SEPTEMBER 2, 2008 

QUALITY CONTROL REVIEW REPORT

REPORT NO. IG-08-026 (ASSIGNMENT NO. A-08-015-00) 

OFFICE OF AUDITS

QUALITY CONTROL REVIEW OF 

PRICEWATERHOUSECOOPERS, LLP, OFFICE OF 

MANAGEMENT AND BUDGET CIRCULAR A-133 AUDIT 

OF THE UNIVERSITY OF ALABAMA IN HUNTSVILLE FOR 

THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 

OFFICE OF INSPECTOR GENERAL

National Aeronautics and 

Space Administration 

 
Acronyms 

AICPA American Institute of Certified Public Accountants 

FY Fiscal Year 

GAGAS Generally Accepted Government Auditing Standards 

OIG Office of Inspector General 

OMB Office of Management and Budget 

PwC PricewaterhouseCoopers, LLP 

SEC Securities and Exchange Commission 

UAH The University of Alabama in Huntsville 

REPORT NO. IG-08-026 
RESULTS

REPORT NO. IG-08-026 1 

National Aeronautics and 

Space Administration 

Office of Inspector General 

Washington, DC 20546-0001 

 September 2, 2008 

Mr. Michael W. Lammons, Partner 

PricewaterhouseCoopers, LLP 

Mr. Ray M. Pinner, Vice President for Finance and Administration 

The University of Alabama in Huntsville 

Mr. Robert C. Leonard, Controller 

The University of Alabama in Huntsville 

SUBJECT: Quality Control Review of PricewaterhouseCoopers, LLP, Office of 

Management and Budget Circular A-133 Audit of The University of 

Alabama in Huntsville for the Fiscal Year Ended September 30, 2006 

(Report No. IG-08-026; Assignment No. A-08-015-00) 

The audit firm PricewaterhouseCoopers, LLP (PwC), located in Birmingham, Alabama, 

performed a single audit of The University of Alabama in Huntsville (UAH) for the fiscal 

year ended September 30, 2006 (FY 2006). Office of Management and Budget (OMB) 

Circular No. A-133, “Audits of States, Local Governments, and Non-Profit 

Organizations,” requires these audits. 

Background. UAH is a public research university that offers 62 degree-granting 

programs, including 35 bachelor’s degree programs, 17 master’s degree programs, 

and 10 Ph.D. programs through five colleges: Administrative Science, Liberal Arts, 

Engineering, Nursing, and Science. UAH is an autonomous campus within The 

University of Alabama System. 

UAH received $94.3 million for externally funded projects during FY 2006. Sponsors 

of the research included Federal and State agencies, academic institutions, industry, and 

private foundations. Research is conducted within the individual colleges and throughout 

UAH’s 19 independent research centers, laboratories, and institutes. Major 

interdisciplinary research thrusts included optics, propulsion, space physics and 

astrophysics, earth system science, information technology, microgravity and materials, 

modeling and simulation, biotechnology, and systems engineering. 

Quality Control Review Objectives. As the cognizant audit agency for UAH, the 

NASA Office of Inspector General (OIG) performed a quality control review of the 

PwC audit of UAH for FY 2006. The objectives of our quality control review were to 

determine whether PwC had conducted the audit in accordance with the Government 
RESULTS

2 REPORT NO. IG-08-026 

Accountability Office’s “Government Auditing Standards, 2003 Revision” (often referred to 

as generally accepted government auditing standards, or GAGAS) and the auditing and 

reporting requirements of OMB Circular A-133 and its related Compliance Supplement 

(the Supplement). OMB issued the Supplement to assist auditors in meeting the 

requirements of OMB Circular A-133. See Enclosure 1 for details of the scope and 

methodology of our review, requirements for single audits, and the latest peer review of 

PwC. See Enclosure 2 for the results of the PwC audit of UAH for FY 2006. 

