Single Audit and OMB Uniform Grant Guidance Update - PowerPoint Presentation

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Single Audit and OMB Uniform Grant Guidance Update

Heather Acker, CPA, PartnerDecember 4, 2014

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Document link and effective dateOMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards

“Uniform Grant Guidance (UGG)” “Uniform Guidance”Previously referred to as “Supercircular”Document link:

https://

www.federalregister.gov/articles/2013/12/26/2013-30465/uniform-administrative-requirements-cost-principles-and-audit-requirements-for-federal-awards

FAQ link:https://cfo.gov/wp-content/uploads/2014/08/2014-08-29-Frequently-Asked-Questions.pdf

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Document link and effective datePublished in Federal Register on December 26, 2013OMB and federal agencies to work in unison to issue additional regulations or guidance which will be effective one year from publication of this guidance (December 26, 2014)

Administrative and cost principal changes applicable for new awards and additional funding increments of existing awards made after December 26, 2014Complexity with simultaneous administration of multiple grant awardsQ&A states organizations that choose to implement entity-wide system changes to comply with the UGG after 12/26/14 will not be penalized fordoing soProcurement is the only area with a time extension for implementation ofone yearSingle audit changes effective for years ending

December 31, 2015

and after

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Objective of the grant reformReduce administrative burden for those receiving federal awards, while also reducing risk of waste, fraud, and abuse

Improve the integrity of financial management and operation offederal programsStrengthen accountability for federal dollars by improving policies that protect against waste, fraud, and abuseIncrease impact and accessibility of programs by minimizing time spent complying with unnecessarily burdensome administrative requirementsReorient recipients toward achieving program objectivesGrants awarded based on meritIncreased management focus on performance outcomesStreamlined rules governing federal fundsSingle audit oversight tool is better focused to reduce waste, fraud,

and abuse

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Impacted circularsStreamlining of related circulars and guidance

A-21

Cost Principles

for Educational Institutions

A-50

Audit Follow-Up, related to Single Audit

A-87

Cost Principles for State, Local, and Indian Tribal Governments

A-89

Federal Domestic Assistance Program Information

A-102

Awards and Cooperative Agreements with State and

Local Governments

A-110

Uniform Administrative Requirements for Awards and Other Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations

A-122Cost Principles for Non-Profit OrganizationsA-133Audits of States, Local Governments andNon-Profit Organizations

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UGG document organization

Document organization6 SubpartsSubpart A, 200.XXX – Acronyms and DefinitionsSubpart B, 200.1XX – GeneralSubpart C, 200.2XX – Pre-Award – FederalSubpart

D, 200.3XX

–

Post-Award – RecipientsSubpart E, 200.4XX – Cost PrinciplesSubpart F, 200.5XX –

Audit Requirements

11 Appendices

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Three major sections

Reforms to administration requirements

(subparts A-D)

Reforms to cost principles

(subpart

E)

A

B

Audit requirements

(subpart F)

C

Three major sections

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Administrative Requirements

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Administrative requirements key changes

ChangesSectionAuthority for OMB to waive certain compliance requirements and approve new strategies for innovative program designs that improve cost-effectiveness and encourage effective collaboration across programs200.102Fixed amount awards focused on meetingperformance milestones

200.201

Emphasis on performance goals and

performance reporting200.301

Focus on performance

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Administrative requirements key changesConsistent definitions

Most common example:

Subrecipient

–

a non-Federal entity that receives a subaward from a pass-through entity to carry out part of a Federal program

Contractor

–

an entity that receives a contract as defined in 200.22 Contract (terminology of vendor not used)

Nature

of relationship trumps what the agreement is called!

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Administrative requirements key changesStandardized requirements

ChangesSectionNotice of Funding Opportunities

200.203

and Appendix I

Award, Application and Reporting Requirements200.210200.301

200.327

200.328

Federal

agencies can impose more restrictive

requirements only with OMB approval

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Administrative requirements key changes

Information to be included in a federal awardStandard 15 data elements

Guidance on Federal Awarding Agency, Program, or Award Specific Terms and Conditions

Requires Federal awarding agencies to include an indication of the timing and scope of expected performance as related to the outcomes intended to be achieved

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Administrative requirements key changesSubrecipient

monitoringChangesSection

Heightened focus

on subrecipient monitoring

Various required elements of subawardMandatory risk assessment to determine appropriate monitoring

