5a - 2023 AUDIT STATEMENT OF WORK Ver 2-7-2023.docx

STATEMENT OF WORK

Audit Services Proposal Submission

Audit start date: mutually agreeable time between 4/15/2023 and 9/30/2023

I. INTRODUCTION

The specifications contained herein are intended to describe the scope and nature of the work required of the Certified Public Accountant (hereinafter referred to as the “Contract Auditor” or “Contractor”), who is engaged by the U. S. Coast Guard Morale, Well-Being, and Recreation (hereinafter referred to as the “MWR”) Program, to conduct:

1. An audit of the nonappropriated fund financial statements of the MWR program; and,

2. An examination of management’s assertions regarding the effectiveness of the internal control structure over financial reporting.

II. BACKGROUND

The MWR is a nonappropriated fund instrumentality (NAFI) of the United States Government.

The MWR mission is to uplift the spirits of the Coast Guard family and be an essential element of the Coast Guard mission readiness and retention through customer-owned and driven MWR programs and services around the world.

The MWR financial objective is to maintain a sound capital structure to ensure continued operation of the local MWR program.

The unit Commanding Officer directly controls local MWR operations that may consist of Category A, B, or C MWR Activities. In general, category designations denote the amount of appropriated fund support authorized. For instance, Category A MWR Activities are authorized the maximum appropriated fund support as they have the least ability to generate revenues. Category C Activities have the maximum abilities to generate revenues and must be operated as a business entity. General administrative, financial, personnel, and operations instructions are contained in Commandant Instructions M1710.13D, M7010.5C, and M12271.A, supplemented with other MWR Headquarters’ Instructions and local command guidance. The Contract Auditor should note that Coast Guard policy is updated periodically. Before the engagement, the Contract Auditor should ensure that Coast Guard policy documents, as stated herein have not been amended.

The unit’s MWR accounting records are maintained on-site using Coast Guard prescribed forms and QuickBooks Online accounting software. The modules may consist of an Accounts Payable, Accounts Receivables, and a General Ledger. NAFI Payroll is prepared using the services of the firm ADP. The accounting function is performed by MWR employees.

Quarterly financial statements and audit reports, where conducted, for the past three (3) years will be available. The MWR does not produce an annual report, but rather four quarterly reports; the MWR does not produce monthly financial statements for distribution to Coast Guard MWR Headquarters but may develop monthly reports for local management purposes. The cost of goods sold should be determined by the perpetual inventory method at cost. The MWR is not required to pay federal, state, or local income, sales, property, or use taxes, except payroll taxes and occupational taxes for food and beverage operations.

A copy of the location’s quarterly financial reports is available on-site and should be requested as part of a site visit. The prospective Contract Auditor shall coordinate any request for an on-site visit with the unit point of contact who will normally be the unit MWR Director.

MWR Audit Statement of Work Page 2

III. SPECIFICATIONS

A. Audit Objectives.

The audit objectives are financial, compliance, and performance related to include:

1. Expressing an opinion on the fairness of presentation of the Operating Summary (Balance Sheet and Income Statement) of the MWR activities on 31 January 2023 in conformance with generally-accepted accounting principles (GAAP), Government Auditing Standards (GAS), and the MWR accounting standards. The MWRs use a comprehensive accounting basis that may differ slightly from GAAP.

2. Determining whether the MWR has established sufficient internal controls to safeguard the assets against loss from unauthorized use or disposition, including assessing the adequacy of the management control system to measure, report, and monitor the MWRs’ operations.

3. Review and recommendation for improvements in the internal controls identified in the above objective (Paragraph III.A. 2), including at a minimum, testing, and analyzing such areas as cash receipts, cash disbursements, payroll, inventory management, and fixed asset acquisition and control.

4. Reviewing the previous two (2) years of audit reports and determining if corrective action was warranted and whether it was taken.

5. Recommending to management ways to improve the effectiveness of the MWR’s organization and fiscal operations and identify methods to increase the MWR’s program profitability.

B. Audit Scope.

The scope of the audit will include auditing the MWR’s financial statements of 31 January 2023, and the related income statement for the year then ending for each activity. The observance of inventory, if applicable, as of 31 January 2023 is required. If the auditor is unable to observe the counting of the physical inventory at the balance sheet date, an alternate inventory verification method may be used. Firm-Fixed price proposals should include costs for observance of 2022 NAF Budget year that concludes on 31 January 2023.

C. Auditing Standards.

1. The audit of the MWRs’ operations will be conducted according to generally-accepted General Accounting Office (GAO) Standards; generally-accepted auditing by the Federal Managers Financial Officers Act of 1990; including the Federal Manager’s Financial Integrity Act, and Office of Management and Budget (OMB) (Circular A-123, Internal Control Program), with standards and procedures set forth in the Non-appropriated Fund Instrumentalities (NAFI) Manual, Commandant Instruction M7010.5C, Morale, Well-Being, and Recreation Manual, Commandant Instruction M1710.13D; and, other regulatory guidance, as applicable.

2. Should the Contract Auditor suspect fraud, waste, mismanagement, abuse, or any other illegal or unethical action by the MWR personnel or vendors, the Contract Auditor should bring this immediately to the attention of the MWR Director, who will in turn refer instances of suspected waste, fraud, or any other abuse to the appropriate command staff level. The MWR Director may be contacted at (808)842-2953.

