Select Changes to Federal Grant Policies and Single Audits NASACT Middle Management Conference April 13, 2016

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Agenda 2 General Information and Effective Dates Pre- and Post-Federal Award (Administrative) Requirements Cost PrinciplesAuditor Requirements (Subpart F)

General Information and Effective Dates (Subpart B of Uniform Guidance)

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Effective Date: December 26, Federal agencies must implement policies and procedures by promulgating regulations to be effective December 26, OMB will review. Upon implementation, the guidance will be in effect for all Federal awards or funding increments provided after the effective date. Non-Federal entities wishing to implement entity-wide system changes to comply with the guidance after effective date will not be penalized for doing so Standards in Subpart F (Audit Requirements) effective for fiscal years beginning on or after December 26, 2014 Federal agencies will implement this guidance in unison, which will provide non-Federal entities with a predictable, transparent, and government-wide consistent implementation. Dec. 26, 2014

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS 5 Frequently asked questions, updated November 2014  The new rules apply as of the Federal award date to new awards and, for agencies that consider incremental funding actions on previously made awards to be opportunities to change award terms and conditions, the first funding increment issued on or after 12/26/14. Federal Register Vol. 80, No 175 dated September 10, 2015  Guidance on effective/applicability date is revised to allow a grace period of two fiscal years for non-Federal entities to implement changes to their procurement policies and procedures in accordance with guidance on procurement standards. Effective Date: December 26, 2014, continued

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Written Policies 6 “Written Policy” reference in Uniform Guidance (25 times) Financial management – section Payment – section Procurement – sections , , and Compensation – sections and Relocation costs – section Travel costs – section

Pre- and Post-Federal Award (Administrative) Requirements (Subparts C and D of Uniform Guidance)

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Internal Control Requirements Non-Federal entities must: 1. Establish and maintain effective internal control that provides reasonable assurance that entity is managing Federal award in compliance with Federal statutes, regulations, and terms and conditions of Federal award. 2. Evaluate and monitor the non-federal entity’s compliance with statues, regulations, and terms of the federal award 3. Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings 4. Take reasonable measures to safeguard protected personally identifiable information 8 §

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Internal Control Requirements Internal controls should be in compliance with: COSO (Internal Control Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission), and Green Book (Standards for Internal Control in the Federal Government, issued by the Comptroller General of the United States) NOTE – Frequently asked questions dated November The word “should” is used throughout section 200. Does it really mean “must”? No. The word “must” is used throughout part 200 to indicate requirements. The word “should” is used to indicate best practices or recommended approaches that the COFAR wanted non-Federal entities to be aware of, but not necessarily required to comply with. 9 § Green Book has similar structure to COSO.

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS COSO 2013 Updated Internal Control – Integrated Framework (2013 Framework) issued on May 14, 2013 Companion documents: Internal Control – Integrated Framework: Executive Summary Illustrative Tools for Assessing Effectiveness of a System of Internal Control Internal Control over External Financial Reporting: A Compendium of Approaches and Examples COSO 1992 Framework was available until December 15, 2014, then superseded

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS What is not changing...What is changing... Core definition of internal control Three categories of objectives and five components of internal control Each of the five components of internal control are required for effective internal control Important role of judgment in designing, implementing and conducting internal control, and in assessing its effectiveness Updated for changes in business and operating environments Expanded operations and reporting objectives Implicit fundamental concepts underlying five components codified as 17 principles Updated for increased relevance and dependence on IT Addresses fraud risk assessment and response COSO 2013 Framework – Summary of Changes

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS COSO Components and Principles For effective internal control: Each of the five components and 17 principles must be present and functioning The five components must operate together in an integrated manner 1.Demonstrates commitment to integrity and ethical values 2.Exercises oversight responsibility 3.Establishes structure, authority and responsibility 4.Demonstrates commitment to competence 5.Enforces accountability 6.Specifies suitable objectives 7.Identifies and analyzes risk 8.Assesses fraud risk 9.Identifies and analyzes significant change 10.Selects and develops control activities 11.Selects and develops general controls over technology 12.Deploys through policies and procedures 13.Uses relevant information 14.Communicates internally 15.Communicates externally Control Environment Risk Assessment Control Activities Information and Communication Monitoring Activities 16.Conducts ongoing and/or separate evaluations 17.Evaluates and communicates deficiencies