Verify subrecipients have audits, if required

Review audit results and adjust pass-through entity records, if needed

Determine necessary action for subrecipient noncompliance, follow up, issue management decision

200.331

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Administrative requirements key changes –

Subrecipient / contractor determinationSubrecipientContractor

Creates a Federal assistance relationship

Determines who is eligible to receive what Federal assistance

Has its performance measured in relation to whether objectives of a Federal program were met

Has responsibility for programmatic decision making

Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and

In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing stature, as opposed to providing goods or services for the benefit for

PTE

Purpose is to obtain goods and services

for the non-Federal entity’s

own use and creates a procurement relationship

Provides the goods and services within normal business operations

Provides similar goods or services to many different purchasers

Normally operates in a competitive environmentProvides goods or services that are ancillary to the operation of the Federal program; andIs not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons

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Administrative requirements key changes

Federal Award IdentificationSubrecipient name and DUNS numberFederal award identification number (FAIN) and award date

Subaward period of performance – start and end date

Amount of federal funds obligated by the action

Total amount of federal funds obligated to the subrecipient

Total amount of the federal award

Federal award project description

Name of the federal awarding agency, PTE, and contact information for awarding official

CFDA number and name; must identify the dollar amount made available under each CFDA number at time of disbursement

Whether the award is R&D

Indirect cost rate for the federal award, including if de

minimis

rate is charged

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Administrative requirements key changes

Factors to consider in evaluating Subrecipient RiskPrior experience with same or similar

subawards

Results of previous audits

Whether new or substantially changed personnel or systems

Extent and results of Federal awarding agency monitoring

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Administrative requirements key changesProcurement

ChangesSectionGeneral Requirements

and

5 methods for procurement – most closely

follow the previous OMB CircularA-102 requirements200.318 –200.326

Specific

c

ontract requirements

– non-federal entities should review that contracts in compliance

200.326

Appen

d II

Grace period – one year

after effective date of uniform guidance!

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Administrative requirements key changesGeneral p

rovisions - ProcurementGeneral StandardsSection

Documented policies which

reflect federal law, standards of UGG, and any state regulations

Necessary (and economical – shared service purchases recommended where practical)Written conflict of interest policies required

Documentation of procurement activities/steps required

200.318

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Administrative requirements key changesGeneral p

rovisions - ProcurementFull and Open CompetitionSection

Contractors who draft specifications for RFPs must be excluded from competing for those opportunities.

Cannot have unreasonable requirements to limit competition

Complexities with geographic preference criteria200.319

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Administrative requirements key changes5

Methods of procurement1. Micro PurchaseSection

Aggregate dollar amount does not exceed $3,000 ($2,000 if subject to Davis Bacon)

When practical, distribute equitably among qualified suppliers

No competitive quotes required if management determines price is reasonable.

200.320

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Administrative requirements key changes5

Methods of procurement2. Small PurchaseSection

Purchases up to the Simplified Acquisition Threshold (currently $150,000)

Informal procedures acceptable

Price or rate quotes must be obtained from an adequate number of sources200.320

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Administrative requirements key changes5

Methods of procurement3. Sealed BidsSection

Purchases over the Simplified Acquisition Threshold (currently $150,000)

Formal solicitation required

Fixed price (lump sum or unit price) awarded to responsible bidder who conformed with all material terms and is the lowest in priceMost common for construction contracts

See section for additional detail

200.320

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Administrative requirements key changes5

Methods of procurement4. Competitive ProposalsSection

Purchases over the Simplified Acquisition Threshold (currently $150,000)

Formal solicitation required

Fixed price or cost-reimbursement contractsUsed when sealed bids not appropriate

Awarded to responsible firm whose proposal is most advantageous to the program, with price being one of various factors

See section for additional detail

200.320

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Administrative requirements key changes5

Methods of procurement5. Noncompetitive ProposalsSection

May be used only when

one or more

of the following apply:The item is available only from a single sourceThe public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation

The Federal awarding agency (or pass-through entity) expressly authorizes this method in response to a written request from the non-Federal entity

After solicitation of a number of sources, competition is determined inadequate

200.320

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Administrative requirements key changesInternal controls

ChangesSection

Required

to establish and maintain effective internal controls over federal programs

200.303(Previously only in single audit requirements)

COSO and federal green book tied in

although Q&A clarifies usage as “best practice”

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Administrative requirements key changesInterest earned on federal funds

ChangesSectionPayment of interest earned on federal funds

Up

to $500/year may be retained by recipient for administrative costs

Amounts in excess of that should be paid to one central federal agency (HHS)200.305

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Administrative requirements key changesTechnology

ChangesSectionDefined that computers are considered supplies, not equipment

200.940

Flexibility in electronic document retention, with associated internal controls

200.335

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Administrative requirements key changesStronger oversight

ChangesSectionEmphasis on conflict of interest policies and procedures.

