Prior to the commencement of the audit, the OSC will conduct an initial meeting. This initial meeting typically includes all the members of the OSC audit team, supervisors, and managers. From the provider’s side, the key members of management should be there. You typically don’t need to include your accountant or attorney in the initial meeting, unless there are significant issues that need to be addressed. If you will be bringing any outside representation, such as legal counsel, it is imperative that you notify the OSC so that they can have their attorneys present at the meeting also.
The purpose of this meeting is to discuss audit protocols and such, but it is also for the OSC to ask certain questions about the agency. The questions asked are in response to the information that you provided them and typically evolves around:
- Related Parties and less-than-arms-length transactions: The OSC was looking to ensure that had a full understanding who the related parties are (including related employees) and asked specific questions based upon CFR-5, responses to the questionnaire you completed, and other information you provided.
- The questionnaire you completed as part of your initial package: The OSC will ask questions about controls and responsibilities from an internal control perspective, much of which was outlined in the initial questionnaire.
- Your organization chart: The OSC is interested in understanding your flow of information, positions in place, and the oversight that exists within the organization.
- A review of your general ledger: The OSC will ask questions regarding costs within your general ledger to see how you allocate costs and how you capture disallowed costs. In past meetings, the focus has been on food costs, travel, auto expenses, fringe benefits, etc.
- The programs you run: The predominant focus of the audit will be on tuition based programs. During the initial meeting, the OSC traditionally asks questions about the tuition based programs to understand where the services are provided, are they under collaborative agreements, where SEIT services are provided, etc.
- Other available information: The OSC will ask questions about staff performance reviews, job descriptions, and similar documentation.
This list is not all-inclusive, and your particular situation may prompt additional questions.
The initial meeting will last between 1 and 2 hours and you can utilize this meeting to ask questions about the process. Consider documenting what was discussed during this and future meetings you have with the OSC and its representatives.
Kenneth R. Cerini, CPA, CFP, FABFA
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.