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Procurement General procurement standards for entities other than states:  Must maintain oversight to ensure contractors perform in accordance with the terms and conditions of the contract  Must maintain written standards of conduct covering conflicts of interest and governing the performance of its employees engaged in the selection, award and administration of contracts  Must avoid acquisition of unnecessary or duplicative items  Encouraged to enter into state and local intergovernmental agreements  Encouraged to use Federal excess or surplus property in lieu of purchasing  Must maintain records sufficient to detail the history of the procurement  All procurement transactions must be conducted in a manner providing full and open competition consistent with the standards of this section.  Must only contract with responsible contractors possessing the ability to perform successfully. Consideration should be given to contractor integrity, compliance with public policy, record of past performance, and financial and technical resources 13 §

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Procurement Five prescriptive procurement methods (for entities other than states) :  Micro-purchase – supplies or services with an aggregate amount that does not exceed $3K, or $2K in case subject to Davis-Bacon Act To the extent practicable, Must distribute equitably amount qualified suppliers Award without soliciting quotations if consider the price reasonable  Small purchase procedures – less than Simplified Acquisition Threshold (currently $150K) Must obtain price or rate quotations from an adequate number of qualified sources 14 §

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Procurement Five prescriptive procurement methods:  Sealed bids (formal advertising) Specification or purchase description is available Two or more responsible bidders are willing and able to compete Lends itself to a fixed contract Invitation to bid will be publicly advertised and must be solicited from an adequate number of suppliers Firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder 15 §

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Procurement Five prescriptive procurement methods:  Competitive proposals Generally used when you can not use a sealed bid Requests for proposal must be publicized, identify all evaluation factors, and must be solicited from adequate number of sources Must have written method for conducting evaluations Contract must be awarded based on most advantageous to the program  Noncompetitive proposals (i.e. sole source) Item available only from a single source Public emergency will not permit a delay resulting from solicitation Federal awarding agency provides written approval After solicitation of a number of sources, competition is determined inadequate 16 §

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Pass-Through Entities Each subaward must clearly be identified as subaward and include standard data elements, including: 1. Federal award identification (see details on next slide) 2. Requirements imposed by pass-through entity 3. Provision for indirect costs (see following slides) 4. Requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient's records and financial statements as necessary for the pass-through entity to meet the requirements 5. Terms and conditions for close out 17 §

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Pass-Through Entities Federal Award Identification. 1. Subrecipient name (which must match registered name in DUNS); 2. Subrecipient's DUNS number (see § Data Universal Numbering System (DUNS) number); 3. Federal Award Identification Number (FAIN); 4. Federal Award Date (see § Federal award date); 5. Subaward Period of Performance Start and End Date; 6. Amount of Federal Funds Obligated by this action; 7. Total Amount of Federal Funds Obligated to the subrecipient; 8. Total Amount of the Federal Award; 9. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); 10. Name of Federal awarding agency, pass-through entity, and contact information for awarding official, 11. CFDA Number and Name; the pass-through entity must identify the dollar amount made available under each Federal award and the CFDA number at time of disbursement; 12. Identification of whether the award is R&D; and 13. Indirect cost rate for the Federal award (including if the de minimis rate is charged per § Indirect (F&A) costs). 18 §

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Pass-Through Entities Must evaluate each subrecipient’s risk of noncompliance for purposes of determining appropriate monitoring. (i.e. perform a risk assessment) Evaluation may include: 19 § Prior experience with similar subawards Results of previous audits Whether subrecipient has new personnel or systems Extent and results of Federal awarding agency monitoring Based on risk assessment, following monitoring tools may be used:  Providing training and technical assistance on program related matters to subrecipients  Performing on-site reviews  Arranging for agreed-upon procedures engagements

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Pass-Through Entities Monitoring activities must include: Reviewing financial and programmatic reports required by pass- through entity Following up on corrective actions Issuing management decisions Verifying every subrecipient is audited as required by Subpart F Consider the need for adjustments Consider taking enforcement action against noncompliant subrecipients 20 §

Cost Principles (Subpart E of Uniform Guidance)

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Compensation – Personal Services 22 Many commenters of NPG requested additional flexibility, while others requested stricter uniformity in the provision of specific certification language to better prevent and facilitate prosecution of fraud. Significant differences in time and effort documentation requirements under the three existing cost circulars (A-21, A-87, and A-122) A-21 is based on estimates that produce a reasonable approximation of the activity A-87 and A-122 are based on periodic (at least monthly) time and effort reporting of employees Uniform Guidance loosely based on concepts from all three circulars Increases emphasis on internal controls Provides less prescriptive guidance on documentation §