Mandatory disclosure

of fraud, bribery impacting award.

200.112200.113Emphasis for federal agencies to build on single audit results, rather than repeating procedures

200.503

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Administrative requirements key changesTerminology tips

1. Per COGAR…throughout documents both “should” and “must” are used

“Must” means “required”

“Should” indicates best practices or recommended approach

Possible technical corrections will be issued at end of year that could change some of these

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Cost Principles

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Cost principles key changes

ChangesSectionFocus on high standards for maintaining strong internal controls to justify costs of salaries and wages200.430Flexibility in process used to meet those standards200.430

Personnel activity reports not specifically required – focus shifted to appropriate internal controls in place to ensure that charges to federal awards for salaries and wages are based on records that accurately reflect the work performed

200.430

Maintained that when charges based on budgeted amounts, internal controls must exist to ensure adjustments are made so final amounts charged to federal awards are proper200.430

Time and effort reporting (personnel

c

osts)

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Cost principles key changes

RemindersTime distribution records must be maintained for all employees whose salary is:Paid in whole or in part with federal fundsUsed to meet a match/cost share requirementCannot be based on budgeted distributions alone – needs

to be supported by actual hours worked. Budgets may need adjustment.

Include all time worked for the organization to calculate what portion relates to federal awards.

Nonexempt employees must also prepare records indicating the total number of hours worked each day.

Time and effort reporting (personnel costs)

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Cost principles key changes

RemindersIn addition to the allocation of time, need to continue to consider controls over existence of employees, reasonableness of compensationIf previous system of controls worked well, no changes may be needed.

Time and effort reporting (personnel

c

osts)

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Cost principles key changes

ChangesSectionClarification that administrative costs may be treated as direct costs when they meet certain conditions200.413Provision for de minimis indirect rate of 10% of modified total direct costs (MTDC) for those who have never had a negotiated indirect rate

200.414

For those with negotiated rates, requires federal agencies to accept (usually)

200.414Entities may apply for a negotiated rate at any time 200.414

Existing negotiated rates may be extended for up to four years

200.414

Pass through entities required to provide indirect cost rate to subrecipients

200.331

Indirect/direct costs

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Cost principles key changes

ChangesSectionList of items requiring prior written approval200.407

Advertising and public relations clarified, include program outreach

200.421

Audit services allowable indirect cost when single audit not required200.425

Fringe benefits – excessive severance unallowable

200.431

Other items of interest

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Cost principles key changes

ChangesSectionConference spending clarified200.432Contingency costs clarified200.433

Employee “morale” costs eliminated

200.437

Entertainment still unallowable, but exceptions with a programmatic purpose in award or with prior approval200.438

Other items of interest

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Cost principles key changes

ChangesSectionOrganizational costs generally unallowed

200.455

Publication

costs treatment clarified when aftergrant award

200.461

Recruiting costs clarified

200.463

Limitations on relocation costs

200.464

Travel costs may include temporary

dependent care in certain circumstances

200.474

Other items of interest

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Single Audit

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Single audit changesSingle audit changesEffective for years ending on and after December 31, 2015 (no

early implementation)Single audit threshold raised from $500,000 to $750,000 (5,000 audits eliminated, 1% of federal awards previously audited)Low risk auditee criteria updatedgoing concern addedMust be GAAP (minor exception if state mandated regulatory basis)inability for cognizant/oversight agency to approve exceptionsType A program threshold raised to $750,000 (or still 3%, $3 million, .3% for larger entities)Type Bs – not required to identify more high risk Type

Bs

than at least 25% low risk type As

Type B floor changed to 25% of Type A thresholdCriteria for high risk type A changed (various criteria removed – mixed impact)

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Single audit changesSingle audit changesQuestioned costs threshold raised to $25,000 (known or likely)

Questioned costs section requires description of how calculatedFindings require “perspective” section (isolated, prevalent, type of sampling used)Repeat findings require identification as repeat and the prior finding reference number40

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Single audit changesSingle audit changesCoverage requirements for major programs tested changed to 20% for low risk

auditees and 40% for non-low risk auditeesOnline publication of reports (Clearinghouse)Intended to be the sole point of submission and access moving forward“Next business day” due date provisionAuditee certification that no protected personally identified information included in reporting packageSEFA requires payments to subrecipients (language on extent practical is removed)Federal agencies must indicate in CFDA.gov whether program is subject to single audit.

