Circular A 133 Audits for Non Profit Clients: Protecting Grant - - PowerPoint PPT Presentation

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Circular A‐133 Audits for Non‐Profit Clients: Protecting Grant Eligibility

Successful Audit Tactics Based on Latest Guidance and Standards

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific WEDNES DAY, FEBRUARY 2, 2011

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

Bruce Braunewell Principal LarsonAllen Philadelphia Bruce Braunewell, Principal, LarsonAllen, Philadelphia Lee Klumpp, S enior Technical Manager, BDO USA, Bethesda, Md. Celina Miller, Partner, Null-Lairson, Houston

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Circular A‐133 Audits for Non‐Profit Cli t P t ti G t Eli ibilit Clients: Protecting Grant Eligibility Webinar

• Feb. 2, 2011

Lee Klumpp, BDO US A lklumpp@ bdo.com Bruce Braunewell, LarsonAllen LLP bbraunewell@ larsonallen.com Celina Miller, Null-Lairson ccmiller@ null-lairson.com

Today’s Program

S ingle Audit Act and Y ellow Book: Updates [Bruce Braunewell] S lide 6 – S lide 12 American Recovery and Reinvestment Act Update [Lee Klumpp] New Auditing S tandards And Effects On S ingle Audits S lide 13 – S lide 23 S lide 24 – S lide 46 g g [Celina Miller and Bruce Braunewell] The S ingle Audit And What To Expect From Auditors [Celina Miller and Bruce Braunewell] S lide 47 – S lide 61 [Celina Miller and Bruce Braunewell]

SINGLE AUDIT ACT AND

Bruce Braunewell, LarsonAllen LLP

SINGLE AUDIT ACT AND YELLOW BOOK: UPDATES

Si l A di A R f h Single Audit Act Refresher

I. Purpose of the Single Audit Act of 1984 and OMB Circular A-133 I. Purpose of the Single Audit Act of 1984 and OMB Circular A 133 A. Standardized audit requirements for states, local governments and Indian tribal governments that receive and use federal awards programs II Organizations (auditees) that spend $500 000 or more in federal funds are II. Organizations (auditees) that spend $500,000 or more in federal funds are required to have a single audit performed under OMB Circular A-133. III. An auditee’s responsibilities under OMB A-133 are as follows: A Prepare the sched le of e pendit res of federal a ards (SEFA) and A. Prepare the schedule of expenditures of federal awards (SEFA) and related disclosures B. Establish and maintain internal controls over federal awards C C l h l l d h f C. Comply with laws, regulations and the provisions of contracts or grant agreements related to each of its federal programs D. Follow-up and corrective action on all audit findings E. Electronically certify and submit the “reporting package” to the federal clearinghouse

7

Si l A di A R f h (C ) Single Audit Act Refresher (Cont.)

An auditor’s primary responsibilities under the Single Audit Act are to: An auditor s primary responsibilities under the Single Audit Act are to:

• A. Provide an opinion on whether the financial statements are presented fairly in

accordance with generally accept ed audit ing st andards (GAAS ) and government audit ing st andards (GAGAS ) g g ( )

• B. Provide an “ in relation to” opinion on the S

EF A

• C. Obtain understanding of internal controls over maj or programs, sufficient to

plan the audit plan the audit

• D. Provide a report on internal control
• E. Perform procedures to determine if auditee complied with laws, regulations and

the provisions of contracts and grant agreements the provisions of contracts and grant agreements

• F. Provide a report on compliance with laws, regulations and the provisions of

contracts or grant agreements. G Provide a report on audit findings in a schedule of findings and questioned costs

• G. Provide a report on audit findings in a schedule of findings and questioned costs
• H. Electronically certify the data collection form

8

C li S l 2010 Compliance Supplement

Released August 2010 I. To be used for June 30, 2010 audits and beyond (until 2011 I. To be used for June 30, 2010 audits and beyond (until 2011 compliance supplement is released in final form) II. ARRA requirements are in bold and are now incorporated into the li bl t f P t 3 f th 2010 l t t applicable parts of Part 3 of the 2010 supplement vs. a separate addendum for 2009.

