Community Legal Services Program - Auditor Information Kit

Community Legal Services Program - Auditor Information Kit

Dear Centre Manager

INFORMATION KIT FOR AUDITORS

We enclose an audit kit providing information to assist your centre and your auditor to comply with the audit requirements of the Community Legal Services Program (CLSP) Agreement for 2010-13 (the Agreement).

The kit contains a Sample Letter of Engagement detailing the work to be done in the audit with Attachments:

1. Auditor’s Checklist comprising a summary of matters which require specific examination by the auditor.
2. Auditor’s Certification
3. Community Legal Services Information System (CLSIS) Funds Report for individual funding categories and information to assist with its completion and reconciliation to financial reports, and
4. Terms and Conditions of the Agreement regarding reporting requirements.

If you already have audit arrangements in place, there may be no further action required. However, we recommend that you discuss the Letter of Engagement and other elements of the Information Kit with your auditor as soon as possible, to ensure your specific financial reporting requirements are covered.

The Agreement requires that you engage a registered company auditor to complete your audit. If a registered company auditor is not available, please discuss this with your SPM before any audit is undertaken, as approval to use a non-registered company auditor must be obtained from the Commonwealth.

We would like to take this opportunity to remind you that audited financial reports need to be submitted to your SPM by 31 October. We expect you to make every effort to meet this deadline, but if there are extenuating circumstances an extension may be approved.

Should you require further information or assistance in this matter please contact your SPM on

Yours sincerely

Sample Letter of Engagement

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(Your Auditor’s name and address)

Dear Sir/Madam

Letter of Engagement

Purpose

The purpose of this letter is to advise you of our reporting requirements and the scope of the current formal audit of our organisation, and should not be construed to limit or restrict your express or implied duties as our auditor.

Audit Opinion

In the course of examining and reporting on the organisation’s financial statements and Community Legal Services Program (CLSP) Funds Reports, our members (and, through our annual report, our funding bodies) require the following information:

·  an audit opinion of whether the statutory financial statements present the organisation’s financial performance and position fairly, in accordance with applicable Australian Accounting Standards and other mandatory professional reporting requirements, and are based on proper accounts and records,

·  CLSP Funds Reports signed off as complete and accurately reporting use and availability of CLSP funds as required by the CLSP Agreement for 2010-13 [the Agreement], and

·  if it is necessary to qualify this audit opinion in any way, the nature and extent of any qualification, and your suggested remedial action.

To meet the requirements of the Agreement, you will also need to complete the Auditor’s Certification found at Attachment B of this kit.

Audit Approach

The Terms and Conditions of the Agreement state that the audit must be carried out by a registered auditor, being a person who is registered as a company auditor under the Corporations Act 2001, and that this registration number is advised on the audit certification. The audit will be conducted in accordance with the applicable Australian Accounting and Auditing Standards, taking into account any relevant Urgent Issues Group Abstracts.

In developing the audit approach please review our financial systems and procedures, and assess the potential risk to the Organisation’s financial reports of any weaknesses discovered.

In particular, please ensure that:

1. During audit planning and testing:

a)  financial control systems and procedures are reviewed and summarised for the audit file

b)  potential risk is assessed for possible omissions or errors in recording transactions

c)  selection of transactions for testing of controls is based on the assessment of potential risk, and

d)  asset registers and stock takes are reviewed to determine their accuracy, that values are reasonable and that there is sufficient and suitable insurance cover.

2. Annual audited reports are completed in accordance with the Agreement including:

a)  for each funding category, a separate CLSP Funds Report provided in the format used by the Community Legal Services Information System (CLSIS) .. CLSIS reports should include all financial year transactions including any audit adjustments. (Please note details for reconciling Section 2 of the 4th quarter CLSIS Funds Report to Financial Reports can be found in the CLSIS Funds Report Information at AttachmentC)

b)  a Statement of Financial Position for the organisation at the end of the financial year

c)  a Statement of Comprehensive Income for the organisation for the financial year

d)  if the organisation is a reporting entity required to complete General Purpose Financial Reports, a cash flow statement for the organisation for the financial year

e)  where the CLSP activity is a minor portion of the organisation’s activities, a Statement of Financial Position at the end of the financial year giving the position of the CLSP funds provided to the organisation under this and any previous Agreement, and

f)  notes to accounts (if not otherwise clearly identified) specifying details of:

