ernst & young technical line omb grant guildelines 04 22 2013

What you need to know • The US Office of Management and Budget has proposed streamlining its grant

guidance and issuing a single document.

• The proposal also would allow new grantees to use a minimum flat indirect

cost rate for a few years and provide new opportunities for certain grantees

to simplify the reporting needed to support salary charges. It also may lead to

more robust subrecipient monitoring.

• Other proposed changes include streamlining the Circular A-133 compliance

audit to focus on areas of waste, fraud and abuse, raising the audit threshold

to $750,000 and increasing the Type A/B program threshold to $500,000.

• Comments are due by 2 June 2013.

Overview The US Office of Management and Budget (OMB) is seeking comment on broad

revisions to its guidance for federal awards.

The proposal, Proposed OMB Uniform Guidance: Cost Principles, Audit and

Administrative Requirements for Federal Awards, would streamline and consolidate

eight existing OMB documents and regulations into one document. The proposed

guidance would supersede the following OMB Circulars:

• A-133, Audits of States, Local Governments and Non-Profit Organizations

• A-21, Cost Principles for Educational Institutions

• A-87, Cost Principles for State, Local, and Indian Tribal Governments

• A-102, Awards and Cooperative Agreements with State and Local Governments

No. 2013-08

22 April 2013

Technical Line OMB — proposed guidance

In this issue:

Overview ........................................... 1

Key changes for grant recipients ....... 2

Cost principles ................................ 2

Administrative requirements ........... 5

Audit requirements ......................... 6

Reporting on the Schedule of Expenditures of Federal Awards ... 8

Indirect effects on grant recipients .... 8

Circular A-133 audit threshold would increase to $750,000 ....... 8

Changes to the major program determination process ................ 8

Percentage of coverage changes... 10

Criteria for low-risk auditee ........... 10

No more deviation from use of risk criteria to select major programs ........................ 10

Reduction in types of compliance requirements to be tested ......... 11

Audit findings ............................... 12

Appendix A: The proposed guidance .. 13

Appendix B: Summary of proposed A-133 audit changes and effects on recipients ................................ 14

Changes proposed to

federal grant policies

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

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

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2 22 April 2013 Technical Line Changes proposed to federal grant policies

• A-110, Uniform Administrative Requirements for Awards and Other

Agreements with Institutions of Higher Education, Hospitals, and Other

Non-Profit Organizations

• A-122, Cost Principles for Non-Profit Organizations

The proposed guidance would also supersede sections of A-50, Audit Follow-Up,

related to Circular A-133 audits, and A-89, Federal Direct Program Assistance

Information. The cost principles for hospitals currently contained in 45 CFR

Part 74, Appendix E, would remain in effect, but the OMB is considering an update

to align them with the proposed guidance.

With the proposal, the OBM is attempting to establish uniform cost principles and

audit requirements for federal awards to nonfederal entities and administrative

requirements for federal grants and cooperative agreements that total more than

$600 billion annually. The OMB’s goal is to:

• Reform grant policies to increase the efficiency and effectiveness of federal

programs

• Eliminate unnecessary and duplicative requirements

• Focus grant policies on areas that emphasize the achievement of better grant

outcomes at a lower cost

The OMB and federal agencies have been talking for some time about how to make

federal programs more efficient and effective. The proposal follows an “advance

notice” published in the Federal Register on 28 February 2012, in which the OMB

sought comments on a document entitled Reform of Federal Policies Relating to

Grants and Cooperative Agreement; cost principles and administrative requirements

(including Single Audit Act). The advance notice and the proposal were developed in

response to presidential directives.

If the proposal is finalized, the standards that affect the administration of grants

and cooperative agreements issued by federal agencies will be codified and become

effective within one year. The OMB will set an effective date for the audit provisions

when it issues the final guidance.

Key changes for grant recipients Cost principles

OMB has proposed consolidating the three circulars on cost principles into

Subchapter F of the proposed guidance, supplemented by appendices IV through IX.

OMB’s goal is to eliminate duplicative language and clarify substantive policy

variances across entities.

