OMB Circular A-133 (PPT)

OMB Circular A-133OMB Circular A-133

Audits of States, Local Audits of States, Local Governments and Non-Profit Governments and Non-Profit

OrganizationsOrganizations

Presented by Ann Holmes and Toni LawsonPresented by Ann Holmes and Toni Lawson

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PresentersPresenters

• Ann HolmesChief Financial Officer, [email protected]

301‑226‑8804

• Toni LawsonAssociate Director, [email protected]‑6275

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History of Single AuditHistory of Single Audit

• Each agency used to be responsible for its own audits

• Audits were not coordinated• Inflated costs to Federal

Government• Undue burden on Universities

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Single Audit ReportSingle Audit Report

• Financial statements• Schedule of expenditures of Federal

awards• Auditors opinions on fair

presentation of financial statements• Schedule of expenditures of Federal

awards

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Single Audit ReportSingle Audit Report

• Auditors’ report on internal control & opinion on compliance

• Auditors’ schedule of findings and questioned costs

• Auditees’ corrective action plans; and• A summary schedule of prior audit

findings

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A-133 EmphasisA-133 Emphasis

• Sets standards for audit consistency and uniformity

• Identifies compliance requirements

• Establishes criteria for testing internal controls

• Tests for reasonable assurance that financial statements are accurate

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Risk Based ApproachRisk Based Approach

• Identify major programs based on expenditures in fiscal year

• Review previous audit findings

• Review new programs or those with regulatory changes

• Review personnel or system changes at institution

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Risk AssessmentRisk Assessment

• Focus is on high risk transactions• Cost sharing• Direct vs. F & A costs (F.6.b.)• Shared use items

– Big order of lab supplies - is the expense allocated on a reasonable basis?

• Related party transactions

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Circular OrganizationCircular Organization

• General– Gives the purpose of the circular

and definitions of frequently used terms

• Audits– Specific information on audit

requirements

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Circular OrganizationCircular Organization

• Responsibilities defined for:– Auditees (the university)– Federal Agencies– Pass-Through Entities– Auditors

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OMB Circular A-133OMB Circular A-133

• Appendix

– A.- Data Collection Form– B.- Compliance Supplement

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A-133 Subpart A A-133 Subpart A PurposePurpose

Sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of [Universities] expending Federal funds.

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A-133 Subpart AA-133 Subpart ADefinitionsDefinitions

CFDA Number

The number assigned to a Federal program in the Catalog of Federal Domestic Assistance (CFDA).

Examples: 59.037 SBDC47.076 Education/Human Resources (NSF)

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Internal ControlProcess designed to provide reasonable assurance of achieving the following:– Effective & efficient operations– Reliable financial reporting– Compliance with laws & regulations

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Pass-through EntityA non-Federal entity that provides a Federal award to a subrecipient to carry out a Federal program.

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A-133 Subpart AA-133 Subpart ADefinitions Definitions

SubrecipientA non-Federal entity that expends Federal funds received from a pass-through entity to carry out a Federal program.

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A-133 Subpart B A-133 Subpart B Audits Audits

Defines:• Who is required to be audited• Determining subrecipient vs

vendor• Frequency of audits

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Subcontract or Vendor?Subcontract or Vendor?

• Subcontractor

– Performance measured against whether the objectives of the federal program are met

– Has responsibility for programmatic decision making

– Has responsibility for adherence to applicable federal program compliance requirements

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Subcontract or Vendor?Subcontract or Vendor?

• Vendor

– Provides the goods and services within normal business operations

– Provides similar goods or services to many different purchasers

– Operates in a competitive environment

– Provides goods or services that are ancillary to the project

– Not subject to compliance requirements

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A-133 Subpart C A-133 Subpart C AuditeesAuditees

Auditee responsibilities:– Identify all Federal awards received

(funds are listed in the A-133 report)– Maintain control over Federal program– Comply with laws & regulations– Prepare financial statements– Ensure audits are done & submitted

when due– Follow up and take corrective action

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A-133 Subpart D A-133 Subpart D Pass-through Pass-through

EntitiesEntities

Responsibilities:• Identify Federal awards to

subrecipient (CFDA#)• Advise subrecipient of Federal

requirements• Monitor subrecipient for

compliance

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A-133 Subpart E A-133 Subpart E Auditors Auditors

