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

J Kurt Tucker CPA

Instructor Information

• 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

P t 5 Cl t f P

• Part 5‐ Clusters of Programs
• 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 l b l Applicability

• 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 l b l ( d) Applicability (continued)

• 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 l d d i CS (i hi hi h included in CS (ie. matching percentages, high‐ 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

d t i i hi h li i t k d “Y” determining which compliance requirements marked “Y” are 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

ith t th F d l ’ t b ( § 37 ld f t ti without the Federal agency’s part number (e.g., §___ .37 would refer to sections 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

i i l

• e. swimming pool

• 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). F f CAP f li i All bilit I

• Focus of a CAP, for compliance purposes, is on Allocability. Is

the plan fairly (reasonably) distributing cost to the participating programs?

• Types of CAPs:
• a. Allocated‐ costs are allocated to benefiting

bl b i Th CAP h programs on some reasonable basis. These CAPs have an 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 b h l f d l l l h f ll to submit the plan for Federal approval unless they are specifically requested to do so by the Federal cognizant agency. (exception‐ Indirect Cost). f l l i f d b i i l h i

• If a local government receives funds a a subrecipient only, the primary

recipient will be responsible for negotiating and/or monitoring the local government’s CAP. All CAP h i d b b i d i hi 6 h i h

• All CAPs, when required, must be submitted within 6 months prior to the

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

dj f billi

• c. adjustment to future billings rates

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 ) h d l d ll bl 2) Direct charges to Federal Awards are allowable in 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)

Central Service Costs‐ continued Central Service Costs continued

• Compliance Audit Procedures (CAPs)‐ in accordance with OMB A‐87

 Review costs included in pool for allowability (test a sample of transactions)  Determine whether the methodology used to allocate/bill costs are gy / appropriate in light of relative benefits received  Review direct charges to programs for compliance with plan (approved rate) in a consistent manner (test of programs) ) ( p g )  Verify that carry‐forward adjustments are properly treated in future rate determination  Verify that working capital reserves do not exceed 60 days  Verify that working capital reserves do not exceed 60 days  Self‐insurance funds rate and reserve amounts need to be supported by actuarial studies performed biennially

Direct Program Costs Direct Program Costs

• Compliance Audit Procedures in accordance with

Compliance Audit Procedures in accordance with OMB A‐87  Compare program actual costs to those approved p p g pp costs in original budget  Review grant agreements for identification of g g specific unallowable costs  Review costs included as direct program costs for allowability (test a sample of transactions)

Part 6‐ Internal Controls Part 6 Internal Controls

• OMB A‐102 Common Rule requires that non‐Federal entities receiving

Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. OMB A‐133 requires the auditors to d d f h l ’ l l gain an understanding of the client’s internal control system over compliance which includes the testing of internal controls.

• Part 6 is intended to assist non‐Federal entities and their auditors in

l i i h h i b d ibi f h f complying with these requirements by describing, for each type of compliance requirement, the objectives of internal control, and certain characteristics of internal control that, when present and operating effectively may ensure compliance with program requirements effectively, may ensure compliance with program requirements.

Internal Controls‐continued Internal Controls continued

• Objectives of Internal Controls over Compliance Requirements:

(1) Transactions are properly recorded and accounted for to:

• a. permit the preparation of reliable financial statements

and federal reporting p g

• b. maintain accountability over assets
• c. Demonstrate compliance with laws, regulations, and
• ther compliance requirements
• ther compliance requirements

(2) Transactions are executed in compliance with laws, regulations, and provisions of grant agreements that could have a material effect on a Federal program Federal program. (3) Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition.

Internal Controls‐continued Internal Controls continued

• Internal Control‐ Integrated Framework (COSO

Internal Control Integrated Framework (COSO Report)‐ provides framework for organizations to design implement and evaluate internal to design, implement, and evaluate internal control systems.

Internal Controls‐ continued Internal Controls continued

• Five Internal Control Components:

1) Control Environment‐ sets the “tone” of an organization influencing the control consciousness of its people.

• Code of Conduct (ethical behavior)

( )

• Governing Board active in the audit process
• Management’s participation in corrective action plans
• Key managers’ responsibilities clearly defined
• Key managers responsibilities clearly defined
• Key managers have knowledge and experience in areas of compliance
• Staff knowledgeable about compliance requirements and being given

ibili i ll i f li responsibility to communicate all instances of noncompliance to management

• Commitment to staff training
• Management’s support of adequate information and reporting system

Internal Controls‐ continued Internal Controls continued

• 2) Risk Assessment‐ is the entity’s identification and analysis of risks relevant to

achievement of its objectives, forming a basis for determining how the risks should be managed.

• Program managers and staff understand and have identified compliance

requirements and objectives requirements and objectives

• Organizational structure provides identification of risks of non compliance:

 Key managers have responsibility to identify and communicate changes  Employees who require close supervision are identified  Employees who require close supervision are identified  Management has identified and assessed complex operations, programs, or projects  Management is aware of results of monitoring audits and reviews and considers  Management is aware of results of monitoring, audits, and reviews and considers related risk of noncompliance  Process established to implement changes in program objectives and procedures

Internal Controls‐ continued Internal Controls continued

• 3) Control Activites‐ are policies and procedures that help ensure that management’s

di i i d directives are carried out.  Operating policies and procedures clearly written and communicated which identify and address each of the 13 major compliance requirements.  Procedures in place to implement changes in laws, regulations affecting grants. p p g , g g g  Management prohibition against intervention or overriding established controls.  Adequate segregation of duties provided between performance, review, and recordkeeping

• f a task.

 C t t l d t t ti ti it b k  Computer controls over: data entry, exception reporting, access, security, backups  Supervision of employees commensurate with their level of competence.  Personnel with adequate knowledge and experience to discharge responsibilities.  Equipment, inventories, cash, and other assets secured physically and periodically counted  Equipment, inventories, cash, and other assets secured physically and periodically counted and compared to recorded amounts.  Governing Board regularly reviews financial information and written support exists to support the oversight of financial activities.

