ES, IG-99-050, Sheridan & Company Audit of the Institute for Global Environmental Strategies, Inc.

SHERIDAN & COMPANY AUDIT OF
THE INSTITUTE FOR GLOBAL ENVIRONMENTAL STRATEGIES, INC., FOR
FISCAL YEARS ENDED JUNE 30, 1997, AND JUNE 30, 1998⁽¹⁾
IG-99-050

Executive Summary

Introduction
The Institute for Global Environmental Strategies, Inc. (IGES), Arlington, Virginia, is a non-profit research corporation. The Concord, Massachusetts, office of Sheridan & Company performed the audits of the IGES organization for the fiscal years ended June 30, 1997, and June 30, 1998. The audit is required by Office of Management and Budget (OMB) Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations" (for details, see Appendix A). The National Aeronautics and Space Administration (NASA) is the Federal agency for oversight for IGES, and the NASA Office of Inspector General (OIG) performed a review of the Sheridan & Company audits of IGES for the fiscal years ended June 30, 1997, and June 30, 1998.

Objectives
The objective of a report review is to determine whether the report submitted⁽²⁾ by the auditee meets the applicable reporting standards in the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 98-3, "Audits of States, Local Governments, and Not-for-Profit Organizations Receiving Federal Awards," and the OMB Circular A-133 reporting requirements (see Appendix B for the details on the standards and reporting requirements).
The objectives of our quality control review were to determine whether the audit was conducted in accordance with applicable standards and whether the audit meets the auditing and reporting requirements of OMB Circular A-133. See Appendix C for details on our quality control review methodology.

Results of Review
We reviewed the Sheridan & Company audit results, audit report format, and related working papers.

Reported A-133 Results. On September 16, 1997, Sheridan & Company issued the audit report for the IGES fiscal year ended June 30, 1997, and on August 27, 1998, issued the audit report for the fiscal year ended June 30, 1998. The auditors identified no findings and questioned no costs. Sheridan & Company issued an unqualified opinion on the financial statements, Schedule of Federal Awards,⁽³⁾ and major program compliance. The auditors also found no instances of noncompliance in the financial statement audit that must be reported under generally accepted government auditing standards. Finally, the auditors identified no material weaknesses related to internal controls for the financial statement or major programs.

Report Quality Review Results. The Sheridan & Company audit reports do not meet the applicable reporting guidance and regulatory requirements of OMB Circular A-133. The audit reports omit the auditor's Schedule of Findings and Questioned Costs (a major component of the report) and contain language from an AICPA audit guide that the AICPA no longer considers to be generally accepted.
Sheridan & Company meet the President's Council on Integrity and Efficiency's definition of a referable action under the Council's Position Statement 4, "IG [Inspector General] Quality Control Referral Procedures." We are referring Sheridan & Company for two reasons. First, the audit firm omitted the Schedule of Findings and Questioned Costs that is required by OMB Circular A-133 ___.505(d) from both years' audit reports. Second, the reports are based on an audit guide that is no longer generally accepted. Therefore, we will refer the audit firm to the AICPA and the Massachusetts Board of Public Accountancy.

Audit Quality Review Results. The Sheridan & Company audit work meets the applicable auditing guidance and requirements contained in: (1) OMB Circular A-133 and its related Compliance Supplement, (2) generally accepted government auditing standards, and (3) generally accepted auditing standards.

Recommendation
We recommend that Sheridan & Company prepare the audit reports and Schedules in accordance with the reporting requirements of OMB Circular A-133 and the AICPA SOP 98-3, "Audits of States, Local Governments, and Not-for-Profit Organizations Receiving Federal Awards."

Management's Response
On September 13, 1999, Sheridan & Company issued revised audit reports for the IGES fiscal years ended June 30, 1997, and June 30, 1998.

Evaluation of Management's Response
We evaluated the revised reports and determined that they meet the reporting requirements of OMB Circular A-133 and AICPA SOP 98-3. We consider Sheridan & Company's prompt issuance of the revised reports responsive to the recommendation. Therefore, no further response to this report or corrective action is required.

FOOTNOTES

1. We have redacted portions of this report due to references to process information. The redacted passages do not affect the validity of this report or management's response.

