APPSD Audits FASB & Single Audit Update ERISA Audit Requirements

1. APPSD AuditsFASB & Single Audit UpdateERISA Audit Requirements Presented by: James F. Anderson, CPA Kristin F. Anderson, CPA Anderson & Company PC Anderson & Company PC jfacpa@AndersonCoPC.comkfa@AndersonCoPC.com 732-906-6222 732-906-6222 www.AndersonCoPC.com www.AndersonCoPC.com Matthew J. Anderson Anderson & Company PC mja@AndersonCoPC.com 732-906-6222 www.AndersonCoPC.com

4. “Good legislation should bring clarity not confusion.” - Bill Haslam

5. APPSD Audits, FASB & Single Audit Update, ERISA Audit Requirements Content of Presentation Recent NJDOE Financial Desk Audit Issues Prior NJDOE Financial Desk Audit Issues Common Findings During APSSD Audits FY 18 Audits – Areas to Address Before the Audits Recent FASB Standards FASB ASU 2016-02 Leases (Topic 842) FASB ASU 2016-14 Not-for-Profit Entities (Topic 958) OMB Reforms Related to Federal Awards ERISA Audit Requirements for Employee Benefit Plans Questions & Answers Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

6. Recent NJDOE Financial Desk Audit Issues

7. Recent NJDOE Financial Desk Audit Issues The following items were noted in recent NJDOE desk audit letters for FY 14 and FY 15: • Audit reports • Must contain the number of years a prior year finding has existed. • Consultants • Consultant contracts do not contain the required elements. • Consultants held to maximum salary requirements for like positions. • Accounting services. • Nutrition Program • NJDOE considering costs for the amount not collected from students as non allowable (poor attempt to collect, one letter won’t suffice). • Fund Deficit • Explanation of deficit fund balance in either the school restricted or unrestricted fund. • Not disclosing circumstances for fund balance deficits. • Not disclosing or preparing corrective action plans for unrestricted fund deficits 3 years or more. • Inconsistent use of job title (AFPI, AFS). • Allocation of secretarial costs over all categories. • Request for depreciation schedules. • Request for deferred rent schedules. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

8. Recent NJDOE Financial Desk Audit Issues - continued • Board of Trustees/Directors • Questions as to whether any retiree medical benefits are related to current or retired board of trustee members. • Support for benefits paid. • Questions if payments made to a board member are for services performed as a member of the board of trustees. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

9. Prior NJDOE Financial Desk Audit Issues

10. Prior NJDOE Financial Desk Audit Issues • Employees, Titles, & Certifications • The job titles reflected on the audited financial statements do not agree with the staff members’ employment contracts and/or the AFPI. • Inconsistencies in employee counts and salaries within the AFPI and AFS. • A staff member’s salary is reflected in two or more account numbers with only one position title on the employee contract. • Failure to segregate salaries by position title. • Failure to obtain county office approval for use of an unrecognized position title. • A staff member hired in a position without the proper provisional/standard credential. • Positions not properly reflected under Special Vocational Programs – instruction (i.e. Teacher of Production, Personal, or Service Occupations: Building Maintenance, Teacher of Culinary Arts). Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

11. Prior NJDOE Financial Desk Audit Issues - continued • Employees, Titles, & Certifications - continued • Salaries must be detailed for School Sponsored Athletics on AFPI and audit report. • The school must have on staff a full-time non-teaching principal that is responsible for administration and supervision of school (unless they have a waiver). • AFPI missing detail for substitute teachers. Also, challenges as to allowable use of substitutes (For those exceeding 20 instructional days in the same position for a year, did the school receive county approval for 40 days?) • Disclosures • Not providing explanations for fund transfers in AFS. • No footnote on due to/from affiliate accounts. • Improper note disclosure regarding food services. • Pension note must reflect whether or not an employee benefit plan is qualified. • Related party transactions not explained in the footnotes to the financial statements. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

12. Prior NJDOE Financial Desk Audit Issues - continued • Other Items • “Analytic review” of audited financial statements. • NJDOE has asked for explanations for fluctuations as low as $60 between audited years. Some letters have asked for explanations of over 40 accounts and required the submission of all documentation supporting the explanation. • Errors in preparing the AFPI and the related appendices (i.e. cost of vehicles and their use). • Collection efforts on bad debts not properly supported. • NJDOE attempting to address significant outstanding audit issues disclosed in audited financial statements. • Related party transactions detailed in the audit report for which no prescribed cost of ownership form was completed. • Letters are inconsistently addressed to auditors and schools. • Auditors are not permitted by GAAP/GAAS to make changes in the financial statements without the approval of the school. For this reason letters should be addressed to the school. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

