Laws & Guidance GENERAL
CAROI's Principles

The Cooperative Audit Resolution and Oversight Initiative

Six key CAROI Principles are applied throughout the audit resolution process.

1. Communication

2. Collaboration

3. Trust

4. Understanding

5. Resolution

6. Sharing


Principle 1: Communication

CAROI takes full advantage of opportunities for open verbal dialogue among all participants in resolving audit findings.

While written communication proves useful in resolving audit findings, verbal communication is more helpful in gaining a mutual understanding of issues and in reaching agreement. In some instances, a single telephone call may serve to resolve simple, straightforward audit issues. However, more complex findings may require more reliance on continued full and open verbal dialogue among all participants.

For more complex audit issues, teleconferencing may serve as the best means.

Principle 2: Collaboration

CAROI encourages collaboration among participants involved in the resolution of an audit from federal and state levels, including representatives from program, finance, legal, and audit organizations.

Participants in audit resolution actions include persons responsible at the federal and state levels for administering programs, maintaining fiscal records, auditing, resolving audit findings, and identifying and addressing legal issues. Resolution of less complex audit findings may not require the involvement of all of these organizations. For example, a simple finding involving late financial reports usually does not involve legal issues; therefore, attorney involvement may not be required. However, for more complex audit findings with potential legal issues, participants representing program, legal, audit, and finance organizations should be involved in teleconferences to determine appropriate resolution means. CAROI serves as a vehicle for encouraging cross-program coordination, planning, and service delivery.

Collaboration fostered by CAROI helps to overcome challenges at both the federal and state levels between and among the participants. As federal and state teams comprised of audit, legal, program and finance officials develop partnerships to work together to resolve specific audit issues, ongoing working relationships develop that will prove useful in resolving future audit issues and in addressing audit related concerns before problems develop. In addition, states may form partnerships with local governments to apply CAROI.

Principle 3: Trust

CAROI fosters a sense of trust among the participants involved in resolving audit findings.

The philosophical tenets of CAROI call for participants to use creativity when developing mutually beneficial resolutions. An environment of trust must exist or be created before participants willingly assume the perceived risks associated with "laying all cards on the table." Trust is built through open dialogue and collaboration as described in Principles 1 and 2 as well as by learning that the other parties want a fair resolution. Participants must make every effort to follow through on commitments, or to keep all participants informed when commitments require modification.

From the least complex to the most complex audits, trust must exist in all resolution activities. For example, if extensions of time for submission of materials are granted, all involved should honor the time frames.

Principle 4: Understanding

CAROI creates an open environment for the participants to determine whether a violation has occurred and to determine the conditions that led to the violations.

In the event that all involved agree that a violation has occurred, all participants must reach a mutual understanding of the requirements that have been violated and the reasons for the violations. In dealing with less complex audit issues, a phone call involving one or more of the participants may be sufficient to achieve a mutual understanding of the violation and the conditions that led to it.

If all agree that there has not been a violation, the participants, including the auditors, must reach a mutual understanding of why there is no violation. For less complex audits, if the auditor may have misunderstood a federal requirement and there is no violation, a short teleconference call between the Department staff, the auditor, and a representative of the audited organization should help the auditor to understand so that the auditor will not report a similar finding in future audit reports.

Principle 5: Resolution

CAROI encourages negotiating a resolution of audit issues that is responsive to the needs and interests of all of the participants that helps to prevent recurrence of the audit finding.

Participants use the principles of "win/win" negotiation to reach agreement on the steps to be taken to resolve audit issues in a manner that is not overly prescriptive.

The primary goal of the negotiated resolution is to ensure that the conditions that led to any violations are addressed in a way that ensures that the violations do not recur. In some cases, if the federal interest is harmed, the effect of the violation will be addressed.

In less complex audits where there are no monetary exceptions and some negotiation is needed for resolution, negotiations may take place around acceptable corrective actions that the auditee will agree to take.

Principle 6: Sharing

CAROI encourages the sharing of solutions achieved through the process.

Best practices and model agreements achieved through CAROI should be widely disseminated in order to share applicable solutions from state to state. For example, if a better and improved method of maintaining time and effort records is identified in one state, ED and the state partners should take the leadership in sharing these new and acceptable methods of time record keeping with other agencies and states.

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Last Modified: 09/10/2003