uniform grant guidance laura hirst office of the auditor general
TRANSCRIPT
Uniform Grant Guidance
Laura HirstOffice of the Auditor General
Agenda
Background
Overview of Uniform Grant Guidance
Effective Dates
Highlights of Key Changes
New Audit Requirements
Available Resources
Questions
Background
Consolidates multiple circulars into one format
A-21, A-50, A-87 A-110, A-122, A-89, A-102, and A-133
Purpose was to streamline and improve clarity and accessibility
Final guidance is located in Title 2 of the Federal Code of
Regulations (CFR) and the Federal Agency implementation
actions in joint interim final rule
Time line
October 2011 – Council on Financial Assistance Reform (COFAR)
created
December 2013 – Final Uniform Guidance issued.
February 2014 – 1st COFAR Frequently Asked Questions (FAQ)
issued
October 2014 – 2nd COFAR FAQs issued
November 2014 – Update to COFAR FAQs
December 2014 – Joint Interim Final Rule Issued (includes agency
implementation and technical corrections).
Overview of Uniform Guidance
Sub part A – Acronyms and Definitions
Sub part B – General Provisions
Sub part C – Pre-Federal Award Requirements and
Contents of Federal Awards
Sub part D – Post Federal Award Requirements
Sub part E – Cost Principles
Sub Part F – audit Requirements
Multiple Appendices
Effective Dates
Federal Agencies must implement policies and procedures by promulgating regulations to be effective December 26, 2014.
Non-federal entities will need to implement the new requirements for all new federal awards and for additional funding to existing awards (referred to as funding increments) made after December 26, 2014.
Audit requirements are effective for fiscal year beginning on or after December 26, 2014.
Funding Increments
Funding increments are situations in which the federal agency provides additional funding on an existing grant and has the opportunity to modify the terms and conditions of the award.
If the terms and conditions can not or are not modified, the grant will continue to be covered by the original terms and conditions and subject to the old requirements.
Effective Dates Example
For fiscal year 2015: Non federal entities will have to adopt the new requirements
for all new federal awards and for funding increments to existing awards.
Single audit requirements continue to use “old” requirements
Auditor compliance testing will be affected by the adoption of the “new” requirements.
For Fiscal year 2016: New single audit requirement apply
Auditors may still have to test some awards subject to the “old” requirements.
Pass Through Awards
A subrecipient's effective date is the same as the effective date of the federal award from which the subaward is made.
The requirements for the subaward, no matter when made, flow from the requirements of the original federal award.
As a pass through entity you are required to inform the subrecipient of the effective date.
Compliance Supplement
2015 Compliance Supplement, in conjunction with the Federal Agency implementation actions in joint interim final rule, will be key to getting through the transition
2015 Compliance Supplement will include old and new guidance
Part 6 – Internal Control sections are currently out of date and auditees should refer to the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) or the Internal Control in the Federal Government (green book) issued by GAO for guidance
Key Changes
Part D –Post Federal Award Requirement Standards for Financial and Program management
Internal Control Procurement Sub recipient Monitoring
Part E – Cost Principles
Direct and Indirect Costs Time and Effort
Internal Control
The non federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statute, regulations, and the terms and conditions of the federal award.
These internal controls should be in compliance with guidance in the green book and COSO
Internal Control
Auditors have always been required to test the effectiveness of an entity’s internal control, however, there was not an explicit requirement that the entity establish effective internal controls.
This new section was meant to strengthen and make explicit the non-federal entity’s responsibilities with regard to effective internal control. The audit requirements in relation to internal control have not changed.
COFAR FAQ 303-1, 2, and 3 clarify that should indicates a “best practice” and is not a presumptively mandatory requirement.
Internal Control
A few more requirements: The non-federal entity must comply with federal
statutes, regulations, and terms and conditions of the award
Evaluate and monitor compliance
Take prompt action when instances of non compliance are identified (including audit findings)
Take reasonable measures to safeguard protected personally identifiable and other sensitive information
Procurement
The non federal entity must use its own documented procurement procedures and must maintain an appropriate level of oversight to ensure that contractors perform in accordance with their contract.
Entities must have written conflict of interest policies. No employee, officer, or agent must participate in the selection, award, or administration of a contract if he or she has a real or apparent conflict of interest.