13. Prior NJDOE Financial Desk Audit Issues - continued • Other Items - continued • “Mathematical” errors in financial statements/reports. • Improper re-billing of tuition in excess of 10% of tentative tuition rates. • Not properly using plant funds or using plant funds and not segregating unrestricted and school restricted fund balances. • Large expenditures from petty cash. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

14. Common Findings During APSSD Audits

15. Common Findings During APSSD AuditsFinancial Statement Items • Fixed asset depreciation/amortization lapse schedules improperly maintained. • Capital items that are improperly expensed. Repairs and maintenance items that extend the useful life of an asset should be capitalized. • Unrealized appreciation/depreciation of market value for investments not properly calculated. • Tuition payable not refunded on a timely basis. • Long-term debt payments not properly recorded according to appropriate amortization schedule. • Unallowable mortgage interest expense on mortgage loans. • Opening fund balance footnotes and changes as a result of prior year NJDOE changes to audit reports. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

16. Common Findings During APSSD AuditsFinancial Statement Items - continued • Long-term debt covenants not being properly monitored. • Certain costs expensed beyond the allowable limits. • Detailed schedule of leases not properly maintained. • Inconsistent or no method of determining functional expenses. • Inability to prepare draft financial statements. • Not properly monitoring instructional and administrative percentages. • Expense records “by student” for extraordinary services not maintained. • Improper billing for PT and OT services. Only one-on-one services can be billed. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

17. Common Findings During APSSD AuditsCompliance Issues • Employee contracts do not contain the required elements. • Job titles should be on the approved job title list and also must agree on the AFPI and employee contract. • Approved title = contract title = AFPI. • Use approved job titles for all staff (certified and non-certified). • Provisional certifications must be obtained in a timely manner. • Salaries in excess of allowable maximums. • If an individual holds multiple job titles (i.e. principal and executive director) each position is subject to the maximum salary of that title times the % of total time worked in that job. • Must calculate the related unallowable fringe benefits and pension. • Mandated tuition contracts not returned to school and kept on file. • Must have contracts on file for all consultants. • Consultant contracts do not contain the required elements. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

18. Common Findings During APSSD AuditsCompliance Issues - continued • Consultants are subject to maximum salary considerations for “like” positions. • School does not prepare the required quarterly NJDOE financial reports. They must be reviewed with the board of trustees and noted as such in the minutes. • Tuition rebilling in excess of 10% of the tentative tuition rate must be supported with a quarterly report and the rebill appropriately approved by the school’s board of trustees before the bills are mailed. • Limited usage of purchase orders. • Not properly maintaining petty cash accounts. • Not properly maintaining vehicle logs. • Unallowable costs - make use of the “pre-audit compliance questionnaire” (available upon request). • Independent auditors will be responsible for verifying criminal history checks. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

19. FY 18 Audits – Areas to Address Before the Audit

20. FY 18 Audits – Areas to Address Before the Audit • Read the new code and the NJDOE Question and Answer Pages. • Know what to do and when regarding rebills greater than 10%. Letters to districts must have: • A detailed letter outlining cost and/or changing enrollment and reasons for the change; • Management’s response to the changes; • Why these changes were not offset by a reduction of costs. • Percentage changes: • Instructional minimum 55.5%; • Administrative maximum 24.5% • Related services: • Beyond normal school day; • Beyond IEP; • Beyond the tuition contract; • Separate contract. • As of July 1, 2017, OT, PT and Speech/Language Specialist maximum salaries: • The published hourly rates shall include an allowance of 35% more than the allowable salary rate calculated and published pursuant to the 2016-2017 maximum salary rates. • Can contract with an approved clinic or agency at a rate higher than the maximum as long as the school: • Gets three quotes from approved organizations; • Takes the lowest quote when a related party is involved; • Provides documentation of three rates when asked by the NJDOE (and they will). Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

