FMCS Financial Audit SOW Finalized.pdf

Statement of Work (SOW) FMCS Financial Audit Services

1.0 Introduction

The Federal Mediation and Conciliation Service (FMCS) is an independent agency of the Federal Government responsible for promoting the development of sound and stable labor‑management relationships, preventing or minimizing work stoppages by assisting labor and management in resolving disputes through mediation, and advocating collective bargaining, mediation, and voluntary arbitration as preferred methods of dispute resolution. FMCS also advances the art, science, and practice of conflict resolution and supports the establishment and maintenance of constructive joint processes that improve labor‑management relationships, employment security, and organizational effectiveness.

FMCS employs approximately 91 full‑time equivalent employees across 6 regions, including Headquarters in Washington, DC, and operates with approximately $7.4 million in annual appropriated and reimbursable funding. As part of its statutory responsibilities, FMCS must maintain accurate, reliable, and compliant financial reporting.

1.1 Problem Statement

FMCS must undergo an annual financial statement audit to meet federal statutory and regulatory requirements; however, the agency does not have internal capabilities to perform an independent audit as required by GAGAS and OMB Bulletin 24-02. Without contractor support, FMCS risks noncompliance with federal audit mandates, delayed financial reporting, and undetected financial management deficiencies. The objective is to obtain a complete, independent audit that provides FMCS with an audit opinion, identifies any internal control weaknesses, and ensures compliance with all applicable federal financial management requirements.

1.2 Statement of Need

FMCS requires independent audit services to evaluate the accuracy and fairness of its annual financial statements and to verify compliance with federal financial management laws, internal control requirements, and reporting standards. Because federal audit standards mandate auditor independence and FMCS does not have internal audit personnel capable of performing a GAGAS‑compliant financial statement audit, an external contractor is necessary. The Contractor’s work will enable FMCS to meet statutory audit requirements, identify internal control weaknesses, ensure proper financial reporting, and support effective financial management across the agency.

2.0 Background

FMCS utilizes the Department of the Treasury’s Administrative Resource Center (ARC) as its shared service provider for financial management system support. ARC provides accounting, reporting, budget processing, payroll accounting, accounts payable and receivable, cash management, and related financial services. FMCS also utilizes the following systems:

• Financial Management System: ARC Oracle Financial Platform

• Travel System: Concur (via Treasury ARC)

• Human Resources and Payroll: Paycheck8 (via USDA National Finance Center)

FMCS is required to comply with applicable federal financial management and audit laws, regulations, and guidance, including but not limited to:

• Chief Financial Officers Act of 1990

• Federal Managers’ Financial Integrity Act of 1982

• Federal Financial Management Improvement Act of 1996

• Antideficiency Act

• Office of Management and Budget (OMB) Bulletin No. 24-02, Audit Requirements for Federal Financial Statements

• Government Auditing Standards (GAGAS)

A comprehensive, independent audit is required annually to ensure FMCS’s financial information is fairly presented, reliable, and compliant with applicable laws and regulations.

3.0 Objective

FMCS’s primary objective is to obtain an independent audit of the agency’s annual financial statements to ensure they are fairly presented and audited in accordance with applicable federal requirements and regulations. The Contractor shall perform the audit in accordance with generally accepted auditing standards (GAAS), Government Auditing Standards (GAGAS) issued by the Comptroller General of the United States, and the requirements of OMB Bulletin No. 24-02, Audit Requirements for Federal Financial Statements.

The audit objectives include, but are not limited to:

• Determining the effects of misstatements and internal control weaknesses on:

o The achievement of FMCS operational control objectives o The accuracy and reliability of financial reports prepared by FMCS o The formulation and execution of the agency’s budget

• Evaluating whether key control activities are properly designed and placed in operation, even when broader control environment weaknesses may limit their effectiveness

• Assessing FMCS’s compliance with applicable financial management laws, regulations, and federal accounting standards

• Providing recommendations for corrective actions to strengthen internal controls and improve FMCS financial management processes

4.0 Scope of Work

The Contractor shall perform all necessary audit work to issue an independent audit opinion and required accompanying reports. The audit shall be conducted in accordance with:

• Government Auditing Standards (GAGAS)

• Generally Accepted Auditing Standards (GAAS)

• American Institute of Certified Public Accountants (AICPA) auditing standards, as applicable

• Office of Management and Budget (OMB) Bulletin No. 24-02

• Federal Financial Management Improvement Act (FFMIA) requirements

The Contractor shall:

• Develop an audit strategy and audit plan consistent with assessed risk, materiality, and applicable quality standards

• Evaluate internal controls over financial reporting, financial system compliance, and reporting processes

• Perform substantive testing, analytical procedures, and audit sampling as required

• Document audit work, findings, conclusions, and recommendations in accordance with GAGAS

• Prepare all required audit reports and related deliverables in accordance with federal audit guidance

4.1 Auditor Independence and Peer Review

The Contractor shall meet all independence requirements under Government Auditing Standards (GAGAS) and shall remain independent throughout the period of performance.