Internal Controls‐ continued Internal Controls continued

• 4) Information and Communication‐ are the identification, capture, and exchange of

i f i i f d i f h bl l h i ibili i information in a form and time frame that enable people to carry out their responsibilities.  Accounting system provides for separate identification of Federal and non‐Federal transactions and allocation of transactions applicable to both.  Adequate source documentation exists to support amounts and items reported. q pp p (Source‐‐‐‐‐‐> General ledger posting …..Audit Trail)  Reports provided timely to managers for review and appropriate action. (Major issue‐ communications between Program directors and Finance Dept.)  A t i f ti i ibl t th h d it  Accurate information is accessible to those who need it.  Reconciliations and reviews ensure accuracy of reports.  Establish internal and external communication channels: staff meetings, bulletin boards, memos, emails, surveys, suggestion box. y gg  Employees’ duties and control responsibilities effectively communicated.  Channels of communication for people to report suspected improprieties established. (Whistle Blower policy)

Internal Controls‐continued Internal Controls continued

• 5) Monitoring‐ is a process that assesses the quality of internal control

performance over time. (Test of Internal Controls)  Ongoing monitoring built in through independent reconciliations, staff meeting feedback, rotating staff, supervisory review, and management review of reports.  P i di it i it f d t d t li d l ti d h k f d t  Periodic site visits performed at decentralized locations and checks performed to determine whether procedures are being followed as intended.  Follow up on irregularities and deficiencies to determine the cause.  Intern al Quality control reviews performed  Intern al Quality control reviews performed.  Management meets with program monitors, auditors, and reviewers to evaluate the condition of the program and controls.  Internal audit routinely tests for compliance with Federal requirements  Internal audit routinely tests for compliance with Federal requirements  Governing Board reviews the results of all monitoring or audit reports and periodically assesses the adequacy of corrective plans.

Internal Controls‐continued Internal Controls continued

• In Part 6 the Compliance Supplement outlines

In Part 6, the Compliance Supplement outlines specific internal controls for each of the 13 major compliance requirements major compliance requirements.

• We will be looking at a summarized set of

these controls for each requirement in these controls for each requirement in Compliance Supplement.

Internal Controls over Activities Allowed/ Allowable Costs (p 6‐A‐1) Costs (p. 6 A 1)

• Control Environment

 Management sets reasonable budgets  Management enforces appropriate penalties for misappropriation or misuse of funds

• Risk Assessment

 Key manager has sufficient understanding to identify where unallowable activities

• r costs could be charged to a Federal program and not be detected.
• Control Activities

 Accountability provided for charges and costs between Federal and non‐Federal activities.  Process in place for updating written policies and procedures.  C t ti h k d f  Computations checked for accuracy.

Internal Controls over Activities Allowed/ Allowable C t ti d Costs‐ continued

 Supporting documentation compared to list of allowable and unallowable expenditures (see 3‐B‐3)  Proper adjustments made to identified unallowable expenditures  Adequate segregation of duties in review and authorization of costs  Accountability for authorization (purchase requisition) is fixed in an individual y (p q ) (program director) who is knowledgeable of activities allowed and allowable costs.

• Information and Communication

 Reports, such as budget to actual financials, are provided to management (program directors) for review on a timely basis.  Training in the area of allowable activities and cost.  Grant agreements, agency regulations, and cost principle circulars are available to bl ff responsible staff.

Internal Controls over Activities Allowed/ Allowable C t ti d Costs‐ continued

• Monitoring

 i i d i f ll bl  Management reviews supporting documentation of allowable cost information.  Budgetary monitoring of approved cost line items in a grant.  Budgetary monitoring of approved cost line items in a grant.

• C. Cash Management
• C. Cash Management
• Establishment of procedures to minimize the time elapsing between the

expenditure and the reimbursement by the Federal government.

• Non‐638 (Cost reimbursable) contracts and grants‐ focus is on timing between

expenditure vs. drawdown. 638 t t f i f di f d f d h d

• 638 contracts‐ focus is on safeguarding of advance funds on hand.
• Interest earned in excess of $100 by Federal program on advances will need to be

reimbursed to the Federal agency. Exception: 638 advances, interest earnings are not reimbursable to the Federal government and are considered discretionary in not reimbursable to the Federal government and are considered discretionary in nature.

• Non‐638 contracts and grants typically carry “Grants Receivable” balances for

their financial position.

• 638 contracts typically carry “Deferred Revenue” balances for their financial

position.

Discuss a tribal cash management system (single checking)

Cash Management‐continued Cash Management continued

• Audit Objectives

Audit Objectives  Cost reimbursable grants‐Minimization of timing between grant draw and grant timing between grant draw and grant expenditures  638 C ( d f di ) i h  638 Contracts (advance funding)‐ is the advance funding safeguarded from use by h

• ther programs

 Interest earnings properly treated.

Cash Management‐continued Cash Management continued

• Suggested Audit Procedures‐ Compliance

 Select a sample of Federal cash draws and verify that:

• The timing of the cash draws was in compliance with the applicable funding

technique.

• That program income, rebates, refunds, and other income were disbursed before

requesting additional Federal cash draws.  Review a sample of reimbursement requests and trace to supporting documentation showing that the costs for which reimbursement was requested documentation showing that the costs for which reimbursement was requested were paid (expensed) prior to the date of the reimbursement request.  Review records to determine if interest was earned on Federal cash draws. If so, review evidence to ascertain whether it was returned to appropriate agency. pp p g y  Review Grants Receivable balances by programs for proper support. Look for

• verstated balances which could suggest grant overruns.

