1 Office of the Utah State Auditor Compliance Requirements For Federal Awards Audits.

1

Office of the

Utah State Auditor

Compliance Requirements

ForFederal Awards Audits

Background

Single Audit Act of 1984 (amended 1996)

Standardized audit requirements

Objectives: improve grant administration, report on SEFA, audit compliance of federal awards

Cost Principle Circulars (i.e. A-21, A-87, A-121, etc.)

OMB Circular A-133: Audits of State, Local Governments, and Non-Profit Organizations

http://www.whitehouse.gov/omb/circulars/a133_compliance_supplement_2013

3

Office of the

Utah State Auditor

Changes to Single Audit Requirements

Office of Management and Budget issued Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; Final Rule on December 26, 2013.

Document and the related crosswalks can be obtained at: http

://www.whitehouse.gov/omb/grants_docs#final

http://www.whitehouse.gov/omb/grants_docs#final



4

Office of the

Utah State Auditor

Effective / Applicability Date

§200.110

December 26, 2014Federal

Agencies• Implement

policies & procedures by promulgating regulations

Non-Federal Entities

• Implement new administrative and cost principle requirements

Audits of Awards

• Subpart F Audit Requirements applicable for fiscal years beginning on or after 12/26/14

5

Office of the

Utah State Auditor

OMB’s Stated Goals in Federal Register Notice

5

. . .more effectively focus Federal resources on improving

performance and outcomes while ensuring the financial integrity of

taxpayer dollars in partnership with non-Federal stakeholders.

. . .strengthen oversight of Federal funds to reduce the risk of waste,

fraud and abuse.

. . .deliver on the promise ofa 21st-Century government that is

more efficient, effective and transparent.

. . .streamline our guidance for Federal awards to ease administrative burden. . .

6

Office of the

Utah State Auditor

Structure of Uniform Guidance

New Uniform Guidance Previous Circular(s)

Subpart A: Acronyms and Definitions All

Subpart B: General Provisions All

Subpart C: Pre-Federal Award Requirements and Contents of Federal Awards

A-89 and A-110

Subpart D: Post Federal Award Requirements A-102 and A-110

Subpart E: Cost Principles A-21, A-87, and A-122

Subpart F: Audit Requirements A-133

Appendices

A section by section crosswalk to the existing guidance as well as various text comparisons can be found at:


7

Office of the

Utah State Auditor

Applicability of Uniform Guidance

7

• Applies to Federal agencies making Federal awards and non-Federal entities receiving Federal awards

• Subpart B

– Includes chart by Subpart on applicability to different types of awards (i.e., loans, grants)

– Indicates terms and conditions of Federal awards (including the Uniform Guidance) and how it flows down to subrecipients unless section of the Uniform Guidance or award specifically indicates otherwise

– Indicates Federal agencies may apply Subparts A to E to for-profit entities and foreign organizations

– Lists other exemptions for specific programs

8

Office of the

Utah State Auditor

Revisions to Pre-Award Policies

Before making awards, awarding agencies must evaluate the risks to

the program posed by each applicant, and each applicant’s merits and

eligibility. These requirements are designed to ensure applicants for

Federal assistance receive a fair and consistent review prior to an award

decision.

9

Office of the

Utah State Auditor

Post Award Administration (Subpart D)

Key changes include a new section that explicitly outlines the

Government’s expectation of recipients in terms of their internal controls and more

stringent requirements.

10

Office of the

Utah State Auditor

Internal Control Requirements• Non-Federal entities must establish and maintain

effective internal control that provides reasonable assurance that entity is managing Federal award in compliance with Federal statutes, regulations, and terms and conditions of Federal award.

• Internal controls should be in compliance with:– COSO (Internal Control Integrated

Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission), and/or

– Green Book (Standards for Internal Control in the Federal Government, issued by the Comptroller General of the United States)

10

11

Office of the

Utah State Auditor

COSO Components and Principles

• For effective internal control:

Each of the five components and 17 principles must be present and

functioning.• The five components must operate

together in an integrated manner

12

Office of the

Utah State Auditor


• Control Environment– Demonstrates commitment to integrity

and ethical values– Exercises oversight responsibility– Establishes structure, authority and

responsibility– Demonstrates commitment to

competence– Enforces accountability

13

Office of the

Utah State Auditor


• Risk Assessment–Specifies suitable objectives– Identifies and analyzes risk–Assesses fraud risk– Identities and analyzes significant

change

14

Office of the

Utah State Auditor


• Control Activities–Selects and develops control

activities–Selects and develops general

controls over technology–Deploys through policies and

procedures

15

Office of the

Utah State Auditor


• Information and Communication– Uses relevant information– Communicates internally – Communicates externally

• Monitoring Activities– Conducts ongoing and/or separate evaluations– Evaluates and communicated deficiencies

16

Office of the

Utah State Auditor

GAO-Green Book

The Government Accountability Office is updating the Green Book.