D. Audit Report.

1. Draft Audit Report.

a. The Contract Auditor shall prepare a preliminary draft of the audit report and submit the draft report to the MWR Director. After the MWR Director has reviewed and approved the draft with changes as appropriate, the Contract Auditor will make all appropriate changes and send the revised draft report to the unit’s Commanding Officer. The Contract Auditor should schedule an

MWR Audit Statement of Work Page 3 exit briefing with the MWR Director and the Commanding Officer to discuss the audit report before it is finalized.

b. The Contract Auditor should send the preliminary draft report to:

MWR Regional Director Mr. Neil Morgan neil.l.morgan@uscg.mil 808-842-2953

And

Personal Support Department Head LCDR Joshua R Cain Joshua.r.cain@uscg.mil 808-842-2018

c. The Contract Auditor shall make changes necessary to clarify the findings and statements made in the audit report draft and cooperate with the MWR Director as necessary to resolve any audit findings and disputes.

2. Final Audit Report.

The Contract Auditor shall deliver the final report as an electronic file (PDF or .Doc) to the U.S. Coast Guard Base Honolulu MWR Division at the above address. The Contract Auditor will have completed all work required under this contract only on delivery of the final audit report acceptable by the MWR Director. The Contract Auditor may then submit an invoice for services provided.

3. Form and Content.

a. Address the audit report to the MWR Director.

b. The report should contain these parts:

(1) A report and opinion on the financial statements’ examination, consisting of a statement of the Contract Auditor’s scope, and an opinion on the financial statements according to GAAP and GAO Standards, including the Chief Financial Officer’s Act.

(2) A report and opinion on whether the MWR activity has established sufficient internal controls to safeguard its’ assets against loss from unauthorized use or disposition and findings, or recommendations to improve the internal control environment. Each finding will include a regulatory citation or criteria to identify the laws, regulations, directives, or standards against which the condition is measured.

(a) Each finding, labeled as such, will include whenever feasible, quantifiable terms of the effect of the condition and its impact, consequences, or significance on cost, performance, or lost sales. Each finding also should include those other elements required by GAO Standards, including the condition, cause, effect and criteria, and recommendations to correct the finding.

(b) Separate and number each finding by seriousness or materiality concerns to highlight and identify important areas and facilitate follow-up.

(c) Report on the status of the corrective recommendations for the previous two (2) years of audits and other inspections.

(d) NOTE: Management’s comments will be required through follow-up action initiated by Headquarters which requires MWR units to comply with recommendations in accordance with Coast Guard and GAO directives.

c. A presentation of the balance sheet and income statements for the year ending 31 January

MWR Audit Statement of Work Page 4 in 2023. The income statement presentation should include a summary of all revenue, expenses and a breakdown showing results for business activities. The balance sheet should also include aged schedules of all account receivables and payables.

IV. METHOD OF PAYMENT & TIME LIMITATIONS

A. Method of Payment.

See the attached vendor payment information sheet for instructions for prompt payment of purchase order.

B. Time Limitations.

Follow the timetable below as closely as possible. The MWR Director and the Contract Auditor may modify this timetable if such modifications would not jeopardize the successful completion of the audit or that such changes would enhance the Contract Auditor’s product.

C. Estimate of Dates for Key Events.

1. On or before 1 April 2023 -- Firm-fixed priced, order-contract awarded.

2. On or about 15 April 20 -- Dates to observe and verify inventory if alternative method of inventory verification is not used; coordinate with the local MWR Director.

3. Open or Negotiable – Begin audit fieldwork; coordinate with the local MWR Director. All field work must be completed by 30 September 2023.

4. 24 October 2023 Deliver preliminary draft report to MWR Director.

5. 15 November 2023 Deliver final audit reports to MWR Director.

MWR Audit Statement of Work Page 5

V. PROPOSAL

A. A firm fixed price proposal, to include all costs, is required. In preparing a proposal for an audit, the Contract Auditor shall describe these:

1. Methodology to be used to perform the audit.

2. Qualifications to perform the audit:

a. Firm’s qualifications, including past MWR audit contracts/experience in government audits that conforms to GAO Standards, and retail auditing experience.

b. Show past performance of MWR Audits.

c. Proposed staff qualifications, including previous government auditing experience that conforms to GAO Standards and retail auditing experience.

d. Procedures to notify the Audit Director of key personnel changes.

e. Staffs’ accounting and auditing CPEs in the last two (2) years.

e. Independence to perform the audit and statement that only Certified Public Accountant, or CPA candidates, will perform field audit work for the engagement.

f. A statement that there exists no conflict of interest or related-party involvement, including family or relatives of Coast Guard current or former employees, to perform audit work. Additionally, no members of the audit team performing field work may be current Coast Guard personnel, civilian or military, active duty or reservist.

g. Peer review results from the most recent peer review.

h. Any disciplinary actions against the firm during the past five (5) years.

i. The Contract Auditor shall immediately notify the MWR Director if suspended, disbarred, or declared ineligible by any Federal department or agency, or upon receiving a notice of proposed debarment from another Federal department or agency during the performance of this contract.

j. A statement that the Contract Auditor shall make facilities and operations available to the MWR Director, or designated representative, for audit program and work paper review to jointly benefit both the Contract Auditor and the Office of Exchange and MWR. The Contract Auditor will accompany the MWR Director and other appropriate MWR Sections’ personnel during infrequent on-site visits to the local MWR activity when requested.

B. Contractors shall direct all questions about this Statement of Work and coordinate on-site visits with Mr. Neil Morgan, MWR Director at (808) 842-2953.