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2013 Compliance Supplement, Revised Data Collection Form, and OMB Proposed Grant Reforms

2013 Compliance Supplement, Revised Data Collection Form, and OMB Proposed Grant Reforms. National State Auditors Association Annual Meeting Monterey, CA June 14, 2013. Compliance Supplement 2013. FAFATA Reporting Testing Required

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2013 Compliance Supplement, Revised Data Collection Form, and OMB Proposed Grant Reforms

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  1. 2013 Compliance Supplement,Revised Data Collection Form, andOMB Proposed Grant Reforms National State Auditors Association Annual Meeting Monterey, CA June 14, 2013

  2. Compliance Supplement 2013 FAFATA Reporting Testing Required Deleted from Part 2 Matrix – Equipment, Procurement, Suspension & Debarment, Program Income , and Real Property from any Program Deleted AARA Programs from Parts 4 & 5 Based on Limited Funds still Subject to Audit Changes in Appendix VII 340B Program testing

  3. New 2013 Form Items • New Terminology- Replace “Qualified” with “Modified” • Page 1- Auditor’s EIN • Page 2- Federal Programs • Remove Part III, Item 4, “Is a significant deficiency disclosed for any major program? (§_.510(a)(1))” • Remove Part III, Item 5, “Is a material weakness disclosed? (§_.510(a)(1))” • Remove Part III, Item 6 “Are any known questioned costs reported? (§_.510(a)(3) or (4))” • Page 3, Federal Awards- Add Loan/Loan Guarantee column • Page 3, Federal Awards- Add “Number of Findings” for each Federal award

  4. New 2013 Form Items (con’t) • Page 3- • Move Type(s) of compliance requirement(s) to new Page 4 • Move Audit Finding reference number(s) to new Page 4 • New “Page 4”- Federal Award Findings Summary: Finding-specific • Standardized Audit Finding Reference Numbers: YYYY-###, (ex. 2013-001, 2013-002) • Type(s) of Compliance Requirements • “Type(s) of Deficiency(ies)” • Modified Opinion, Other Noncompliance, Material Weakness, Significant Deficiency, Other (Nine allowable combinations) • Questioned Costs: Y/N

  5. Form SF-SAC(2010 Version) • Which compliance requirement is related to which finding? • Which finding caused the modified opinion? • Non-standard audit finding reference numbers

  6. Form SF-SAC(2013 Version) • Identifies the compliance requirements that correspond to each finding • Gives detail of how each finding affected each Federal award

  7. Proposed Changes

  8. Background • OMB issued Advance Notice on potential reforms onFebruary 24, 2012 • OMB received more than 350 responses to the Advance Notice • OMB issued Proposed OMB Uniform Guidance: Cost Principles, Audit, and Administrative Requirements for Federal Awards on February 2, 2013 • Effective date of new guidance not specified • Proposed document and the related crosswalks can be obtained at: http://www.whitehouse.gov/omb/grants_docs#proposed The reforms proposed are intended to improve the performance of federal grants and cooperative agreements, while targeting waste, fraud, and abuse to ensure accountability in the use of funds.

  9. Single Audit Threshold • Increase audit threshold from $500,000 to $750,000 • Based on single audits submitted to the FAC for 2011, there would be approximately 6,300 fewer entities subject to a single audit, but there would only be a reduction in dollars covered of approximately $3.9 billion, or less than 1% OMB’s goal is to concentrate audit resolution and oversightresources on higher dollar and higher risk awards.

  10. Type A Threshold • Groupings are based on dollars — Type A programs are those above the dollar threshold, Type B are those below • The minimum threshold is increased from $300,000 to $500,000.

  11. Large Loan Programs • Proposal incorporates the guidance on the inclusion or exclusion of large loan or loan guarantee programs in determining the Type A threshold that is currently in the Compliance Supplement • Proposal modifies the guidance related to a cluster of programs • A cluster of programs is treated as one program in determining Type A programs. For the purposes of excluding large loan programs in the determination of other Type A programs, a cluster of programs is not considered to be a loan program if the individual loan programs within the cluster comprise less than 50% of the expenditures of the cluster.

