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Circular No. A-50
September 29, 1982
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Audit Followup
1. Purpose. This circular provides the policies and
procedures for use by executive agencies when considering reports issued
by the Inspectors General (IGs), other executive branch audit
organizations, the General Accounting Office (GAO), and non-Federal
auditors where followup is necessary.
2. Rescissions. This revision replaces and rescinds Circular
No. A-50, "Executive branch action on General Accounting Office reports,"
Revised, dated January 15, 1979, and incorporates
certain provisions previously set forth in Circular A-73, "Audit of
Federal operations and programs," Revised, dated November 27, 1979.
a. Budget and Accounting Act of 1921, as amended (31 USC 16 & 53).
b. Section 236 of the Legislative Reorganization Act of 1970.
c. Supplemental Appropriations and Rescissions Act of 1980 (P.L.
d. Appropriations Act of 1981 (P.L. 96-526).
e. 4 CFR 101-105, Federal Claims Collection Standards.
f. GAO Policy and Procedures Manual for Guidance of Federal
Agencies (Title 2-Accounting).
4. Background. The principal objectives of this revision are:
a. To specify the role of the designated audit followup
officials, and the role of Inspectors General with regard to audit followup.
b. To strengthen the procedures for resolution of audit findings
and corrective action on recommendations contained in audit reports
issued by IGs, other audit organizations, and the GAO.
c. To clarify the applicability of the Circular to regulatory and
d. To emphasize the importance of monitoring the implementation
of resolved audit recommendations in order to assure that promised
corrective action is actually taken.
e. To improve accounting and collection controls over amounts due
the Government as a result of claims arising from audits.
5. Policy. Audit followup is an integral part of good
management, and is a shared responsibility of agency management officials
and auditors. Corrective action taken by
management on resolved findings and recommendations is essential to
improving the effectiveness and efficiency of Government operations.
Each agency shall establish systems to assure the
prompt and proper resolution and implementation of audit
recommendations. These systems shall
provide for a complete record of action taken on both monetary and
non-monetary findings and recommendations.
a. Responses to Audit Reports -- Written comments by
agency officials indicating agreement or disagreement on reported
findings and recommendations. Comments indicating
agreement on final reports shall include planned corrective actions and,
where appropriate, dates for achieving actions. Comments indicating
disagreement shall explain fully the reasons for
disagreement. Where disagreement is based on interpretation of law,
regulation, or the authority of officials to take or not to take action,
the response must include the legal basis.
(1) For most audits, the point at which the audit
organization and agency management or contracting officials agree on
action to be taken on reported findings and
recommendations; or, in the event of disagreement, the point at which
the audit followup official determines the matter to be resolved. A
report may be considered resolved despite the right of
persons outside the agency to negotiate, appeal, or litigate.
Resolution of a report with respect to parties outside the Government
does not preclude further consideration of issues in the report by
(2) For preaward contract audits, the point at which the
agreement is reached, a contract price negotiated, or proposed award
canceled, whichever occurs first.
(3) For GAO reports, the point at which the agency responds
to the Congress, as required by the Legislative Reorganization Act of 1970.
c. Corrective Action -- Measures taken to implement
resolved audit findings and recommendations.
d. Disallowed Costs -- An incurred cost questioned by the
audit organization that management has agreed should not be charged to
a. Agency Head. Agency heads are responsible for:
(1) Designating a top management official to oversee audit
followup, including resolution and corrective action.
(2) Assuring that management officials throughout the agency
understand the value of the audit process and are responsive to audit
b. Management Officials. Agency management officials are
responsible for receiving and analyzing audit reports, providing timely
responses to the audit organization, and taking
corrective action where appropriate. Where management officials
disagree with an audit recommendation, the matter shall be resolved by
the followup official.
c. Audit Followup Official. The audit followup official
has personal responsibility for ensuring that (1) systems of audit
followup, resolution, and corrective action are documented and
in place, (2) timely responses are made to all audit reports, (3)
disagreements are resolved, (4) corrective actions are actually taken,
and (5) semi-annual reports required by paragraph 8.a. (8)
below are sent to the head of the agency.
d. Inspectors General. Inspectors General or other audit
officials are responsible for (1) making independent audits and
investigations of their agencies' programs, operations, activities,
and functions; (2) overseeing the work of non-Federal auditors performed
in connection with Federal programs; and (3) reviewing responses to audit
reports and reporting significant disagreements to the audit followup
e. Comptroller General. The Comptroller General is the
head of the GAO, a legislative branch agency responsible for auditing and
evaluating programs, activities, and financial operations of the
8. Action Requirements.
a. Follow-up Systems. Agencies shall assign a high
priority to the resolution of audit recommendations and to corrective
action. Systems for resolution and corrective action must
meet the following standards:
(1) Provide for appointment of a top level audit followup official.
