OMB’s Proposal for grant reform

1. OMB’s Proposal for grant reform February 20, 2013

2. OMB Proposal Released for Comment On February 1, 2013, the Office of Management and Budget released a notice of proposed guidelines entitled: “Proposed Uniform Guidance: Cost Principles, Audit, and Administrative Requirements for Federal Awards” The proposal, also being referred to as “The Super Circular”, combines the multiple Federal regulations that currently govern the way we administer grants into a single, comprehensive and streamlined uniform policy guide.

3. Which Circulars are Impacted? The proposed guidance would consolidate eight current OMB Circulars. Those having a direct impact on School Districts and ESDs are: • Circular A-102 – Administrative Regulations • Circular A-87 – Cost Principles • Circular A-133 – Audit Requirements

4. Why Consolidate the Circulars? The main objectives that OMB considered when drafting the proposal were: • To strengthen accountability for Federal dollars by improving policies that protect against waste, fraud, and abuse. • To increase the impact and accessibility of programs by minimizing time spent complying with unnecessarily burdensome administrative requirement and focus on program objectives.

5. “Super circular” content • The proposal is outlined in four main areas: • Section A: Reforms to Administrative Requirements • Section B: Reforms to Cost Principles • Section C: Reforms to Audit Requirements • Section D: Additional Suggestions Outside of the Guidance Reform

6. Where can I find the Proposal? The proposal’s full text (244 pages) as well as a summary (89 pages) can be found at www.regulations.gov under docket number OMB-2013-0001. You can also provide comments which are due by May 2, 2013.

7. Changes in policy • Many of the changes were due to consolidating the same requirements contained in different circulars for different types of entities, without any impact on current policy. There are significant changes to clarify existing requirements. • The majority of the policy changes that directly impact School Districts and ESDs are related to OMB Circular A-133 which governs the way audits are conducted.

8. Policy Changes • The single audit threshold will increase from $500,000 in federal expenditures to $750,000. • Impact: This will decrease the number of school districts required to have a single audit of their federal programs under Circular A-133, therefore eliminating both staff time assisting the auditors and the cost of the audit. • To determine whether this affects you, look at your prior Schedule of Expenditure of Federal Awards to determine your total federal expenditures, then take into account any significant increases/decreases.

9. Policy Changes • The number of compliance areas required to be audited has been reduced from fourteen to seven. • Impact: Amount of hours spent on the audit should be reduced, therefore reducing the cost of the audit. • Some areas proposed to be removed as a requirement for the auditor to include in their single audit work are: • Procurement (including suspension and debarment) • Equipment and Real Property Management • Level of Effort • Earmarking • Program Income • Davis Bacon

10. Policy Changes • Determination of which programs to include in a single audit • Increase in threshold for audit coverage of expenditures: Low Risk Entity: Reduced from 25% to 20% High Risk Entity: Reduced from 50% to 40% • Impact: These changes may impact which and how many programs the auditor will select for audit. Cannot measure any added benefit/reduced burden at this time.

11. Policy Changes • The threshold for known questioned costs increased from $10,000 to $25,000 • Impact: Will reduce the number of published findings, which will also reduce the likelihood of being classified as high risk for future single audits.

12. Proposed “Super Circular” Guidance We will keep you informed of any updates regarding the release of the final rule. Questions? Contact Jennifer Carrougher, Director, Audit Management and Resolution, OSPI, at 360-725-6288