9

l l ( ) 2010 Compliance Supplement (Cont.)

I. A - Activities Allowed: Updated to include limitations on activities funded with ARRA funds II. C – Cash Management: Updated to include audit obj ective on i b t t reimbursement payments

• III. D - Davis Bacon Act: Updated to include coverage under ARRA
• IV. I - Procurement, S

uspension and Debarment: Updated to add ARRA “ Buy American” requirements

• V. L – Reporting: Updated for ARRA 1512 reporting
• VI. M - S

ub-recipient Monitoring: Updated for requirement for use

• VI. M S

ub recipient Monitoring: Updated for requirement for use

• f central contractor registration
• VII. N - S

pecial Tests and Provisions: To provide three special tests for ARRA funded expenditures p

10

l l ( ) 2011 Compliance Supplement (Cont.)

I. Release date expected sometime in S pring 2011 II. Government Audit Quality Center (GAQC) has a nice summary including:

• A. New CFDA numbers

B. Deleted CFDA numbers C CFDAs with name changes

• C. CFDAs with name changes
• D. Programs identifies by OMB as having more than minor

change in supplement E Clusters identified by OMB as having changes in E. Clusters identified by OMB as having changes in supplement F. S tatus update on other sections within the supplement

11

P d Y ll B k Ch Proposed Yellow Book Changes

I. In August 2010, GAO issued proposed standards revising the July 2007 generally accepted government auditing standards (GAGAS ). II. Anticipated to be effective for audits beginning after Dec. 15, 2010 (with exception of financial chapter)

• III. Chapter reorganization
• IV. Changes to independence chapter – includes “ threat

assessment” and application of safeguards assessment and application of safeguards

12

AMERICAN RECOVERY AND

Lee Klumpp, BDO USA

AMERICAN RECOVERY AND REINVESTMENT ACT UPDATE

Effects Of ARRA On Your Organization

• A. Accountability and transparency

1. QCRs built into the OMB guidance – results to be placed on Recovery gov placed on Recovery.gov 2. S ingle audit reporting to be made available on the Internet 3. Auditees significantly affected by S

• ect. 1512

reporting; auditor responsibility going forward? B Non static Compliance S upplement and other OMB B. Non-static Compliance S upplement and other OMB guidance issued on continual basis

• C. Changes to maj or program determination process

14

P i l ARRA R l d Pi f ll Potential ARRA‐Related Pitfalls

I. Maj or program determination II. Failure to properly document maj or program determination

• III. Failure to file 1512 Report

15

f l Impact Of ARRA On Compliance Requirements

The following compliance requirements have been affected by ARRA The following compliance requirements have been affected by ARRA

• A. Activities allowed or unallowed

B. Davis Bacon Act B. Davis Bacon Act

• C. Procurement
• D. S

uspension and debarment E. Reporting F. S ub-recipient monitoring

• G. S

pecial tests and provisions

16

A ti iti All d/U ll d Activities Allowed/Unallowed

Pursuant to S

• ect. 1604 of ARRA, none of the funds appropriated or
• therwise made available in ARRA may be used by any state or local

government, or any private entity, for any casino or other gambling establishment, aquarium, zoo, golf course or swimming pool. , q , , g g p

17

D i B A t Davis Bacon Act

S ect 1605 of ARRA prohibits the use of ARRA funds for a proj ect for S

• ect. 1605 of ARRA prohibits the use of ARRA funds for a proj ect for

the construction, alteration, maintenance or repair

• f

a public building or work unless all of the iron, steel and manufactured goods used in the proj ect are produced in the United S tates BUY AMERICAN used in the proj ect are produced in the United S

• tates. BUY AMERICAN

Act.

18

Procurement Suspension And Debarment

I. Prohibits use of funds for proj ect for construction or repair of a public building

• r

work unless all the iron steel and public building

• r

work unless all the iron, steel and manufactured goods used are produced in the U.S . II. Buy-American award terms.