Prior to the commencement of audit fieldwork, the Contractor shall provide, upon request, a written assertion that it is independent of the Federal Mediation and Conciliation Service (FMCS) in accordance with GAGAS.

The Contractor shall have undergone an external peer review in accordance with GAGAS and shall provide, upon request, a copy of its most recent peer review report, including any findings and the status of corrective actions.

The Contractor shall immediately notify the Contracting Officer in writing of any circumstances that may impair, or appear to impair, the Contractor’s independence during performance of this contract.

5.0 Work Breakdown Structure (WBS) and Specific Tasks

The following Work Breakdown Structure (WBS) reflects detailed tasks required to conduct a complete, compliant financial statement audit. These tasks fully incorporate and expand upon the requirements of the previous SOW to ensure no elements are omitted.

5.1 Planning and Understanding FMCS Operations

The Contractor shall obtain a sufficient understanding of FMCS to plan and perform the audit in accordance with applicable auditing standards (GAGAS, GAAS, and OMB Bulletin No. 24-02). As part of audit planning, the Contractor shall:

• Gather information to obtain an overall understanding of FMCS’s origin, history, size, locations, and organizational structure

• Understand FMCS’s mission, major business processes, and strategic priorities

• Identify inherent risks, fraud risks, risk assessment processes, monitoring activities, and the control environment

• Review significant accounting policies and identify key accounting issues

This understanding enables early identification and resolution of accounting and auditing issues. The Contractor’s understanding need not be exhaustive but shall include:

• FMCS management and organizational structure

• External factors affecting operations

• Internal factors affecting operations

• Significant accounting policies and issues

5.2 Management and Organizational Assessment

The Contractor shall identify key members of FMCS management and obtain a general understanding of how the organization is structured and managed. This includes:

• Understanding FMCS leadership roles, reporting lines, and management style

• Identifying process owners and responsible officials relevant to the audit

• Determining key personnel responsible for financial operations, internal controls, and reporting

5.3 External and Internal Factors Assessment

The Contractor shall identify significant external and internal factors that affect FMCS operations, including but not limited to: External factors:

1. Funding sources and the nature of appropriations

2. Seasonal or cyclical fluctuations

3. Current political or regulatory climate

4. Relevant legislation or federal mandates

Internal factors:

1. Size of FMCS and staffing levels

2. Number and distribution of office locations

3. Degree of centralization vs. decentralization

4. Complexity of operations

5. Information system architecture

6. Qualifications and competencies of key personnel

7. Turnover or staffing instability

5.4 Audit Reporting Requirements

The Contractor shall prepare audit reports in accordance with OMB Bulletin No. 24-02, including:

• An independent auditor’s opinion on FMCS’s financial statements, internal control over financial reporting, and compliance with applicable laws and regulations, in accordance with OMB Bulletin No. 24-02.

• Relevant information obtained during the audit

• Information likely to be useful in future audits, documented in a permanent file

• Any understandings reached with FMCS requesters and management

• A written management letter containing suggestions for improvement for matters that are or are not classified as significant deficiencies, material weaknesses, or reportable conditions

• The Contractor shall review and assess FMCS management’s responses and corrective action plans related to audit findings for completeness and reasonableness.

The Contractor shall prepare all required audit reports and associated materials in final, professional format. This includes, but is not limited to presentation materials suitable for executive briefings, out briefs, and submission to oversight entities, as applicable.

5.5 Identification and Communication of Reportable Conditions Throughout audit performance, the Contractor may identify issues requiring timely communication. The Contractor shall:

• Document the nature of each reportable condition

• Identify the criteria, cause, potential effect, and any suggestions for improvement

• Communicate these issues promptly to the FMCS Director of Finance and COO upon identification

• Use a structured method for documenting issues to aid communication within the audit team and with FMCS management

Reportable matters shall be discussed with management as identified, rather than waiting for the exit conference.

5.6 FMCS Profile Documentation

The Contractor shall prepare or update an FMCS Profile (or equivalent document) capturing all relevant information gathered in the planning phase, including:

• FMCS’s origin and history

• Size, locations, and organizational structure

• Mission and statutory responsibilities

• Results of prior and current audits

• Accounting and auditing considerations relevant to FMCS

The profile shall be limited to information pertinent to audit planning and shall be updated annually for changes.

