Federal Audit Compliance Overview of A-133 Audit Compliance Supplement

1. Federal Audit Compliance Overview of A-133 Audit Compliance Supplement Business and Fiscal Officers Meeting - 2/18/10 Presented by: Glen Jones, Director Post-Award Research and Sponsored Programs

2. Compliance Requirements and Internal Control • Activities Allowable or Unallowable • Allowable Costs/Cost Principles • Cash Management • Davis-Bacon Act • Eligibility • Equipment and Real Property Management • Matching, Level of Effort, Earmarking • Period of Availability of Federal Funds • Procurement and Suspension and Debarment

3. Compliance Requirements and Internal Control • Program Income • Real Property Acquisition and Relocation Assistance • Reporting • Subrecipient Monitoring

4. Activities Allowable or Unallowable • Activities allowed or unallowed are unique for each Federal Program and can be found in the following: • Laws & Regulations • Program Legislation • Federal Agency regulations • Provisions of the grant agreement • Terms and Conditions of Award • A-133 Compliance Supplement • Agency Program Requirements by CFDA#

5. Allowable Costs/Cost Principles • OMB Circular A-21, “Cost Principles for Educational Institutions” (2 CFR part 220) • Selected Items of Cost (Direct and Indirect)

6. Allowable Costs/Cost Principles (Cont)

7. Allowable Costs/Cost Principles (Cont)

8. Allowable Costs/Cost Principles (Cont)

9. Allowable Costs/Cost Principles (Cont)

10. Allowable Costs/Cost Principles (Cont)

11. Allowable Costs/Cost Principles (Cont) • Basic Considerations to Determine Costs • Reasonable and necessary (A-21, C.3) • Conform with the allocability provisions (A-21, C.4) • Consistent accounting treatment (A-21, C.10 & C.11) • Cost incurred for the same purpose, in like circumstances • Treated as direct costs only, or • Treated as indirect costs only • Conform with allowability of cost provision (A21, C.5) • Be net of applicable credits (A-21, C.5) • Be supported by appropriate documentation (A-21, C.4) • POs, receiving report, canceled checks, effort reports

12. Allowable Costs/Cost Principles (Cont) • Basic Considerations to Determine Costs (Cont) • Be applied uniformly to Federal and non-Federal activities • Fringe benefit allocation • based on benefits received by different classes of employees • Direct Costs • Identified specifically with a particular sponsored project • Can be assigned to a project relatively easily and accurately • Indirect Costs (F&A) • Incurred for common or joint objectives • cannot be identified readily and specifically with a project • Include both facilities and administrative costs (A-21, F.)

13. Allowable Costs/Cost Principles (Cont) • Basic Considerations to Determine Costs (Cont) • Indirect Costs (F&A) (Cont) • Facilities – depreciation, interest associated with building debt, equipment, capital improvements, operation & maintenance, library expenses. • Administration – general and administrative expenses, departmental administration, sponsored projects administration, student administration and services, and other administrative costs

14. Cash Management • Compliance Requirements • Cost reimbursement basis • Program costs must be paid before requesting reimbursement • Advanced funds • Procedure to minimize time elapsed between receipt & expense • Appropriate assignment of responsibility of cash drawdowns. • Drawdowns are consistent with cash needs. • Routine assessment of adequacy of subrecipient cash needs.

15. Davis-Bacon Act • Construction Grants Only • Wages for laborers and mechanics paid at prevailing wage rates. • Construction contracts should include Davis-Bacon language. • Contractors and Subcontractors should report weekly, for each week the contract work is performed.

16. Eligibility • Eligibility is unique to each Federal Program • Determine who can participate in program • Individuals • Groups of individuals • Subrecipients • Consultants • Employees

17. Equipment and Real Property Management • Equipment acquired with federal funds • Title vests with the university in most cases • Acquisition cost of $5,000 or more per unit. • Use, manage, dispose of equipment per established procedure • Property tags are placed on equipment • Physical inventory periodically taken (at least every 2 years) • Property records contain • Description • Source (vendor) • Who holds Title • Acquisition date and cost • Percentage of Federal participation in cost • Location • Condition • Disposition Data

18. Matching, Level of Effort, Earmarking • Compliance Requirements • Verifiable from the university’s records • Do not include contributions from other federal programs • Are necessary and reasonable to accomplish project • Are allowable under applicable cost principles (A-21) • Are not paid by Federal Government under another award • Are provided for in the approved budget when required • Conform to applicable provisions in A-110, laws, regulations and provisions of grant agreement.

19. Matching, Level of Effort, Earmarking • Matching, Level of Effort, Earmarking Defined: • Matching (Cost Sharing) – non federal contributions • Specific amount or percentage • Allowable non-federal costs incurred • In-kind contributions • Level of Effort • Specific level of service to be provided from period to period • Specific level of expenditures maintained from period to period • Federal funds to supplement not supplant non-Federal funding • Earmarking • Minimum and/or maximum amount or percentage of the program’s funding that must/may be used for specific activities, including funds provided to subrecipients

20. Period of Availability of Funds • Compliance Requirements • All transactions must be incurred within the stated period of performance (expensed or encumbered for goods and services) • All unliquidated obligations (encumbrances) should be liquidated within 90 days of the end of the grant. • Timely communication of period of availability requirements • Grant close-out emails • Periodic reporting of unliquidated balances • Burn rate report • Periodic review of expenditures before and after cut-off date

21. Procurement and Suspension and Debarment • Compliance Requirements • Procurement • Provide reasonable assurance that procurement are made in compliance with the provisions in OMB Circular A-110 • Procedures to verify vendors providing goods and services under a grant award have not been suspended or debarred. • Requires staff to determine that entities receiving subawards of any value and procurement contracts equal to or exceeding $25,000 are not suspended or debarred. • Checking the Excluded Parties Listing System (EPLS) • Obtaining a certification, or • Inserting a clause in the agreement

22. Program Income • Definition • Program income is gross income received that is directly generated by the federally funded project during the grant period. • Requirement • To provide reasonable assurance that program income is correctly earned, recorded, and used in accordance with the program requirements.

23. Program Income • Compliance • Identify Program Income • Review grant award to see if program income is anticipated • Determine or assessing Program Income • Properly determined and calculated and from allowable sources • Recording of Program Income • Properly recorded in accounting system • Use of Program Income • Used in accordance with program requirements and A-110

24. Real Property Acquisition and Relocation Assistance • Requirement • To provide reasonable assurance of compliance with the real property acquisition, appraisal, negotiation, and relocation requirements. • Uniform Relocation Assistance Act of 1970 • Typically related to HUD grants

25. Reporting • Requirement • To provide reasonable assurance that reports include all activity of the reporting period, are supported by underlying accounting or performance records, and are fairly presented in accordance with program requirements. • Timely reporting • Financial Reporting • Performance Reporting • Special Reporting

26. Subrecipient Monitoring • Requirements • Award identification • Identify to subrecipient the federal award information (CFDA#) • During the award monitoring • Reporting, site visits and regular contact with subrecipient • Subrecipient Audits • Audit confirmation from subrecipients verifying A-133 audit

27. Special Tests and Provisions • Compliance Requirement • Unique to Federal Program • Program listed in compliance matrix by CFDA number • Requirements listed in Part 4 and Part 5 of Supplement • Programs not listed in compliance matrix • Review grant agreement for requirements

28. Common Audit Findings • Time and Effort Reporting • Cost Sharing and Matching • Subrecipient Monitoring • Cash Management Findings in recent WSU audit related to reporting ??QUESTIONS??