Report | Dec. 17, 2015

Quality Control Review of the PricewaterhouseCoopers LLP FY 2014 Single Audit ofCarnegie Mellon University

DODIG-2016-034

Objective

As the cognizant Federal agency for the Carnegie Mellon University (Carnegie Mellon), we performed a quality control review of the PricewaterhouseCoopers LLP (PwC) single audit report and supporting audit documentation for the audit period of July 1, 2013, through June 30, 2014. Our objective was to determine whether the single audit was conducted in accordance with generally accepted government auditing standards, generally accepted auditing standards, and the 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 scope and methodology and identifies prior quality control reviews. Appendix B lists the compliance requirements that PwC determined to be applicable to the FY 2014 audit.

 

Background

Carnegie Mellon University

Carnegie Mellon is a private, not-for-profit educational and research institution. Carnegie Mellon enrolls about 13,000 students and grants approximately 4,100 bachelor’s degrees, master’s degrees and doctoral degrees each year. A substantial portion of Carnegie Mellon’s revenues are from sponsored research and other projects under Federal, state, industrial, and other contracts. During FY 2014, Carnegie Mellon expended $379.9 million in Federal funds. Of the $379.9 million, Carnegie Mellon expended $322.9 million on one major program, the research and development cluster; including $187.2 million expended on Department of Defense awards. Carnegie Mellon engaged PwC to perform the FY 2014 single audit.

PricewaterhouseCoopers LLP

PwC, a member firm of PricewaterhouseCoopers International Limited, provides a wide array of business services, including audit and assurance, business and Government consulting, and tax preparation and planning. PwC maintains its own system of internal quality control over its accounting and auditing practices as required by the American Institute of Certified Public Accountants. PwC’s office in McLean, Virginia, performed Carnegie Mellon’s FY 2014 single audit.

Single Audit

Public Law 98-502, "The Single Audit Act of 1984," (the Act) as amended, was enacted to promote sound financial management of Federal awards administered by non-Federal entities and to establish a uniform set of auditing and reporting requirements for all Federal award recipients that are required to obtain a single audit. OMB Circular A-133 establishes policies that guide the implementation of the Act and provides an administrative foundation for uniform audit requirements of non-Federal entities administering Federal awards. Entities that expend Federal funds of $500,000 or more in a year are subject to the Act and OMB Circular A-133 requirements. Therefore, they must have an annual single or program-specific audit performed in accordance with generally accepted government auditing standards and submit a complete reporting package to the Federal Audit Clearinghouse. The single audit includes an audit of the non-Federal entity’s financial statements and Federal awards as described in OMB Circular A-133.

Review Results

Carnegie Mellon complied with OMB Circular A-133 reporting requirements. However, PwC did not fully comply with auditing standards and OMB Circular A-133 requirements for the Carnegie Mellon FY 2014 single audit. Specifically, the auditors did not adequately perform and document audit procedures for their review of the cash management requirement. As a result, PwC needs to complete additional audit work to support its audit conclusions and the overall opinion on compliance with requirements for the research and development cluster.

Management Comments and DoDIG Response

PricewaterhouseCoopers LLP agreed to take corrective action in response to our recommendations. Management comments were responsive and no additional comments are needed. PwC agreed to perform additional testing and provided additional information to support the conclusions on the cash management requirement. We will review all information provided and additional testing performed during our follow-up procedures to ensure actions fully address deficiencies cited in this report. Management comments are included in their entirety at the end of this report. Appendix C includes a summary of management’s comments on our finding along with our response.