Entities must maintain records sufficient to document the procurement history including rationale for the method of procurement, selection of contract type, contractor selection or rejection, and basis for contract price.
Suprecipient Monitoring
The pass through entity must make a case by case determination as to whether a Sub- awardee is a subrecipient or a contractor (formerly vendor)
All characteristics listed in the uniform guidance do not have to be present
Judgment is involved in the determination
Substance of the relationship is more important than the form of the agreement
Determination
Subrecipient Contractor
Creates a Federal Assistance Relationship Purpose is to obtain goods and service for the entity’s use and creates a procurement relationship
May determine eligibility Provides the goods and services within a normal business operation
Performance measured against federal program objectives
Provides similar goods or services to many different purchasers
May make programmatic decisions Normally operates in a competitive environment
Is responsible for adherence to federal program requirements specified in the federal award
Provides goods and services ancillary to the operation of the federal program
Uses federal funds to carry out a program for a public purpose as opposed to providing goods or services for the benefit of the pass through entity.
Is not subject to compliance requirements of the federal programs as a result of the agreement, though similar requirements may apply for other reasons.
Pass through Entity Responsibilities
Pass through entities must:Ensure that every subaward is clearly identified and
includes certain information at the time of the subaward
Evaluate each subrecipient’s risk of non compliance
Monitor the activities of the subrecipient as necessary
Verify that every subrecipient is audited as required by subpart F
Subaward Information
Federal Award Identification
Subrecipient name and DUNS number
Federal award identification number 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 federal awarding agency, pass through Entity, and contact information for
the awarding official
CFDA number and name, must identify the dollar amount made available under each
CFDA number at the time of disbursement
Whether the award is R&D
Indirect cost rate for the federal award, including if de Minimis rate is charged.
Subaward information
All requirements imposed by the pass through entity on the subrecipient so that the federal award is used in accordance with the federal statutes, regulations, and terms and conditions of the federal award.
Any additional requirements that the pass through entity imposes on the subrecipient in order for the pass through entity to meet its compliance requirements
An approved federally recognized indirect cost rate negotiated between the subrecipient and the federal government, or between the pass through entity and the federal government or a de Minimis indirect rate defined in section 200.414
A requirement that the sub recipient permit the pass through entity and auditors to have access to the sub recipient’s records and financial statements as necessary
Appropriate terms and conditions concerning close out of the sub award
Subrecipient Monitoring
Evaluate each subrecipient’s risk of noncompliance to determine the appropriate level of sub recipient monitoring
The Subrecipients prior experience with similar awards
Results of previous audits
New personnel or new or substantially changed systems
Other federal monitoring
Subrecipient Monitoring
Consider imposing specific sub award conditions as outlined in 200.207
Must monitor activities for compliance with requirements and performance goal achievement:
Review financial and Programmatic reports
Follow up on corrective action
Issue a management decision for audit findings
Subrecipient monitoring
Depending on the results of the risk assessment, the pass through entity may:
Provide training and technical assistance Perform on-site reviews Arrange for agreed-upon procedures engagements
(section 200.425)
Verify Subrecipient obtained a single audit, if required:
Consider whether the results of the audits or other reviews necessitate adjustments to the pass through entity records
Consider if enforcement actions are necessary.
Indirect Costs
Federal agencies and pass through entities will have to accept a non federal entity’s negotiated indirect cost rate (unless statute or regulation allows for an exception)
Non federal entities will have a one-time option to extend the rate for up to four years
For non federal entities who have never received a negotiated rate, a de Minimis rate of 10% of modified total direct costs may be used indefinitely
Compensation/Personal Services
New language intended to reduce the administrative burden of documenting time and effort
Less prescriptive on documentation – places greater emphasis on internal control
However, there is a requirement that charges must be based on records that accurately reflect the work performed.