Review Results. PwC’s audit work substantially met GAGAS and the auditing and 

reporting requirements of OMB Circular A-133. However, we noted one exception 

related to the GAGAS reporting standards for financial audits in that PwC failed to 

include references required by GAGAS (Finding A). In addition, the Data Collection 

Form filed with the Federal Audit Clearinghouse was not consistent with the PwC’s 

audit report and Schedule of Findings and Questioned Costs (Finding B). 

Management Comments. In response to a draft of this report, PwC concurred with our 

findings and recommendations and described actions to be taken (see Enclosure 3 for the 

full text of management comments). We consider the comments responsive and have 

closed the recommendations. 

Finding A 

Failed to Include Required References. The single audit reporting package filed with 

the Federal Audit Clearinghouse did not include references required by GAGAS. The 

report failed to include a statement in the Independent Auditor’s Report that the audit was 

performed in accordance with GAGAS and a reference to a separate report on internal 

control and compliance and other matters as required under GAGAS. GAGAS, 

section 5.05, states, “Audit reports should state that the audit was performed in 

accordance with GAGAS.” GAGAS, section 5.08, further states that a description of the 

scope and the results of the auditor’s testing on internal control over financial reporting 

and compliance should be included in the audit report or a reference to a separate report 

should be provided. A reader of the Independent Auditor’s Report on the financial 

statements would be unable to conclude whether the audit work complied with GAGAS 

or whether PwC considered UAH’s internal control over financial reporting and tested 

compliance with certain provisions of laws, regulations, and other matters. 

Recommendation 1. We recommended that PwC ensure future audit reports 

resulting from engagements performed in accordance with GAGAS contain the 

required references and are filed with the Federal Audit Clearinghouse. 

Management’s Response. PwC concurred, stating that it had issued two 

versions of the audit report, one with GAGAS references as required and 

one without for the University. The version of the report that was without 

the GAGAS references was inadvertently filed with the Federal Audit 
RESULTS

REPORT NO. IG-08-026 3 

Clearinghouse. PwC stated that it would work with the University to file 

the correct report and ensure that future reports filed with the Federal 

Audit Clearinghouse contain the GAGAS references. 

Evaluation of Management’s Response. Management’s planned 

corrective action is responsive to the intent of our recommendation. We 

consider the recommendation closed. 

Finding B 

Classifications of Opinions and Findings Were Reported Incorrectly on the Data 

Collection Form. There were discrepancies in how four grants were reported in the Data 

Collection Form when compared to PwC’s report on major program compliance and 

internal control. The PwC audit report classified four grants as having an unqualified 

opinion on compliance with requirements applicable to each major program but were 

reported as having an adverse opinion on the Data Collection Form. All four of the 

grants were also referenced to the incorrect finding in the Schedule of Findings and 

Questioned Costs. These grants were referenced to a finding for research and 

development programs on the Data Collection Form. Also, because of the incorrect 

finding reference, the incorrect finding types were recorded on the Data Collection Form. 

Circular A-133, Section .320(b) requires the information included in the form to be 

“accurate and complete.” 

Recommendation 2. PwC should ensure that future Data Collection Forms filed 

with the Federal Audit Clearinghouse are consistent with the audit report. 

Management’s Response. PwC concurred, stating that the errors were 

inadvertent and that it will work with the University to file a corrected 

Data Collection Form with the Federal Audit Clearinghouse. PwC also 

stated that additional reviews would be made by both PwC and University 

personnel to ensure such inadvertent errors do not recur. 

Evaluation of Management’s Response. Management’s planned 

corrective action is responsive to the intent of our recommendation. We 

consider the recommendation closed. 
RESULTS

4 REPORT NO. IG-08-026 

We appreciate the courtesies extended to the staff during our review. For additional 

information on this report, please contact Mr. Mark Jenson, Financial Statement Audits 

Director, at 202-358-0629. See Enclosure 4 for the report distribution. The review team 

members are listed inside the back cover of this report. 

 signed 

Evelyn R. Klemstine 

Assistant Inspector General for Auditing 

4 Enclosures 
ENCLOSURE 1 

REPORT NO. IG-08-026 5 

QUALITY CONTROL

REVIEW PROCESS

Scope and Methodology 

We conducted a quality control review of the PwC audit of UAH for FY 2006 and of the 

resulting reporting package submitted to the Federal Audit Clearinghouse. We performed 

our review May 12–16, 2008, at UAH, Alabama. For FY 2006, UAH reported total 

Federal expenditures of $79,170,757; $58,650,643 is attributable to NASA. 

