Report | Feb. 2, 2022

Quality Control Review of the Warren Averett, LLC FY 2019 Single Audit of DEFENSEWERX, Inc. (DODIG-2022-060)

Evaluations

Publicly Released: February 4, 2022

Objective

The objective of this quality control review was to determine whether Warren Averett, LLC (Warren Averett) performed the FY 2019 single audit of DEFENSEWERX, Inc. (DWX) in accordance with generally accepted government auditing standards and Federal requirements for single audits.

 

Background

Non‑Federal entities that expend Federal funds of $750,000 or more in a year are subject to Public Law 104‑156, “Single Audit Act Amendments of 1996,” (the Single Audit Act) and Title 2 Code of Federal Regulations (CFR) part 200 (the Uniform Guidance) audit requirements. The Single Audit Act was enacted to promote sound financial management of Federal awards administered by non‑Federal entities and to establish uniform requirements for audits of Federal awards. The Uniform Guidance establishes the standards for obtaining consistency and uniformity among Federal agencies for the audit of non‑Federal entities expending Federal awards.

DWX is a nonprofit corporation headquartered in Niceville, Florida. DWX assists the Government by collaborating with industry and academia to find solutions to science and technology challenges. During F Y 2019, DWX spent $24.1 million in Federal awards on one major program, the Research and Development Cluster. The entire $24.1 million was spent on DoD programs. DWX engaged Warren Averett to perform the FY 2019 single audit.

 

Finding

The Warren Averett auditors did not comply with auditing standards and Uniform Guidance requirements when performing the FY 2019 single audit of DWX because the Warren Averett auditors did not:

• obtain sufficient, appropriate evidence to support conclusions that the following compliance requirements were not direct and material to the major program being audited: Cash Management, Equipment and Real Property Management, Procurement and Suspension and Debarment, and Special Tests and Provisions;

• prepare sufficient, appropriate evidence of the procedures they performed and the audit evidence they obtained for the following compliance requirements: the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance; and

• include the correct Schedule of Expenditures of Federal Awards (SEFA) in the reporting package to reflect the adjustments made to DWX’s financial statements. As a result, Federal agencies cannot rely on the FY 2019 single audit because the audit documentation did not provide sufficient, appropriate evidence to support the audit conclusions and the audit opinion on DWX’s compliance with Federal requirements. In addition, Federal agencies cannot use the SEFA to adequately monitor DWX Federal awards.

 

Recommendations

We recommend that the Warren Averett, LLC Partner:

• perform and document additional audit procedures to determine whether the Cash Management, Equipment, Procurement, and Special Tests compliance requirements are direct and material to the FY 2019 single audit, and perform any additional audit procedures necessary for the requirements determined to be direct and material;

• update the FY 2019 single audit documentation to provide a clear and accurate description of the procedures performed and to identify the evidence that supports the auditor’s conclusions on the Allowable Costs and Period of Performance compliance requirements; and

• coordinate with DEFENSEWERX, Inc. to update and reissue the FY 2019 reporting package, including the correct Schedule of Expenditures of Federal Awards and the results of the additional audit procedures performed in response to our recommendations.

 

Management Comments and Our Response

The Warren Averett Partner agreed with our recommendations and stated that Warren Averett will perform additional audit procedures, update audit documentation, and coordinate with DWX to update and reissue the report for the FY 2019 single audit. In addition, the Warren Averett Partner stated that Warren Averett will review the audit procedures completed in the FY 2020 single audit to ensure similar actions are taken.

Comments from the Warren Averett Partner addressed the specifics of the recommendations; therefore, the recommendations are resolved but remain open. We will close the recommendations once we perform followup procedures to verify that Warren Averett corrective actions fully address our recommendations.

This report is a result of Project No. D2021-DEV0SO-0114.000.