OMB Circular A-133 Overview: Audit Requirements, Responsibilities, and Follow-up

1. Departmental Research Administrators Training Track OMB Circular A133 Audits of States, Local Governments, and Non-Profit Organizations

2. An Overview of OMB Circular A133 OMB A-133 General (Purpose and Definitions) Audit requirements Auditee’s Responsiblities Federal Agencies and Pass-Through Entities Responsiblities Auditor’s Responsibilities Appendix A – Data Collection Form Appendix B – Compliance Supplement

3. An Overview of OMB Circular A133 General Purpose and Definitions Purpose: This Circular “sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of states, local governments, and non-profit organizations expending Federal awards.” Definitions: This section provides definitions of key terms used the the Circular.

4. An Overview of OMB Circular A133 Audit Requirements: Single Audit: Non Federal entities that expend $500,000 or more in a year in Federal awards are to conduct a single audit. Basis for determining Federal awards expended –determination is based on when the activity related to the award occurs Expenditure transactions associated with grants Disbursement of funds passed through to subrecipients The receipt or use of program income

5. An Overview of OMB Circular A133 Audit Requirements: (cont’d) Provides guidance for determining difference between subrecipients and vendors. Characteristics indicative of a Federal award received of a subrecipient are when the organization: Determines who is eligible to receive federal financial assistance Has performance measured against whether the objectives of the Federal program are met Has responsibility for programmatic decision making Has responsibility for adherence to compliance requirements Characteristics indicative of payments received by a Vendor Provides the goods or services within normal business operations Provides similar goods or services to many different purchasers Operates in a competitive environment Is not subject to compliance requirement of the Federal program

6. An Overview of OMB Circular A133 Audit Requirements: (cont’d) Relation to other audits: shall be in lieu of any financial audit required under individual Federal awards. Frequency of audits: annual or occasionally biennial. Sanctions: Lists sanctions that can be imposed if audits are not performed or are performed incorrectly. How to treat audit costs. Program-specific audits: Guide available for how to handle including report submission requirements

7. An Overview of OMB Circular A133 Auditees’ Responsibilities: Identify all federal awards correctly. Federal Program and award identification includes: CFDA Title and number Award number and year Name of Federal Awarding Agency Name of Pass-Through Entity Maintain Internal Control.

8. An Overview of OMB Circular A133 Auditees’ Responsibilities: (cont’d) Comply with laws, regulations and the provisions of contracts or grant agreements. Prepare appropriate financial statements, including schedule of expenditures of Federal Awards. Ensure that audit is properly performed and reports submitted when due. Follow up and take corrective action on audit findings, including preparing a summary schedule of prior audit findings and corrective action plan.

9. An Overview of OMB Circular A133 Financial Statements Auditee must prepare financial statements that reflect its financial position, results of operations or changes in net assets Auditee must prepare a schedule of expenditures of Federal Awards for the period covered by the financial statements. Must list individual Federal programs by agency For Federal awards received as a subrecipient, the name of the pass-through entity must be included. Must provide total Federal awards expended for each program and the CFDA number or other identifying number.

10. An Overview of OMB Circular A133 Audit Finding Follow-up The auditee is responsible for follow-up and corrective action on all audit findings. The summary schedule of prior audit findings reports the status of all findings included in the prior audit’s schedule and all audit findings included in the prior audit’s schedule of findings and questioned costs. When audit findings are fully corrected, the summary schedule need only list audit findings and state that corrective action was taken.

11. An Overview of OMB Circular A133 Audit Finding Follow-up (cont’d) When audit findings were not corrected or onlypartially corrected, the summary schedule should describe the correction action as well as any partialcorrective action taken. When the corrective action is significantly different from action previously reported in a corrective action plan, the schedule must provide an explanation.

12. An Overview of OMB Circular A133 Audit Finding Follow-up (cont’d) When the auditee believes an audit finding is no longer valid, the reasons for this position must be described in the summary schedule. To consider a finding not warranting further action, all the following must have occurred: Two years have passed since the audit report in which the finding occurred was submitted to the Federal clearinghouse. The Federal agency or pass-through entity is not currently following up with the auditee on the finding. A management decision was not issued.

13. An Overview of OMB Circular A133 Report Submission The audit is required to be completed no later than nine months after the end of the fiscal year. The auditee is to submit a data collection form which states whether the audit was completed in accordance with A-133 and provides information about the auditee, its federal programs, and the results of the audit.

14. An Overview of OMB Circular A133 Report Submission (cont’d) Compliance Requirements – for each Federal program A. Activities allowed or unallowed B. Allowable cost/cost principles C. Cash management D. Davis-Bacon Act E. Eligibility F. Equipment and real property management G. Matching, level of effort, earmarking

15. An Overview of OMB Circular A133 Compliance Requirements (cont’d) H. Period of availability of Federal funds I. Procurement and suspension and debarment J. Program Income K. Real property acquisition and relocation assistance L. Reporting M. Subrecipient monitoring N. Special tests and provisions

16. An Overview of OMB Circular A133 Reporting Submission – Reporting Package Report Package shall be submitted to the Federal Clearing House and shall consist of the following: Financial statements and schedule of Federal Awards – Data Collection Form Summary Schedule of prior audit findings Corrective action plan The Federal Clearing House distributes the information to the appropriate Federal Agencies

17. An Overview of OMB Circular A133 Federal Agency and Pass-Through Entity Responsibilities Recipients expending more than $25 million a year in Federal Awards are designated a cognizant agency. The determination is based upon the amount of direct funding provided to the entity. UMBC’s cognizant agency is the Department of Health and Human Resources

18. An Overview of OMB Circular A133 Cognizant Agency Responsibilities: (Selected) 1. Provide technical audit advice and liaison to auditees and auditors; 2. Consider auditee requests for extension of the report submission deadline; 3. Conduct quality control reviews of audits made by non-Federal auditors; 4. Promptly inform other Federal agencies or law enforcement officials of any direct reporting by the auditee of irregularities or illegal acts; 5 Advise the auditor, and if necessary, the auditee of any deficiencies found in the audit; 6. Coordinate management decisions

19. An Overview of OMB Circular A133 Federal Awarding Agency Responsibilities 1. Inform each recipient of the CFDA title and number, award name and number, award year and if it is R&D. 2. Advise recipients of requirements imposed by Federal laws and regulations, and the provisions of contract and grant agreements. 3. Ensure that audits are completed and reports are received in a timely manner. 4. Provide technical advice to auditees and auditors. 5. Issue management decision on audit finding within six months after receipt of the audit report and ensure corrective action is taken.

20. An Overview of OMB Circular A133 Pass-through Entity Responsibilities Monitor the activities of subrecipients to ensure Federal awards are used for authorized purposes in compliance with laws, regulations and the provisions of contracts and grant agreements, and that performance goals are achieved. Ensure that subrecipients expending more than $500,000 or more in Federal awards have met applicable audit requirements. Issue a management decision on audit findings within six months after receipt of the subrecipients audit and ensure corrective action is taken.

21. An Overview of OMB Circular A133 Auditors’ Responsibilities Describes the scope of the audit - Financial Statements, Internal Controls, and Compliance. How much detail? Required to cover the entire operation of the auditee Required to report deficiencies in internal control over major Federal programs, material noncompliance, known fraud affecting a Federal award. Required to use a risk-based approach to determine which Federal programs are major programs

22. An Overview of OMB Circular A133 Where to get more information? http://www.whitehouse.gov/omb/rewrite/circulars/a133/a133.html