19

R i Reporting

I. Presentation on the S chedule of Expenditures of Federal Awards and Data Collection Form; applicable to all maj or programs ; pp j p g with expenditures of ARRA awards. II. Verify that the S EF A properly identifies and reports expenditures of ARRA awards and reported expenditures are supported by accounting records

20

S b R i i M i i Sub‐Recipient Monitoring

I. A pass-through entity is responsible for central contractor registration and keeping current, including obtaining DUNS number. number. II. Verify that the entity separately identified to each sub- recipient, and documented at the time of the sub-award and disbursement

• f

funds, the federal award number, CFDA number and the amount of ARRA funds; and required their sub- ; q recipients to provide appropriate identification in their S EF A

21

S i l T t A d P i i Special Test And Provision

S eparate accountability for ARRA funding is applicable to all maj or S eparate accountability for ARRA funding is applicable to all maj or programs with expenditures of ARRA awards. This is provided for in 2 CFR S

• ect. 176.210, Federal agencies must require recipients to

meet the three new ARRA compliance requirements which apply to meet the three new ARRA compliance requirements, which apply to all programs:

• 1. S

eparate accountability for ARRA funding – applicable to all maj or programs with expenditures of ARRA awards

• 2. Presentation on the schedule of expenditures of federal awards

and data collection form and data collection form

• 3. S

ub-recipient monitoring – applicable to all maj or programs with expenditures of ARRA awards

22

Ch A d I Changes And Issues

I. Typical findings and lessons learned II. Increased scrutiny by federal agencies and IGs III N d t ll ti f Wh t h h d i 2010 (ARRA

• III. New data collection form: What has changed in 2010 (ARRA

Information)

• IV. Program vs. grant: Expectation GAAP on what is under audit

g g p

• V. Maj or program determination: How does ARRA affect the

auditor determination on what they test?

23

Celina Miller, Null‐Lairson

NEW AUDITING STANDARDS

Bruce Braunewell, LarsonAllen LLP

AND EFFECTS ON SINGLE AUDITS AUDITS

N S li G id New Sampling Guidance

R t ti l i l dit li j t i d i J 2007 Report on national single audit sampling proj ect issued in June 2007 under the President’s Council on Integrity and Efficiency (PCIE)

• A. AICP

A developed seven task forces to examine the PCIE’s p findings and make recommendations as follows:

• B. Sampling/materiality issues in a single audit environment
• C. Internal audit control and compliance responsibilities in a

single audit environment D S chedule of expenditures of federal awards reporting issues

• D. S

chedule of expenditures of federal awards reporting issues E. Reporting audit findings in a single audit F. S ingle audit training needs and continuing professional g g g p education evaluation

25

N S li G id (C ) New Sampling Guidance (Cont.)

Prior to the new guidance

• Lack of specific guidance on audit sampling

OMB A 133 li bl diti t d d d th AICP A dit

• OMB A-133 applicable auditing standards and the AICP

A audit guides did not require specific minimum numbers of tests of transactions in single audits.

• Practices varied among other firms, and questions raised on

audit quality The sampling taskforce added Chap 11 to the AICP A Audit

• The sampling taskforce added Chap. 11 to the AICP

A Audit Guide, Government S t andards and Circular A-133 Audit s.

26

N S li G id (C ) New Sampling Guidance (Cont.)

• S

ampling to accomplish compliance-related audit obj ecitves in a

• S

ampling to accomplish compliance-related audit obj ecitves in a Circular A-133 compliance audit environment differs from sampling in a financial statement audit.

• A. Auditor must gather sufficient appropriate audit evidence on

whether the auditee has complied with laws, regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on each program.

• Direct and material
• A. Direct: Does a specific compliance requirement (A-N) apply

to the maj or program in question? B. Material: Are expenditures greater than the established B. Material: Are expenditures greater than the established materiality threshold (usually 5%

• f federal program)?

27

N S li G id (C ) New Sampling Guidance (Cont.)

