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02-A12-345-67-890 Office of Inspector General—Office of Audit 

SINGLE AUDIT 

QUALITY CONTROL REVIEW 

RECOVERY ACT: QUALITY CONTROL REVIEW 

SINGLE AUDIT OF JOB SERVICE NORTH 

DAKOTA FOR THE YEAR ENDED JUNE 30, 2010 

Date Issued: September 30, 2011 

Report Number: 18-11-008-03-001 
 

 

 

U.S. Department of Labor – Office of Inspector General 

U.S. Department of Labor Office of Inspector General 

Washington, D.C. 20210 

September 30, 2011 

Assistant Inspector General’s Report 

David Krebsbach, Finance Manager 

Job Service North Dakota 

1000 E Divide Ave. 

Bismarck, ND 58506 

Dear Mr. Krebsbach: 

The purpose of this report is to formally advise you of the results of a Quality Control 

Review (QCR) the U.S. Department of Labor (DOL), Office of Inspector General (OIG) 

conducted of the Single Audit of Job Service North Dakota (JSND) for the year ended 

June 30, 2010, completed by Eide Bailly, LLP (Firm), under the Federal Single Audit Act 

and Office of Management and Budget (OMB) Circular A-133 (A-133). 

Our review included the following DOL major programs: the Employment Services (ES) 

cluster, Unemployment Insurance (UI), and Workforce Investment Act (WIA) cluster 

totaling $153,469,345, which includes $13,995,400 of American Recovery and 

Reinvestment Act (Recovery Act) expenditures. 

Since our review included Recovery Act funds, we are required by the Recovery Act to 

post this report on our website www.oig.dol.gov and link it to the Recovery 

Accountability and Transparency Board’s (Board) website www.recovery.gov. 

The objectives of the QCR were to determine whether (1) the audit was conducted in 

accordance with applicable standards and met the Single Audit requirements, (2) any 

follow-up work is needed, and (3) there are any issues that may require management’s 

attention. 

The audit work performed by the Firm over compliance with requirements applicable to 

each major program and internal control over compliance in accordance with A-133 was 

acceptable. However, audit work related to the Statement of Expenditures of Federal 

Awards (SEFA) did not meet certain requirements of A-133 in that the Firm did not 

report a material error in the SEFA. The Firm should report an internal control finding 

related to a material misstatement of the SEFA, and work with JSND to reissue the 

Single Audit reporting package to the Federal Audit Clearinghouse. The Firm should 

improve its supervisory review of audit documentation and quality control over reviewing 

Single Audit reports; and also provide additional training to those responsible for 

ensuring Single Audit reports are properly presented. 

A-133, Section 400(a)(5), requires us to advise the auditor, and where appropriate, the 

auditee of any deficiencies found in the audits when the deficiencies require corrective 

Single Audit QCR – Job Services North Dakota 

Report Number: 18-11-008-03-001 

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U.S. Department of Labor – Office of Inspector General 

action by the auditor. When advised of deficiencies, the auditee shall work with the 

auditor to take corrective action. If corrective action is not taken, we are responsible for 

notifying the auditor, the auditee, and applicable Federal awarding agencies and 

pass-through entities of the facts and make recommendations for follow-up action. 

Major inadequacies shall be referred to appropriate state licensing agencies and 

professional bodies for disciplinary action. 

Details on the results of our review are provided in the Enclosure. 

Sincerely, 

Elliot P. Lewis 

Assistant Inspector General 

 for Audit 

Enclosure 

cc: Ms. Barb Aasen, Partner, Eide Bailly, LLP 

Ms. Judith A. Fisher, Director, Division of Policy, Review, and Resolution 

Employment and Training Administration 

Ms. Darlene Lucas, Audit Liaison, Employment and Training Administration 

Ms. Kari Baumann, Audit Liaison, Employment and Training Administration 

Single Audit QCR – Job Services North Dakota 

Report Number: 18-11-008-03-001 

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U.S. Department of Labor – Office of Inspector General 

Enclosure 

Recovery Act: Quality Control Review 

Single Audit of Job Service North Dakota 

for the Year Ended June 30, 2010 

(18-11-008-03-001) 

Introduction 

The Single Audit Act of 1984, as amended by the Single Audit Act Amendments of 

1996, created a single organization-wide financial and compliance audit for state and 

local governments, colleges, universities, and not-for-profit organizations that expend 

Federal funds equal to or greater than $300,000 in any fiscal year ($500,000 for fiscal 

years ending after December 31, 2003.) 