5.7 Flux Analysis and Analytical Procedures Document

The Contractor shall prepare a Flux Analysis and Analytical Procedures Document (or equivalent audit planning file) that includes:

• Preliminary analytical procedures and results

• Data used, including:

o Financial item amounts o Periods covered o Whether data are audited or unaudited o Source of data and responsible individuals

• Parameters for identifying significant fluctuations

• Explanations obtained for significant fluctuations, including sources and responsible personnel

• Auditor’s conclusions and the impact of analytical results on the audit strategy

This document shall serve as part of the overall audit planning documentation and guide the execution of substantive procedures.

6.0 Deliverables

The Contractor shall conduct an entrance conference at the start of each audit cycle and an exit conference upon completion of audit fieldwork. These conferences shall include FMCS financial management leadership, the COR, and other designated officials. The Contractor shall present preliminary findings, significant issues, and proposed recommendations to FMCS management as they are identified during audit performance and shall provide a consolidated summary of such items at the exit conference prior to issuance of draft reports.

All deliverables identified in this section shall be submitted in sufficient time to allow FMCS to meet all applicable Office of Management and Budget (OMB), Department of the Treasury, and governmentwide financial reporting deadlines.

All deliverables shall be reviewed and accepted by the Contracting Officer’s Representative (COR) within ten (10) business days of submission. Deliverables not meeting contractual requirements may be returned for revision at no additional cost to the Government.

Deliverable Reference Schedule PBC List Section 6.1 TBD at audit start Entrance Conference Materials

Section 6.0 Mutually Agreed upon time within one month of award.

Exit Conference Materials Section 6.0 Completion of Audit fieldwork

Status Reports and meetings Section 6.2 Monthly Issues and Findings Log Section 5.5 Updated throughout audit performance Draft Financial Statements Audit Report

Section 5.4 Draft: November 20XX

Final Financial Statements Audit Report

Section 5.4 Final: November 20XX

Statement of Assurance Section 5.4 Draft/Final: November

20XX

Compliance Report Section 5.4 Draft/Final: November

20XX

Management Letter Section 5.4 As needed Flux Analysis & Analytical Procedures

Section 5.7 June 20XX / September

20XX

Final Deliverables Package All Sections Contract Closeout

6.1 PBC List

The Contractor shall provide a complete PBC (Provided by Client) list in Excel with due dates, responsibilities, descriptions, and comments. A secure electronic exchange method compliant with OMB/NARA M‑19‑21/M23-07 is required.

6.2 Status Reports

Status reports shall summarize progress, issues, completed work, and upcoming milestones.

6.3 Additional Deliverables

Additional deliverables may be requested in writing by the Contracting Officer. Only the Contracting Officer may modify this contract, including adding, removing, or changing deliverables, acceptance criteria, or performance standards. The COR may review deliverables and provide technical clarification but may not direct the Contractor to perform work outside the scope or modify contract requirements.

7.0 Period of Performance

The period of performance consists of:

• Base Period: 12 months

• Option Year 1: 12 months

• Option Year 2: 12 months

• Option Year 3: 12 months

• Option Year 4: 12 months

Each option year may be exercised at the discretion of the Government.

8.0 Place of Performance

Primary performance will be remote. Work at FMCS Headquarters (250 E Street SW, Washington, DC 20427) may occur but is not anticipated. No travel outside the Washington, DC metropolitan area is expected.

8.1 Government-Furnished Information (GFI)

FMCS will provide the Contractor with the information and system access reasonably necessary to perform the audit, which may include: - Prior-year audited financial statements and reports - Internal control documentation - FMCS financial policies and procedures - Access to ARC-generated financial reports and data extracts - Access to Concur travel reports, Paycheck8 HR/payroll data, and other relevant system outputs - Management-prepared schedules, reconciliations, and supporting documentation

FMCS will make GFI available electronically unless otherwise specified. The Contractor is responsible for requesting clarification or additional information when needed and for identifying missing or incomplete documentation in a timely manner.

9.0 FMCS Information Custodial Requirements

9.1 Use of FMCS Information

Information made available to the Contractor by FMCS for the performance or administration of this contract, or information developed by the Contractor in performance or administration of the contract, shall be used only for those purposes and shall not be used in any other way without the prior written agreement of the Contracting Officer.

9.2 Data Segregation and Inspection Rights

FMCS information shall not be co‑mingled with any other data on the Contractor’s or subcontractor’s information systems or media storage systems to ensure FMCS requirements related to data protection and media sanitization can be met. FMCS reserves the right to conduct IT resource inspections to verify data separation and to conduct on‑site inspections of information destruction, media sanitization, or disposal procedures to ensure compliance with FMCS policy requirements.