• If a compliance requirement is direct and material for a maj or

program, then the auditor must obtain an understanding of the auditee’s internal controls over compliance.

• If internal controls over compliance are properly designed and

and implemented, Circular A-133 requires that the auditor plan the audit to support a low level of assessed control risk of non the audit to support a low level of assessed control risk of non- compliance.

• S

amples for internal control are designed to achieve a 90% to 95% confidence level

28

N S li G id (C ) New Sampling Guidance (Cont.)

• Plan for zero exceptions
• Take into consideration significance of control and inherent risk
• f compliance requirement

29

N S li G id (C ) New Sampling Guidance (Cont.)

• S

ignificance of control being tested (all important, but range of g g ( p , g signficance) A. Higher “ what could go wrong” risk or “ risk of material non- compliance” compliance

• Inherent risk of compliance requirement

A. New program with little history of compliance requirements B. Correspondence from grantor indicating non-compliance C. High auditee turnover D C l i ( ti j d t l i t ti D. Complex processing (non-routine, j udgment, manual intervention E. New procedure or history of deviations F. S ubstantial change in procedure from prior period g p p p G. Program identified as high-risk by OMB

30

Internal Control Suggested Sample Sizes

Minimum sample sizes for large populations >250 Minimum sample sizes for large populations >250 transactions

Significance of Control and Inherent Risk (IR) of Compliance Requirement Minimum Sample Size 0 deviations tolerated Very Significant and Higher IR Very Significant and Limited IR 60 40 Moderately Significant or Hire IR Moderately Significant and Limited IR 25

31

N S li G id (C ) New Sampling Guidance (Cont.)

Input for compliance sample size determination

• A. Tolerable exception rate linked to program materiality – 5%

B E ti t i l d i B. Exception rates in sample design

• C. Link the terms “ exception” with compliance and “ deviation”

with controls

• D. Cannot rotate compliance controls testing

1. Very clear from A-133 regulation that testing of controls is required annually



This is a key difference with a financial statement audit audit.

32

Compliance Suggested Sample Sizes

Minimum sample sizes for large populations >250 Minimum sample sizes for large populations >250 transactions

Desired Level of Assurance (Remaining Risk of Material Non‐ compliance) Minimum Sample Size 0 exceptions expected compliance) High 60 M d 40 Moderate 40 Low 25

33

N S li G id (C ) New Sampling Guidance (Cont.)

For populations between 52 and 250 – 10% sample size is allowed F l ti l th 52 l i

Frequency & S l Si

For populations less than 52, use sample sizes below

q y Population Size Sample Size Quarterly (4) 2 Monthly (12) 2‐4 Semi‐monthly (24) 3‐8 Weekly (52) 5 9 Weekly (52) 5‐9

34

N S li G id (C ) New Sampling Guidance (Cont.)

• Random selection
• A. All items have equal chance of seletction

H h d l ti

• Haphazard selection
• A. Not careless; auditor’s best effort to be random
• S

ystematic selection

• S

ystematic selection

• A. Every Nth item, with a random start
• There is no method required to be used; j ust required to

There is no method required to be used; j ust required to document method

35

N S li G id (C ) New Sampling Guidance (Cont.)

S

• what does this mean for the NPO?

A. Auditor samples will increase, as auditors have to select a compliance sample based on the new guidance for each maj or program. B. Internal controls can be tested across maj or programs only if it is determined that the same controls are in place for each area tested, e.g. payroll, non-payroll transactions. C. Auditors can design a dual-purpose test under which each transaction is tested for both compliance and controls. D. Auditor must document which attributes are for controls and compliance. E. Auditee should be prepared for even more in-depth interviews with the auditor/ F. Document! Document! Document! If it wasn;t documented, it never h d Thi i f b h di d di !

• happened. This is for both auditor and auditee!

36

New Sampling Guidance (Cont ) New Sampling Guidance (Cont.)