(2) Require prompt resolution and corrective actions on audit
recommendations. Resolution shall be made within a maximum of six months
after issuance of a final report or, in the
case of audits performed by non-Federal auditors, six months after
receipt of the report by the Federal Government. Corrective action
should proceed as rapidly as possible.
(3) Specify criteria for proper resolution and corrective
action on audit recommendations, whether resolution is in favor of the
auditor or an auditee. These criteria
should provide for written plans for corrective action with specified
action dates, where appropriate.
(4) Maintain accurate records of the status of audit reports
or recommendations through the entire process of resolution and
corrective action. Such records shall include
appropriate accounting and collection controls over amounts determined
to be due to the Government.
(5) Provide a means to assure timely responses to audit
reports and to resolve major disagreements between the audit organization
and agency management or contracting officials.
The process should provide sufficient time to permit resolution to take
place within the six month limit.
(6) Assure that resolution actions are consistent with law,
regulation, and Administration policy; and include written justification
containing, when applicable, the legal basis for decisions not agreeing
with the audit recommendation.
(7) Provide for coordinating resolution and corrective
action on recommendations involving more than one program, agency, or
level of Government.
(8) Provide semi-annual reports to the agency head on the
status of all unresolved audit reports over six months old, the reasons
therefor, and a timetable for their resolution; the
number of reports or recommendations resolved during the period; the
amount of disallowed costs; and collections, offsets, write-offs, demands
for payment and other monetary benefits resulting from audits. These
reports should include an update on the status of previously reported
(9) Provide for periodic analysis of audit recommendations,
resolution, and corrective action, to determine trends and system-wide
problems, and to recommend solutions.
(10) Assure that performance appraisals of appropriate
officials reflect effectiveness in resolving and implementing audit
(11) Provide for an evaluation of whether the audit followup
system results in efficient, prompt, and proper resolution and
corrective action on audit recommendations. The first
evaluation will be made within one year of the date of this Circular,
and evaluations will be made periodically thereafter.
b. Special Requirements. The following additional
requirements apply to General Accounting Office reports:
(1) Draft Reports. The GAO normally issues draft
reports to agencies for their review and comment, so that final reports
may incorporate agency views. In accordance with 31 USC 53(f) (1),
agencies shall provide comments on draft GAO reports with
30 days of issuance. However, the law provides that, if an agency cannot
respond to a report within 30 days, the agency may request additional
time from GAO to comment.
(2) Final Reports. The GAO issues final reports to
the Congress or the head of an agency. Agencies are required to respond
to these reports in accordance with instructions
contained in paragraphs (3) and (4) below.
(3) Statements to the Office of Management and
Budget. The agency head will submit a statement to the Director of
OMB within 60 calendar days after formal transmittal of a
GAO report to the agency when at least one of the following applies:
(a) The report contains a specific recommendation for the
head of the agency;
(b) The report contains financial statements accompanied by
either a qualified audit opinion or a disclaimer of opinion:
(c) The report indicates a violation of the Antideficiency
Act which has not been reported to the appropriate authorities;
(d) The report indicates a violation of other laws; or
(e) When requested to comment by OMB.
The agency statement should identify the GAO report by number and date
(i.e., GAO/GGD-82-00, dated January 30, 1982), and be submitted in
duplicate. It should inform the OMB of the agency views on the findings
and recommendations made by the GAO. It should
also identify any action taken, or planned, in response to each
significant finding or recommendation.
If the agency response to a draft GAO report accurately and adequately
reflects its current views, a copy of those comments will be sufficient.
When corrective action is incomplete, still under study, or planned, the
agency will include a statement of when it expects action to be
completed, and will report on corrective action after it is completed.
The agency should include in its statement to OMB copies of statements
required by Section 236 of the Legislative Reorganization Act of 1970.
See paragraph (4) below. These statements may be used to satisfy the
initial reporting requirements to OMB. The
statements should be accompanied by any additional information not
provided to the Congress, but required by this section of the Circular.