Indirect costs

Section 616 of the proposed guidance would give entities the option of extending

the negotiated rate for up to four years, with approval of the appropriate “indirect

cost cognizant” agency. The proposal would allow entities to use the one-time

extension only if there have been no major changes to indirect costs. Entities

wouldn’t be able to renegotiate the rate during the extension period.




A minimum rate of 10% of modified total direct costs would be set to ensure that

entities that aren’t able to negotiate receive a minimum reimbursement (for no

more than four years until they develop negotiating capacity). The proposed

guidance specifies the circumstances under which agencies would be able to make

exceptions to the negotiated rate. This may result in fewer requests by granting

agencies to establish rates below the entity-wide negotiated rate.

In addition, pass-through entities would have to take one of the following actions:

• Honor the indirect cost rates negotiated at the federal level

• Negotiate a rate in accordance with federal guidelines

• Provide a minimum flat rate

How we see it The changes could reduce costs for grant recipients by eliminating the need for

negotiations on indirect cost rates during periods in which extensions are in effect.

Time and effort reporting

Section .621 Selected Items of Cost, C-10, Compensation-Personal Services, of the

proposed guidance would consolidate reporting requirements and eliminate specific

examples. The OMB is trying to focus on broad principles of how an entity may

establish internal controls to validate personnel-related costs.

In a potentially far-reaching change from today’s guidance, the proposal would allow

entities to document personnel costs by using performance-based reporting (based

on milestones) rather than time and effort reports. The appropriate agency would

have to approve the use of such an approach, but entities could use performance-

oriented metrics to account for multiple awards and their combined use.

This new option could significantly reduce the administrative burden of

documenting positions funded by multiple grants that essentially serve the same

population of program participants.

The proposed guidance requires that:

• Time and effort reports provide after-the-fact certification of the conformance

of payroll charges with the activity of each employee

• Certification periods of up to 12 months be established to provide oversight of

federal awards

• Budget estimates made before services are performed do not qualify as support,

but may be used for interim accounting purposes in certain circumstances

How we see it OMB is especially interested in whether recipients believe the proposed guidance

on time and effort reporting provides enough flexibility and whether auditors

believe the requirements can be easily audited.

The proposed guidance

would allow entities to

validate personnel costs

using performance-based

reporting.




Collection of improper payments

Under the proposed guidance, recipients would be allowed to keep amounts collected

to cover the expense of collection efforts to recover improper payments. The costs

may be considered direct or indirect. Amounts in excess of the expense of collection

would be treated in accordance with accepted cash management standards.

Contingency provisions

Budgeting for contingency funds associated with a federal award for the construction

or upgrade of a large facility or instrument or for information technology systems

would be required, and the method by which contingency funds are managed and

monitored would be at the discretion of the federal funding agency. Recipients would

no longer be allowed to draw on reserve funds, which they can now draw in advance.

Cost accounting disclosure statement

While institutions would still be required to document their cost accounting practices,

OMB has proposed eliminating from A-21 the requirement to file a cost accounting

disclosure statement for approval by the funding agency. Certain institutions may still

need to prepare such a disclosure statement based on the terms of their contracts.

Depreciation

Restrictions on the use of indirect costs recovered for depreciation or use

allowance reimbursements would be eliminated.

Idle facilities and idle capacity

Costs associated with excess or idle capacity in consolidated data centers,

telecommunications and public safety facilities would be allowable costs.

Intangible assets

The proposed guidance updates the cost principles to treat intangible assets such

as computer software capitalized in accordance with GASB Statement Number 51,

Accounting and Financial Reporting for Intangible Assets, in a fashion similar to

other fixed assets.

Material and supply costs

The cost of computing devices not otherwise subject to inventory controls would be

considered allowable direct cost supplies rather than equipment. The proposal sets

a $5,000 threshold for allowable maximum residual inventory of on-hand supplies

as long as the cost was properly allocable to the original grant agreement at the

time of purchase.

Utility costs

The proposal would replace the 1.3% Utility Cost Adjustment (which only certain

higher-education institutions receive) with two options for utility cost reimbursement.