On November 18, 2010, the Firm issued a Single Audit report of the JSND financial 

statements, SEFA, and reports required by Government Auditing Standards (GAS) and 

A-133 for the year ended June 30, 2010. 

Our review included the following DOL major programs: 

DOL Major Programs 

Reviewed 

Major Program 

Catalog of Federal 

Domestic 

Assistance 

(CFDA) Number 

Recovery 

Act Funds 

Reported as 

Expended 

DOL 

Major Funds 

Reported as 

Expended 

17.207 

ES Cluster 17.801 

17.804 $ 6,558,810 

UI 17.225 $127,669,722 

17.258 

WIA Cluster 17.259 

17.260 $5,245,413 

Recovery Act – ES 17.207 

Cluster $982,570 

Recovery Act – UI 17.225 $9,803,908 

Recovery Act – WIA 

Cluster 

17.258 

17.259 

17.260 $3,208,922 

Subtotals by Funding 

Source $13,995,400 139,473,945 

Total DOL Major 

Program Funds 

Reported as Expended $153,469,345 

Single Audit QCR – Job Services North Dakota 

Report Number: 18-11-008-03-001 

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U.S. Department of Labor – Office of Inspector General 

Since our review included Recovery funds, we are required by the Recovery Act to post 

this report on our website www.oig.dol.gov and link it to the Board’s website 

www.recovery.gov. 

Objectives 

The objectives of the QCR were to determine whether (1) the audit was conducted in 

accordance with applicable standards and met the Single Audit requirements, (2) any 

follow-up work is needed, and (3) there are any issues that may require management’s 

attention. To address these objectives, we answered the following question: 

Did the Firm’s Single Audit comply with applicable standards and Single Audit 

requirements so that no follow-up work or management’s attention would be 

needed? 

Results 

The audit work performed by the Firm over compliance with requirements applicable to 

each major program and internal control over compliance in accordance with A-133 was 

acceptable. However, audit work performed related to the SEFA did not meet certain 

requirements of A-133. Specifically, the Firm did not report a material error in the SEFA 

related to JSND not identifying total UI expenditures. Although the audit work over 

compliance and internal control over compliance was acceptable, the Firm did not 

always ensure audit documentation was sufficient to allow a knowledgeable person with 

no prior association with the work to be able to reach the same conclusions as the 

auditor. 

Additional work is required to bring this audit into compliance with the requirements of 

A-133 and GAS. Specifically, the Firm should do the following: 

1. Report an internal control finding related to a material misstatement of JSND’s 

SEFA. 

2. Work with JSND to correct and reissue the Single Audit report to the Federal 

Audit Clearinghouse. 

3. Emphasize the Firm’s audit documentation policy to those performing Single 

Audits to ensure Single Audit projects are documented in accordance with GAS. 

4. Provide additional training targeting supervisory review of audit documentation 

and quality control over reviewing Single Audit reports. 

A-133, Section 400(a)(5), requires us to advise the auditor, and where appropriate, the 

auditee of any deficiencies found in the audits when the deficiencies require corrective 

action by the auditor. When advised of deficiencies, the auditee shall work with the 

auditor to take corrective action. If corrective action is not taken, we are responsible for 

notifying the auditor, the auditee, and applicable Federal awarding agencies and 

pass-through entities of the facts and make recommendations for follow-up action. 

Single Audit QCR – Job Services North Dakota 

Report Number: 18-11-008-03-001 

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U.S. Department of Labor – Office of Inspector General 

Major inadequacies shall be referred to appropriate State licensing agencies and 

professional bodies for disciplinary action. 

Did the Firm’s Single Audit comply with applicable standards and Single Audit 

requirements so that no follow-up work or management’s attention would be 

needed? 

By not identifying and reporting a material weakness in the presentation of the 

SEFA, the Firm did not ensure users of JSND’s Single Audit Report had 

information needed to make informed decisions on JSND’s use of Federal 

awards. 

Finding 1 — The Firm did not report an audit finding related to JSND not reporting 

total UI expenditures in the SEFA. 