 Review Deferred Revenue balances on cost reimbursable grants. Identify any excess cash on hand and seek to correct for future drawdown errors.

Cash Management‐continued Internal Controls

• Control Environment

 Appropriate assignment of responsibility for approval of cash drawdowns.  Reimbursement is requested only after costs have been incurred.

• Risk Assessment

 Mechanisms exist to anticipate identify and react to routine events that affect cash needs  Mechanisms exist to anticipate, identify, and react to routine events that affect cash needs.

• Control Activities

 Cash flow monitoring system in place.  Accounting system is capable of scheduling payments for accounts payable and requests for g y p g p y p y q funds to avoid time lapse between drawdown and actual disbursement.  Supervisory review of cash management activities.  Written policies that address cash management areas. M it i

• Monitoring

 Review by top management of programs’ balance sheet to determine if cash drawdowns are being made on a timely basis. Emphasis is on cash flow of the organization. Note: Grants receivable balances greater than 60 days of a program’s yearly budget should be investigated and is usually deemed in excess.

• D. Davis‐Bacon Act
• D. Davis Bacon Act
• All laborers and mechanics employed by contractors or subcontractors to work on

construction contracts in excess of $2,000, financed by Federal assistance funds, must be paid wages not less than those established prevailing wage rates established by the DOL. (http://www.dol.gov/whd/contracts/dbra.htm)

• Construction contracts must include a contract provision identifying that the Davis
• Construction contracts must include a contract provision identifying that the Davis‐

Bacon Act applies.

• Contractors and subcontractors must submit to the non‐Federal entity weekly, for

each week in which any contract work is performed, a copy of the payroll and a y p , py p y statement of compliance (certified payrolls). Form WH‐347

• 638 Construction Contracts are generally subject to Davis‐Bacon Act except where

a Tribe uses its own work force or where the Act is specifically waived under the contract.

Davis-Bacon Information (Additional Items p.5) See Form

Davis‐Bacon Act‐ continued Davis Bacon Act continued

• Audit Objectives

 Determination of compliance by contractors and subcontractors of the Davis‐ Bacon Act on applicable construction contracts

• Suggested Audit Procedures‐Compliance

 Verify that prevailing wage rate clauses were included in construction contracts covered by the Act.  Verify that the contractor or subcontractor submitted weekly the required certified payrolls payrolls.  Review a sample of certified payrolls for prevailing wage rates.  Review on‐site employee inspections and interviews for support of the certified payrolls payrolls.

Davis‐Bacon Act‐ continued Internal Controls

• Control Environment

 Management understands and communicates to staff, contractors, and subcontractors the requirements to pay wages in accordance with Davis‐Bacon Act.  Management understands its responsibility for monitoring compliance.

• Control Activities

Control Activities  Contractors informed in the procurement documents of the requirements for prevailing wage rates.  Contractors and subcontractors are required to submit weekly certified payrolls.

• Information and Communication

 Prevailing wage rates requirements are appropriately communicated.  Reports provide sufficient information to determine if requirements are being met.  Channels are established for staff/employees to report non compliance  Channels are established for staff/employees to report non‐compliance.

• Monitoring

 On‐site interviews are conducted of workers.  Management reviews to ensure proper notification to contractors , weekly certified payrolls submission, and spot testing of wage rates are being conducted by assigned personnel.

• E. Eligibility
• E. Eligibility
• The specific requirements for eligibility are unique to each Federal program and

are found in the laws, regulations, and provisions of contract or grant agreements pertaining to the program. For programs listed in the CS, these specific requirements are in Part 4 or 5 Agency Program Requirements.

• Audit Objectives
• Audit Objectives

 Determine whether required eligibility determinations were made, (including

• btaining any required documentation/verifications), that individual program

participants or groups of participants (including area of service delivery) were p p g p p p ( g y) determined to be eligible, and that only eligible individuals or groups of individuals participated in the program.  Determine whether amounts provided to or on behalf of eligible participants were l l d i d i h i calculated in accordance with program requirements

See example 4-14.867-5

Eligibility‐ continued Eligibility continued

• Suggested Audit Procedures‐ Compliance

 When a computer system is integral to eligibility compliance , the auditor should consider the non‐Federal entity’s computer processing. The auditor should perform audit procedures relative to the computer system used, if applicable, for eligibility determination. Perform tests to verify the accuracy of the following applicable functions performed by the computer: calculations to assist in determining eligibility, amount of benefits, payment of benefits, individuals’ profile information, tracking of time period of eligibility, matches with other computer databases to verify eligibility (e.g., matches to verify earnings or identify individuals who are deceased), control who is authorized to approve benefits, exception reports indicating likely errors that need follow‐up (e.g., benefit thresholds).  Split Eligibility Determination Functions‐ When the non‐Federal entity arranges with another entity to perform part or all of the eligibility determination, then the eligibility requirements for the non‐Federal entity will be limited just to those specific functions it performs in the y j p p eligibility determination process. Ensure that eligibility testing includes all benefit payments regardless of whether another entity, by arrangement, performs part of the eligibility determination functions.

Eligibility‐ continued Eligibility continued

 Perform procedures to ascertain if the non‐Federal entity’s records/database includes all i di id l i i b fi d i h di i d ( f l ) individuals receiving benefits during the audit period (test of completeness).  Select a sample of individuals receiving benefits and perform tests to ascertain if:

• The required eligibility determinations and redeterminations, (including obtaining any

required documentation/verifications) were performed and the individual was determined to q ) p be eligible in accordance with the compliance requirements of the program.

• Benefits paid were calculated correctly.
• Benefits were discontinued when period of eligibility expired.

 R i i d lit t l if li bl t t i if it i ti t  Review any required quality control process, if applicable, to ascertain if it is operating to effectively meet the objectives of the process and in compliance with applicable program requirements.  Eligibility of Group of Individuals or Area of Service Delivery

• In some cases, the non‐Federal entity may be required to perform procedures to determine

whether a population or area of service delivery is eligible. Test information used in determining eligibility and ascertain if the population or area of service delivery was eligible.