The first would allow any institution to meter its utility use at the sub-building level

instead of by building. If this isn’t feasible, entities could calculate their utility costs

as a multiple of their “effective” square footage used for research.




Additional topics

The proposed guidance would also make the following changes:

• Charging directly allocable administrative support as a direct cost would be

allowed as long as the work is allocable to only one award.

• Requirements to conduct lease purchase analyses and to provide notice

before moving federally sponsored activities into a debt-financed facility

would be eliminated

• Requirements for cost reasonableness studies for large research facilities

would be eliminated

Administrative requirements

OMB generally used language from Circular A-110 as the basis for the consolidated

proposed guidance on administrative requirements for grants and cooperative

agreements in Subchapters A–E. One exception is Section .504 on procurement,

which is taken from Circular A-102.

Agency review of merits of proposals and risk posed by applicants

Before making an award, federal agencies would have to evaluate the risk an

applicant would pose to the program in addition to evaluating the applicant's

eligibility and the quality of its application. Items agencies could consider include

the applicant’s financial stability, quality of management systems, history of

performance, eligibility and Circular A-133 audit reports. As a result, applicants

may receive requests for more information before awards are granted.

Announcement of funding opportunities

For each program that issues grants or cooperative agreements, federal agencies

would have to notify the public through an announcement on an OMB-designated

website. The proposed guidance describes the information that would have to be

included in the announcement.

Interest earned on advances

The threshold for requiring recipients to remit interest earned to the federal

government would increase to $500 from $250 for state and local governments

and $100 for non-profit organizations and institutions of higher education.

Property standards

Information technology systems would be defined as equipment. The proposal

would allow equipment that is no longer needed for the federal program for which it

was purchased to be used to support other programs.

Contractors would replace vendors

The proposed guidance uses the term “contractor” instead of “vendor” to refer to

dealers, distributors, merchants, or other sellers that provide goods or services

required for federal programs. These goods or services may be for an organization’s

own use or for the use of beneficiaries of the program. Additional guidance on

distinguishing between a subrecipient and a contractor is provided in section .501

of the proposed guidance.




How we see it The introduction of the term “contractor” could cause confusion. Pass-through

entities may use a document called a “subcontract” to pass funds to a subrecipient,

but the use of this document would not make the recipient a contractor. The

determination of whether a recipient is a subrecipient or a contractor would be

based on the substance of the relationship between the two parties.

Audit requirements

Public accessibility of the Circular A-133 reporting package

Under the proposal, the entire Circular A-133 reporting package including the

audited financial statements would be publicly available on the Federal Audit

Clearinghouse website. Currently, only the data collection form that summarizes

the contents of the package is publicly available.

OMB has said it will work with the Federal Audit Clearinghouse to determine

whether privacy concerns over personally identifiable information and confidential

business information can be overcome. Federal officials are also talking about

making the information searchable so it can be used to develop audit-risk metrics

for types of entities, federal programs, findings and compliance requirements.

Recipient certification about personally identifiable information

A senior-level representative of the auditee (e.g., state controller, director of

finance, chief executive officer, chief financial officer) would have to sign a

statement that would be included in the data collection form certifying, among

other things, that the reporting package does not include personally identifiable

information and that the Federal Audit Clearinghouse is authorized to make the

reporting package and the form publicly available. Recipients would have to review

the Circular A-133 reporting package to ensure that it doesn’t contain personally

identifiable information. Such information often appears in the auditor’s findings,

the Summary Schedule of Prior Audit Findings or the Corrective Action Plan.

Submission of a separate Circular A-133 Corrective Action Plan

The proposed guidance would require the auditee to prepare in a document

separate from the auditor's findings a corrective action plan to address each audit

finding in the current-year auditor’s reports. The plan would have to provide:

• The name(s) of the contact person(s) responsible for the corrective action

• The corrective action planned

• The anticipated completion date

If the entity being audited does not agree with the audit findings or believes that

corrective action is not required, the entity would have to explain this in the

corrective action plan.