21. FY 18 Audits – Areas to Address Before the Audit - continued • The NJDOE will perform a salary survey for 2021-2022 fiscal year. • Hire only staff or consultants in a job that requires certification or bachelor’s/master’s degree if the job is in the approved title list, or if unrecognized must get county supervisor annual approval. But unrecognized is limited to the lowest maximum. • Non-administrative – Commissioner may approve a higher maximum allowable salary for no more than two employees. • Must apply by May 1 or previous SY; • NJDOE will determine by June 30 of that year. • Provide detail of other employees in similar position; • A detailed budget and how it will affect expenditure, ADE and budgeted tuition; • Explanation for the need to go above maximum; • Educational impact. • New school must amortize start-up costs over 5 years (cash flow). • Capital leasehold improvements over the remaining term plus any extension, not less than five years. Related party 10 years. Must be in service. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

22. FY 18 Audits – Areas to Address Before the Audit - continued • First $15,000 of litigation (each suit) will be considered administrative. The rest outside of the cost categories. (Docket or tracking number). • Employee contract must have the required components. Consider using the prototype provided by ASAH. • Expense refunds must be applied to original expense charge. • Benefit waivers maximum of $5,000. Obtain proof of other insurance. • Accrued and sick pay only in the year paid. • If an APSSD loans money it must charge interest at the prime rate. • Retirement plan or medical benefit costs for retired employees must be expensed when paid. GAAP may require an accrual. • Frivolous challenges to a State of NJ audit or financial review. Be aware!! • Improperly documented consultant contracts. General retainers are not adequate. • Depreciation on passenger vehicles is limited to $30,000 and must be depreciated over no less than 5 years. • Passenger vehicle leased must be used by Executive Director, Director or owner. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

23. FY 18 Audits – Areas to Address Before the Audit - continued • Document the approval a type of fringe benefit in the board minutes before offering it to employee. Document all before the beginning of the fiscal year. • Bank loans must be used exclusively for educational needs. • Pension payments must be made within nine months after the end of the fiscal year. • Transportation costs for students to/from school except where students IEP requires after school activities. • Can provide either severance (maximum 4 weeks) or buy-out (Maximum 90 days). An APSSD can’t do both. • Payout no more than 1% of an employee’s accrued sick leave in one year. • Limit travel (less of 0.25% of actual allowable costs or $20,000). • Behavior modification policy must be adopted to incur cost. No replacement meals. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

24. Recent FASB Standards

25. Recent FASB Standards These ASUs, issued in 2016 and 2017, are considered relevant to most not-for-profit entities: • ASU No. 2016-02, Leases (Topic 842): Right to Use Assets and Lease Liability. This update is effective for annual periods beginning after December 15, 2018 for public companies and employee benefit plans and after December 15, 2019 for all other entities. • ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606). This update is effective for annual periods beginning after December 31, 2017. • ASU No. 2016-14, Not-For-Profit Entities (Topic 958). This update is effective for annual periods beginning after December 31, 2017. • ASU No. 2016-15, Statement of Cash Flows (Topic 230). This update is effective for annual periods beginning after December 15, 2017. • ASU No. 2017-02, Non-for–Profit Entities – Consolidation (Sub-topic 958-810). Clarifying when a NFP entity that is a general partner or a limited partner should consolidate a for-profit limited partnership. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

26. FASB Accounting Standards Update 2016-02 Leases (Topic 842)

27. Leases: The New Requirements • To improve financial reporting of leasing activities. • More faithful representation of lessee’s rights and obligations arising from leases. • Improvements in comparability of lessee’s financial statements. • Reduced opportunities for structuring contracts to avoid balance sheet recognition. • Clarification on the definition of a lease. • In February 2016: ASU No. 2016-2, Leases (Topic 842), released. • New standard codification in new FASB ASC 842, Leases. • Effective for public businesses and certain other entities for fiscal years beginning after December 31, 2018. So for APSSDs, it would apply to the year ended June 30, 2020. • One year later for all other entities. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

28. Leases: What Is a Lease? Previous Lease Definition: An agreement conveying the right to use property, plant, or equipment (land and/or depreciable assets) usually for a stated period of time. Revised Lease Definition: A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

29. Leases: Flowchart Start • Contract Contains a Lease • Contract Does Not Contain a Lease No • Identified Asset Yes • Customer Right to Economic Benefit No Yes • Right to Control the Use Supplier Customer Neither • Customer Right to Operate Asset Yes No Yes • Designed by Customer No Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

