The CAROI Concept
The Cooperative Audit Resolution Oversight Initiative (CAROI) is a collaborative approach to audit resolution designed to improve education programs and student performance at state and local levels through better use of audits, monitoring, and technical assistance. CAROI was first developed at ED in the mid 1990’s and updated in 2010 by the Association of Government Accountants (AGA) Intergovernmental Partnership workgroup which included a number of ED staff to respond to the oversight challenges presented by the Recovery Act.
CAROI can play a pivotal role in preventing and resolving audit findings and oversight issues. CAROI differs from traditional resolution processes in that it focuses on improving communication in a ‘team’ environment, developing a sense of trust among government officials, rather than utilizing a more ‘traditional’ resolution approach, reliant solely on written communication. It helps identify the underlying cause of findings and empowers the people who know programs best to chart a course for program improvement. CAROI relies on the perspectives of government officials from many disciplines, including program officials, financial managers, legal staff, auditors, as well as the grantee community who are most knowledgeable about specific programs. These officials may develop a written agreement that serves as a blueprint for the resolution of compliance issues, and for addressing their underlying causes. In the CAROI process, the independent auditor will most often be asked to provide advice to management for the audit resolution process.
CAROI is now a requirement for Federal agencies under 2 CFR 200.513 (“Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards,” otherwise known as the Uniform Guidance, published in December 2013 and generally effective as of December 2014). “Specifically, the Uniform Guidance states the following:
§ 200.25 Cooperative audit resolution.
Cooperative audit resolution means the use of audit follow-up techniques which promote prompt corrective action by improving communication, fostering collaboration, promoting trust, and developing an understanding between the Federal agency and the non-Federal entity. This approach is based upon:
(a) A strong commitment by Federal agency and non-Federal entity leadership to program integrity;
(b) Federal agencies strengthening partnerships and working cooperatively with non-Federal entities and their auditors; and non-Federal entities and their auditors working cooperatively with Federal agencies;
(c) A focus on current conditions and corrective action going forward;
(d) Federal agencies offering appropriate relief for past noncompliance when audits show prompt corrective action has occurred; and
(e) Federal agency leadership sending a clear message that continued failure to correct conditions identified by audits which are likely to cause improper payments, fraud, waste, or abuse is unacceptable and will result in sanctions.
In April 2016, AGA through the Intergovernmental Partnership published another resource titled, “Successfully Implementing Cooperative Audit Resolution: A Playbook for Improving Programs and Reducing Improper Payments.”
The new Playbook outlines a proactive approach to implementing some of the broad policy reforms contained in the Uniform Guidance. It illustrates how key provisions in the Uniform Guidance can be leveraged to create a continuous feedback loop for program improvement, strengthening internal controls and mitigating improper payments. While CAROI is not required of pass-through entities (grant recipients), according to the 2016 guide/playbook – grantees are encouraged to use it with their subrecipients (and subrecipients may request that it be used). The Playbook also works in conjunction with the original AGA CAROI Guide published in 2010 (Guide to Improving Performance and Accountability Through Cooperative Audit Resolution and Oversight, published by the Association of Government Accountants in 2010. (https://www.agacgfm.org/getattachment/Intergovernmental/Free-Online-Products-for-Financial-Managers/CAROI052010.pdf.aspx)