S ampling is not always required A Auditor may select individually important items A. Auditor may select individually important items 1. Large, risky or unusual itesm or transactions that contain characteristics of a prior compliance finding 2 S ik i i i d i i d f i h j l 2. S pikes in activity around a certain period of time, such as j ournal entries made at the beginning or close of a grant. 3. Transactions processed at odd times in a cycle, such as new beneficiaries brought into a program in the spring when eligibility is beneficiaries brought into a program in the spring when eligibility is usually granted only once a year during an enrollment period in the fall 4. Grant close-out report, as compared to routine financial or progress 4. Grant close out report, as compared to routine financial or progress reports B. When individually important items are selected for testing, sampling may be used for remaining population, or other auditing procedures may be applied (i.e., scanning). Or, no additional audit procedures may be applied, because there is acceptably low risk of material non-compliance.

37

N S li G id (C ) New Sampling Guidance (Cont.)

• Document for the auditor that the populations provided for sample

p p p p selection are complete

• Ensure that all programs within a cluster are tested as one program

A dit ill l t fi di t l l t ti t f t ti l

• Auditors will evaulate findings to calculate an estimate of potential

total questioned costs, in order to determine whether likely questioned costs exceed $10,000. $

• For example, if the auditor specifically identifes $7,000 in known

questioned costs for a type of compliance requirement but, based on his

• r her proj ection of the exception to the population, develops an

ti t th t th t t l lik l ti d t i t l estimate that the total likely questioned costs are approximately $60,000, then the auditor should report a finding that indicates only the known questioned cost of $7,000 (AAG-S LA 11.1119).

• If the likely questioned costs exceed program materiality, then the

auditor may consider qualifying the audit opinion for that program.

38

Statement On Auditing Standards No. 117: Compliance Audits

• A. Issued in response to a federal study on the quality of audits performed under

OMB A-133

• B. Report verbiage and titles have changed
• C. Effective for fiscal periods ending on or after June 15, 2010
• D. S

upersedes S AS

• No. 74 (compliance auditing considerations in audits of

governmental entities and recipients of governmental financial assistance)

• E. Applicable when an auditor is engaged or required by law or regulation, to

perform a compliance audit in accordance with all of the following: 1. Generally accepted auditing standards 2. The standards of financial audits under the Y ellow Book 3. A governmental audit requirement that requires an auditor to express an

• pinion on compliance (e.g. A-133)

p p ( g )

• F. Only applies to compliance audit portion of single audits (A-133 report)

39

Statement On Auditing Standards No. 117: Compliance Audits (Cont.)

New title: Report on Compliance wit h Requirement s t hat Could Have a Direct and Mat erial Effect on Each Maj or Program and on Int ernal Cont rol

• ver Compliance in Accordance wit h OMB Circular A-133

For report wit h unqualified opinion on compliance; no Mat erial weaknesses or S ignificant Deficiencies in Int ernal Cont rol over g f f Compliance Ident ified Change in first paragraph: “ W h dit d E l E t it ’ li it h t f li “ We have audit ed Example Ent it y’s compliance wit h t ypes of compliance requirement s described in t he OMB CircularA-133 Compliance S upplement that could have a direct and material effect on each of Example Entity’s maj or federal programs for the year ended June 30 Example Entity s maj or federal programs for the year ended June 30, 20x1.”

40

Statement On Auditing Standards No. 117: Compliance Audits (Cont.)

Change in fourth paragraph on internal controls over compliance g p g p p “ In planning and performing our audit , we considered Example Ent it y’s int ernal cont rol over compliance wit h t he requirement s t hat could have a direct and mat erial effect on a maj or federal program t o det ermine a direct and mat erial effect on a maj or federal program t o det ermine t he audit ing procedures for t he purpose of expressing our opinion on compliance and t o t est and report on int ernal cont rol over compliance in accordance wit h OMB Circular A-133, but not for t he purpose of , f p p f expressing an opinion on t he effect iveness of int ernal cont rol over compliance.” As discussed previously, “ direct and material” is the driving force of As discussed previously, direct and material is the driving force of auditor’s procedures. “ Direct and material” can be used by the auditee as well when looking at evaluating the 14 compliance requirements and ensuring their entity is in evaluating the 14 compliance requirements and ensuring their entity is in compliance.