Responsibilities:• Financial statements• Internal control• Compliance with regulations• Follow-up on prior audit findings

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Pass-through Entity Pass-through Entity ResponsibilitiesResponsibilities

• Award Identification– Inform the sub-recipient of the federal

award information (e.g. award name, CFDA)

• During- the-Award-Monitoring– Monitor the sub’s use of funds through

regular contact

• Sub-recipient Audits – Ensure that entities of met the A-133

audit requirements

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Pass-through EntitiesPass-through Entities(UM) Responsibilities(UM) Responsibilities

• Measures for subrecipient compliance:

– Sponsored Projects Subcontract Procedure Manual

– Subrecipient’s A-133 Audit Certification

– Subrecipient’s A-133 Audit Report

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• Subaward– used when a portion of a sponsored project

is performed by another entity

– states work to be performed, conditions to be imposed on subrecipient, flow-down of Federal regulations and laws, terms and conditions of prime award

– constitutes a part of UM’s proposal to sponsor

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• Contents of subrecipient’s proposal:

–Work statement–Budget–Schedule/Deliverables–Endorsement

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• PI/PD’s role:– Review and document subrecipient’s

qualifications– Ensure subrecipient’s costs are

reasonable– Initiate request to issue subaward and

subsequent modifications to ORAA – Review and approve subrecipient’s

invoices

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• PI/PD’s role, continued:– Monitor subrecipient’s performance to

ensure satisfactory conformance with subrecipient’s statement of work

– Receive and review subrecipient’s technical reports

– Facilitate close-out, i.e. final technical reports and final invoices

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• ORAA’s role: – Draft subaward

– Assign subaward a unique identification number (Q or Zxxxxx)

– Issue/negotiate subaward with subrecipient

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• ORAA’s role, continued: – Forward fully-executed subaward to

PI/PD or business officer– Manage and process subaward

modifications

– Facilitate close-out of subawards

– Encumber funds authorized to

subrecipient in FRS

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Pass-Through EntitiesPass-Through Entities(UM) Responsibilities(UM) Responsibilities

• OCGA’s role: – Receive and incorporate

subrecipient’s financial reports with reporting requirements of prime award

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Internal Controls Internal Controls

• Sense of conducting operations ethically

• Positive responsiveness to questioned costs

• Staff knowledge of compliance requirements

• Training programs

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Compliance Compliance RequirementsRequirements

• Ensure that funds were used only for activities that further the objectives outlined in the award document

• 14 areas of review (A-N):– Emphasis on largest expenses

• Employee compensation• F&A costs• Equipment

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Compliance & Compliance & Internal ControlsInternal Controls

A. Activities Allowed or Unallowed– Identify the types of activities

allowed or prohibited

– Test for proper classification & accumulation

– Review Sub-awards to ensure activities are allowable

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B. Allowable Costs/Cost Principles– OMB A-21

•Reasonable, Necessary, Allowable•Facilities & Administrative vs Direct•Disclosure Statement •Comparisons of budgets to actual

costs

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C. Cash Management– Cost reimbursable*– Cash Advances*– Letter of credit*

*Funds requested are for actual expenses

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D. Davis-Bacon Act– All laborers and mechanics

employed to work on construction projects financed by the Federal government must be paid prevailing wage rates.

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E. Eligibility– Who can participate in a Federal

program and the amounts for which they qualify

– Subrecipients are reviewed for eligibility

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F. Equipment and Real Property Management– Proper records & adequate safe

guards

– Disposition of equipment

– Agency compensated if sold

– Property tags in place

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G. Matching, Level of Effort– Comply with A-110 (section 23)

– Test to determine if commitment met

– Verify source of funds is allowable

– Review effort requirements were met

– Commitment from management to meet matching requirements

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H. Period of Availability of Federal Funds– Only cost resulting from obligations

incurred during the funding period may be charged to the award

– Test transactions charged after the award expired

– Mechanisms for identifying awards about to expire

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I. Procurement, Suspension & Debarment– Purchases are made in compliance

with A-110

– Contracts are not made with entities or individuals that have been suspended or disbarred

– University has existing codes of conduct

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J. Program IncomeGross income received that is directly generated by the federally funded project during the grant period

•Verify income is added to the budget•Verify income was properly accounted

for

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K. Real Property Acquisition & Relocation Assistance– Equitable treatment if property is

acquired

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L. Reporting– Financial -Recipients should use

standard financial reporting forms

– Performance -at least annually must submit actual accomplishments compared to goals

