Audit of the Communitas, Inc. and Affiliates Objectives, Scope, and Methodology

An overview of the purpose and process of auditing the Communitas, Inc. and Affiliates.

Overview

In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of certain activities of Communitas, Inc. and Affiliates for the period July 1, 2015 through June 30, 2018.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Below is a list of our audit objectives, indicating each question we intended our audit to answer and the conclusion we reached regarding each objective.

Objective	Conclusion
Are the administrative and program expenses charged to state contracts reasonable, allowable, and properly documented according to Section 1 of Title 808 of the Code of Massachusetts Regulations (CMR)?	Yes
Did Communitas identify and report all of its nonreimbursable expenses, with the appropriate non-state revenue to offset these expenses?4	Yes

 

To achieve our audit objectives, we gained an understanding of the internal controls we determined to be relevant to our audit objectives and tested the operating effectiveness of controls over expenditures. We conducted further testing as described below.

• We selected a statistical sample of 30 non-payroll expenditures (totaling $13,216) from a population of 45,923 transactions (totaling $13,856,193), with a confidence level of 95% and a tolerable error rate of 10%, to determine whether any nonreimbursable costs were not reported. Because the type of error we found (taxes paid that should have been reported as nonreimbursable costs) would not affect the entire population, we did not project the results to the entire population.
• We selected a nonstatistical judgmental sample of 12 out of 36 monthly credit card statements, which consisted of credit card charges for four months (November, December, May, and June) of each fiscal year during our audit period. Our sample consisted of 492 transactions (totaling $100,705) from a population of 1,420 transactions (totaling $279,159). We then reviewed the charges to determine whether they were reasonable, allowable, and properly documented. Because we used nonstatistical sampling, we did not project the results to the entire population.
• We reviewed all fiscal year end accounting entries posted to the general ledger for evidence of cost shifting (reallocation) between programs.
• We reviewed all general ledger expense transactions categorized as “non-reimbursable costs” in 808 CMR 1 (to which the Uniform Financial Statement and Independent Auditor’s Report [UFR] refers as “non-reimbursable expense details”) to determine whether the items purchased were reported in the UFR as “non-reimbursable expense details.”

We reconciled offsetting revenue from the general ledger to the UFRs to determine whether it was appropriately recorded in the UFRs. We then selected a nonstatistical sample of 21 transactions from a population of 176 general ledger offsetting revenue transactions (investment income, contributions, property sales, and commercial income) to determine whether they met the definition of “offsetting revenue” in 808 CMR 1.02.

Data Reliability Assessment

To determine the reliability of the information obtained from the automated accounting system, we conducted information security testing by reviewing policies and procedures, conducting interviews, and performing observations. Additionally, we performed validity and integrity tests of the data, which included (1) scanning for duplicate records, (2) tracing a sample of 10 expense documents to the general ledger, and (3) tracing a sample of 10 expense transactions in the general ledger to supporting expense documentation. Communitas’s automated general ledger is the basis for the preparation of its UFRs that are audited annually by an independent public accountant. Because of these factors, we determined that the data obtained from the accounting system were sufficiently reliable for the purpose of our audit.

4.    The Operational Services Division has an “Audit Resolution Policy” that establishes specific resolution standards with which state agencies must comply. The standards state that nonreimbursable expenses are subject to recovery through recoupment, delivery of in-kind services, or rate adjustment. However, under an Operational Services Division policy, human-service providers are not required to repay expenses that an audit has identified as nonreimbursable if they have received sufficient non-state contract revenue. In such cases, providers can adjust and refile the financial statements they previously submitted to the division to show that non-state funds were used to pay for (i.e., offset) the nonreimbursable expenses.

Date published:	October 17, 2019