The Firm did not ensure that the auditee complied with reporting requirements to 

prepare the SEFA in the format required by OMB A-133 Compliance Supplement. 

Reported UI expenditures are required to include all benefit payments whether paid with 

Federal or state funds. The SEFA was materially understated by almost $87 million 

because the state UI payments were not included by JSND in its report and the Firm did 

not ensure the SEFA reporting was accurate. If this condition had been found by the 

Firm, it should have issued a finding related to JSND that it did not have adequate 

controls in place to ensure the completeness of the SEFA. 

OMB A-133 Compliance Supplement, Part 4-17.225-IV, requires that State UI funds 

should be included with Federal funds on the SEFA. GAS, 5.26 through 5.30, state that 

if material misstatements are identified by the auditors after the report is issued, then 

this may lead to the auditee reissuing the report within an appropriate timeframe and 

with appropriate disclosures. Furthermore, GAS, 5.31, requires that if the auditee does 

not reissue the report accordingly, then it is the Firm’s responsibility to inform 

appropriate officials in order to prevent further reliance in the previously issued report. 

The SEFA reported approximately $51 million in UI expenditures; however, the JSND 

Statements of Revenue, Expenses and Changes in Fund Net Assets reported $51 

million in Federal UI expenditures and almost $87 million in state UI expenditures. 

Although the Firm tested both Federal and state UI expenditures, the inaccurate SEFA 

reporting was not identified and corrected due to a lack of auditee and Firm 

understanding of OMB reporting requirements. 

The Firm should have identified JSND’s SEFA preparation error and issued a finding 

that JSND did not have adequate controls in place to ensure the SEFA’s completeness. 

When the SEFA is not presented accurately, it does not allow users to efficiently and 

effectively use the data contained in the reports. 

Single Audit QCR – Job Services North Dakota 

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U.S. Department of Labor – Office of Inspector General 

Finding 2 — The Firm did not always include audit documentation as required by 

GAS. 

The Firm did not always ensure its referenced audit documentation adequately 

supported its conclusions on JSND’s internal control and compliance as required by 

GAS and A-133. For example, referenced audit documentation did not show how the 

Firm ensured: 

1.	 completeness of databases used in testing internal control over compliance and 

compliance with laws, regulations and grant agreements; 

2.	 sufficiency of audit documentation to support a conclusion on the allowability of 

payroll charges to a specific grant fund; 

3. reasonableness of some random samples; 

4. adequacy of explanations and discussions with auditee management for material 

variances noted during analytical procedures; and 

5.	 sufficiency of audit documentation referencing to supporting detailed audit 

documentation.
 

GAS, paragraph 4.19, states, in part: 

Under the American Institute of Certified Public Accountants standards 

and GAS, auditors should prepare audit documentation that enables an 

experienced auditor, having no previous experience to the audit, to 

understand: 

(a) the nature, timing, and extent of auditing procedures performed to 

comply with Generally Accepted Government Auditing Standards 

(GAGAS) and other applicable standards and requirements; 

(b)	 the results of the audit procedures performed and the audit 

evidence obtained; 

(c)	 the conclusions reached on significant matters; and 

(d)	 that the accounting records agree or reconcile with the audited 

financial statements or other audited information. 

The Firm stated that JSND was an ongoing client, which could have contributed to the 

auditors and those responsible for reviewing the audit documentation to use their past 

knowledge of the client’s accounting processes — rather than adequately documenting 

the information in the audit documentation as required by the Firm’s policy — as support 

for the work performed and conclusions reached. The Firm was able to provide verbal 

information and audit documentation that had not originally been referenced as support 

for its conclusions. 

The lack of documented explanations and referencing regarding how compliance and 

internal control testing was conducted and how it formed the basis for the documented 

conclusions could raise questions on whether the auditors, including the reviewer, 

understood the testing that was performed and the conclusions reached. 

Single Audit QCR – Job Services North Dakota 

Report Number: 18-11-008-03-001 

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U.S. Department of Labor – Office of Inspector General 

Recommendations 

We recommend the Firm: 

1. Follow GAS 5.26 through 5.31 related to subsequent discovery of facts existing 

at the date of the auditor’s report to ensure users of JSND’s Single Audit 

reporting package are aware of the reporting errors. This would include reporting 

the appropriate findings noted in this report. 