1. changes to written down values of CLSP Assets including totals of purchases, disposals and depreciation
2. legally enforceable commitments beyond the current financial year, and
3. any CLSP Allowable and Excess Surpluses

3. Where an audit qualification or limitation of scope is given in the Audit Opinion, the reasons for the qualification or limitation of scope and the recommended remedial actions are provided. .

The Auditor’s Checklist (Attachment A) may be of assistance in relation to the above matters.

Management Letter

To ensure the organisation’s management is meeting its financial responsibilities please prepare a letter to the management committee summarising any concerns found in the audit with recommended remedial actions or improvements, particularly noting:

a)  if the Organisation has discharged its statutory obligations, especially in relation to meeting funding body, incorporation and taxation requirements

b)  any significant issue found during the audit indicating inadequate or weak internal controls, financial management practices, procedures or systems, or failure to use documented processes

c)  the outcome of the reviews of accuracy of the employee benefits and provisions calculations and the asset registers, and whether insurance coverage is adequate

d)  if CLSP funds are held in a bank account in the Organisation’s name and if sufficient cash is set aside as required to cover the Organisation’s liabilities and accumulated depreciation (to use for asset replacement purposes)

e)  if cash transactions are appropriately controlled and if any tested cash transactions relating to CLSP funds are unapproved or have been used in any other connection than in the provision of CLSP services, or in the acquisition or replacement of assets to provide CLSP services, and

f)  whether board papers and minutes indicate appropriate decision making and financial management processes.

Timing

The financial statements, management letter and independent audit report should be submitted to the organisation’s management committee no later than < insert date >. This will enable the audited financial statements to be passed at the annual general meeting and submitted to the funding agency by 31October. In organising time periods to conduct this audit, please be aware that late submission of the audited financial statements constitute a breach of the Agreement conditions applying to this organisation and may lead to the withholding of CLSP funding support by the Funding Bodies.

If circumstances arise where an extension of time is required, please inform the Organisation of the reasons for the delay before the due date so that written consent for an extension of time can be requested from our Funding Body.

Letter of Engagement

This letter will be effective for the current audit covering the insert year financial year.
We look forward to your written confirmation of the above terms of engagement.

Yours sincerely

(Chairperson of Centre)

(Date)

Attachment A

Auditor’s Checklist

¨ / Reviewed Organisation’s constitution
¨ / Reviewed financial systems, procedures and controls, noting weaknesses
¨ / Determined transactions to test, based on potential risk assessment from review of financial systems, procedures and controls and conducted tests for compliance
¨ / Verified tested expense transactions are appropriately allocated to correct CLSP categories and, where applicable, a fair and appropriate allocation method has been used to distribute shared costs between different programs
¨ / Asset registers and asset stock take checked, values and insurance coverage assessed
¨ / Rent checked to lease, other lease documents checked
¨ / BAS and FBT reports checked
¨ / Individual salary checks made to personnel records, total salaries compared to payment summaries, calculations of employee benefits and provisions’ calculations checked
¨ / CLSP grant income checked to Schedule 1 letters taking into account Grants in Advance transfers.
¨ / Checked unused CLSP grants are reported correctly in Grants in Advance in Financial Reports and Notes to Accounts differentiate CLSP Grants in Advance.
¨ / Checked accuracy and appropriateness of accrual calculations
¨ / CLSP funds banked to accounts in Organisation’s name, funds invested appropriately when not immediately needed, interest correctly recorded
¨ / Checked sufficient cash is held to meet future needs including payments of liabilities and replacement of assets (equivalent to accumulated depreciation)
¨ / Board papers and minutes reviewed for appropriateness, adequacy for financial management processes and any major changes to operations (effects of which also discussed with management and the Chairperson)
¨ / Remedial measures considered for identified weaknesses
¨ / Checked that the Organisation has met relevant Incorporation legislation requirements
¨ / Statements of Comprehensive Income and Financial Position and Notes to Accounts are presented as required in the Australian Accounting Standards.
¨ / Checked Cash Flow Report, if required (if General Purpose Reports are prepared), for accuracy and that it agrees to cash balances in the Statement of Financial Position.
¨ / CLSIS Funds Reports (or similarly formatted reports) are audited – for each category, brought forward balances checked, annual figures checked, capital expenditure checked, other income checked. Items recorded as advised in CLSIS Funds Report Information (included in this kit).
¨ / If CLSP activities are not the major activities of the organisation, a separate Statement of Financial Position for the CLSP position at the end of the financial year is provided and audited.
¨ / Details of changes in CLSP assets (including purchases, sales and depreciation), legal commitments for future years and any CLSP Allowable Surplus and Excess Surplus are shown clearly in either reports or Notes to Accounts.
¨ / Annual Report reviewed (including financial reports)
¨ / Auditor’s certification and independent audit report completed
¨ / Management letter prepared
¨ / Deadline met and all audited reports, auditor’s certification, independent audit report and management letter presented and discussed with the Chairperson