41

Statement On Auditing Standards No. 117: Compliance Audits (Cont.)

Both auditor and auditee should carefully read the matrix of compliance Both auditor and auditee should carefully read the matrix of compliance requirements Direct: Does the matrix state a requirement is applicable? If yes, is it material (5%

• f program) to the federal program?

Assess internal control risk and test compliance Direct: S ub-recipients – Compliance requirements state that it is applicable for a particular grant. Material: The NPO does not have any sub-recipients, so the amount sub- awarded is $0, which is NOT material. No further work is necessary.

42

Statement On Auditing Standards No. 117: Compliance Audits (Cont.)

• AICP

A Government Audit Quality Center provides an excellent tool for auditors to document the requirements of the compliance supplement, whether a requirement is direct and material, internal control assessments, and risk of non- compliance.

• One firm has added formulas to calculate sample sizes, based
• n the population using the parameters provided by the AICP

A Audit Guide – GAS and Circular A-133 Audits.

43

SAS 118‐120

S AS 118 (other information in documents containing audited financial statements) A Auditor is required to read other information and determine A. Auditor is required to read other information and determine whether there are material inconsistencies in relation to the audited financials. B. Can include: 1. Financial summaries 2 Highlights 2. Highlights 3. Employment data 4 Planned capital expenditures 4. Planned capital expenditures

44

SAS 8 (C ) SAS 118‐120 (Cont.)

S AS 119 (supplementary information in relation to the financial statements taken as a whole_ A. S upplementary information is defined as not considered necessary for financial statements to be fairly presented in accordance with the applicable financial reporting framework. pp p g B. Practitioner should perform procedures to determine whether th i f ti i f i l t t d i ll t i l t i the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

45

SAS 8 (C ) SAS 118‐120 (Cont.)

S AS 120 (required supplemental information) A Defined as information that is required to accompany the basic A. Defined as information that is required to accompany the basic financial statements B. Practitioners should: A. Inquire of management as to the methods of preparing information B. Compare information for consistency with management inquiries and the basic financial statements C. Obtain management representations on the required supplemental information pp

46

Celina Miller, Null‐Lairson

THE SINGLE AUDIT AND

Bruce Braunewell, LarsonAllen LLP

WHAT TO EXPECT FROM AUDITORS AUDITORS

P i F Th A l A di Preparing For The Annual Audit

• A. Internal controls over financial reporting and over

compliance (year-end process) B Effective internal controls are the first line of defense in B. Effective internal controls are the first line of defense in preventing and detecting non-compliance.

• C. Auditor is required to test controls; if controls are not in

place or are deemed ineffective, findings will be reported.

• D. In summary, effective controls keep the NPO out of

trouble. trouble. E. Part VI of the compliance supplement provides good examples of controls over compliance.

48

P i F Th A l A di (C ) Preparing For The Annual Audit (Cont.)

A B d t d t dit ’ i i i l t d t th

• A. Be prepared to respond to auditors’ inquiries related to the

five elements of controls (COS O framework):

• 1. Control environment
• 2. Control activities
• 3. Risk assessment
• 4. Information and communication
• 5. Monitoring
• B. Y

ear-end-close procedures are in place.

• C. Provide auditors with information needed to do the audit

(reduces the time they are in your office and can keep audit (reduces the time they are in your office, and can keep audit costs down as well)

49

P i F Th A l A di (C ) Preparing For The Annual Audit (Cont.)

• Have continuous conversations with your auditor to ensure

that you are on the same page about any findings and questioned costs

• A. Check source documentation used to develop finding
• Remember that any questioned costs, whether known or likely,

have to be reported on the S chedule of Findings and Questioned Costs.

• A. Federal government may require a refund.
• A. Federal government may require a refund.

B. Increased oversight or scrutiny

• C. Reputation affected

50

P i F Th A l A di (C ) Preparing For The Annual Audit (Cont.)