What is the Green Book and should I care?• It reflects federal internal control

standards and is written primarily for the federal government. It provides criteria for auditors of federal agencies. COSO and Green Book are cited as “best practices” for establishing and maintaining internal controls.

17

Office of the

Utah State Auditor

Revisions Related to Cost Principles (Subpart E of Uniform Guidance

The guidance incorporates a number of changes to existing cost principles. Consolidates

OMB Circular A-21, A-87, and A-122. These changes may

significantly impact award recipients.

18

Office of the

Utah State Auditor

Revisions to Cost Principles

Compensation-Personal Services– Significant differences in time and effort

documentation requirements under the three existing cost circulars (A-21, A-87, and A- 122)

– A-21 is based on estimates that produce a reasonable approximation of the activity

– A-87 and A-122 are based on periodic (at least monthly) time and effort reporting of employees

– Uniform Guidance loosely based on concepts from all three circulars

19

Office of the

Utah State Auditor

Cost Principles (Subpart E of Uniform Guidance) Consolidated Cost Principle Changes

• Direct Charges for Computers– Computing devices are now subject to less

burdensome administrative requirements of supplies (as opposed to equipment) if the acquisition cost is less than the capitalization level of the non-Federal entity or $5000

– Uniform Guidance specifically allows direct charging non-capitalized “computing devices” that are essential and allowable but not solely dedicated to the performance of a Federal award

20

Office of the

Utah State Auditor


• Indirect (F&A) Costs– Negotiated rates may be extended for up to

four years if no major changes in F&A costs, with cognizant agency approval.

– Federal agencies are required to use negotiated F&A rates for all awards, unless limited by law or regulation

– De minimus rate of 10% MTDC may be used by entities that have never had negotiated indirect cost rate

21

Office of the

Utah State Auditor


• Additionally, for state and local governments– Must use cost allocation plan for central

services (e.g., motor pools, computer centers, purchasing, accounting, etc

– For interagency costs (excluding central services), a standard indirect cost allowance of 10% of direct salary and wage costs may be used in lieu of determining actual indirect costs

22

Office of the

Utah State Auditor

Subpart F – Audit Requirements

• Increased single audit threshold from $500,000 to $750,000

• Based on single audits submitted to the FAC for 2012, there would be approximately 6,200 fewer entities subject to a single audit, but there would only be a reduction in dollars covered of approximately $3.9 billion, or less than 1%

• OMB’s goal is to concentrate audit resolution and oversight resources on higher dollar and higher risk awards.

§200.501

23

Office of the

Utah State Auditor


• Major Program Determination (Step 1)– Identify larger Federal programs (Type

A)

§200.518

Total Federal awards expended Type A threshold

$750,000 - $25,000,000 $750,000

> $25 million - $100 million 0.03 of total expended

> $100 million - $1 billion $3,000,000

> $1 billion - $10 billion 0.003 of total expended

> $10 billion - $20 billion $30,000,000

> $20 billion 0.0015 of total expended

24

Office of the

Utah State Auditor


• Major Program Determination (Step 2)– Identify Type A programs that are low-

risk• Must have been audited as a major program

in at least one of the two most recent audit periods

• No internal control deficiencies identified as material weaknesses

• No modified opinion related to compliance• No known or likely questioned costs

exceeding 5% of the program’s Federal awards expended

§200.518

25

Office of the

Utah State Auditor


• Major Program Determination (Step 3)– Identify Type B programs that are high-

risk• Use professional judgment and criteria in

§200.519• Not required to identify more high-risk Type

B programs than at least ¼ of the number of low-risk Type A programs identified under Step 2

• Perform risk assessments on Type B programs that exceed 25% of the Type A threshold

§200.518

26

Office of the

Utah State Auditor


• Major Program Determination (Step 4)– Audit the following as major programs:

• All Type A programs not identified as low-risk

• All Type B programs identified as high-risk• Additional programs necessary to comply

with the percent of coverage rule

§200.518

Type of Auditee A-133 Guidance New Guidance

Low-risk 25% 20%

Non low-risk 50% 40%

27

Office of the

Utah State Auditor

Major Program Determination

• OMB believes the changes to the major program determination will result in the following:

27

A more targeted audit coverage of programs with internal control

weaknesses.