2. Work with JSND to correct and reissue the Single Audit report to the Federal 

Audit Clearinghouse. 

3. Emphasize the Firm’s audit documentation policy to those performing Single 

Audits to ensure Single Audit projects are documented in accordance with GAS. 

4. Provide additional training targeting supervisory review of audit documentation 

and quality control over reviewing Single Audit reports. 

Firm’s Response 

The Firm agreed with the recommendations and provided its plans to address each of 

them. See Appendix D for the Firm’s complete response. 

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U.S. Department of Labor – Office of Inspector General 

Appendices 

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U.S. Department of Labor – Office of Inspector General 

Appendix A 

Background 

The Single Audit Act of 1984 established consistent and uniform entity-wide audit 

requirements for state and local governments receiving Federal financial assistance. 

The Single Audit is the primary mechanism used by Federal agencies to ensure 

accountability for Federal awards. Audits performed under the Act are intended to 

satisfy all Federal agencies providing assistance to the entity. The act was amended in 

1996 by Public Law 104-156, raising the threshold for Single Audit to $300,000 in 

Federal assistance. The June 27, 2003, revision to A-133 raised this threshold to 

$500,000 for fiscal years ending after December 31, 2003. 

A QCR is performed to provide evidence of the reliability of Single Audits to the auditors 

of Federal agency financial statements, such as those required by the Chief Financial 

Officers Act, those responsible for the programs, and others. We performed a QCR of 

the Single Audit of JSND financial statements, SEFA, and reports required by GAS and 

A-133 for the year ended June 30, 2010, performed by the Firm. 

For the year ended June 30, 2010, JSND reported expenditures of about $157 million in 

total Federal awards and about $155 million in DOL awards, of which almost $14 million 

was reported as attributable to the Recovery Act. 

The Recovery Act was signed into law on February 17, 2009. The stated purposes of 

the Recovery Act are to: 

•	 preserve and create jobs and promote economic recovery; 

•	 assist those most impacted by the recession; 

•	 provide investments needed to increase economic efficiency by spurring 

technological advances in science and health; 

•	 invest in transportation, environmental protection, and other infrastructure that 

will provide long-term economic benefits; and 

•	 stabilize state and local government budgets, in order to minimize and avoid 

reductions in essential services and counterproductive state and local tax 

increases. 

The Recovery Act requires agencies to implement an unprecedented level of 

transparency and accountability to ensure the public can see where and how their tax 

dollars are being spent. The Board was established by the Recovery Act, Congress, 

and the OMB to oversee and monitor implementation of the Recovery Act through 

periodic reporting on the use and expenditure of funds. We are required by the 

Recovery Act, Title XV Accountability and Transparency, Subtitle A – Transparency and 

Oversight Requirements, Section 1514 Inspector General Reviews, to post this report 

on our website www.oig.dol.gov and link it to the Board’s website www.recovery.gov. 

11 Single Audit QCR – Job Services North Dakota 

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U.S. Department of Labor – Office of Inspector General 

Appendix B 

Objectives, Scope, Methodology, and Criteria 

Objectives 

Our objectives were to determine whether: 

1. The audit was conducted in accordance with applicable standards and met the 

Single Audit requirements; 

2. any follow-up work is needed; and 

3. there are any issues that may require management’s attention. 

To answer those objectives we asked the following question: 

Did the Firm’s Single Audit comply with applicable standards and Single Audit 

requirements so that no follow-up work or management’s attention would be 

needed? 

Scope 

We performed a QCR of the Firm’s Single Audit of the JSND financial statements, 

SEFA, and reports required by GAS and A-133 for year ended June 30, 2010. As part of 

the QCR, we included review of the Single Audit reports issued by JSND and the Firm 

for the years ended June 30, 2009 and 2010. We performed our work at the offices of 

the Firm at 1730 Burnt Boat Loop, Suite 100, Bismarck, ND. 

Our review included the following DOL major programs: the ES cluster, UI, and WIA 

cluster totaling $153,469,345, including $13,995,400 in Recovery Act expenditures 

Methodology 

Using the President’s Council of Inspectors General on Integrity and Efficiency Uniform 

Guide for QCRs of OMB Circular A-133 Audits (QCR Guide), we reviewed audit 

documentation and held discussions with the Firm’s partners and auditors to accomplish 

the required steps. The QCR Guide was developed to test for compliance with GAS 

general and fieldwork standards and A-133 requirements. 