Attachment B

Auditor’s Certification (from Schedule 5 of Current Agreement)

Name of Organisation:
Financial Year Period: / ...... / …… / …….. to ...... / …… / ……..

I hereby certify that:

(a) I am not a principal, member, shareholder, officer, employee or accountant of the Organisation or of a related body corporate as defined in section 9 of the Corporations Act 2001;

(b) In my opinion, the attached financial statements which comprise a Statement of Financial Position, a Statement of Comprehensive Income (previously known as a Statement of Financial Performance), and Notes to the Financial Statements of the above-mentioned Organisation (‘the Organisation’), and, if general purpose reports are provided, a Statement of Cash Flows, for the stated Financial Year Period are:

i.  based on proper accounts and present true and fair view of the Organisation’s financial position and financial performance in accordance with applicable Accounting Standards and other mandatory professional reporting requirements in Australia, and

ii.  in accordance with the terms and conditions of the Agreement [Insert Names of Parties and Date of Agreement], a copy of which has been made available to me, in relation to the provision of community legal services.

(c) The fourth quarter CLSIS Funds Report, containing details of the Organisations transactions for the financial year, including audit adjustments, and the Organisation’s grant position at the beginning and end of the financial year is provided in respect of funds provided in accordance with the Terms and Conditions of the Agreement referred to in b.ii above for all Funding Categories.

This is a qualified/unqualified audit report [Deleted whichever is not applicable]. If the report is a qualified report, the qualified audit report must be attached.

Unless written under separate cover, I hereby further certify that, in my opinion, there is no conflict of interest between myself and the Organisation or its Management Committee.

AUDITOR DETAILS
Full Name:
Name of Company (if applicable):
ACN or ABN Number:
Registered Auditor:
* Yes * No / If Yes:
Registration No.: ………………………….
Signature:
Date: / ...... / …… / ……..

Attachment C. CLSIS Funds Report

This is the format for the CLSIS Funds Report as it appears on CLSIS.

CLSIS Funds Report Information

The CLSIS Funds Report is used to inform the CLSP funding bodies of the use and availability of grant funds. Unused or overused funds from the previous year are combined with income from the current year. Expenses and permitted capital expenditure in the year are deducted from the available funds to calculate the balance of funds to transfer to the next year.

Four Sections

The CLSIS Funds Report is divided into four sections:

Section 1 brings forward unused or overused funds from the previous year. These are automatically transferred to the Funds Report from the current year’s CLSIS budget.

Section 2 reports the values of actual year to date (YTD) income and expenses, YTD budget, variance of actual to budget and % of total budget. Accrued income and expenses provide the value of all the period’s activities, whether paid, invoiced but not paid, or estimated. Income includes CLSP recurrent and one-off, Commonwealth and State grants, the value of any capital contribution (either in equipment or cash) and other income generated from CLSP grants or activities (service generated income) due for the period.