30. Leases: New Lease Classification Finance Lease: • A lessee is required to classify a lease as a finance when it meets any one of the recognition criteria in FASB ASC 842-10-25-2: • The lease transfers ownership of the underlying asset to the lessee by the end of the lease term. • The lease contains a purchase option that the lessee is reasonably certain to exercise. • The lease term is for the major part of the remaining economic life of the underlying asset. • The present value of the lease payments and residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset. • The underlying asset is specialized and expected to have no alternative use to the lessor at the end of the lease term. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

31. Leases: New Lease Classification - continued Operating Lease: • Same criteria for old operating lease. • FASB ASC master glossary definition changed only to indicate a lease that is not a finance (instead of capital) lease. • Big changes in measurement and recognition. Short-Term Lease: • Lease term of 12 or fewer months. • Does not include an option to purchase asset that a lessee is reasonably certain to exercise. • Accounting policy election. • If elected, treated as previous operating lease (off-balance sheet). Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

32. Leases: Presentation Statement of Financial Position • Lessee • Present separately, or disclose, financing and operating lease right of use assets and liabilities from other assets and liabilities. • Either present separately or disclose which items lease assets or liabilities are included within. • Lessor • No changes from previous lease requirements. • Present lease assets separately from other assets, subject to current versus noncurrent classification. Statement of Comprehensive Income • Lessee • Finance leases: Amortization of right-of-use asset and interest on lease liability consistent with other assets and other interest expense. • Operating leases: Present as a single lease cost consistent with previous lease standards. • Lessor • All Leases: Option to present lease income separately or disclosing within notes which items include lease income. • Should present profit or loss from leases in a manner that best reflects lessor’s business model. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

33. Leases: Presentation - continued Statement of Cash Flows • Lessee • Presentation aligned with presentation in statement of comprehensive income. • Operating: Operating lease payments, variable lease payments, short-term lease payments. • Investing: Payments to bring another asset to the condition necessary for intended use. • Financing: Repayment of principal portion of lease liability. • Lessor • All cash receipts from a lease should be classified as operating activities. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

34. Leases: Disclosures • Information about nature of entity’s leases. • Existence of options to extend or terminate. • Lease transactions with related parties. • Extensive quantitative and qualitative disclosures, including significant judgements made by management. • Will be required to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing contracts. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

35. FASB Accounting Standards Update 2016-14 Not-for-Profit Entities (Topic 958)

36. Statement of Financial Position The main provisions of this Update, which amends the requirements for financial statements and notes in Topic 958, Not-for-Profit Entities, require an NFP to: • Present on the face of the statement of financial position amounts for two classes of net assets at the end of the period, rather than for the currently required three classes. • An NFP will report amounts for net assets with donor restrictions and net assets without donor restrictions, as well as the currently required amount for total net assets. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

37. Statement of Activities • Present on the face of the statement of activities the amount of the change in each of the two classes of net assets (noted on the previous slide) rather than that of the currently required three classes. • An NFP would continue to report the currently required amount of the change in total net assets for the period. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

38. Statement of Cash Flows • Continue to present on the face of the statement of cash flows the net amount for operating cash flows using either the direct or indirect method of reporting but no longer require the presentation or disclosure of the indirect method (reconciliation) if using the direct method. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

39. Enhanced Disclosures Provide the following enhanced disclosures about: • Amounts and purposes of governing board designations, appropriations, and similar actions that result in self-imposed limits on the use of the resources without donor-imposed restrictions as of the end of the period. • Composition of net assets with donor restrictions at the end of the period and how the restrictions affect the use of resources. • Qualitative information that communicates how an NFP manages its liquid resources available to meet cash needs for general expenditures within one year of the balance sheet date. • Qualitative information, either on the face of the balance sheet or in the notes, and additional qualitative information in the notes as necessary, that communicates the availability of an NFP’s financial assets at the balance sheet date to meet cash needs for general expenditures within one year of the balance sheet date. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

40. Enhanced Disclosures – continued • Availability of a financial asset may be affected by: • Its nature, • External limits imposed by donors, grantors, laws, and contracts with others , and, • Internal limits imposed by governing board decisions. • Amounts of expenses by both their natural classification and their functional classification. That analysis of expenses is to be provided in one location, which could be on the face of the statement of activities, as a separate statement, or in notes to financial statements. • Method(s) used to allocate costs among program and support functions. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