As the audit agency responsible for performing the review, we focused the review on six 

areas: 

• reporting, 

• auditor qualifications, 

• planning, 

• conduct of the audit work, 

• audit work relating to the Schedule of Expenditures of Federal Awards, and 

• supervision. 

In conducting our review, we assessed the audit documentation prepared by PwC. We 

also discussed the audit with PwC audit personnel. We emphasized the areas that are of 

major concern to the Federal Government, such as determining and auditing major 

program compliance and internal controls. 

Single Audit Requirements 

The Single Audit Act (the Act), Public Law 98-502, as amended, and OMB 

Circular A-133 are designed to improve the financial management of State and local 

governments and nonprofit organizations. The Act and OMB Circular A-133 establish 

uniform auditing and reporting requirements for all Federal award recipients who are 

required to obtain a single audit. OMB Circular A-133 establishes policies that guide 

implementation of the Act and provide an administrative foundation for uniform 

requirements of non-Federal entities administering Federal awards. OMB Circular A-133 

applies to all Federal departments and agencies that make awards to non-Federal entities. 

Entities that expend $500,000 or more of Federal awards in a fiscal year are subject to the 

Act and the audit requirements in OMB Circular A-133 and, therefore, must have an 

annual single or program-specific audit performed in accordance with GAGAS. 
ENCLOSURE 1 

6 REPORT NO. IG-08-026 

To meet the requirements of the Act and OMB Circular A-133, the auditee submits to the 

Federal Audit Clearinghouse a complete reporting package on each single audit. The 

submission includes the following: 

• a data collection form certified by the auditee and auditor that the audit was 

completed in accordance with the Circular; 

• financial statements and related opinion; 

• a Schedule of Expenditures of Federal Awards and related opinion; 

• a report on compliance and internal controls over financial reporting; 

• a report on internal control over compliance for major programs; 

• a report on compliance with requirements for major programs and related opinion; 

• a schedule of findings and questioned costs; 

• a summary schedule of prior audit findings, when appropriate; and 

• a corrective action plan, when appropriate. 

The Supplement assists auditors in identifying the compliance requirements that the 

Federal Government expects to be considered as part of the single audit. For each 

compliance requirement, the Supplement describes the related audit objectives for the 

auditor to consider in each audit conducted in compliance with OMB Circular A-133 as 

well as suggested audit procedures. The Supplement also describes the objectives of 

internal controls and characteristics that, when present and operating effectively, help 

ensure compliance with requirements. The following 14 compliance requirements 

identified in the Supplement may be material to a major program that is audited: 

1. Activities Allowed or Unallowed 

2. Allowable Costs/Cost Principles 

3. Cash Management 

4. Davis-Bacon Act 

5. Eligibility 

6. Equipment and Real Property Management 

7. Matching, Level of Effort, Earmarking 

8. Period of Availability of Federal Funds 

9. Procurement and Suspension and Debarment 

10. Program Income 

11. Real Property Acquisition and Relocation Assistance 

12. Reporting 

13. Subrecipient Monitoring 

14. Special Tests and Provisions 

The American Institute of Certified Public Accountants (AICPA) Audit Guide, 

“Government Auditing Standards and Circular A-133 Audits,” May 2003, provides 
ENCLOSURE 1 

REPORT NO. IG-08-026 7 

guidance on auditor responsibilities for conducting audits according to the Act and OMB 

Circular A-133. In general, the Audit Guide provides auditors with an understanding of 

the unique planning, performance, and reporting considerations for single audits 

performed in compliance with GAGAS. In addition, the Audit Guide uses summary 

tables and detailed discussions to provide the auditor with an understanding of the 

additional GAGAS general, fieldwork, and reporting requirements, including the 

additional standards relating to quality control systems, continuing professional 

education, workpapers, audit follow-up, and reporting. 

