ATTACHMENT B NFR GUIDANCE.pdf
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This document provides guidance on preparing Notices of Findings and Recommendations according to Government Auditing Standards. It defines the purpose of NFRs as communicating management or internal control issues to auditors and the audited entity. NFRs should describe the condition found, cause, applicable criteria, effect, and auditor's recommendation. The guidance specifies when an auditor should prepare an NFR based on the type of error and control conditions, such as for isolated large errors or repetitive small errors under weak supervision or systems.
A separate section describes a federal contract solicitation for audit services. The Bureau of Fiscal Service is soliciting proposals on behalf of the HUD OIG for financial auditing of HUD Consolidated and FHA statements. Interested offerors must submit questions by August 26th and proposals in four volumes by September 15th, including technical approach, quality control plan, management plan with past performance references, socioeconomic participation plan, and price proposal. The resulting contract will be labor hour.
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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
| ATTACHMENT B |
| NFR GUIDANCE |
| Notice of Findings and Recommendations (NFR) – Description and Purposes |
| Prepare NFR |
| Control Conditions |
| Type of Error |
| No |
| Yes |
| Yes |
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