Understanding Grant Compliance within OMB Circular A 133, within OMB - PowerPoint PPT Presentation

Understanding Grant Compliance within OMB Circular A ‐ 133, within OMB Circular A 133, Compliance Supplement

Instructor Information Instructor Information J Kurt Tucker CPA J. Kurt Tucker, CPA Audit Partner, Midwest Professionals Senior Instructor, Falmouth Institute kurt@mwp.us.com

Table of Contents Course Overview • Part 1 ‐ Background and Purpose ,Introduction g p , (How to use the Supplement) • Part 2 ‐ Matrix of Compliance Requirements • Part 3 ‐ Compliance Requirements (14) ( ) • Part 4 ‐ Agency Program Requirements • Part 5 ‐ Clusters of Programs P t 5 Cl t f P • Part 6 ‐ Internal Controls over Compliance • Part 7 Guidance for Missing Programs • Part 7 ‐ Guidance for Missing Programs • Part 8 ‐ Appendices (excerpts) • Part 9 ‐ Additional Items Part 9 Additional Items

Part 1 ‐ Background, Purpose, and Applicability l b l • Single Audit Act of 1984 • Supplement based on requirements of the 1996 and 1997 revisions to OMB Circular A ‐ 133, Audits of States, Local Governments, and Non ‐ Profit Organizations • National State Auditors Association (NSAA) ‐ “The Compliance Supplement provides an invaluable tool to both Federal agencies and auditors in setting forth the both Federal agencies and auditors in setting forth the important provisions of Federal assistance programs. This tool allows Federal agencies to effectively communicate items that they believe are important to successful y p management of the program and legislative intent. Such a valuable tool requires constant review and update.”

Part 1 ‐ Background, Purpose, and Applicability (continued) l b l ( d) • Compliance Supplement (CS) serves to identify existing important compliance requirements that the Federal government expects to be considered as part of an audit required under the Single Audit Act (OMB A ‐ 133) q g ( ) • CS provides a resource of information for users to understand the Federal program’s objectives, procedures, and compliance requirements as well as procedures, and compliance requirements as well as suggested audit procedures for determining compliance with these requirements. • OMB A 133 provides that Federal agencies are • OMB A ‐ 133 provides that Federal agencies are responsible to annually inform OMB of any updates needed to the CS

Applicability Applicability • Auditors (Grantees) shall consider the CS and Auditors (Grantees) shall consider the CS and the references laws, regulations, and OMB circulars that could have a direct and material effect on each program. Adherence to the CS is required and satisfies requirements under OMB A 133 OMB A ‐ 133. • There may be specific grant provisions not i included in CS (ie. matching percentages, high ‐ l d d i CS (i hi hi h risk requirements) Hierarchy of Authority -2 Basic Types of Grants -Standards for Financial Management System (Additional Items p.4)

Technical Information ‐ Additional Guidance • Page Numbering Scheme g g • Code of Federal Regulations (CFR) ‐ electronic version http://www.gpoaccess.gov/ecfr/ • Compliance Supplement ‐ electronic version OMB circulars, http://www.omb.gov • Catalog of Federal Domestic Assistance (CFDA) Catalog of Federal Domestic Assistance (CFDA) http://www.cfda.gov • Inspectors General ‐ http://www.ignet.gov • Federal Audit Clearinghouse ‐ http://harvester.census.gov/fac/

Part 2 ‐ Matrix of Compliance Requirements • Purpose ‐ identification of compliance requirements that are p p q applicable to the programs included in the CS • The auditor should exercise professional judgement when determining which compliance requirements marked “Y” are d t i i hi h li i t k d “Y” applicable and need testing • For those applicable requirements use of: pp q a. Part 3 ‐ Compliance Requirements b. Part 4 or 5 ‐ Agency Specific Requirements c. Part 6 ‐ Internal Controls over Compliance

§ Part 3 ‐ Compliance Requirements Introduction Objectives of most compliance requirements are generic in nature. Part 3 provides • a “general” approach to each requirement Part 4 or 5 contains more specific requirements related to each federal program • Administrative requirements under A ‐ 102 Common Rule sections are referred to • without the Federal agency’s part number (e.g., § ___ .37 would refer to sections ith t th F d l ’ t b ( 37 ld f t ti in all agency regulations). This allows the auditors (users) to refer to the same section numbers when discussing administrative issues with different Federal funding agencies. g g Subrecipients ‐ subject to the same provisions under A ‐ 102, Common Rule plus • additional requirements may be added by pass ‐ through entity. The descriptions of the compliance requirements in Parts 3, 4, and 5 are generally • a summary of the actual compliance requirements. The user should refer to the referenced citations (e.g. laws and regulations) for the complete statement of the compliance requirements.

