ATTACHMENT B - NFR GUIDANCE - 10-2-2019.docx
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- HUD OIG Audit Assistance for Ginnie Mae
- Solicitation number
- 86612720R00001
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This document provides guidance on preparing Notice of Findings and Recommendations (NFRs) related to an audit assistance contract with the Department of Housing and Urban Development Office of Inspector General (HUD OIG). The NFR is used to communicate management or internal control issues identified during the audit. The guidance specifies that NFRs should describe the condition found, cause, applicable criteria, effect, and auditor's recommendation according to Government Accountability Office standards. An NFR should be prepared when the auditor detects a non-existent or weak internal control that could lead to misappropriation of assets or financial misstatement if left uncorrected. The matrix provided indicates when an NFR is appropriate based on the type of error and control environment, such as for repetitive small errors or an isolated large error with weak supervision. The related federal contract opportunity is for audit assistance for HUD OIG's annual financial statement audit of the Government National Mortgage Association.
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Text version
ATTACHMENT B
NFR GUIDANCE
Notice of Findings and Recommendations (NFR) – Description and Purposes
The process of communicating management or internal control issues to the OIG and to the audit entity has been contractually in place for about eight years. The Performance Work Statement (PRS) does not specify criteria or standards to follow, except to provide the format. One element of the OIG’S NFR QUALITY CONTROL Plan is for the COR to provide training to the Contractor staff in the preparation, review and reporting of NFRs.
The NFR is based upon the GAO Yellow Book standards that findings should describe the (a) Condition (s) found, (b) the primary Cause (s) for those conditions, (c) the Criteria that the auditor believes should apply, (d) conclusions about why the condition deviates from the accepted laws, regulations, policies, procedures, and practices known as the Effect and (d) the auditor’s Recommendation(s) to correct the control deficiency.
The key question is when should the auditor prepare an NFR? The simple answer is when she or he detects either a non-existent or a weak internal control that, if left uncorrected, could lead to either misappropriation of assets or a misstatement in financial reporting. The abbreviated matrix below provides one form of guidance of when to exercise this judgment. However, it is not a substitute for professional judgment or expanding testing to ensure that what appears to be a random or isolated performance error is a control weakness or deficiency.
| Type of Error |
| Control Conditions |
| Prepare NFR |
| Isolated Performance Error |
| - Strong policies, etc. |
- Good supervision
- Satisfactory systems No
| Isolated Large Error |
| - Strong policies, etc. |
- Weak supervision
- Satisfactory systems Yes
| Repetitive Small Errors |
| - Adequate policies, etc. |
- Weak Supervision or
- Weak systems Yes
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