate mean more when
they are given in context. The size of the population, the number of transactions and the period of time
provide that context.
Percentages should not be used when referring to small samples (less than one hundred).
Graphics should be used when they add to the understanding of the text.
Wrap-up and Conclusion
Wrap-up
This guide supports the External Audit Directorate approach to developing consistent audit reports. It
includes the following elements:
 a definition of report users
 report purposes
 a discussion on the readership
 a design that attracts readers and increases their reading efficiency
 a writing style with: consistent terminology, crisp sentences, the active voice, few intensifiers
and a point system using bullets as punctuation
 presenting essential content under standardized headings and sub-headings.
Conclusion
The Audit Report Writing Guide deals with the very basic aspects of report writing. It cannot replace the
skill, experience and initiative of audit teams. However, it does provide the basis for consistent and
professional reports that meet the needs of both clients and auditees. In addition, an effective audit report
will encourage managers to improve the use of human resources in the Public Service.
Bibliography
Audit Branch, PSC. The Audit Branch Manual.
Secretary of State. The Canadian Style, Dundern Press.

Office of the Auditor General. A Writer's Handbook.
Office of the Auditor General. An Approach to Comprehensive Audit.
Canadian Comprehensive Auditing Foundation. Comprehensive Auditing - Concepts, Components and
Characteristics.
Canadian Comprehensive Auditing Foundation. Conducting Operational Reviews: A Generic Approach.
Strunk, W. & White, E.B. The Elements of Style. The MacMillan Co.
Williams, Joseph M. Ten Lessons in Style and Grace. Scott, Foresman and Company.
Lanham, Richard A. Revising Business Prose, Charles Scribner's Sons.
Freelance Editors' Association of Canada. Editing Canadian English, Douglas McIntyre.
Jonassen, D.H. (Ed.). The Technology of Text - Volumes 1 & 2, Educational Technology Publications.
Duffy, T.M. and Waller, R. (eds.). Designing Usable Texts, Academic Press.
The Project Resource Group, Functional Writing is Writing that Works, PRG, 1992.
Note: The bibliography at the end of the French version lists a number of other valuable reference
books.
APPENDIX A - Quotations and Bibliography - A Practical Guide
Purpose
The purpose of this guide is to provide auditors with some useful information on how to present
quotations and bibliographical references in reports.
Quotations
A quotation is a fragment of text, or "a word or a passage reproduced from a book, a statement"
(Webster's New World Dictionary), that is included in a new text and identified by quotation marks.
The source of the quotation can be provided briefly, in parentheses, as in the previous paragraph, or
more completely, in a footnote.
Reference - Footnote
The five main elements of a footnote are:
1. Reference Number: an arabic numeral, placed immediately after the cited text, in superscript
2. Author's Name: first name and/or initial(s) and surname, followed by a comma
3. Document Title: written in full, and underlined or in bold
4. Facts of Publication: publisher, place and year of publication (in parentheses)
5. Text Location: specific location of the text source: usually the page, paragraph or section
number.

Bibliography
A bibliography is a list, usually in alphabetical order, of documents consulted or suggested for
consultation, or of sources that have influenced or helped the author. It is usually placed in a separate
section at the end of the document.
Basic Elements
A bibliographical reference contains four basic elements:
1. Author's Name: contrary to the reference footnote, the surname is written first, then the first
name or initial; if there is more than one author, the additional names are written in the regular
order, as in the second example below
2. Title: written in full, with no abbreviation; can be put in bold characters
3. Facts of Publication: publisher, place and year of publication, as in the footnote, but without
parentheses
4. Collation: length of the work, expressed as the number of pages or volumes.
EXAMPLE
Bibliography
Mornissey, George L., Effective Business and Technical Presentations, Addison-Wesley Publishing
Co., Reading, Massachussetts, 1968, 143 p.
Rosenblatt, Bernard S., Richard T. Cheatham, James T. Watt, Communication in Business, Prentice-
Hall Inc., Englewood Cliffs, N.J., 1977, 370 p.
When a document is published on behalf of a government, the country (province or state) and the
responsible entity are cited as author. It may also be useful to add some information such as the edition
number, the name of the legal depositary or the standard book number.
EXAMPLE
Bibliography
Canada. Secretary of State. Translation Bureau. Public Administration and Management
Vocabulary. Terminology Bulletin #194. Minister of Supply and Services of Canada 1990. 775 p. ISBN
0-660-55655-3. United Nations. Bibliographical Style Manual. New York: United Nations
Publications, 1963. 58 p. Dag Hammarskjold Library.

APPENDIX B - Elimination of Stereotypes
Guidelines
Guidelines concerning the representative depiction of minority groups and the elimination of sexual
stereotyping.
Reference: Corporate Management Manual (CMM), PSC, Chap. 4: Communications Management.
Background
In August 1992, the PSC officially approved guidelines to ensure the equitable portrayal of women, men
and minorities in communications.
This appendix concerns the application of these guidelines to our reports and other documents.
Observations
No problems were identified in audit reports regarding the equitable depiction of minority groups. In
tables as well as in text, we should continue to avoid the use of terms that may be considered offensive
or discriminatory, such as "Blacks", "handicapped", etc.
In French, the equitable depiction of women and men is a rather complex issue, mainly due to gender
differentiation that applies to nouns, pronouns, adjectives, etc. The main challenge is finding the proper
balance between the equitable representation of women and language clarity, conciseness and elegance.
(See the French version of this appendix for more details.)
In English, it is usually easy to avoid sexist grammatical forms. In many cases, using the plural or
passive form will be sufficient to avoid the difficulties of subjects (he, she) or possessives (his, her). The
guidelines focus mainly on eliminating certain language forms that have a sexist connotation, such as
"man-year, policewoman, Mr. and Mrs. Paul X..."
Following are a few basic rules and suggestions.
Basic Rules
 The guidelines must not be seen as a cumbersome and unnecessary constraint, but as a guide.
 Writing must remain clear and precise; with a little effort and attention, it is possible to create
non-sexist documents that are neither too wordy nor too heavy.
 When referring to men and women, the principles of equality apply.
Suggestions
(See CMM Guidelines, pages 23-26 for details.)
 Use gender-neutral occupation and position titles: "representative", "police officer" rather than
"spokesman", "policewoman".
 Avoid using the word "man" to refer to people in general ("the man in the street", "man-year")
or the masculine form (he, his, him) to represent both women and men.
 Treat persons of both sexes equally, by varying the position of references to males and
 females, by using equal forms of salutation in correspondence, and by avoiding unnecessary
distinctions between sexes.
Advice
Refer to this Appendix and to the Guidelines when you are about to start writing or reviewing a
report or other important document.

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