– Special Reporting -as required by the agency

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M. Subrecipient Monitoring– Ensure Compliance with Federal

requirement

– Reasonable assurances that subrecipients obtain required audits

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Subrecipient MonitoringSubrecipient Monitoring

• Subrecipient monitoring is a requirement in both OMB Circular A-110 and OMB Circular A-133

• Get your PIs involved in reviewing progress reports and invoices

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Subrecipient ReportsSubrecipient Reports

• Flow-down requirements make subs responsible for reporting

• Final reports must incl. prime and subs• Subaward reports must be submitted

prior to due date for reports to sponsor• PI (prime) approves reports (technical

and program) • Subs should be closed before prime

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Keys to Good Subrecipient Keys to Good Subrecipient MonitoringMonitoring

• Write a good subaward document that includes a clear SOW.

• ORAA uses the Federal Audit Clearinghouse to assess whether your subrecipient would be considered high risk

• Think of yourself as a sponsor—make sure invoices certified by the subrecipient’s authorized official

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Approving the Subaward Approving the Subaward InvoiceInvoice

• Have the PI sign the invoice (or provide an email) authorizing the payment.

• Sample statement for PI authorization:

– In signing below I approve payment of this invoice and attest that the charges appear reasonable, and progress to date on this project is satisfactory and in keeping with the statement of work.

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N. Special Tests & Provisions– Student Financial Assistance– Federal Work Study– Loans

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Types of AuditsTypes of Audits

• Pre-award ($1mil or greater)• Financial Statement• OMB A-133 • Program• Disclosure Statement • F&A Cost Proposal• Procurement System Review• Property System Review

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Surviving an AuditSurviving an Audit

• Question: When do you begin preparing for an audit?

• Answer: The day you submit the proposal!

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Documents Required for Documents Required for AuditAudit

• Copy of Agreement• Proof of Salary Approval• Copies of ALL invoices paid on the

account– Include P.O. if required for purchase

• Cost Sharing Documentation– Cost Sharing worksheet/account– Don’t forget to include F&A on

salaries/fringe benefits

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• Effort Reports – Must match payroll charges – caution

when preparing transfers

• Sub-Awards– Copy of award– Copy of report or deliverable from

sub.– Copy of approved final invoice

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• Reconciliation Documentation– Proof that the charges were

reviewed– Are charges valid– Are encumbrances correct– Have recipients been paid

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Key to Successful Audit Key to Successful Audit

• Organized Files• Documentation for expenses• Appropriate Approvals• Audit Trails• Knowledge of policies and

regulations

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Transfer of ExpensesTransfer of Expenses

• “Transfer(s) must be supported by documentation that contains a full explanation of how the error occurred...”

• “An explanation that merely states ‘to correct error’ or ‘to transfer to correct project’ is not sufficient.”

• “It should be noted that frequent errors in the recording of costs may indicate the need to review the accounting system and/or internal controls.” (DHHS Grants Manual)

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AuditsAudits

• Document! Document! Document!

When transfers are required — “Defend the Debit” – Auditors want to know why the

award was charged for the expense

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Auditor ManagementAuditor Management

• Don’t assume the auditor has basic knowledge of regulations

• Understand all auditors questions

• If you are not sure - check it out

• Don’t ramble or provide additional information

• Keep track of questions and responses

• Accompany the auditors when they speak to PI

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Recent UM Audit FindingsRecent UM Audit Findings

• Cost price analysis for reasonability of costs on “subcontract” only

• Lack of documentation on Subawards

• Expense Transfers missing complete explanations of why/how the error occurred

• Charging Administrative salaries to awards not in the sponsor approved budget

• Equipment on loan from federal government not in inventory system

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Possible Consequences Possible Consequences for Noncompliancefor Noncompliance

• Corrective Actions• Additional Special Award Terms

and Conditions• Loss of Expanded Authorities• Cost Disallowance and Repayment• Termination of Award• Civil and/or Criminal Violations

and Imposed Penalties

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Words to the WiseWords to the Wise

“If you don’t like being audited by an auditor, you will really dislike being audited by an angry auditor.”NCURA

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Questions?Questions?

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OMB Circular A-133 (PPT)

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Transcript of OMB Circular A-133 (PPT)