OMB Circular A-133 Audits of States, Local Governments and Non-Profit Organizations Presented by Ann Holmes and Toni Law

1. OMB Circular A-133Audits of States, Local Governments and Non-Profit OrganizationsPresented by Ann Holmes and Toni Lawson

2. Presenters • Ann Holmes Chief Financial Officer, CASL aholmes@casl.umd.edu 301‑226‑8804 • Toni Lawson Associate Director, ORAA tlawson@umresearch.umd.edu 301-405‑6275

3. History 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

4. Single Audit Report • Financial statements • Schedule of expenditures of Federal awards • Auditors opinions on fair presentation of financial statements • Schedule of expenditures of Federal awards

5. Single 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

6. A-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

7. Risk 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

8. Risk 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

9. Circular Organization • General • Gives the purpose of the circular and definitions of frequently used terms • Audits • Specific information on audit requirements

10. Circular Organization • Responsibilities defined for: • Auditees (the university) • Federal Agencies • Pass-Through Entities • Auditors

11. OMB Circular A-133 • Appendix • A.- Data Collection Form • B.- Compliance Supplement

12. A-133 Subpart A Purpose Sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of [Universities] expending Federal funds.

13. A-133 Subpart ADefinitions CFDA Number The number assigned to a Federal program in the Catalog of Federal Domestic Assistance (CFDA). Examples: 59.037 SBDC 47.076 Education/Human Resources (NSF)

14. A-133 Subpart ADefinitions Internal Control Process designed to provide reasonable assurance of achieving the following: • Effective & efficient operations • Reliable financial reporting • Compliance with laws & regulations

15. A-133 Subpart ADefinitions Pass-through Entity A non-Federal entity that provides a Federal award to a subrecipient to carry out a Federal program.

16. A-133 Subpart ADefinitions SubrecipientA non-Federal entity that expends Federal funds received from a pass-through entity to carry out a Federal program.

17. A-133 Subpart B Audits Defines: • Who is required to be audited • Determining subrecipient vs vendor • Frequency of audits

18. 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

19. 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

20. A-133 Subpart C Auditees 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

21. A-133 Subpart D Pass-through Entities Responsibilities: • Identify Federal awards to subrecipient (CFDA#) • Advise subrecipient of Federal requirements • Monitor subrecipient for compliance

22. A-133 Subpart E Auditors Responsibilities: • Financial statements • Internal control • Compliance with regulations • Follow-up on prior audit findings

24. Pass-through Entity Responsibilities • 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

25. Pass-through Entities(UM) Responsibilities • Measures for subrecipient compliance: • Sponsored Projects Subcontract Procedure Manual • Subrecipient’s A-133 Audit Certification • Subrecipient’s A-133 Audit Report

26. Pass-through Entities(UM) Responsibilities • 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

27. Pass-through Entities(UM) Responsibilities • Contents of subrecipient’s proposal: • Work statement • Budget • Schedule/Deliverables • Endorsement

28. Pass-through Entities(UM) Responsibilities • 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

29. Pass-through Entities(UM) Responsibilities • 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

30. Pass-through Entities(UM) Responsibilities • ORAA’s role: • Draft subaward • Assign subaward a unique identification number (Q or Zxxxxx) • Issue/negotiate subaward with subrecipient

31. Pass-through Entities(UM) Responsibilities • 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

32. Pass-Through Entities(UM) Responsibilities • OCGA’s role: • Receive and incorporate subrecipient’s financial reports with reporting requirements of prime award

33. Internal Controls • Sense of conducting operations ethically • Positive responsiveness to questioned costs • Staff knowledge of compliance requirements • Training programs

34. Compliance Requirements • 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

35. Compliance & Internal 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

36. Compliance & Internal Controls B. Allowable Costs/Cost Principles • OMB A-21 • Reasonable, Necessary, Allowable • Facilities & Administrative vs Direct • Disclosure Statement • Comparisons of budgets to actual costs

37. Compliance & Internal Controls C. Cash Management • Cost reimbursable* • Cash Advances* • Letter of credit* *Funds requested are for actual expenses

38. Compliance & Internal Controls 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.

39. Compliance & Internal Controls E. Eligibility • Who can participate in a Federal program and the amounts for which they qualify • Subrecipients are reviewed for eligibility

40. Compliance & Internal Controls F. Equipment and Real Property Management • Proper records & adequate safe guards • Disposition of equipment • Agency compensated if sold • Property tags in place

41. Compliance & Internal Controls 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

42. Compliance & Internal Controls 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

43. Compliance & Internal Controls 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

44. Compliance & Internal Controls J. Program Income Gross 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

45. Compliance & Internal Controls K. Real Property Acquisition & Relocation Assistance • Equitable treatment if property is acquired

46. Compliance & Internal Controls 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

47. Compliance & Internal Controls M. Subrecipient Monitoring • Ensure Compliance with Federal requirement • Reasonable assurances that subrecipients obtain required audits

48. Subrecipient 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

49. Subrecipient 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

50. Keys to Good Subrecipient Monitoring • 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