Circular A-133 currently does not explicitly say that the corrective action plan must

include these elements and must be presented separately from the “Management’s

response and planned corrective actions” section of the auditor’s current-year

findings, which often contain only brief responses. Federal officials believe that

requiring recipients to provide a separate corrective action plan will make it clear to

them that it is their responsibility, not the auditor’s responsibility.

The entire Circular A-133

reporting package

would be posted on a

government website.




How we see it The requirement to develop a separate Corrective Action Plan may require more

effort on the part of some entities.

Summary Schedule of Prior Audit Findings

The proposed guidance would require recipients to report on the status of previously

issued financial statement audit findings in the Summary Schedule of Prior Audit

Findings (Summary Schedule). The Summary Schedule would also have to identify

any prior-year findings that are repeated in the current year, along with the number

used to identify the finding. Current guidance requires recipients to report only the

status of previously issued federal award findings on the Summary Schedule.

Expansion of pass-through entity responsibilities

Pass-through entities would be required to provide more information in sub-awards,

including:

• The Code of Federal Financial Assistance title and number

• Federal award name and number, federal award year, whether the award is for

research and development (R&D), as defined in Appendix I of the proposed

guidance, and the name of the federal awarding agency.

The pass-through entity would have to provide this information to each subrecipient

at the time of the federal award and with each annual continuation of the

sub-award. If the disbursement contains funds from multiple federal awards or

nonfederal funds, the pass-through entity would have to list the dollar amount

made available under each federal award. Today, many pass-through entities do not

provide this information.

Pass-through entities would also have to monitor subrecipients by analyzing reports

they submit and performing other procedures to ensure compliance with program

requirements and achievement of performance goals of the award.

The proposed guidance says pass-through entities may take the following actions to

monitor subrecipients:

• Perform on-site reviews of subrecipients’ program operations

• Provide subrecipients with training and technical assistance on program

related matters

• Arrange for agreed-upon procedures engagements

In evaluating the risk posed by subrecipients, pass-through entities could consider

factors such as the results of previous audits, whether the entity is a new

subrecipient, whether the entity has new personnel or has new or substantially

changed systems and the extent of federal monitoring if the subrecipient also

receives direct awards.

While many of these responsibilities are implicit today, the proposed guidance

would more clearly enumerate them. As a result, we would expect pass-through

entities to refocus their efforts, particularly in documenting risk assessments of

subrecipients. This could result in more work to comply with grant requirements.




How we see it Recipients that are pass-through entities should carefully compare the

responsibilities listed in the proposal with their current policies, procedures and

practices to determine whether they would need to take additional steps to

comply with the proposed requirements.

Reporting on the Schedule of Expenditures of Federal Awards

The proposed guidance would require recipients to report the amounts that they

have passed through to subrecipients by program on the Schedule of Expenditures

of Federal Awards (Schedule), which is part of the Circular A-133 reporting

package. This could require significant effort for certain recipients. Under the

current Circular A-133, recipients are not required to report this information on

either the face of or in notes to the Schedule. Instead, they are required to report

this information only to the extent practicable. Federal agencies believe that

recipients should have in place adequate subrecipient monitoring systems to

identify and report this information on the Schedule.

Indirect effects on grant recipients

Circular A-133 audit threshold would increase to $750,000

The proposed guidance would raise the threshold for undergoing a Circular A-133

audit to $750,000 in annual expenditures of federal awards from the current level

of $500,000, which was set in 2003. The OMB says this change would provide

relief from audits for roughly 5,000 entities while maintaining audit coverage of

more than 99% of the funds that are currently covered. However, pass-through

entities that rely partly on A-133 audits to monitor subrecipients may need to

change their monitoring processes for small grantees.

The proposed guidance would require entities below the $750,000 threshold to

make records available for review or audit by appropriate officials of the federal

agency, the pass-through entity and the Government Accountability Office.

Changes to the major program determination process

The OMB is proposing to modify several key provisions of major program

determination in ways that could reduce audit effort for some entities.