• Perform test to ascertain if the population or area served along with the benefits paid were
• Perform test to ascertain if the population or area served along with the benefits paid were

eligible.

Eligibility‐continued Eligibility continued

 Eligibility for Subrecipients

• If the determination of eligibility is based upon approved application or plan,
• btain a copy of this document and identify the applicable eligibility requirements.
• Select a sample of awards to subrecipients and perform procedures to verify that

th b i i t li ibl d t d d ithi f di li it the subrecipients were eligible and amounts awarded were within funding limits.

Eligibility‐continued Internal Controls (p.6‐E‐1)

• Control Environment

 S ff i d id f ki f li ibili d i i  Staff size and competence provides for proper making of eligibility determinations.  Lines of authority clear for determining eligibility.  Adequate knowledge and access to computer system and/or database used for eligibility assessment

• Risk Assessment

 Identification of risk of inaccurate assessment information.  Conflict of interest statements for individuals who determine and review eligibility.

• Control Activities

 Written eligibility policies.  Procedures to calculate benefit amounts consistent with program requirements.  Periodic review of authorized signatures on eligibility documents.  Adequate safeguards in place to ensure access to records limited to appropriate personnel.  Manual criteria checklists or automated process used in making determinations. p g  Process for periodic redeterminations in accordance with program requirements.  Verification of accuracy of information used in determinations.  Process in place to ensure that benefits are discontinued when requirements are no longer met or period

• f eligibility has expired.

g y p

Eligibility‐ continued Internal Controls

• Information and Communication

 Processing of information subject to edit checks and balancing procedures.  Training for employees on eligibility requirements.  Channels of communication exist for people to report suspected eligibility improprieties.  Documentation of determinations in accordance with program requirements  Documentation of determinations in accordance with program requirements.

• Monitoring

 Periodic management monitoring and analytical reviews of determinations.  Periodic audits of detailed transactions.  Program quality control procedures performed over determination process.

• F. Equipment and Real Property

Management

• Equipment Management

 Definition‐ acquisition cost $5,000 or more with a useful life of more than one year.  Title vests with non‐Federal entity.  Requirements under OMB A‐102, Common Rule, Section 32 (p. 9‐D)  Disposition with FMV of $5 000 or more Federal agency entitled to proportionate share  Disposition with FMV of $5,000 or more, Federal agency entitled to proportionate share.  Purchases: Non‐638 grants need prior agency approval vs. 638 contracts no approval required.

• Real Property Management

 Title vests with non‐Federal entity.  Real property shall be used for originally authorized purpose as long as needed for that purpose.  The non‐Federal entity may not dispose of or encumber the title to real property without the prior consent of the awarding agency. prior consent of the awarding agency.  Disposition instructions must be obtained from the Federal awarding agency.  Federal agency entitled to proportionate share of sale proceeds.  Purchases: Non‐638 grants need prior agency approval vs. 638 contracts no approval required.

See Management Requirements under Common Rule (Additional Items p.14)

Property Management‐continued Property Management continued

• Audit Objectives

 Determine whether the non‐Federal entity maintains proper records for equipment and adequately safeguards and maintains equipment.  Determine whether disposition or encumbrance of any equipment or real property acquired under Federal awards is in accordance with Federal requirements and that the awarding q g agency was compensated for its share of any property sold or converted to non‐Federal use.

• Suggested Audit Procedures‐ Compliance

 Select a sample of equipment transactions and test for compliance with organization’s policies/OMB Common Rule for management and disposition of equipment policies/OMB Common Rule for management and disposition of equipment  Inquire if a required physical inventory of equipment was taken within the last two years.  Identify current year equipment purchases made under Federal awards and trace to property

• records. Verify that property records contain proper information as outlined under Common

Rule section 32.  Select a sample from all equipment identified as acquired under Federal awards from the property records and physically inspect the equipment, including whether the equipment is appropriately safeguarded and maintained.

Property Management‐ continued Property Management continued

 For dispositions of equipment acquired under Federal awards, perform procedures to verify that the dispositions were properly reflected in the property records.  For dispositions of equipment (FMV>=$5,000) or real property acquired under Federal awards, perform procedures to verify that the non‐Federal entity followed instructions of the awarding agency (Federal portion reimbursement).

Property Management Internal Controls

• Control Environment

 S ffi i bili i di i f i f F d l  Sufficient accountability exists to discourage temptation of misuse of Federal assets.

• Risk Assessment

 Procedures to identify risk of misappropriation or improper disposition of property acquired with Federal awards. C l A i i i

• Control Activities

 Accurate property records are maintained  Property tags are placed on equipment  Physical inventory taken periodically (at least every two years) and compared to prop. records  Property records contain required information  Disposal procedures for dispositions to Federal agencies  Policies and procedures for responsibilities of recordkeeping and authority for disposals

• Information and Communication

 Accounting system provides sufficient information  Program managers provided with applicable requirements and guidelines

• Monitoring

 Management reviews inventories (discrepancies) and property disposals (approvals) g ( p ) p p y p ( pp )

• G. Matching, Level of Effort,

Earmarking

• Matching or Cost Sharing

 To provide contributions of a specified amount or percentage to match Federal awards. Matching may be in the form of allowable costs incurred or in‐kind contributions.  Verifiable from non‐Federal entity’s records (accounting for match)  Necessary and reasonable for the project and allowed under OMB A‐87 cost principles  Are not paid by the Federal government under another award, except where authorized  Included in approved budget  Properly supported

• Level of Effort (requirements)
• Level of Effort (requirements)

 Specified level of service be provided  Specified level of expenditures for specified activities to be maintained for period  Federal funds to supplement and not supplant non‐Federal funding of services

• Earmarking

 Includes requirements that specify the minimum and/or maximum amount or percentage of the program’s funding that must/may be used for specified activities, including funds provided to

• subrecipients. Earmarking may also be specified in relation to the types of participants covered.