• Identify all federal programs and get clarification from grantor

as to whether a grant is considered federal, state or local monies

• Read all grant requirements per the OMB A-133 compliance

requirement

• Read all grant requirements per the grant application
• Provide the auditor with any correspondence between you and

the federal or state government the federal or state government

• Inform your auditor of turnover of key employees
• Follow up on prior-year findings and ensure that corrective

actions have been implemented

51

P i F Th A l A di (C ) Preparing For The Annual Audit (Cont.)

S chedule of Expenditures of Federal Awards (AICP A disclosure checklist) A Cl l id if ARRA f d

• A. Clearly identify ARRA funds
• B. List individual federal program by federal agency
• C. S

how total federal awards expended for each individual federal program and include the CFDA number. Identify all grants that are part

• f federal program (child nutrition program has several grants; make

sure all of those are identified, so that auditors can properly plan their audit) audit) D.If the CFDA number is not available, include another identifying number and the name of the program or the federal agency two-digit number followed by 999, unknown, or information about the grant (e.g. 12.999, followed by 999, unknown, or information about the grant (e.g. 12.999, 12.UNKNOWN, 47.ABC-852)

• E. List individual awards within a cluster of programs

F For research and development (R&D) list federal awards expended

• F. For research and development (R&D), list federal awards expended

either by individual award or by federal agency and maj or subdivision within the federal agency

52

P i F Th A l A di (C ) Preparing For The Annual Audit (Cont.)

S chedule of Expenditures of Federal Awards (AICP A disclosure checklist), Cont. S chedule of Expenditures of Federal Awards (AICP A disclosure checklist), Cont.

• A. Identify, to the extent practical, the total amount provided to sub-recipients

from each federal program (or, alternatively, may be included in the notes)

• B. Include, if applicable, for federal awards received as a sub-recipient, the

, pp , p , name of the pass-through entity and identifying number assigned by the pass- through entity

• C. Include notes that describe the significant accounting policies used in

preparing the schedule and basis of accounting preparing the schedule and basis of accounting

• D. S

chedule or a note should include the value of the federal awards expended in the form of

• 1. Noncash assistance (commodities under child nutrition program)
• 1. Noncash assistance (commodities under child nutrition program)
• 2. The amount of insurance in effect during the year
• 3. The amounts of loans or loan guarantees (including interest subsidies)
• utstanding at year-end

g y

53

P i F Th A l A di (C ) Preparing For The Annual Audit (Cont.)

S chedule of Expenditures of Federal Awards (AICP A disclosure checklist) Cont checklist), Cont.

• A. If non-federal awards are presented, are the data clearly

segregated and designated as non-federal, along with a modification of the title to indicate the inclusion of non- federal awards?

54

L Ri k A di S Low‐Risk Auditee Status

An auditee is considered low-risk if ALL of the following criteria An auditee is considered low risk if ALL of the following criteria are met:

• A. S

ingle audits were performed in accordance with the i i f OMB Ci l A 133 ( tit th t h provisions of OMB Circular A-133 (an entity that has biennial audits does not qualify as a low-risk entity, unless agreed to in advance by the cognizant or oversight agency for audit). [S

• ect. 530(a)]

B. The auditor’s opinions on the financial statements and the schedule of expenditures of federal awards were schedule of expenditures of federal awards were unqualified, or if either or both were qualified, the cognizant or oversight agency for audit has j udged that the qualified opinions do not affect management of the qualified opinions do not affect management of federal awards and has provided a waiver. [S

• ect. 530(b)]

55

L Ri k A di S (C ) Low‐Risk Auditee Status (Cont.)

An auditee is considered low-risk if ALL of the following criteria are met (Cont.):

• A. None of the federal programs had audit findings from any of the

following in either of the preceding two years (or, in the case of biennial audits, the preceding two audit periods) in which they were classified as Type A programs: [S

• ect. 530(d)] (If there were no Type A

programs in either year, these questions are N/ A and do not need to be answered for Type B programs) 1. Material weaknesses in internal controls over compliance 2 Non-compliance with the provisions of laws regulations 2. Non compliance with the provisions of laws, regulations, contracts or grant agreements that have a material effect on the Type A programs 3 Known or likely questioned costs that exceed 5%

• f the total

3. Known or likely questioned costs that exceed 5%

• f the total

federal awards expended for a Type A program during the year

• f the findings

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L Ri k A di S (C ) Low‐Risk Auditee Status (Cont.)

