NO: 95-13-OMB

ORIGINATING AGENCY: OFFICE OF MANAGEMENT AND BUDGET

EFF DATE: APRIL 3, 1995

EXP DATE: INDEFINITE

SUPERSEDES: 85-39-OMB
                          86-12-OMB

SUBJECT: AUDITS OF STATE AGENCIES

ATTENTION: DIRECTORS OF ADMINISTRATION AND CHIEF FISCAL OFFICERS

FOR INFORMATION CONTACT: FRANCIS C. GATTI, JR.
PHONE: 984-9611

An adequate system of internal control requires each department and agency
to have a policy and procedures concerning the prompt resolution of audit
findings. The policy and procedures should allow management to take
prompt, responsive action on all findings and recommendations made by
auditors.

This circular letter requires that all departments and agencies report audit
resolution action to the Office of Management and Budget (OMB).

AUDIT REPORTS

Copies of all reports on audits of State departments and agencies issued by
external auditors must be submitted to the Assistant Director of Financial
Management, Office of Management and Budget. Since reports issued by the
Office of the State Auditor (OSA) are routinely forwarded to OMB, department
and agencies are not required to submit copies of these reports. However,
reports issued by other external auditors (federal auditors, public
accounting firms, etc.) must be submitted by the departments or agencies
audited within two weeks of the report issue date.

AUDIT RESOLUTION

Within three months of issue of any external audit including those performed
by OSA, a department or agency is required to submit a memorandum detailing
the current status of the action taken or planned to correct identified
deficiencies and produce improvements and, if planned, a schedule for
implementing the improvements. The department or agency may also choose to
demonstrate that the audit findings and recommendations are either invalid
or do not warrant management action. The memorandum should be submitted
to the Office of Management and Budget, Supervisor of Management Audit,
CN 221, Trenton, NJ 08625-0221. If further resolution action is needed,
additional correspondence may be required at the discretion of the Management
Audit Unit.

MONITORING

The Management Audit Unit will monitor the audit reports and resolution. The
monitoring may include visits to the department or agency to examine
documentation which supports the statements made concerning resolution
action taken.