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What hasn’t changed

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Federal due date is still nine months after fiscal year end.

Any future changes would require a change in federal law (not currently proposed).

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What we don’t know yet

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Streamlining of compliance requirements

13 of the 14 compliance areas likely to remain

Potential changes within those 13

2015 Compliance Supplement to include

Currently OMB is stating available April/May 2015

Potential future changes to single audit reporting package (combining DCF and SEFA into one document)

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Wisconsin State Single Audit GuidelinesA few meetings have been held among the large state agencies that included discussion of enhancing consistency among agencies related to:

Dollar threshold for SSAG applicabilityContractual languageDetermination of program typesGranting of waiversReportingProgress is slow

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Additional Q&A documents to be issued on COFAR website.

Use of the word “should” – does this always mean “recommend” or “best practice”?

Documentation requirements (search for the word “document” and “written” in UGG…many requirements for documenting)

Federal agency compliance date = recipient effective date – What interim information will federal agencies provide?

Things to keep an eye on…

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Assign a

Champion

Factors to consider:

Who is ultimately responsible for entity’s compliance?

Who has ability to successfully bring various grant spending departments together?

Time, resources, availability

1.

Steps for creating an OMB

UGG

implementation plan

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Create a

team

Identify key stakeholders and other effected personnel in organization

Consider programmatic, financial, and budget side of grants management in creating team

Include representatives receiving federal direct and pass

through

funding

2.

Steps for creating an OMB

UGG

implementation plan

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Hold a kickoff

meeting

Require advance preparation:

Reading of all or select areas of federal register notice

COFAR

Q&A

Industry specific articles, communications

Grantor agency communications

Discuss

timing, resources, needs

Based on advance prep work, determine areas of change for your organization, and assign priority based on impact and timing of

those changes

3

.

Steps for creating an OMB

UGG

implementation plan

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assign sub-

committees

Research

Evaluating impact of change on organization

Identifying all organizational policies, procedures, communications that need modification for change

Raising questions that need clarification from funding agencies or OMB

Creating an education plan for those impacted

Monitor assigned area for change

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.

Steps for creating an OMB

UGG

implementation plan

Form sub-

committees

Determine potential subcommittee membership needs from other departments (procurement, IT, HR, internal audit, etc.)

4.

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Obtain

Approval

Obtain management and governing body approval of organizational policy changes as needed

6.

Roll out entity-wide communication and training plan

Roll out

plan

7.

Steps for creating an OMB

UGG

implementation plan

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monitor

adjust

Continue to monitor, assign additional research and subcommittees as needed, adjust plan as necessary

8

.

Steps for creating an OMB

UGG

implementation plan

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Auditor’s tips for a smooth single audit

Communicate with the auditorsIdentify significant changes in programs as soon as possibleShare results of federal or state agency monitoringDesignate an individual to be the overall single audit liaison for your entity who will prepare or review the SEFA/SESA and coordinate the overall processDesignate a primary person in each department to serve as the department’s audit contact, who will be primarily responsible for organization of single audit work, gathering requests, etc.

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Maintain DocumentationWe are required to test controls over compliance. If there is no documentation that a control was performed, we can’t conclude that it was performed.This applies to supervisory review of invoices, reports submitted to grantors, and electronic submissions.

Review the compliance supplementsFederal: http://www.whitehouse.gov/omb/circulars State: http://www.doa.state.wi.us/Divisions/budget-and-finance/financial-reporting/state-controllers-office/state-single-audit-guidelines

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Auditor’s tips for a smooth single audit

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Questions and commentsHeather Acker, CPA, Partner State and Local Government

608 240 2374heather.acker@bakertilly.comThank you for your attendance and participation!

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DisclosureThe content in this presentation is a resource for Baker Tilly Virchow Krause, LLP clients and prospective clients. Nothing contained in this presentation shall be construed as legal advice, opinion, or as an offer to buy or sell any property or services. In conformity with U.S. Treasury Department Circular 230, tax advice contained in this communication and any attachments is not intended to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code, nor may any such tax advice be used to promote, market or recommend to any person any transaction or matter that is the subject of this communication and any attachments.

The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments

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