Compensation/Personal Services
Time and distribution records must be maintained for all employees whose salary is paid in whole or in part with federal funds and/or is used to meet a match/cost share requirement
Must be actual not budget estimate alone
Must document all time worked and what percentage is federal
Compensation/Personal Services
New Standards for documentation:
Charges must be based on record that accurately reflect the work performed
Must be supported by a system of internal control which provides reasonable
assurance that amounts are accurate, allowable, and properly allocated
Be incorporated into official records
Reasonably reflect total activity for which the employee is compensated
Activities may be expressed as a percentage of distribution of total activities
Non exempt employees must prepare records indicating the total number of
hours worked each day
Salaries and wages of employees used in meeting cost sharing or matching
requirements on federal awards must be supported in the same manner
Audit Requirements
A non federal entity that expends $750,000 or more in federal awards during the non-federal entity’s fiscal year must have a single audit.
Intended to be in lieu of any financial audit of the federal awards required by other federal statutes and regulations
Generally completed annually
Auditee responsibilities
Procure or otherwise arrange for audit to ensure that it is performed and submitted timely
Prepare appropriate financial statements, including the schedule of expenditure of federal awards
Promptly follow up and take corrective action on audit findings and prepare summary schedule of prior audit findings
Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for the auditor to perform the audit
Auditees portion of the data collection form
Auditor Responsibilities
Conduct audit in accordance with generally accepted government auditing standards (GAGAS)
Provide financial statement opinion and a report on internal control over financial reporting and compliance
Provide a report on compliance for each major program and a report on internal control over compliance
Prepare a schedule of findings and question costs
Prepare a summary of the auditors results
Auditors portion of the data collection form
Changes to Audit Requirements
Threshold for reporting questions cost increased to $25,000 in known question costs for major and non major programs
$25,000 in known and likely question costs for major programs
Major program determination
Low risk auditee criteria
Major Program Selection
Risk based approach considerations
Current and prior audit experience
Oversight by federal agencies or pass through entities
Inherent risk
Steps outlined in section 200.518 (b) through (i)
Major Program Selection Step 1
Identify Type A programs:Total Federal Awards Expended Type A/b Threshold
Equal $750,000 but less than or equal to $25 million
$750,000
Exceeds $25 million but less than or equal to $100 million
Total federal awards expended times .03
Exceeds $100 million but less that or equal to $1 billion
$3 million
Exceeds $1 billion but less than or equal to $10 billion
Total federal awards expended times .003
Exceed $10 billion but less than or equal to $20 billion
$30 million
Exceeds $20 billion Total federal awards expended times .0015
Major Program Selection Step 1
Programs meeting the threshold are type A, programs under the threshold are type B
The new guidance pulls in steps when large entities have large loan programs
If the loan program exceeds four times the largest non- loan program, it is automatically a type A program and it is excluded from the total federal awards expended when determining the Type A/B threshold for the remaining programs.
Major Program Selection Step 2
Identify Type A Programs that are low risk:
Must consider oversight by federal agencies or pass
through entity
Results of prior audit follow-up
Changes in personnel or systems
Must have been audited as a major program in at least
one of the two most recent audit periods
Had no material control weaknesses
Had an unmodified opinion on the program
Known or likely question costs less than 5% of the total
federal awards expended for the program
Major Program Selection – Step 3
The auditor must identify high risk type B programs using the criteria in section 200.519
Only perform risk assessment until the number of high risk type B programs identified are at least 1/4th of the number of low risk type A.
Auditor is encourage to use an approach that would provide an opportunity for different high-risk Type B programs to be audited as a major over a period of time.
Major Program Determination – Step 4
Additional programs may be necessary if the total expended for the programs selected in steps 2 and 3 do not meet the percentage of coverage rules.
The auditor must then select additional programs to reach 20% of total awards expended for low risk auditees and 40% of total awards expended for auditees not identified as low risk
Low Risk Auditee Criteria
Annual Single Audit submitted timely
Unmodified financial statement opinion
No material control weaknesses
Auditor did not report a going concern
None of the Major Programs audited in the previous two years had:
◦ Material control weaknesses◦ Modified opinion on major program ◦ Known or likely question costs that exceed five percent of the
total federal awards expended for a Type A program
Resources
Statewide Single Audit Intranet site: http://
inside.michigan.gov/SBO/financial_mgmt/Pages/Statewide-Single-Audit.aspx
Uniform Grant Guidance Documents: https://www.whitehouse.gov/omb/grants_docs/
Council on Financial Assistance Reform (COFAR): https://www.cfo.gov/cofar
To sign up for the COFAR mailing list: https://survey.max.gov/index.php/496587/lang-en
Questions