Question

Many social services programs are accomplished under contract with not-for-profit agencies and
for-profit business enterprises.

Required: In auditing a social services program that is being accomplished under contract with a
for-profit business enterprise, describe the major audit objectives in (a) the pre-award and award
phase of the contract and (b) the execution phase of the contract. Also, discuss whether the
objectives would be any different if only not-for-profit agencies were awarded the contracts.

Answer 1

a.

Major audit objectives in pre-award and award phase-

- Check whether there was a tender issued for the contract, examine it's conditions and requirements.

- If there were competing bids, see that the vendor with the lowest bid who fulfilled all the requirements was chosen.

-Check whether the contenders for the contract were qualified to bid for it, in terms of government certification, experience, qualification, etc...

-See whether the business which is awarded the grant has signed a contract with the other party which contains the program's requirements, cost caps, eligibility and other information.

b.

Major audit objectives in execution phase-

- Check if expenditure has been incurred in accordance with the contract and that it is not extravagant.

-Verify progress on the project and compare with the expected timeline stated in the contract, if there are any delays inquire as to the reasons behind them.

- Ensure that the standard of work expected and stated in the contract is being delivered by the contractor.

-Detection of defalcation of assets, missapropriation of funds, and other fradulent activities should be carried out.

-The internal control system employed by the firm and internal checks carried out should be examing for their adequacy and effectiveness.

The objectives of auditing a social services program would largely remain the same even if only not-for-profit agencies were awarded the contracts. Some minor changes would include verifying the non profit's registration, inspecting it's articles of association to know it's objects, etc.. These are just points relating to the entity's composition as a non profit.