2. OMB Circular A-133 requires the Federal award recipient to submit the OMB Circular A-133 audit report to the Department of Commerce, Federal Audit Cleringhouse.

3. Rather than referring to the Schedule of Expenditures of Federal Awards, the audit report references "Schedule of Federal Awards," which is the title prescribed in the original OMB Circular A-133, issued March 8, 1990. Hereafter, except in citations from the revised OMB Circular A-133, June 24, 1997, we will refer to this Schedule as the "Schedule of Federal Awards."

Introduction	The Institute for Global Environmental Strategies, Inc. (IGES), Arlington, Virginia, is a non-profit research corporation. The Concord, Massachusetts, office of Sheridan & Company performed the audits of the IGES organization for the fiscal years ended June 30, 1997, and June 30, 1998. The audit is required by Office of Management and Budget (OMB) Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations" (for details, see Appendix A). The National Aeronautics and Space Administration (NASA) is the Federal agency for oversight for IGES, and the NASA Office of Inspector General (OIG) performed a review of the Sheridan & Company audits of IGES for the fiscal years ended June 30, 1997, and June 30, 1998.
Objectives	The objective of a report review is to determine whether the report submitted⁽²⁾ by the auditee meets the applicable reporting standards in the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 98-3, "Audits of States, Local Governments, and Not-for-Profit Organizations Receiving Federal Awards," and the OMB Circular A-133 reporting requirements (see Appendix B for the details on the standards and reporting requirements). The objectives of our quality control review were to determine whether the audit was conducted in accordance with applicable standards and whether the audit meets the auditing and reporting requirements of OMB Circular A-133. See Appendix C for details on our quality control review methodology.
Results of Review	We reviewed the Sheridan & Company audit results, audit report format, and related working papers. Reported A-133 Results. On September 16, 1997, Sheridan & Company issued the audit report for the IGES fiscal year ended June 30, 1997, and on August 27, 1998, issued the audit report for the fiscal year ended June 30, 1998. The auditors identified no findings and questioned no costs. Sheridan & Company issued an unqualified opinion on the financial statements, Schedule of Federal Awards,⁽³⁾ and major program compliance. The auditors also found no instances of noncompliance in the financial statement audit that must be reported under generally accepted government auditing standards. Finally, the auditors identified no material weaknesses related to internal controls for the financial statement or major programs. Report Quality Review Results. The Sheridan & Company audit reports do not meet the applicable reporting guidance and regulatory requirements of OMB Circular A-133. The audit reports omit the auditor's Schedule of Findings and Questioned Costs (a major component of the report) and contain language from an AICPA audit guide that the AICPA no longer considers to be generally accepted. Sheridan & Company meet the President's Council on Integrity and Efficiency's definition of a referable action under the Council's Position Statement 4, "IG [Inspector General] Quality Control Referral Procedures." We are referring Sheridan & Company for two reasons. First, the audit firm omitted the Schedule of Findings and Questioned Costs that is required by OMB Circular A-133 ___.505(d) from both years' audit reports. Second, the reports are based on an audit guide that is no longer generally accepted. Therefore, we will refer the audit firm to the AICPA and the Massachusetts Board of Public Accountancy. Audit Quality Review Results. The Sheridan & Company audit work meets the applicable auditing guidance and requirements contained in: (1) OMB Circular A-133 and its related Compliance Supplement, (2) generally accepted government auditing standards, and (3) generally accepted auditing standards.
Recommendation	We recommend that Sheridan & Company prepare the audit reports and Schedules in accordance with the reporting requirements of OMB Circular A-133 and the AICPA SOP 98-3, "Audits of States, Local Governments, and Not-for-Profit Organizations Receiving Federal Awards."
Management's Response	On September 13, 1999, Sheridan & Company issued revised audit reports for the IGES fiscal years ended June 30, 1997, and June 30, 1998.
Evaluation of Management's Response	We evaluated the revised reports and determined that they meet the reporting requirements of OMB Circular A-133 and AICPA SOP 98-3. We consider Sheridan & Company's prompt issuance of the revised reports responsive to the recommendation. Therefore, no further response to this report or corrective action is required.