Type A/B program threshold

The threshold for distinguishing between Type A and Type B programs would be

increased to $500,000 from $300,000.

Treatment of loan and loan guarantee programs

The guidance for loan and loan guarantee programs (loan programs) would be

changed in a way that could reduce costs for certain colleges.

Currently, if a loan program exceeds four times the value of the largest non-loan

program, the auditor is required to exclude the value of the loan and program when

determining the Type A/B program threshold.

Roughly 5,000

entities would no

longer have to undergo

Circular A-133 audits.




This requirement has raised audit costs for entities whose auditors are required to

identify more programs that have to be audited as major programs. Consider a

community college where loans represent only a small portion of the Student

Financial Assistance (SFA) cluster because most students receive direct assistance

such as Pell, federal work-study and federal supplementary educational opportunity

grants. In this situation, current rules would require the value of the entire SFA

cluster to be excluded from the determination of the Type A/B program threshold,

even though the true “loan” component is small. This has resulted in certain

community colleges having smaller Type A/B program thresholds and therefore

higher audit costs than colleges whose students rely less on direct grant and

assistance programs.

Under the proposed guidance, if the loan component is less than 50% of the SFA

cluster, the value of the SFA cluster would not be excluded when determining the

Type A/B program threshold.

High-risk Type A programs

The proposed guidance would significantly limit the types of findings that would

cause a Type A program to be considered a high-risk program and therefore be

audited as a major program.

Type A programs would be designated as high risk if they meet one of the following

criteria in the most recent period:

• Failed to receive an unqualified opinion on compliance

• Had a material weakness in internal control over compliance

• Had known or likely questioned costs exceeding 5% of the program’s

expenditures

Under current Circular A-133 rules, any finding that was required to be reported in

the prior year relating to a current-year Type A program generally makes the

program high risk and requires it to be audited as a major program.

The proposal wouldn’t change the requirement that a Type A program be audited as

major at least once every three years, regardless of whether it is high or low risk.

As a result, this change probably wouldn’t significantly reduce the number of

programs that would have to be audited as major programs.

Type B programs

The proposed guidance would:

• Reduce the number of high-risk Type B programs that must be tested as

major programs from at least one-half to at least one-fourth of the low-risk

Type A programs

• Allow the auditor to stop the Type B program risk assessment process after

this number of high-risk Type B programs is identified

• Classify as small Type B programs that are 25% of the Type A/B program

threshold, which would result in fewer Type B program risk assessments

by auditors




How we see it Reducing the number of high-risk Type B programs that would be tested as major

programs could benefit larger entities that have the following characteristics:

• Many federal programs that are roughly the same size

• Few, if any, audit findings on Type A programs resulting in a potentially large

number of low-risk Type A programs

• A significant number of high-risk Type B programs due to factors such as

prior-year Circular A-133 or federal agency oversight findings, known control

deficiencies and other risk indicators

Percentage of coverage changes

The proposal would reduce the percentage of coverage required in any Circular

A-133 audit to 40% from the current level of 50% for auditees that aren’t low risk

and to 20% from 25% for low-risk auditees. This wouldn’t cause a significant

decrease in the number of major programs that an auditor may have to audit

because a Type A program would still have to be audited as major at least once

every three years, regardless of its risk level.

The proposed changes to major program determination are intended to focus audit

coverage on programs with control deficiencies or material compliance issues. The

goal is to provide relief for entities that materially comply with the requirements as

demonstrated by an unqualified opinion and no material weaknesses in internal

controls or material noncompliance. Because large entities such as large state

governments often have at least one finding in a program, almost all of their Type A

programs currently may qualify as high risk and have to be audited as major programs.

Criteria for low-risk auditee

The criteria for low-risk auditees would be revised, making it slightly more difficult

to qualify. One new criterion would require that the auditor did not report a

substantial doubt about the auditee’s ability to continue as a going concern. The

new criteria also would indicate more clearly that submission of the data collection

form and related Circular A-133 audit reporting package within the required nine

months after fiscal year-end is required. Auditees also would no longer be able to

obtain waivers to qualify.