The Audit Guide emphasizes that, when planning an audit to meet the requirements of 

OMB Circular A-133, several factors should be considered in addition to those ordinarily 

associated with an audit of financial statements in accordance with generally accepted 

auditing standards and GAGAS. The factors include, but are not limited to, the 

following: 

• Determining that the Schedule of Expenditures of Federal Awards is presented 

fairly in relation to the financial statements taken as a whole. 

• Determining major programs for audit using a risk-based approach. 

• Determining compliance requirements. 

• Gaining an understanding of internal control over compliance for major Federal 

programs. 

• Testing internal control over compliance for major programs. 

• Determining compliance with laws, regulations, and the provisions of contracts or 

grant agreements pertaining to Federal awards that have a direct and material 

effect on each major program. 

• Satisfying the additional requirements of the Act and OMB Circular A-133 for 

audit documentation, audit follow-up, and reporting. 

Latest Peer Review 

We reviewed the most recent peer review report on PwC, prepared by Deloitte & Touche 

LLP, for the year ended June 30, 2006. The report, issued December 8, 2006, stated that 

the system of quality control for the accounting and auditing practice applied by PwC to 

the audits of non-SEC issuers of financial statements was designed to meet the 

requirements of the quality control standards for an accounting and auditing practice 

established by the AICPA. The peer review found that PwC had complied with the 

quality control standards during the year ended June 30, 2006, providing the firm with 

reasonable assurance of complying with applicable professional standards. The peer 

review report stated a separate letter was issued with comments relating to certain 
ENCLOSURE 1 

8 REPORT NO. IG-08-026 

policies and procedures or compliance with them, but were not considered to be of 

sufficient significance to affect the opinion expressed in the report. PwC responded to 

those comments on December 8, 2006, agreeing to take appropriate corrective action. 
ENCLOSURE 2 

REPORT NO. IG-08-026 9 

RESULTS OF THE PWC AUDIT OF 

UAH FOR FY 2006 

PwC Audit Report 

PwC issued its report, dated March 14, 2007, on the financial statements for UAH. PwC 

reported that it had performed the audit in accordance with generally accepted auditing 

standards. It further stated that the financial statements presented fairly, in all material 

respects, the financial position of UAH and its discretely presented component unit at 

September 30, 2006 and 2005, and the respective changes in its financial position and 

cash flows, as applicable, for the years then ended in conformity with accounting 

principles generally accepted in the United States. 

PwC Audit Report on Internal Control and Compliance and 

Other Matters 

PwC’s “Report on Internal Control over Financial Reporting and on Compliance and 

Other Matters Based on an Audit of Financial Statements Performed in Accordance with 

Government Auditing Standards,” March 14, 2007, stated that PwC “noted no matters 

involving the internal control over financial reporting and [UAH’s] operation that we 

consider to be material weaknesses [and] no instances of noncompliance or other matters 

that are required to be reported under Government Auditing Standards.” However, PwC 

reported that it noted certain other matters that were reported to management in a separate 

letter dated March 14, 2007. 

PwC Audit Report on Major Program Compliance and Internal 

Control 

PwC’s “Report on Compliance with Requirements Applicable to Each Major Program 

and on Internal Control over Compliance in Accordance with OMB Circular A-133,” 

August 27, 2007, stated PwC’s adverse opinion that UAH did not comply, in all material 

respects, with the requirements applicable to research and development programs. Also 

in PwC’s opinion, UAH complied, in all material respects, with reporting requirements 

applicable to each of its other major programs for the year ended September 30, 2006. 

