Appendix A
Scope and Methodology

We tested compliance with the ARC OIG audit organization's system of
quality control to the extent we considered appropriate. ARC OIG did not
perform audits or attestation engagements but rather only reviews. It is
ARC OIG's current policy not to perform audit or any other work under
Generally Accepted Government Auditing Standards (GAGAS). ARC OIG
management contract independent public accountants (IPAs) to conduct
financial statements audits, attestation engagements, and other GAGAS
engagements. Therefore, we did not test compliance with certain ARC OIG's
system of quality controls, but note ARC OIG utilizes inspections and
evaluations to address ARC management and headquarters issues.

We reviewed the ARC OIG's monitoring of audits performed by IPAs where
the IPA served as the principal auditor during the period October 1, 2015
through September 30, 2016. During the period, ARC OIG management
contracted for the audit of its agency's Fiscal Year 2015 financial
statements (OIG Report Number: 16-04) and ARC OIG monitored the IPA's
work. ARC OIG also contracted for certain other types of engagements that
were to be performed in accordance with GAGAS.

We visited the ARC OIG office in Washington DC.
ARC OIG Audits Peer Reviewed
ARC OIG does not perform audits or attestation engagements. Thus, we

tested compliance with relevant aspects of ARC OIG's system of quality
controls.

Contract Audits Peer Reviewed

OIG Report Grant Number (if applicable) Date Issued
ber _ Name of Audit/Grant

'/30/2015%
/22/2016
/19/2016

University of Pikeville KY College of
Optometry
(9


responsible for the attached report dated [Month, Day, Year] and the
conclusions expressed in the report. However, our review disclosed no
instances where [contractor] did not comply, in all material respects, with
U.S. Generally Accepted Government Auditing Standards.”

Appendix B to this report identifies ARC OIG response to our suggested
statement for inclusion in transmittal letters. In addition to reviewing its
system of quality control to ensure adherence with GAGAS, we applied
certain limited procedures in accordance with guidance established by
CIGIE related to ARC OIG's monitoring of audits performed by independent
public accountants (IPAs) under contract where the IPAs served as the
auditor. It should be noted that monitoring of audits performed by IPAs is
not an audit and, therefore, is not subject to the requirements of GAGAS.
We also note ARC OIG audit organization utilizes inspections and
evaluations to address ARC management and headquarters issues such as
implementation of applicable regulations and grant program objectives. The
purpose of our limited procedures was to determine whether ARC OIG had
controls to ensure IPAs performed contracted work in accordance with
professional standards. However, our objective was not to express an
opinion and accordingly, we do not express an opinion, on ARC OIG's
monitoring of work performed by IPAs.

Ce: A. Roy Lavik, Inspector General
Judith A. Ringle, Deputy Inspector General and Chief Counsel


Appendix B

ARC OIG Response to “Suggestion” statement in transmittal letter(s)

APPALACHIA® 4 Prod Past, Office of Inspector General
Keciowny A New Visiow
commission

February 10, 2017

Mr. Miguel A. Castillo

Assistant Inspector General for Audit
Commodity Futures Trading Commission
Three Lafayette Centre

1155 21" Street, N.W.

Washington, D.C. 20581

Dear Mr. Castillo;

‘Thank you for the draft report pertaining to the External Modified Audit Peer Review report
of the Appalachian Regional Commission Office of Inspector General, (OIG Report 16-0-01).

We concur with suggestions with respect to language to be included in transmittal letters
dealing with contractor reports,

Sincerely,

bciceank

Inspector General
Appalachian Regional Commission

1666 CONNECTICUT AVENUE, NW WASHINGTON, DC 20009-1068 (202) 084.7675 Fax (202) 884-7006 wenn ate.gow

Athan Kemnecty Sustawspi
George Narvond Now York

Garaiins Penmzyiranie
Saath Cordon



a U.S. COMMODITY FUTURES TRADING COMMISSION
ea OFFICE OF INSPECTOR GENERAL
i ©) i Cy Three Lafayette Centre
3 sein eas 1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5110

Comodiry Futures Trading Comision

March 6, 2017

Hubert Sparks

Inspector General

Appalachian Regional Commission Office of Inspector General
1666 Connecticut Avenue, NW

Washington, DC 20009

Dear Hubie,

Attached is the External Modified Audit Peer Review Report of the Appalachian
Regional Commission Office of the Inspector General, (OIG Report: 16-O-01).
This peer review was conducted in accordance with Generally Accepted
Government Auditing Standards and the Council of the Inspectors General on
Integrity and Efficiency Guide for conducting modified peer reviews.