(4) Statements to Congressional Committees. In
accordance with Section 236 of the Legislative Reorganization Act of
1970, when a GAO report contains recommendations to the
head of an agency, the agency shall:
(a) Submit a written statement to the Senate Committee on
Governmental Affairs and the House Committee on Government Operations, no
later than 60 days after the date of such report. This statement will
report the action taken or to be taken by the agency with respect to
the recommendations to the head of the agency.
(b) Submit a written statement to the Committees on
Appropriations of the Senate and the House of Representatives, in
connection with the first request for appropriations for that
agency submitted to the Congress more than sixty days after the date of
the GAO report. This statement will report the action taken by the
agency with respect to the recommendations to the head of the agency.
Two copies of the above statements will be submitted on the same date to
the OMB and the GAO.
(5) Advance Clearance and/or Coordination Requirements.
Agency statements to Congressional committees, individual Members of
Congress or the GAO, will be subject to
advance coordination and/or clearance by OMB when the statement:
(1) Expresses views on proposed or pending legislation. See
Circular A-19, "Legislative coordination and clearance."
(2) Deals with other agencies, or with executive branch budget
Requests for advance clearance and/or coordination will be addressed to
the Director, OMB, and will be forwarded in duplicate. Clearance action
will be completed prior to transmittal of the statement.
9. Applicability to Regulatory Audits. The requirements for
resolution and corrective action contained paragraph 8.a. shall be
applied to those reports of agency units responsible for
regulatory or inspection activities involving the review of financial
matters that may result in:
(a) Fines or penalties;
(b) Assessments or price adjustments; or
(c) Other monetary recoveries by the Government.
The agency audit followup official shall ensure that appropriate
followup systems are in place for these units. Separate subsystems may
10. Applicability to Preaward Contract Audits. Audit reports
involving recommendations on contractor estimates of future costs are
subject to the provisions of this Circular. However, since such reports
generally are resolved by negotiation of
a contract price, they are not subject to the time limits or reporting
requirements set forth in paragraphs 8.a.(2), (5), and (8). The
requirement for records on the status of reports
set forth in paragraph 8.a.(4) may be met by records maintained in
official contract files.
11. Accounting and Collection Controls. In order to ensure
effective recovery action, each agency will establish accounting and
collection controls for amounts due the
Government as a result of resolved audit findings and recommendations.
Unless otherwise required by statute, all claims arising from audit
disallowances shall be collected in accordance with Federal Claims
a. Recording Receivables. Amounts due the Government
shall be recorded promptly as accounts receivable on the completion of
the acts which entitle an agency to collect such amounts. For example,
on matters where the auditor has the authority
to make final determinations, such determinations are to be recorded as
receivables at the time the audit report is issued. Audit
recommendations that are subject to management concurrence will be
recorded as accounts receivable within 30 days of being resolved.
The recording of the receivable is to be accomplished even though the
decision to collect is subject to administrative appeal or litigation by
persons outside the agency.
b. Interest Charges. Interest on audit-related debts shall
begin to accrue no later than 30 days from the date the auditee is
notified of the debt. To discourage
unwarranted appeals, interest shall continue to accrue while the appeal
is underway. The interest rate applied shall be that prescribed by the
Treasury Fiscal Requirements Manual (I TFRM 6-8000).
c. Allowance for Uncollectable Amounts. Consideration
shall be given to the potential for collecting audit-related debts. An
allowance account shall be established to reflect that amount of
receivables estimated to be uncollectable.
d. Payment of Debts. Procedures should be established to
assure that the payment of audit-related debts does not result in charges
to other Federal programs or in a reduced level of program activity.
e. Exception. There may be instances where a portion of
the funds on a grant, contract, or other agreement are held back: (1) as
a safeguard against overpayment; (2) pending completion, final inspection
or approval of work; or (3) in accordance with
other provisions of a grant or contract. In such instances, it is not
necessary to record a receivable, since disallowed costs may be offset
against undisbursed funds in the grant or contract audited.
12. OMB Responsibility. OMB will continue to work with agency
audit followup officials and Inspectors General to ensure that the
provisions of this Circular are implemented.
13. Information Contact. Inquiries should be directed to the
OMB Financial Management Division at 395-3993 or to the OMB Debt
Collection Staff at 395-3967.
14. Sunset Review Date. This Circular shall have an independent
policy review to ascertain its effectiveness three years from the date