See Matching Requirements under Common Rule (Additional Items p.15)

Matching, Level of Effort, Earmarking‐continued

• Audit Objectives

 M t hi D t i h th th i i t t f t ib ti t hi f d  Matching‐ Determine whether the minimum amount or percentage of contributions or matching funds was provided.  Level of Effort‐ Determine whether specified service or expenditure levels were maintained.  Earmarking‐ Determine whether minimum or maximum limits for specified purposes or types of participants were met.

• Suggested Audit Procedures

 Matching

• Perform tests to verify that required matching contributions were met.
• Determine if match was from an allowable source.
• Test supporting documentation for in‐kind contributions.
• Test transactions used to match for compliance with allowable costs/cost principle requirements.

 Level of Effort‐ Maintenance of Effort

• Identify the required level of effort and perform tests to verify that the level of effort requirement was met.
• Perform test to verify that only allowable categories of expenditures or other effort indicators (e.g. hours, number
• f people served) were included in the computation and that the categories were consistent from year to year.
• Perform procedures to verify that the amounts used in the computation were derived from books and records

from which the audited financials were prepared.

• Perform procedures to verify that non monetary effort indicators were supported by official records
• Perform procedures to verify that non‐monetary effort indicators were supported by official records.

Matching, Level of Effort, Earmarking‐ continued

• Level of Effort‐ Supplement Not Supplant

 V if h F d l f di i i d l d l h f di  Verify that Federal funding is required to supplement and not supplant other funding.  Ascertain if the entity used Federal funds to provide services which were provided with non‐Federal or

• ther Federal funds in the prior year. Perform procedures to verify supplement vs. supplant requirement

by past services provided with other funding and measurement of increase in services relative to past years years.

• Earmarking

 Identify the applicable percentage or dollar requirements for earmarking.  Perform procedures to verify that the amounts recorded in the financial records met the requirements.  When earmarking specifies a maximum percentage or amount review financial records to identify  When earmarking specifies a maximum percentage or amount, review financial records to identify transactions for the specified activity which were improperly classified in another account.  When earmarking prescribes the minimum number or percentage of specified types of participants that can be served, select a sample of participants that are counted toward meeting the minimum requirement and perform tests to verify that they were properly classified. p y y p p y  When earmarking requirements prescribe the maximum number or percentage of specified types of participants that can be served, select a sample of other participants and perform tests to verify that they were not of the specified type.

Matching, Level of Effort, Earmarking l l Internal Controls

• Control Environment

 Budgeting process identifies resources to meet requirement.  Written policies cover responsibilities, methods of valuation, allowable costs, and methods of accounting for and documenting amounts.

• Risk Assessment

 Identification of areas where estimates will be used.  Identification by management of potential recording and/or support problems in h i the accounting system.

• Control Activities

 Evidence, supporting documentation of matching contributions.  i f hl d dj i i  Review of monthly cost reports and adjusting entries.

• Information and Communication

 Adequate accounting system to record, track, and identify requirement.

• H. Period of Availability
• H. Period of Availability
• Federal awards (usually cost reimbursable grants) may specify a time

period (budget period) during which the non‐Federal entity may use the Federal funds. Where a funding period is specified, a non‐Federal entity may charge to the award costs resulting from obligations incurred during h f d d the funding period.

• If approved (no cost extension), unobligated balances may be carried over

and charged for obligations of a subsequent funding period.

• Obligations‐ the amounts of orders placed, contracts and subgrants

awarded, goods and services received, and similar transactions during a given period that will require payment by the non‐Federal entity during h f i d the same or a future period.

• 638 vs. Non‐638 compliance
• All obligations need to be liquidated 90 days following the funding period.

Where do encumbrances "fit-in"? CFDA 84.000- DOEd definition

Period of Availability‐continued Period of Availability continued

• Audit Objectives

 Determine whether Federal funds were obligated within the period of availability and obligations were liquidated within the required time period.

• Suggested Audit Procedures‐ Compliance

 Review grant documentation to determine funding period.  Test transactions charged to the Federal award after the end of the period of availability that:

• U d

l i bli i d i hi h f di i d

• Underlying obligations occurred within the funding period.
• Liquidation (payment) was made within the allowed time period.

 Test adjustments (journal entries) to the Federal funds for proper classification of costs within the proper funding period costs within the proper funding period.  Review of year‐end balance sheet for grants looking for cost‐reimbursable grants carrying deferred revenue balances

Period of Availability Internal Controls

• Control Environment

 Understanding by management of compliance requirement.  Entity’s operations are such that non‐compliance is unlikely.

• Risk Assessment

 Budgetary process tracks encumbrances  Budgetary process tracks encumbrances.  Identification of the cut‐off requirements.

• Control Activities

 Accounting system that prevents obligation or expenditure outside of funding period g y p g p g p  Cut‐off date monitoring by program managers and finance dept. .

• Information and Communication

 Periodic reporting of unliquidated balances to appropriate levels of management and follow up.

• Monitoring

 Periodic review of expenditures before and after cut‐off date.  Review of budget to actual reports.  Review of budget to actual reports.

I.Procurement and / Suspension/Debarment

• Indian tribal governments will use their own written procurement policies and procedures

id d h f OMB A 102 C R l l ifi l i provided they conform to OMB A‐102, Common Rule plus specific agency regulations.