No more deviation from use of risk criteria to select major programs

For first-year Circular A-133 audits, auditors currently may elect to classify as

major programs all Type A programs, plus any Type B programs needed to meet the

percentage of coverage requirements. First-year audits are defined as the first year

of an entity being audited under Circular A-133 or the year of an auditor change.

Under the proposed guidance, the auditor would not be able to make this election in

any circumstance.

The proposed guidance

provides an incentive for

large governmental

entities to focus on

correcting audit findings.




Reduction in types of compliance requirements to be tested

The proposed guidance would require seven types of compliance requirements to

be tested in a Circular A-133 audit rather than the current 14 types. In the table

below, we list the current and proposed compliance requirements.

Current Proposed

Activities allowed or unallowed — A Activities allowed or unallowed — A

Allowable costs/cost principles — B Allowable costs/cost principles — B

Cash management — C Cash management — C

Davis Bacon Act — D Eligibility — E

Eligibility — E Matching — G (included within

requirement B )

Equipment and real property

management — F

Period of availability of federal funds

— H (included within requirement B )

Matching, level of effort and

earmarking — G Reporting — L

Period of availability of federal funds — H Subrecipient monitoring — M

Procurement and suspension and

debarment — I Special tests and provisions — N

Program income — J

Real property acquisition and relocation

assistance — K

Reporting — L

Subrecipient monitoring — M

Special tests and provisions — N

This change is intended to allow federal agencies to concentrate on the requirements

with the highest risk of improper payments, waste, fraud and abuse.

The proposed guidance would permit agencies to request that certain of the

compliance requirements that would be eliminated be added to the Special Tests

and Provisions requirement for programs where they could be considered essential

to oversight. OMB would consider requests from agencies to add requirements.

It is worth noting that auditors rarely had to test three of the seven compliance

requirements that would be eliminated (i.e., Davis Bacon Act, real property

acquisition and relocation assistance related to federally funded construction and

highway-related activities, and program income). In addition, two of the requirements

(equipment and real property management, and procurement and suspension and

debarment) applied only to certain auditees. Portions of the other two compliance

requirements that would be eliminated (period of availability of federal funds, and

matching, level of effort and earmarking) would be retained as part of the allowable

costs/cost principles compliance requirement.




How we see it For many audits, this change would eliminate the need to document and note

that the requirements were not applicable.

Audit findings

Auditors would be required to report audit findings in more detail. In cases where

the auditor uses statistical sampling techniques, the auditor would have to provide

audit documentation (1) to clearly show how the sample was drawn, (2) to support

that the sample size is appropriate and proportional to any findings or conclusions

in the audit that are based on the sample and (3) to demonstrate that the sample

represents the population.

However, the threshold for reporting known or estimated likely questioned costs in

findings would rise to $25,000 from $10,000. This change is intended to require

the reporting of findings presenting the greatest risk.

The auditor also would be required to identify current-year findings that repeat

earlier findings and provide identifying numbers for those prior-year audit findings.

Next steps • Entities should analyze the proposed guidance and determine whether it

would reduce their administrative efforts.

• Entities also should consider commenting on the proposed guidance by

2 June 2013.

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Appendix A: The proposed guidance The proposed guidance can be found on OMB’s website at www.whitehouse.gov/omb/grants_docs#proposed.

Other documents available on the website that could be helpful include:

• Federal Register notice

• Crosswalk from existing to proposed guidance

• Crosswalk from proposed guidance to predominant source in existing guidance

• Administrative Requirements Text Comparison

• Cost Principles Text Comparison

• Audit Requirements Text Comparison

• Definitions Text Comparison




Appendix B: Summary of proposed A-133 audit changes and effects on recipients

Entities with federal expenditures < $750,000 Entities with less than $3 million in federal

expenditures (1)

Entities with

$3 million - $50 million in federal expenditures

Entities with more than $50 million in federal

expenditures A-133 Revision Topic Expenditures

material to entity Expenditures not material to entity

Threshold for A-133 audit

Eliminates A-133 audit, but audit effort for federal grant revenue recognition and to assess the risk related to unallowable costs will continue to be needed for entities that continue to have their financial statements audited. Likely savings will relate to elimination of A-133 reporting and data collection form, and possibly from focusing audit efforts directly on the impact of material misstatement on the financial statements taken as a whole rather than on a particular program.