• New factor affecting low-risk auditee status

M-10-14, Updated Guidance on the American Recovery and Reinvestment Act (March 22, 2010) - See also GAQC Alert #141 Reinvestment Act (March 22, 2010) See also GAQC Alert #141 “Due to the importance of the Single Audits and the reliance of Federal agencies

• n the audit results to monitor the accountability of Recovery Act programs
• n the audit results to monitor the accountability of Recovery Act programs

agencies should not grant any Governmental Audit Quality Center programs, extension request to grantees for fiscal years 2009 through 2011. In order to meet the criteria for a low-risk Auditee (OMB Circular A- 133 § .530) in the current e c e

• w

s ud ee (O C cu 33 §__.530) e cu e year, the prior two years audits must have met the requirements of OMB Circular A-133, including report submission to the FAC by the due date (OMB Circular A-133 § __.320).”

57

Low‐Risk Auditee Status (Cont.) ( )

Granting extensions eliminated –Affects low-risk auditee criteria A. In order to meet the criteria for a low-risk auditee in the current A. In order to meet the criteria for a low risk auditee in the current year, the prior two years' audits must have met the requirements

• f OMB Circular A-133, including report submission to the Federal

Audit Clearinghouse (F AC) by the due date. g ( ) y OMB Circular A-133 advisories (Appendix VII of 2010 Compliance S upplement) provide suggested procedures: A If a prior year OMB Circular A 133 audit was conducted then A. If a prior-year OMB Circular A-133 audit was conducted, then

• btain a copy of the data collection form (form S

F-S AC) and the reporting package. B C l l h i h d d fil i h h F AC h B. Calculate the nine-month due date to file with the F AC as the date nine months after the end of the audit period. For example, for audits ending June 30, 2009, the audit report would be due March 31 2010 would be due March 31, 2010. C. Access the F AC webpage at http:/ / harvester.census.gov/ sac

58

L Ri k A di S (C ) Low‐Risk Auditee Status (Cont.)

• S

elect the “ search the single audit database” option and using S elect the search the single audit database option and using the “ search for complete records only-entity search” option, locate the F AC record for the entity. Verify the correct record by comparing both entity name and EIN number from the by comparing both entity name and EIN number from the entity’s copy of the S F-S AC to the F AC Web page.

• Compare “ Initial Received Date” or “ F

AC Accepted Date” with the nine-month due date.

• If the deadline was not met, inquire of management whether

they received an extension from the cognizant agency for they received an extension from the cognizant agency for

• audit. If so, review the documentation and determine the

revised due date. A (F d l i h b d i d b OMB

• A. (Federal agencies have been advised by OMB not to grant

any extensions to grantees between 2009 and 2011.)

59

L Ri k A di S (C ) Low‐Risk Auditee Status (Cont.)

How does this affect the audit?

• A. If your entity qualifies as a low-risk auditee, then the

auditor is only required to test at least 25%

• f total

auditor is only required to test at least 25%

• f total

federal expenditures. More than 25% can be tested, but that is not required. B. If your entity does NOT qualify as a low-risk auditee, then the auditor must test at least 50%

• f total federal

expenditures.

• C. With ARRA funds, testing 50%
• f federal expenditures is

not unusual.

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H T W i A P Fi di How To Write A Proper Finding

Each finding should include (at a minimum) the following: Each finding should include (at a minimum) the following:

• A. Information on the federal program

B. Criteria or specific requirement

• C. Condition
• D. Questioned costs

E. Context F. Effect

• G. Cause
• H. Recommendation

I M t’ d l f ti ti I. Management’s response and plan for corrective action

61