• ARRA funds‐ construction and repair of public building must use iron, steel ,and

manufactured goods produced in United States (Buy American Act)

• Procurement requirements found in A‐102, Common Rule section 36.

q ,

• Suspension and Debarment

 Non‐federal entities are prohibited from contracting with parties , under covered transactions, which are suspended or debarred.  C d t ti t $25 000 t ifi d it i ( iti i )  Covered transactions‐ procurements >=$25,000 or meet specified criteria (sensitive services)  All nonprocurement transactions (ie. subawards to subrecipients), irrespective of award amount are considered covered transactions.  Compliance‐ 2 ways either: p y

• Verification by checking the Excluded Parties List System (EPLS) maintained by the GSA.
• Certification form

See Certification Form (Additional Items p.25) See Procurement Methods-Common Rule

• Outline Purchasing System
• Procurement Documentation

Micropurchases (Additional Items p.20)

• Procurement checklists examples (Additional Items p.23)

Procurement, / Suspension/Debarment‐ continued

• Audit Objectives

Audit Objectives Determine whether procurements were made in compliance with provisions of A 102 in compliance with provisions of A‐102, Common Rule. D i d B Determine proper procurements, under Buy American Act, were made using ARRA funding. Determine if covered transactions were properly verified for debarment/suspension.

Procurement, / Suspension/Debarment‐continued

• Suggested Audit Procedures‐ Compliance over Procurement

 Review written procurement policies and procedures for compliance with A‐102, Common Rule, section 36. :

• Selection process affords “full and open” competition.
• Written policy pertaining to ethical conduct.
• Review tribe’s policy on preferences (e.g. geographic and Indian preference).
• Written policies on debarment and suspension compliance.

 Select a sample of current year procurements and perform the following:

• Supporting documentation includes cost analysis procurement method rationale and vendor
• Supporting documentation includes cost analysis, procurement method rationale, and vendor

selection.

• Supporting documentation for sole‐sourcing along with applicable cost analysis.
• Verify that Federal awarding agency approved procurement when required ( e.g. $100,000

threshold noncompetitive negotiation lack of competition brand name and awarded to non low threshold, noncompetitive negotiation, lack of competition, brand name, and awarded to non‐low bidder).

• Supporting documentation for compliance with debarment/suspension (vetting or certification).
• ARRA funding‐ confirm purchase of goods and materials under the Buy American Act.

Procurement, Suspension/Debarment Internal Controls

• Control Environment

 Existence of written codes of conduct over acceptable practices, conflicts of interest, or expected standards of ethical behavior for making procurements.  Written Procurement policies and procedures that incorporate Federal i t requirements.  Board oversight and approval required for high dollar, lengthy, or other sensitive procurement contracts.  Adequate knowledge and experience of key procurement managers of Federal  Adequate knowledge and experience of key procurement managers of Federal procurement requirements.  Clear assignment of authority over the procurement process.

• Risk Assessment
• Risk Assessment

 Procedures to identify risks arising from vendor inadequacy (e.g. quality of goods

• r services, delivery schedules).

 Conflict of interest statements maintained for procurement personnel. p p

Procurement, Suspension/Debarment I l C l i d Internal Controls‐continued

• Control Activities

 Cl l d fi d j b d i i d fi i k h i h d  Clearly defined job descriptions defining tasks that comprise the procurement dept.  Contractor’s performance is monitored and documented.  Segregation of duties between employees responsible for contracting and accounts payable and cash disbursing.  P i i l d d i fil  Procurement actions appropriately documented in procurement files.  Proper supervisory review of procurement actions.  Verification of vendors for debarment and suspension.  Written policy over procurement establishing:

• Contract files that document significant procurement history.
• Methods of procurement, including the vendor selection process.
• Requirements for cost analysis, including contract modifications.
• Obtaining and reacting to suspension and debarment certifications.
• Indian preference defined.

 Written policy over suspension and debarment that:

• Prohibits award to a vendor or subrecipient that is debarred or suspended.
• Requires staff to check the EPLS listing, or obtain the correct certification from vendor.

q g,

Procurement, Suspension/Debarment I l C l i d Internal Controls‐continued

• Information and Communication

 A documentation system in place that includes:

• The basis for contractor selection.
• Justification for sole sourcing.
• The basis for the award cost or price.

 Employee’s procurement duties are effectively communicated.  Channels of communication are provided for people to report suspected procurement and contracting improprieties.

• Monitoring

 Management periodically conducts independent reviews of procurements to d i li i h bli h d li i determine compliance with established policies.

• J. Program Income
• J. Program Income
• Program income is gross income received that is generated by the federally funded

project during that grant period.

• Program income includes: income from fees for services performed, the use of

rental of real or personal property acquired with grant funds, the sale of commodities or items fabricated under a grant agreement and payments of commodities or items fabricated under a grant agreement, and payments of principal and interest on loans made with grant funds. Does not include interest earnings, rebates, credits, and discounts. Program income does not include proceeds from the sale of fixed assets.

• Program income may be used in one of three methods:
• Deducts from outlays
• Added to project budget
• Used to meet matching requirements
• Unless specified otherwise, program income shall be deducted from program
• utlays

See Program Income requirements (Additional Items p.18)

Program income‐continued Program income continued

• Audit Objectives

j

• Determine whether program income is correctly determined,

recorded, and used in accordance with Federal grant i t requirements.

Program Income‐continued Program Income continued

• Suggested Audit Procedures‐ Compliance

 Identify Program Income

• Review various grant agreements and approved budgets and ascertain if program

income was anticipated.

• Inquire of program directors and review accounting records to ascertain if program

income was received.  Determining or Assessing Program Income‐ Perform tests to verify that program income was properly determined or calculated in accordance with stated criteria income was properly determined or calculated in accordance with stated criteria, and that program income was only collected from allowable sources.  Recording of Program Income‐ Perform tests to verify that all program income was properly recorded in the accounting records. p p y g  Use of Program Income‐ Perform tests to ascertain if program income was used in accordance with Federal grant requirements (spent for allowable activities).

Program Income Internal Controls

• Control Environment

 Management recognizes its responsibilities for program income.