A. Activities Allowed or Unallowed A. Activities Allowed or Unallowed • Activities allowed or unallowed are unique to each Federal q program and found in the laws, regulations, and provisions of the contract or grant agreements (see Part 4 or 5 ‐ Agency Program Requirements) Program Requirements) • American Recovery and Reinvestment Act (ARRA) funding may not be used for the following activities: a. Casino/Gambling establishment b. aquarium c. zoo d. golf course e. swimming pool i i l

B. Allowable Costs/Costs Principles B. Allowable Costs/Costs Principles • The #1 most common compliance requirement ‐ applicable to p q pp all Federal grants and contracts • OMB cost principles circulars applicable: a. OMB A ‐ 87 Cost Principles for State, Local, and Indian Tribal Governments b OMB A ‐ 21 Cost Principles for Educational Institutions b. OMB A 21 Cost Principles for Educational Institutions c. OMB A ‐ 122 Cost Principles for Non ‐ Profit Organizations • Allowable and Allocable Costs (page 9 ‐ A) (p g ) • Selected Items of Cost (p. 3 ‐ B ‐ 3) Allowable and Allocable Costs (Additional Items p.2)

OMB Circular A ‐ 87 Cost Principles Central Service Costs • Government services are generally provided for accounting, g y p g, purchasing, computer services, fringe benefits, etc., on a centralized basis using a cost allocation plan (CAP). • Focus of a CAP, for compliance purposes, is on Allocability. Is F f CAP f li i All bilit I the plan fairly (reasonably) distributing cost to the participating programs? • Types of CAPs: a. Allocated ‐ costs are allocated to benefiting programs on some reasonable basis. These CAPs have an bl b i Th CAP h established rate (s) methodology which, for a future year, is usually based on a “fixed rate with carryforward”. Examples included Indirect, Fringe, and Space Costs.

Central Service Costs ‐ continued Central Service Costs continued b. Billed ‐ costs are billed to benefiting programs on g p g an individual fee ‐ for ‐ service or similar basis. The bill rates are usually based on estimated costs providing the services using a fixed rate with carryforward approach. Examples include transportation services, computer, supplies, travel.

Central Service Costs ‐ continued Central Service Costs continued Submission requirements for a CAP: All other local governments claiming • central service costs must develop a CAP in accordance with the requirements described in OMB A ‐ 87 and maintain the plan and related supporting documentation for audit. Local governments are not required to submit the plan for Federal approval unless they are specifically b h l f d l l l h f ll requested to do so by the Federal cognizant agency. (exception ‐ Indirect Cost). If a local government receives funds a a subrecipient only, the primary f l l i f d b i i l h i • recipient will be responsible for negotiating and/or monitoring the local government’s CAP. All CAPs, when required, must be submitted within 6 months prior to the All CAP h i d b b i d i hi 6 h i h • beginning of the government’s fiscal year in which it proposes to claim central service costs. For Tribes, this submission due date applies only to Indirect Cost proposals Indirect Cost proposals.

Central Service Costs ‐ continued Central Service Costs continued Documentation requirements: • a. Budget (composition) worksheet of all costs ‐ types to be claimed b. Rate calculation worksheet (fixed rate with ( carryforward) c. Certification statement • 60 Day ‐ Working Capital Reserve 60 Day Working Capital Reserve • Adjustment of billed central service required when there is a difference between revenue and actual pool costs under one of following methods: a cash refund to the Federal government for its programs a. cash refund to the Federal government for its programs share b. credits to the amounts charged to individual programs c. adjustment to future billings rates dj f billi

Central Service Costs ‐ continued Central Service Costs continued • Audit Objectives (Direct and Indirect Costs): Audit Objectives (Direct and Indirect Costs): 1) Obtain understanding of internal controls and assess risk 2) Direct charges to Federal Awards are allowable in ) h d l d ll bl accordance with OMB A ‐ 87 3) Pool costs are allowable in accordance with OMB A ‐ 87 4) Allocation/billing method is reasonable/equitable and in accordance with CAP (approved indirect cost rate applied)