Jan. 26, 2015 —
As the cognizant Federal agency for the Henry M. Jackson Foundation for the Advancement of Military Medicine (the Foundation), we performed a follow-up quality control review of the Grant Thornton, LLP (Grant Thornton) single audit report and supporting audit documentation for the audit period of October 1, 2010, through September 30, 2011. Our objective was to determine whether Grant Thornton conducted the single audit in accordance with generally accepted government auditing standards, the American Institute of Certified Public Accountants (AICPA) Statements on Auditing Standards, and the auditing and reporting requirements of Office of Management and Budget (OMB) Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations." Appendix A contains additional details on our criteria, scope, and methodology; and identifies prior quality control reviews. Appendix B lists the compliance requirements that Grant Thornton determined to be applicable to the FY 2011 audit.
Henry M. Jackson Foundation for the Advancement of Military Medicine
The Foundation is a not-for-profit organization authorized by Congress in May 1983 to support military medical research. The Foundation administers, manages, and supports scientific programs that benefit members of the armed forces and civilians. During FY 2011, the Foundation expended approximately $400.6 million in Federal awards, under one Federal program, the research and development cluster. Of the $400.6 million, approximately $334.0 million was expended for Department of Defense programs. The Foundation engaged Grant Thornton to perform the FY 2011 single audit.
Grant Thornton, LLP
Grant Thornton, LLP is a member firm of Grant Thornton, International Ltd, and performs a wide array of professional services. It provides independent audit, tax, and advisory services to publicly and privately held companies, government agencies, financial institutions, and civic and religious organizations. Grant Thornton maintains its own system of quality control over its accounting and auditing practices, designed to provide reasonable assurance that audit engagements are conducted in accordance with applicable professional standards. The Grant Thornton office in McLean, Virginia, performed the Foundation’s single audit for FY 2011. Grant Thornton performed the Foundation’s annual single audit from FY 2008 through FY 2012.
The single audit is an audit of both the non-Federal entity’s financial statements and Federal awards. The single audit report includes the following:
- an opinion as to whether the financial statements were presented fairly in all material respects in conformity with generally accepted accounting principles (Report on Audited Financial Statements);
- a report on internal control over financial reporting and compliance with the provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a material effect on the financial statements (Internal Control over Financial Reporting); and
- a report on internal control over major Federal programs and an opinion on the auditee’s compliance with laws, regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on each major program. (OMB Circular A-133 Compliance Report).
Report No. DODIG-2013-124
We initiated a quality control review on the Foundation’s FY 2011 single audit in January 2013; however, we discontinued that review after we learned a Grant Thornton staff auditor had falsified work papers, and therefore, the report opinion could not be relied on. We issued Report No. DODIG-2013-124 on August 26, 2013, which discussed this matter and also identified an issue with Grant Thornton’s sampling policy that needed to be addressed to ensure the audit procedures performed for all single audits were sufficient to support the opinion on compliance with Federal program requirements.
Grant Thornton took immediate corrective action to perform the additional audit work necessary to support its audit opinion on the Foundation’s FY 2011 single audit. The Foundation resubmitted the audit report to the Federal Audit Clearinghouse on November 26, 2013, and we began our follow-up review in April 2014. The results of our review of the additional audit work performed are identified below. Grant Thornton also provided a copy of its revised sampling policy, and we determined that it appropriately included steps for determining and documenting the significance of internal controls. However, Grant Thornton had incorrectly interpreted the table included in the AICPA "Government Auditing Standards and Circular A-133 Audits" (the Audit Guide) that identifies the minimum sample sizes required. Once we notified Grant Thornton, they immediately revised the guidance ensuring it aligned with the sampling tables in the Audit Guide. There was no impact to the Foundation’s FY 2011 single audit because Grant Thornton correctly applied the AICPA guidance when determining the sample sizes necessary to support conclusions.
The Foundation complied with OMB Circular A-133 reporting requirements. Grant Thornton generally met auditing standards and OMB Circular A-133 requirements; however, the FY 2011 audit report was missing an explanatory paragraph and must be reissued (Finding A). We also identified a deficiency that Grant Thornton needs to address in future single audits on the documentation of the understanding of internal control (Finding B).
Management Comments and DoDIG Response
Grant Thornton agreed to take corrective actions in response to our recommendations. Management comments were responsive and no additional comments are needed. Management comments are included in their entirety at the end of the report.
This report is a result of Project No. D2014-DAPOSA-0152.000.