• Risk Assessment

 Mechanisms in place to identify the risk of unrecorded or miscoded program income.

• Control Activities
• Control Activities

 Pricing and collection policies procedures clearly communicate to personnel responsible for program income.  Mechanism in place to ensure that program income is properly recorded as earned and deposited in the bank as collected.

• Information and Communication

 Information systems identify program income collections and usage.  A channel of communication for people to report suspected improprieties in the collection or  A channel of communication for people to report suspected improprieties in the collection or use of program income.

• Monitoring

 Internal audit of program income.  Management compares program income to budget and investigates significant variances.

• K. Real Property Acquisition and

Relocation Assistance

• The Uniform Relocation Assistance and Real Property Acquisition Policies

Act, provides for uniform and equitable treatment of persons displaced by federally assisted programs from their homes, businesses, or farms. Property acquired must be appraised by qualified independent appraisers. ll l b d b All appraisals must be examined by a review appraiser to ensure

• acceptability. After acceptance, the review appraiser certifies the

recommended or approved value of the property for establishment of the

• ffer of just compensation to the owner Federal requirements govern the
• ffer of just compensation to the owner. Federal requirements govern the

determination of payments for replacement housing assistance, rental assistance, and down payment assistance for individuals displaced by federally funded projects The regulations also cover the payment of federally funded projects. The regulations also cover the payment of moving‐related expenses and reestablishment expenses incurred by displaced businesses and farm operations.

• L. Reporting
• L. Reporting
• Reporting requirements are outlined in the grant agreement.
• Financial Reporting

 The Federal awarding agency may accept identical information from the recipient in machine‐ readable format, computer printouts, or electronic outposts in lieu of prescribed formats.  The standard financial reporting forms are as follows:  The standard financial reporting forms are as follows:

• Request for Advance or Reimbursement (SF‐270). Recipients are required to use the SF‐270 to

request reimbursement payments under non‐construction programs, and may be required to use it to request advance payments.

• O tl

R t d R t f R i b t f C t ti P (SF 271)

• Outlay Report and Request for Reimbursement for Construction Programs (SF‐271).

Recipients use the SF‐271 to request funds for construction projects unless advances or the SF‐270 are used.

• Federal Financial Report (FFR) (SF‐425). Recipients use the FFR as a standardized format to

report expenditures under Federal awards, as well as, when applicable, cash status.  Electronic versions of standard forms: http://www.whitehouse.gov/omb/grants_forms

Reporting‐ continued Reporting continued

• Performance Reporting
• Recipients may be required to submit performance reports at least

annually but not more frequently than quarterly. Performance reports generally contain, for each award, the following information: comparison

• f accomplishments to goals/objectives; reasons why goals not met; other

information including cost overrun discussion

• The Federal agencies are moving toward the use of standard

performance/progress reporting formats, however, there is currently no standardized report.

• Special Reporting‐ Required for quantifiable data and has a material effect
• n the program.
• ARRA Reporting‐ Special reporting submitted online through

www.FederalReporting.gov

Reporting‐continued Reporting continued

• Audit Objectives
• D

i h h i d f F d l d i l d ll i i f h i i d

• Determine whether required reports for Federal awards include all activity of the reporting period, are

supported by applicable accounting or performance records, and are fairly presented in accordance with governing requirements.

• Suggested Audit Procedures‐ Compliance

 Determine the types and frequency of the required grant reporting  Determine the types and frequency of the required grant reporting.  Determine the methodology in compiling and reporting the data.  Perform analytical procedures which may include: comparing current reporting with past reporting; compare anticipated (budgeted) results to actual reported data; compare accounting records (financials) to the reports to the reports  Select a sample of financial reports and perform the following:

• Ascertain if the financial reports were complete, accurate, and prepared in accordance with the required

accounting basis.

• Trace the amounts reported to the accounting records
• Trace the amounts reported to the accounting records.
• For discrepancies noted in SF‐425s concerning cash status, review subsequent reports to ascertain if

discrepancies were appropriately resolved.

• Verify timely report submission.

Reporting‐ continued Reporting continued

 Select a sample of performance and special reports and perform the following:

• Test the accuracy and completeness of the reports to the underlying data

used to prepare each report.

• Verify that the data was accumulated and summarized in accordance with

the required or stated criteria and methodology.  Assess the validity of the reports provided. Are these “true” copies of the y p p p reports actually submitted to the Federal agency? (Auditor obtains written representation from management)  ARRA reporting‐ submitted reports are available on Recovery.gov website. p g p y g

Reporting Internal Controls

• Control Environment

 P i i i d i th t th i d k l d kill d biliti  Person preparing, reviewing, and approving the reports possess the required knowledge, skills, and abilities.

• Risk Management

 Mechanisms exist to identify risks of faulty reporting caused by such items as lack of current knowledge of, inconsistent application of, or carelessness or disregard for standards and reporting requirements of Federal awards.  Identification of underlying source data or analysis for performance or special reporting that may not be reliable.

• Control Activities

 Written policy exists that establishes responsibility and provides the procedures for periodic monitoring, verification, and reporting of progress and accomplishments.  Tracking system which reminds staff when reports are due.  Supervisory review of reports performed to assure accuracy and completeness of data and information included in the reports.

• Information and Communication

 A ti i f ti t th t id li bl d t f i ti  An accounting or information system that provides reliable data for use in reporting.

• Monitoring
• Periodic comparison of reports to supporting records.
• Federal agency receipt confirmations of required reports.