Eliminates A-133 audit, but audit effort for federal grant revenue recognition and to assess the risk related to unallowable costs may still be needed as amounts become more material. Savings from elimination of A-133 reporting and data collection form.

No direct effect, but may affect subrecipient monitoring process as noted below.

Threshold for A-133 audit (continued)

Elimination of A-133 audit for subrecipients below the proposed $750,000 threshold, and other proposed changes may affect monitoring of grantees. The scope of the A-133 audit for larger subrecipients could change depending on whether the programs are audited as major programs at the subrecipient level. A robust subrecipient monitoring process for smaller grantees will continue to be required.

Elimination of A-133 audit for subrecipients below the proposed $750,000 threshold, and other proposed changes may affect monitoring of grantees that will continue to be required. The scope of the A-133 audit for larger subrecipients could change depending on whether the programs are audited as major programs at the subrecipient level. A robust subrecipient monitoring process for smaller grantees will continue to be required.

Threshold for Type A/B programs to $500,000

No direct effect, may affect subrecipient monitoring. May reduce total number of Type A programs, which can reduce audit effort.

Little effect but may reduce total number of Type A programs.

Likely little effect for the largest entities.

Effect of loans and loan guarantees on Type A/B threshold for grantees with Student Financial Assistance (SFA) loan programs where loan-related amounts are less than 50% of the SFA cluster

No direct effect, may affect subrecipient monitoring. No increase to Type A/B threshold with likely no effect on audit effort.

Would increase Type A/B threshold and decrease audit effort for grantees such as community colleges where annual SFA cluster amounts reported are currently greater than four times the largest non-loan program.

Would not change Type A/B threshold and not affect audit effort for grantees where annual SFA cluster amounts reported are currently not greater than four times the largest non-loan program.




Entities with federal expenditures < $750,000 Entities with less than $3 million in federal

expenditures (1)

Entities with

$3 million - $50 million in federal expenditures

Entities with more than $50 million in federal

expenditures A-133 Revision Topic Expenditures

material to entity Expenditures not material to entity

Change in criteria of a finding that requires high-risk designation in a Type A program in the following year

No direct effect, may affect subrecipient monitoring. Would likely result in fewer high-risk Type A programs and reduce audit effort at the margin but would allow for more informed judgments on programs that merit audit effort. Entities with dominant federal programs that have to be audited each year to achieve coverage would see little impact.

Likely would decrease high-risk Type A programs and reduce audit effort at the margin but allow for more informed judgments on programs that merit audit effort.

Reduction in coverage percentages

No direct effect, may affect subrecipient monitoring. Audit effort could decline for some entities. Those with dominant federal programs would likely see no change.

Audit effort would likely decline.

Change in selection of high-risk Type B programs

No direct effect, may affect subrecipient monitoring. Audit effort would decrease for entities where auditor is required to perform Type B program risk assessments.

Stop Type B program risk assessment process upon meeting 1/4 threshold


No program risk assessments/testing on small Type B programs < 25% of Type A/B program threshold


Criteria for low-risk auditee, a key determinant in % of coverage testing floor

No direct effect, may affect subrecipient monitoring. Audit effort would increase in specific situations.

Change in compliance testing criteria from 14 to 7

No direct effect, may affect subrecipient monitoring. Effect on audit effort would likely be minimal for most programs, but effort required to document non-applicable compliance requirements would be eliminated.

(1) Effect would be similar for larger entities whose schedule of expenditures of federal awards contains or is dominated by a single or a few major programs.

ernst & young technical line omb grant guildelines 04 22 2013

Technology

proposed changes

proposed guidance

audit changes

proposed omb uniform

federal agencies

reform of federal policies

federal grants

federal register