We thank you and all of your staff that we dealt with for your assistance and
cooperation during the conduct of the review. If you have any questions, please
contact Miguel Castillo at (202) 418-5084 or meastillo@cftc. gov.

A. Roy Lavik
Inspector General
U.S. Commodity Futures Trading Commission


_——

orMetaspector General ~ U,§, COMMODITY FUTURES TRADING COMMISSION

Commodity

OFFICE OF INSPECTOR GENERAL
Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5110

ures Trading Commission

TO: Hubert Sparks
Inspector General
Appalachian Regional Commission Office of the Inspector
General

FROM: Miguel A. Castillo, CPA, CRMA
Assistant Inspector General for Auditing

DATE: March 6, 2017

SUBJECT: System Review Report - External Modified Audit Peer Review
Discussion Draft Report of the Appalachian Regional
Commission Office of the Inspector General
(OIG Report: 16-O-01)

We have reviewed the system of quality control for the audit organization of
the Appalachian Regional Commission (ARC) Office of the Inspector General
(OIG) in effect for the three years ended September 30, 2016. A system of
quality control encompasses ARC OIG’s organizational structure and the
policies adopted and procedures established to provide it with reasonable
assurance of conforming to Generally Accepted Government Auditing
Standards (GAGAS). The elements of quality control are described in
GAGAS. ARC OIG is responsible for establishing and maintaining a system
of quality control that is designed to provide ARC OIG with reasonable
assurance that the organization and its personnel comply with professional
standards and applicable legal and regulatory requirements in all material
respects. Our responsibility is to express an opinion on the design of the
system of quality control and ARC OIG’s compliance therewith based on our
modified review.

Our review was conducted in accordance with GAGAS and the Council of the
Inspectors General on Integrity and Efficiency (CIGIE) Guide for Conducting
Modified Peer Review of the audit organizations of federal offices of
Inspector General. During our review, we met with ARC OIG personnel and
obtained an understanding of the nature of the ARC OIG audit organization,
and the design of ARC OIG’s system of quality control sufficient to assess
the risks implicit in its audit function. Based on our assessments, we
selected audits and attestation engagements, collectively referred to as
"audits", and administrative files to test for conformity with professional
standards and compliance with ARC OIG’s system of quality control. The


audits selected represented a reasonable cross-section of ARC OIG’s audit
organization. Prior to concluding the peer review, we reassessed the
adequacy of the scope of the modified peer review procedures and met with
ARC OIG management to discuss the results of our review. We believe that
the procedures we performed provide a reasonable basis for our opinion.

In performing our review, we obtained an understanding of the system of
quality control for the ARC OIG audit organization. In addition, we tested
compliance with ARC OIG's quality control policies and procedures to the
extent we considered appropriate. These tests covered the application of
ARC OIG's policies and procedures on selected audits. Our review was
based on selected tests; therefore, it would not necessarily detect all
weaknesses in the system of quality control or all instances of
noncompliance.

There are inherent limitations in the effectiveness of any system of quality
control, and, therefore, noncompliance with the system of quality control
may occur and not be detected. Projection of any evaluation of a system of
quality control to future periods is subject to the risk that the system of
quality control may become inadequate because of changes in conditions,
or because the degree of compliance with the policies or procedures may
deteriorate. Appendix A to this report identifies scope and methodology, and
a list ARC OIG audits peer reviewed.

In our opinion, the system of quality control for the audit organization of
ARC OIG in effect for the year ending September 30, 2016 has been suitably
designed and provides ARC OIG with reasonable assurance of performing
and reporting in conformity with applicable professional standards in all
material respects. Audit organizations can receive a rating of pass; pass
with deficiencies; or fail. ARC OIG has received an external peer review
rating of “pass”. However as an observation, we note ARC OIG transmittal
letters need to clearly delineate responsibilities between the ARC OIG and
contractor reports. Therefore, we make the following suggestion for
inclusion in the transmittal letters.

“In connection with the contract, we reviewed [contractor’s] report and
related documentation and inquired of its representatives. Our review, as
differentiated from an audit in accordance with U.S. generally accepted
government auditing standards, was not intended to enable us to express,
and we do not express, opinions on report findings. [Contractor] is