Fiscal:
Audits

Compliance Indicator

The program has submitted to Departments Office of External Audits an acceptable financial & compliance audit

Regulations/Reference

CCD Program Instrument: V. Fiscal CCD 23
Title 5: 18071
Guide: California Department of Social Services Audit Guide
Fiscal Handbook: Child Care Fiscal Handbook
California School Accounting Manual

Monitoring Review Evidence

• Annual Fiscal Audit

Audit Objectives

According to the Audit Guide, the general audit objectives are to determine if:

1. Financial statements are presented in accordance with the Accounting Principles Generally Accepted in the United States of America (GAAP)

2. Agency establishes & maintains effective internal controls to carry out management responsibilities & adequately safeguard state & federal interests

3. State & federal funds are expended in accordance with applicable agreements & provisions of law or regulations that could materially affect the financial statements or programs reviewed

4. Direct & indirect costs incurred & claimed for reimbursement under the contracts are reasonable, necessary, allowable, & allocable to the programs according to the benefits received

5. Supplemental information required by the Audit Guide is fairly stated in all material respects in relation to the financial statements as a whole

Auditor Qualifications

According to the regulations, independent annual audits of Child Care & Development programs shall be performed by one of the following:

1. Certified Public Accountant (CPA) licensed by the California Board of Accountancy (Board)

2. Public Accountant (PA) licensed on or before December 31, 1970, by the Board

3. Internal audit unit of the contractor that is not subject to the direction or authority of the manager responsible for the programs

4. CDSS Office of Audit Services, the California State Auditor, or the California State Controller’s Office (SCO)

NOTE: The above also applies to federal audits, excluding item 3.

Audit Types

There are three audit types:

1. Single Audit Report: Audit report of the entire legal entity, that includes the entity's financial statements, schedule of federal awards, & schedule of findings & questioned costs

2. Program-Specific Audit Report:  Financial & program compliance audit report covering one specific program

3. Contractor Audit Report: Independent financial & compliance audit report of the entire organization, rather than of individual contracts or programs

Reporting Requirements

Audit reporting requirements vary by program & the amount of federal funds expended

1. Contractors receiving $25,000 or more in state funding from all state agencies combined are required to submit an annual Contractor Audit

2. Contractors receiving less than $25,000 of state funds are required to submit a biennial Contractor Audit which covers a two year period, or sooner if there is evidence of fraud or other violation of state law in connection with any direct service contract

3. Contractors that expend federal awards of $750,000 or more during its fiscal year must submit a Single Audit report

NOTE: Local Education Agencies are also subject to the requirements of the SCO Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting

In order for the audit report to be deemed acceptable, the auditor must conduct the corresponding Audit & include the applicable reports & schedules even if the contractor:

1. Terminates contract or goes out of business before completing contract term; or

2. Does not provide child care services in accordance with contract provisions.

NOTE: Failure to submit the required audit report could result in a billing for all funds received for the affected contract(s). 

Annual Audit Status Certification

Contractors that participate in Child Care & Development Programs must annually report to the department the total amount of federal & state funds expended during the past fiscal year on an Annual Audit Status Certification (AASC) form.

The AASC form must be completed by the person familiar with the organization’s financial contracts and programs.

Note: The AASC form does not replace the requirement to submit an annual audit report to the Federal Clearinghouse & the department’s Audits & Investigations Division.

The contractor will receive a request by mail or e-mail to submit an AASC form. The AASC is required to be completed & submitted annually on October 15th (of the next business day).

Failure to submit the AASC Form timely may jeopardize your continued participation in all programs administered by the department.

Quality Review Checklist

In order to streamline the audit report review process, use the Quality Review Checklist for Child Development Agencies.

The checklist is required to be completed by the agency’s CPA & submitted along with the agency’s annual audit report.

The checklist is designed to reduce or eliminate the need for follow-up questions that arise as the department reviews the organization’s audit report submission.

AUD Forms

Audited Attendance and Fiscal Reports and Audited Reserve Account Activity Report, known as AUD forms must be included in the agency’s annual audit report.

There are various AUD forms that address specific contract types within the department’s audit guidelines webpage.

The AUD forms & instructions are intended for:

1. Independent auditors to use in order to simplify the audit process, AND

2. Facilitate the departments determination of fiscal year & reimbursable earnings needed to close out child development contracts

Audit Submission

Audit reports including quality review checklists, management letters (if applicable), & subcontractor audit reports (if applicable) must be submitted in accordance to each departments request.

Audit Reports may be submitted::

• By email: AuditsOffice@dss.ca.gov

• Mailed to:

California Department of Social Services
Office of Audit Services
744 P Street, Mailbox 9-13-04
Sacramento, CA 95814 Att: Audit Reports Review Bureau 

Audit Report Deadlines

The audit report submission deadlines may vary depending on the programs administered, the contract status, and the type of entity.

For contractors with fiscal years ending June 30th are the following:

• November 14: Deadline to request time extension (one per year)

• November 15: Electronic submission or postmarked due date for audit reports without an approved extension 

• December 1: The Department will issue a list of delinquent audit reports & apportionments will be withheld

• December 31: If an extension has been approved

NOTE: Except for Child Development program contractors on conditional status, a one-time-only per year, 30-calendar-day extension of the audit due date may be granted the inability to provide the report timely was beyond the fault & control of the contractor.

Record Retention

According to regulations, audit documentation must be retained by the auditor for a minimum of seven years from the date of issuance of the report unless the auditor is notified in writing by the department of the need to extend the retention period

NOTE: Audit documentation shall be made available upon request.