Specifically, we reviewed: 

• Auditor Qualifications 

• Independence 

• Due Professional Care 

• Quality Control 

• Planning and Supervision 

• Management Representations 

• Litigation, Claims and Assessments 

13 Single Audit QCR – Job Services North Dakota 

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U.S. Department of Labor – Office of Inspector General 

• Possible Fraud or Illegal Acts 

• Determination of Major Programs 

• Schedule of Expenditures of Federal Awards 

• Audit Follow up 

• Reporting 

• Internal Control Over Major Programs 

• Data-Collection Form 

We also reviewed the Firm’s peer review applicable to the period of the audit, as well as 

the Single Audit reports issued by JSND and the Firm for the years ended 

June 30, 2008 and 2009 to identify systemic issues. 

Criteria 

A-133 

American Institute of Certified Public Accountants Audit Guide, GAGAS, and A-133 

Audits 

GAGAS, July 2007 Revision 

Guidance on GAGAS Requirements for Continuing Professional Education 

Recovery Act 

Single Audit Act of 1984 

Single Audit Act Amendments of 1996 

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U.S. Department of Labor – Office of Inspector General 

Appendix C 

Acronyms and Abbreviations 

A-133 Office of Management and Budget Circular A-133 

Board Recovery Accountability and Transparency Board 

CFDA Catalog of Federal Domestic Assistance 

DOL Department of Labor 

ES Employment Services 

Firm Eide Bailly, LLP 

GAS Government Auditing Standards 

GAGAS Generally Accepted Government Auditing Standards 

JSND Job Service North Dakota 

OIG Office of Inspector General 

OMB Office of Management and Budget 

QCR Quality Control Review 

QCR Guide President’s Council on Integrity and Efficiency Uniform QCR Guide 

for A-133 Audits 

Recovery Act American Recovery and Reinvestment Act 

SEFA Schedule of Expenditures of Federal Awards 

UI Unemployment Insurance 

WIA Workforce Investment Act 

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16 Single Audit QCR – Job Services North Dakota 

Report Number: 18-11-008-03-001 
 

 

September 30. 20 I I 

Elliot P. L \' is 

Assistant Inspector General for Audit 

US Department of Labor 

Office of Inspector General 

Washington, DC 20210 

Dear Mr. Lewis: 

~ 

Ei~ eBail ~ 

In conjunction with your Quality Control Review of the Single Audit of Job Service North Dakota for the 

year ended June 30, 2010, we have the following responses to the findings and recommendations included 

in your report. 

Finding #1- We agree with the finding, and accordingly, will follow the requirements of GAS 5.26 

through 5.31 related to subsequent discovery of facts to ensure that the identified reporting errors are 

appropriately addressed, including the reporting of the appropriate finding in the Government Auditing 

Standards report. We will work with Job Service North Dakota to correct and reissue the Single Audit 

report to the Federal Audit Clearinghouse. We believe that this will appropriately address 

recommendation numbers one and two. 

Finding #2 - We agree with the finding . Effective beginning with Single Audit engagements for periods 

ending on or after December 31,2010, the Firm implemented a policy requiring an engagement quality 

review for all Single Audits. We believe that this will appropriately address recommendation number 

three. The Firm conducts annual firm-wide training for all partners and managers assigned to Single Audit 

engagements. We will include training on audit documentation and supervisory review in future training 

sessions. We will also share the results of this QCR with the Chair of our Firm Government Committee 

for distribution of the findings and areas for improvement to applicable Firm personne1. We believe that 

this will appropriately address recommendation number four. 

Sincerely, 

Brian Bluhm, CPA 

Director of Assurance Services 

www.eidebai lly .com 

5601 Gre<l n Vollr;>y Dr., Str;>. 700 I Minnr;>c;>pOli$, MN 55<137-11 45 I T 952.9<1.4.6 166 I F 952.944.8496 I EOE 

U.S. Department of Labor – Office of Inspector General 

Appendix D 

Independent Public Accountant Response to Draft Report 

17 Single Audit QCR – Job Services North Dakota 

Report Number: 18-11-008-03-001