  12. High-Risk Type A Programs Current default criteria: • Not audited as a major program in 1 of 2 most recent audit periods • In most recent period, had any of the following for program: • Significant deficiency in internal control • Material weakness in internal control • Material noncompliance Finding • Has ARRA expenditures in current year • Written request by federal awarding agency to audit as major (180 days notice) Proposed default criteria: • Not audited as a major program in 1 of 2 most recent audit periods • In most recent period, had any of the following for program: • Other than an unqualified opinion • Material weakness in internal control • Known or likely questioned costs that exceed 5% of the total expenditures ofthe program • Written request by federal awarding agency to audit as major (180 days notice) Per the proposal, this change puts the focus of risk assessment on whether the program received a qualified opinion or material weakness over internal control, as opposed to whether the program received less significant findings that are not essential to the financial integrity of the program.

  13. High-Risk Type A Programs • Currently, if none of default criteria met, auditors use professional judgment of listed risk factors to determine if Type A program is considered low or high risk • The proposal is less clear as to whether the auditors continue to use professional judgment although there is a reference to the risk factors The notion of professional judgment appears to be inconsistent with the concept of focusing on programs which had more significant findings.

  14. High-Risk Type B Programs Current: • Currently there are two Type B risk assessment options: • Option 1 – Perform risk assessments on all Type B programs* and select one half of Type B programs identified as high risk up to number of low-risk Type A programs • Option 2 – Perform risk assessments on all Type B programs* until as many high-risk Type B programs have been identified as there are low-risk Type A programs Proposed: • Perform risk assessments on Type B programs* until high-risk Type B programs have been identified up to 25% of low-risk Type A programs • * subject to de minimus threshold • * subject to de minimus threshold

  15. Percentage of Coverage Requirement • The proposal reduces the minimum coverage required as follows:

  16. Streamlining Compliance Requirements

  17. Finding Elements

  18. OMB Cost Principles – Consolidation • Consolidate cost principles into single document with: • OMB Circular A-21 – Educational Institutions • OMB Circular A-87 – Governments • OMB Circular A-122 – Nonprofit Organizations • Health and Human Services at 45 CFR Part 74 AppendixE – Hospitals was not incorporated in the proposal • OMB will conduct further review of the cost principles for hospitals and make a future determination about the extent to which they should be added to this guidance These reforms above are aimed at providing uniformity indocumentation requirements across different types of entities.

  19. Administrative Requirements for Recipients • Proposal consolidates administrative requirements of OMB Circulars A-102 and A-110 into a uniform set of administrative requirements for all grant recipients • Basis appears to be A-110 except for procurement which aligns with A-102 • Proposal clarifies federal expectations for pass-through entities • Consolidates and clarifies subrecipient monitoring • Indicates that all subawards shall include a provision forindirect costs • Either negotiated or a de minimis rate of 10%

  20. Proposed Federal Agency Requirements • Use standard format to announce funding opportunities, including: • Eligibility or qualification information • Clear description of all criteria used in agency review of applications • Disclosure of special terms and conditions • Make all solicitations available for application for at least 30 days unless required by statue or unless exigent circumstancesdictate otherwise • Consider risk (financial stability, management systems and history of performance) associated with each applicant prior to making award • Risk assessment may impact terms and conditions • Designate “single audit accountable official” to oversee singleaudit process • Separate from single audit coordinator

  21. Opportunity to Comment • FR Notice: . . . “We have noted. . .where there is language in the proposal that was particularly difficult to craft, and where feedback on the policy direction outlined will be especially useful. . .” • Provide written comments: • Comments on the proposal were submitted electronically www.regulations.gov no later than 5:00 p.m. Eastern Standard Time (EST) June 2, 2013 (includes OMB extension) • Comments were submitted, to OMB under docket OMB–2013–0001

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