• M. Subrecipient Monitoring
• M. Subrecipient Monitoring
• A pass‐through entity is responsible for:

 D t i i S b i i t Eli ibilit i l d d i l ti i h th li t f b d h id d  Determining Subrecipient Eligibility‐ included in evaluation is whether an applicant for a subaward has provided a Dun and Bradstreet Data Universal Numbering System (DUNS) number as part of its subaward application.  Central Contractor Registration‐ For ARRA subawards, subrecipient needs to register in the Central Contractor Registration.  Award Identification‐ At the time of the subaward, identifying to the subrecipient the Federal award information f y g p (e.g. CFDA#, award anme and number, name of the awarding agency) and applicable compliance requirements.  During the Award Monitoring‐ Monitoring the subrecipient’s use of Federal awards through reporting, site visits, regular contact, and other means to provide reasonable assurance that the subrecipient administers Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved performance goals are achieved.  Subrecipient Audits‐ (1)Ensuring that subrecipients expending $500,000 or more in Federal awards during the subrecipient’s fiscal year have conducted , and timely submitted, a Single Audit in accordance with OMB A‐133. (2) issuing a management decision on audit findings within 6 months after receipt of the subrecipient’s audit report; and (3) ensuring that the subrecipient takes timely and appropriate corrective action on all findings. In cases of continued inability or unwillingness of a subrecipient to have the required audits the pass through entity shall continued inability or unwillingness of a subrecipient to have the required audits, the pass‐through entity shall take appropriate action using sanctions.  Pass‐through Entity Impact‐ Evaluating the impact of subrecipient activities on the pass‐through entity’s ability to comply with applicable Federal regulations.  Monitoring activities‐ Performance in these areas: Reporting (financial and performance), Site Visits (Financial and Programmatic), Regular Contact (Inquiries over program activities).

Subrecipient Monitoring‐continued Subrecipient Monitoring continued

• Audit Objectives

 Determine whether the pass‐through entity had the subrecipient provide a valid DUNS number before issuing the subaward.  Determine whether proper Federal grant information was provided to the subrecipient (e.g. CFDA#, compliance requirements) and approved only allowable activities in the subrecipient’s budget.  For ARRA awards, is the subrecipient properly registered with CCR.  Determine whether the pass‐through entity properly monitored the subrecipient’s activities for compliance with Federal grant requirements.  Determine whether pass‐through entity obtained a copy of subrecipient’s Single Audit along with corrective actions, and whether a management decision on audit findings was issued, within 6 months, by the pass‐through entity.  Determine whether sanctions were necessary and whether they were implemented.  Determine whether the pass‐through entity evaluated the impact of subrecipeint activities on the p g y p p pass‐through entity.  Determine whether the pass‐through entity identified in the SEFA the total amount provided to subrecipients from each Federal program.

Subrecipient Monitoring‐continued Subrecipient Monitoring continued

• Suggested Audit Procedures‐ Compliance

 Test the pass‐through entity’s subaward review and approval documents for DUNS#, and proper Federal information being provided.  Review the pass‐through entity’s during the subaward monitoring of the b i i t i th f ti it i it d t t t if subrecipient in the areas of reporting, site visits, and contacts to verify assurance

• f compliance.

 Verify that pass‐through entity performed required oversight related to the subrecipient’s Single Audit (review of audit findings and SEFA) subrecipient s Single Audit (review of audit findings and SEFA).  Verify that in cases of continued inability or unwillingness of a subrecipient to have the required audits, the pass‐through entity took appropriate action using sanctions.  Verify that the effects of subrecipient noncompliance are properly reflected in the pass‐through entity’s records.

Subrecipient Monitoring Internal Controls

• Control Environment

 Establishment of “tone at the top” of managements commitment to monitoring subrecipients  Establishment of tone at the top of managements commitment to monitoring subrecipients.  Knowledge, skills, and abilities needed to accomplish subrecipient monitoring tasks. Proper job descriptions exist which

• utline monitoring responsibilities.

 Appropriate sanctions taken for subrecipient noncompliance.

• Risk Assessment

 Key managers understanding of monitoring requirements.

• Control Activities

 Identify to subrecipients the Federal award information.  Include in agreement with subrecipients the requirement of compliance with Federal compliance requirements.  Subrecipient’s compliance with audit requirements monitored through obtaining and review of the Single audit report along  Subrecipient s compliance with audit requirements monitored through obtaining and review of the Single audit report along with the corrective action plan. Submission of audit should be verified using the Federal Audit Clearinghouse.  Subrecipient’s compliance with Federal program requirements can be monitored using techniques as follows:

• Issuing timely management decisions for audit and monitoring findings.
• Maintaining a system of tracking and follow up on reported deficiencies.
• Regular contacts with subrecipient relating to Federal program.
• Review of subrecipient reports.
• Budget monitoring.
• Performing site visits to review financial and programmatic records and observe operations.
• Offering technical assistance to subrecipient.
• Offering technical assistance to subrecipient.

Subrecipient Monitoring Internal Controls‐ continued

 Written policies over subrecipient monitoring process.

• Information and Communication

 Standard award documents used by pass‐through entity which contain:

• A listing of Federal requirments that subrecipient must follow.
• A description and program number for each program as stated in the CFDA
• A description and program number for each program as stated in the CFDA.
• A statement signed by an official of the subrecipient, stating that the subrecipient was

informed of, understands, and agrees to comply with the applicable compliance requirements.

• Monitoring

 Establish a tracking system to assure timely submission of required reporting, such as: financial reports, performance reports, audit reports, onsite monitoring reviews, and timely resolution of audit findings. g  Supervisory reviews performed to determine the adequacy of subrecipient monitoring.

• N. Special Tests and Provisions
• N. Special Tests and Provisions
• The specific requirements for special tests and provisions are

p q p p unique to each Federal program and are found in the laws, regulations, and the provisions of contract or grant agreements pertaining to the program For programs listed in agreements pertaining to the program. For programs listed in the CS, the special tests can be found in Part 4 or 5.

Compliance Supplement Compliance Supplement

• Questions and Discussion

Questions and Discussion h k f di hi l h

• Thank‐you for attending this Falmouth

Institute Course!!!