41. Enhanced Disclosures – continued • Underwater endowment funds, which include required disclosures of: • An NFP’s policy, and any actions taken during the period, concerning appropriation from underwater endowment funds, • The aggregate fair value of such funds, • The aggregate of the original gift amounts (or level required by donor or law) to be maintained, and, • The aggregate amount by which funds are underwater (deficiencies), which are to be classified as part of the net assets with donor restrictions. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

42. Investment Return • Report investment return net of external and direct internal investment expenses and no longer require disclosure of those netted expenses. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

43. Expiration of Restrictions • Use, in the absence of explicit donor stipulations, the placed-in-service approach for reporting expirations of restrictions on gifts of cash or other assets to be used to acquire or construct a long-lived asset and reclassify any amounts from net assets with donor restrictions to net assets without donor restrictions for such long-lived assets that have been placed in service as of the beginning of the period of adoption (thus eliminating the current option to release the donor-imposed restriction over the estimated useful life of the acquired asset). Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

44. Year of Implementation • The amendments in this Update should be applied on a retrospective basis in the year that the Update is first applied. However, if presenting comparative financial statements, an NFP has the option to omit the following information for any periods presented before the period of adoption: • Analysis of expenses by both natural classification and functional classification (the separate presentation of expenses by functional classification and expenses by natural classification is still required). NFPs that previously were required to present a statement of functional expenses do not have the option to omit this analysis; however, they may present the comparative period information in any of the formats permitted in this Update, consistent with the presentation in the period of adoption. • Disclosures about liquidity and availability of resources. • In the period that the amendments are first applied, an NFP should disclose the nature of any reclassifications or restatements and their effects, if any, on changes in the net asset classes for each period presented. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

45. OMB Reforms Relating to Federal Awards

46. OMB Reforms Relating to Federal Awards On December 26, 2013, the Office of Management and Budget (OMB) issued Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) that establishes uniform cost principles and audit requirements for federal awards to nonfederal entities and administrative requirements for all federal grants and cooperative agreements. The stated goal of this reform was to streamline guidance for federal awards while easing administrative burden and to strengthen oversight of more than $500 billion in federal funds expended annually. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

47. OMB Reforms Relating to Federal Awards Overall, the Uniform Guidance includes revisions to modify existing guidance and requirements considered to be outdated, ineffective, insufficient or excessively burdensome. The Uniform Guidance consolidates the cost principles (other than those related to hospitals) into a single document with limited variations by type of entity. Combining the circulars containing the cost principles and administrative requirements necessitated revising terms and definitions where applicable. The Uniform Guidance superseded the guidance in the circulars. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

48. Summary of Significant Changes to Single Audit • Terminology • Must versus should • Uniform Guidance Compliance Audits • $750,000 threshold in federal expenditure • Schedule of Expenditures of Federal Awards • Additional disclosures • 10 percent de minimis indirect cost rate • Major Program Determination • 4 step process • $750,000 but ≤ $25 million expended • Type A threshold $750,000 Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com

49. ERISA Audit Requirement for Employee Benefit Plans

50. ERISA Audit Requirement for Employee Benefit Plans • If your school sponsors an employee benefit plan subject to Title I of ERISA, you are subject to annual reporting requirements that may include an audit of the plan’s financial statements. This includes 401(k) and 403(b) plans. • Do you have a “small” or “large” plan? The general rule is that plans with more than 100 participants at the beginning of the plan year are “large” plans, needing an audit. • There is a major exception to this rule, known as the “80-120 Rule.” • If the plan in existence in the previous year, was treated as a small plan for that year (filed Schedule I of the Form 5500), and had no more than 120 participants as of the beginning of the year, it may continue to file as a small plan, and no audit is required. There is no limit to the number of years this rule may be applied. This means a plan may have up to 120 participants for many years without having an audit requirement. • If a plan is new and there is no previous Form 5500 filing, it must file as a large plan if it has over 100 participants at the beginning of the year, and an audit would be required. For first year 403(b)audits, you may go through an “as if” analysis to determine which schedule the plan would have filed in the previous year if it had been required to do a complete filing, and apply the 80-120 Rule “as if” the plan had made a complete 5500 filing in the previous year. • If a plan has been filing as a large plan, the number of participants must drop below 100 before it may file as a small plan. Anderson & Company PC 1140 Route 22 East, Suite 203, Bridgewater, NJ 08807 [P] 732-906-6222 [F] 732-603-8865 www.AndersonCoPC.com