Appropriate burden relief for entities that materially comply as

evidenced by an unqualified audit opinion and no material

weaknesses in internal controls or material questioned costs.

Incentive for entities to focus on correcting the deficiencies that

indicate underlying weaknesses in internal controls.

28

Office of the

Utah State Auditor


• Scope of Audit– Conducted in accordance with GAGAS– Cover entire operations of the auditee– Determine auditee’s financial

statements are fairly presented in accordance with GAAP

– Determine auditee’s SEFA is stated fairly in relation to financial statements as a whole

§200.514

29

Office of the

Utah State Auditor


• Scope of Audit– Internal Control

• Based upon the Green Book and COSO• Obtain understanding to support a low

assessed level of control risk of noncompliance

• Plan testing to support a low assessed level of control risk for relevant assertions to the compliance requirement

• Perform testing of internal control§200.514

30

Office of the

Utah State Auditor


• Scope of Audit– Compliance

• Determine compliance with Federal statutes, regulations, terms and conditions

• Test transactions and perform other necessary procedures to support opinion on compliance

• Follow-up on prior audit findings• Complete & sign specified sections of data

collection form§200.514

31

Office of the

Utah State Auditor

Compliance RequirementsCurrent Compliance Requirements Proposed Changes

A. Activities allowed or unallowed Retained

B. Allowable costs/cost principles Incorporated into A

C. Cash management Retained

D. Davis-Bacon Act Fed agency may include in N

E. Eligibility Retained

F. Equipment & real property management Fed agency may include in N

G. Matching, level of effort, earmarking Matching into A, others in N

H. Period of availability Incorporated into A

I. Procurement & suspension and debarment Fed agency may include in N

J. Program income Fed agency may include in N

K. Real property acquisition & relocation assistance

Fed agency may include in N

L. Reporting Retained

M. Subrecipient monitoring Retained

N. Special tests and provisions Retained

32

Office of the

Utah State Auditor


• Audit Findings Reported– Significant deficiencies and material

weaknesses in internal control and significant instances of abuse related to major programs

– Material noncompliance with provisions of Federal statutes, regulations, terms & conditions

– Known or likely questioned costs greater than $25,000 (increase from $10,000)

§200.516

33

Office of the

Utah State Auditor


• Audit Findings Reported– Circumstances concerning why report

on compliance is other than unmodified (unless otherwise reported as finding)

– Known or likely fraud affecting the Federal award (unless otherwise reported as finding)

– Status of prior audit finding that are materially misrepresented on the summary schedule of prior audit findings

§200.516

34

Office of the

Utah State Auditor


Audit Findings Must Include

1. Federal program award information

2. Criteria or specific requirement

3. Condition found

4. Cause identifying reason or explanation

5. Effect of condition

§200.516

35

Office of the

Utah State Auditor


Audit Findings Must Include

6. Identification of questioned costs

7. Proper perspective for judging

8. Repeat finding

9. Recommendation

10. Views of responsible officials

§200.516

36

Office of the

Utah State Auditor


Criteria for low-risk auditee

1. Single audit performed on annual basis

2. Unmodified opinions on financial statements and SEFA

3. No material internal control deficiencies identified under GAGAS requirements

4. No substantial doubt about auditee’s ability to continue as a going concern

5. Identify in notes the balances outstanding for loan or loan guarantee programs

6. No material IC weaknesses, modified opinion on compliance, or QCs in excess of 5%

§200.520

37

Office of the

Utah State Auditor

Next Steps

37

Read Uniform Guidance

Develop implementation plan

Participate in industry implementation groups

Identify changes to policies and procedures

Develop training plan

38

Office of the

Utah State Auditor

Questions?

Jolene Cooley, MBA

Office of the Utah State Auditor

(801) 808-0749

[email protected]

1 Office of the Utah State Auditor Compliance Requirements For Federal Awards Audits.

Documents

Transcript of 1 Office of the Utah State Auditor Compliance Requirements For Federal Awards Audits.