9.3 Data Destruction Restrictions

Prior to termination or completion of this contract, the Contractor shall not destroy information received from FMCS or gathered or created by the Contractor while performing this contract without prior written approval from the FMCS Contracting Officer. Any data destruction performed on behalf of FMCS must comply with National Archives and Records Administration (NARA) requirements.

9.4 Information Handling Requirements

The Contractor shall receive, gather, store, back up, maintain, use, disclose, and dispose of FMCS information only in compliance with the terms of this contract and applicable Federal and FMCS information confidentiality and security laws, regulations, and policies.

Applicable Federal information security regulations include all Federal Information

Processing Standards (FIPS) and Special Publications (SP) issued by the National Institute of Standards and Technology (NIST). If additional Federal or FMCS information confidentiality and security laws, regulations, or policies become applicable after contract execution, the parties agree to negotiate in good faith to incorporate those requirements into the contract.

9.5 Restrictions on Copying

The Contractor shall not make copies of FMCS information except as necessary to perform the terms of the agreement or to preserve electronic information stored on Contractor electronic storage media for restoration purposes should any electronic equipment or data used by the Contractor require restoration to an operational state.

9.6 Violations and Remedies

If FMCS determines that the Contractor has violated any of the information confidentiality, privacy, or security provisions of this contract, such violation shall be sufficient grounds for FMCS to terminate the contract for default or terminate for cause under Federal Acquisition Regulation Part 12.

10.0 Personal Conflicts of Interest

Contractor personnel shall avoid personal conflicts of interest and may not participate in matters affecting their own financial interests or those of close associates. Impartiality must be maintained at all times.

11.0 Security and Confidentiality

The Contractor shall ensure that all personnel performing work under this contract protect nonpublic FMCS information in accordance with applicable federal laws, regulations, and contract clauses.

Contractor personnel who require access to nonpublic FMCS information shall execute a nondisclosure agreement (NDA) approved by the Government prior to receiving such access.

Any nondisclosure agreement executed under this contract shall:

• Be approved and executed by the Contracting Officer;

• Apply solely to nonpublic FMCS information accessed during performance of this contract;

• Not restrict lawful disclosures to the Office of Inspector General, Congress, or other authorized oversight entities;

• Not limit whistleblower protections provided under federal law; and

• Not conflict with the Freedom of Information Act (FOIA), Privacy Act, or federal records retention requirements.

The execution of an NDA shall not relieve the Contractor of its obligations under this contract, including compliance with all information security, confidentiality, and data protection requirements.

12.0 Performance Assessment

Contractor performance will be assessed based on compliance with: - Government Auditing Standards (GAGAS) - OMB Bulletin No. 24-02 - Requirements set forth in this SOW

- The deliverable schedule established for the annual audit

The COR will determine acceptability of deliverables based on adherence to these standards, completeness of required documentation, timeliness of submissions, and responsiveness to FMCS inquiries during the audit process.

13.0 Definitions

The following definitions apply to this SOW:

13.1 Audit Finding

An issue identified during the audit that shows a deviation from laws, regulations, internal controls, or established financial standards.

13.2 Material Weakness

A deficiency or combination of deficiencies in internal control such that there is a reasonable possibility that a material misstatement will not be prevented or detected in a timely manner.

13.3 Significant Deficiency

A deficiency, or combination of deficiencies, that is less severe than a material weakness but important enough to merit attention by those charged with governance.

13.4 Reportable Condition

An internal control deficiency that auditors determine must be communicated to management due to importance or risk.

13.5 Flux Analysis

An analytical procedure comparing financial statement line items across periods to identify fluctuations requiring explanation.

13.6 FFMIA Compliance

Meeting requirements related to federal financial management systems, federal accounting standards, and the U.S. Standard General Ledger.

13.7 GAGAS (Yellow Book)

Government Auditing Standards issued by GAO, which establish requirements for audits of government organizations, programs, activities, and functions.

13.8 ARC (Administrative Resource Center)

Treasury’s shared service provider supporting FMCS’s financial systems, accounting operations, and reporting.

13.9 Provided by Client (PBC) List

A list of documentation, reports, and data required by the Contractor to perform the audit.

14.0 References

• Chief Financial Officers Act of 1990

• Federal Managers’ Financial Integrity Act of 1982

• Federal Financial Management Improvement Act of 1996

• Antideficiency Act

• Government Auditing Standards

• OMB Bulletin 24‑02

• FMCS audit reports located at https://www.fmcs.gov/resources/documents-and-data/

14.0 References