However, the results of PwC’s auditing procedures disclosed other instances of 

noncompliance. PwC also noted a certain matter involving the internal control over 

compliance and its operation that PwC considered a material weakness related to research 

and development programs. 
ENCLOSURE 2 

10 REPORT NO. IG-08-026 

PwC also expressed its opinion, within the report, on the Schedule of Expenditures of 

Federal Awards for UAH. PwC stated that the information contained in the Schedule of 

Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the 

basic financial statements taken as a whole. 
ENCLOSURE 3 

REPORT NO. IG-08-026 11 

MANAGEMENT COMMENTS
ENCLOSURE 4 

12 REPORT NO. IG-08-026 

REPORT DISTRIBUTION

Independent Audit Firm 

PricewaterhouseCoopers, LLP 

Mr. Michael W. Lammons, Partner 

Audited Organization 

Mr. Ray M. Pinner, Vice President for Finance and Administration, The University of 

Alabama in Huntsville 

Mr. Robert C Leonard, Controller, The University of Alabama in Huntsville 

NASA Headquarters 

Deputy Administrator 

Chief of Staff 

Chief Financial Officer 

Assistant Administrator for Procurement 

Assistant Administrator for Internal Controls and Management Systems 

Non-NASA Federal Organizations 

Office of Management and Budget 

Deputy Associate Director, Energy and Science Division 

 Branch Chief, Science and Space Programs Branch 

Technical Manager, Office of Federal Financial Management 

Government Accountability Office 

Director, NASA Issues, Office of Acquisition and Sourcing Management 

Federal Audit Clearinghouse 

Department of Commerce 

Department of Defense 

Department of Education 

Department of Energy 

Department of Health and Human Services 

Department of the Interior 

Department of Labor 

Department of State 

Department of Transportation 

Department of Veterans Affairs 

National Science Foundation 
ENCLOSURE 4 

REPORT NO. IG-08-026 13 

Congressional Committees and Subcommittees, Chairman and 

Ranking Member 

Senate Committee on Appropriations 

Subcommittee on Commerce, Justice, Science, and Related Agencies 

Senate Committee on Commerce, Science, and Transportation 

Subcommittee on Space, Aeronautics, and Related Sciences 

Senate Committee on Homeland Security and Governmental Affairs 

House Committee on Appropriations 

Subcommittee on Commerce, Justice, Science, and Related Agencies 

House Committee on Oversight and Government Reform 

Subcommittee on Government Management, Organization, and Procurement 

House Committee on Science and Technology 

Subcommittee on Investigations and Oversight 

Subcommittee on Space and Aeronautics 

Major Contributors to the Report: 

Mark Jenson, Director, Financial Statement Audits Directorate 

David Gandrud, Project Manager 

John Pacious, A-133 National Single Audit Coordinator 

REPORT NO. IG-08-026 15 
SEPTEMBER 2, 2008 

REPORT NO. IG-08-026 

OFFICE OF AUDITS

OFFICE OF INSPECTOR GENERAL

ADDITIONAL COPIES

Visit http://oig.nasa.gov/audits/reports/FY08 to obtain additional copies of this report, or contact the 

Assistant Inspector General for Auditing at 202-358-1232. 

COMMENTS ON THIS REPORT

In order to help us improve the quality of our products, if you wish to comment on the quality or 

usefulness of this report, please send your comments to Ms. Jacqueline White, Director of Special 

Projects and Quality Assurance, at Jacqueline.White@nasa.gov or call 202-358-0203. 

SUGGESTIONS FOR FUTURE AUDITS

To suggest ideas for or to request future audits, contact the Assistant Inspector General for Auditing. 

Ideas and requests can also be mailed to: 

Assistant Inspector General for Auditing 

NASA Headquarters 

Washington, DC 20546-0001 

NASA HOTLINE

To report fraud, waste, abuse, or mismanagement, contact the NASA OIG Hotline at 800-424-9183 or 

800-535-8134 (TDD). You may also write to the NASA Inspector General, P.O. Box 23089, L’Enfant 

Plaza Station, Washington, DC 20026, or use http://oig.nasa.gov/hotline.html#form. The identity of 

each writer and caller can be kept confidential, upon request, to the extent permitted by law.