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Compensation – Personal Services (continued) 23 Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work. They must: The standards for documentation contain several references to entity’s written policy. Be supported by a system of internal control which provides reasonable assurance that charges are accurate, allowable, and properly documented Be incorporated into official records of non- Federal entity Reasonably reflect the total activity for which employee is compensated Encompass both federally assisted and all other activities Comply with established accounting policies of non- Federal entity Support distribution of employee’s salary or wages among activities or cost objectives

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Compensation – Personal Services (continued) 24 Budget estimates alone do not qualify as support, but may be used for interim charges provided that: System for establishing the estimate produces reasonable approximations of the activity actually performed Significant changes in corresponding work activity (as defined by the entity’s written policy) are identified and entered into records on a timely basis Short term (such as one or two months) fluctuations between workload categories need not be considered as long as distribution reasonable over long term Entity’s system of internal controls include process to review after-the- fact interim charges based on budget

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Indirect (F&A) Costs 25 Negotiated rates may be extended for up to four years if no major changes in F&A costs, with cognizant agency approval. One time option and no rate changes until end of the 4-year period. Federal agencies are required to use negotiated F&A rates for all awards, unless limited by law or regulation, or where a limitation is approved by the agency head based on documented justification. Agencies must notify OMB of any limitations approved by agency head De minimis rate of 10% MTDC (modified total direct costs = direct less equipment, renovations, subcontracts > $25,000) may be used indefinitely by entities that have never had negotiated indirect cost rate. Must use for all awards. Excludes entities described in Appendix VII Part 200 (d)(1)(B) (SLG and Indian tribes receiving over $35 million) Appendices to Uniform Guidance are an integral part in understanding indirect cost. Separate appendix for higher education, NFP state and local, and public cost allocation plans §

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Indirect (F&A) Costs (continued) 26 Additionally, for state and local governments:  Use cost allocation plan for central services (e.g., motor pools, computer centers, purchasing, accounting, etc.)  For interagency costs (excluding central services), a standard indirect cost allowance of 10% of direct salary and wage costs may be used in lieu of determining actual indirect costs ( )  Appears to be no significant changes for Public Assistance Cost Allocation Plans §

Audit Requirements, Subpart F

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Single Audit Threshold Increases audit threshold from $500,000 to $750,000 Can’t early adopt audit section of Uniform Guidance Effective for December 31, 2015 audits and later (audits of fiscal years beginning on or after December 26, 2014) OMB’s goal is to concentrate audit resolution and oversight resources on higher dollar and higher risk awards. §

Schedule of Expenditures of Federal Awards 29

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Schedule of Expenditures of Federal Awards(SEFA) Face of SEFA must include all Federal awards expended including: Footnotes to SEFA must include: Noncash assistance Loan programs (beginning balance of outstanding loans plus loans disbursed during period plus interest subsidy, cash, or administrative cost allowance) Loan guarantee programs Amounts passed through to subrecipients for each program § & 512 Year-end loan balances Weather or not entity used 10% de minimus cost rate Significant accounting policies

Major Program Determination 31

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Major Program Determination Group as Type A or B Programs Select High-Risk Type A Programs Select High-Risk Type B Programs Select Additional Programs To Meet Coverage Requirement §

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS 1. Group Programs as Type A or Type B Groupings are based on calculated threshold — Type A programs are those above the dollar threshold, Type B are those below  The minimum threshold is increased from $300,000 to $750, If total Federal awards expended is: Then Type A programs are those with Federal awards expended of the greater of $750K thousand to $25 million$750,000 $25 million to $100 million(.03) of total awards expended $100 million to $1 billion$3 million $1 billion to $10 billion(.003) of total awards expended $10 billion to $20 billion$30 million $20 billion or more(.0015) of total awards expended

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS 1. Group Programs as Type A or Type B Incorporates the guidance on the inclusion or exclusion of large loan or loan guarantee programs in determining the Type A threshold similar to what was previously in the Compliance Supplement Guidance was modified as follows:  For the purposes of excluding large loan programs in the determination of the Type A threshold, a program is only considered to be a loan program if the value of the award expended for loans within the program is greater than 50% of the expenditures of the award. A cluster of programs is treated as one program. 1

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS 2. Select All High-Risk Type A Programs Based on Risk Assessment A-133 default criteria: Not audited as a major program in 1 of 2 most recent audit periods In most recent period, had any of the following for program:  Significant deficiency in internal control  Material weakness in internal control  Material noncompliance finding Written request by Federal awarding agency to audit as major (180 days notice) Uniform Guidance default criteria : Not audited as a major program in 1 of 2 most recent audit periods In most recent period, had any of the following for program:  Modified opinion  Material weakness in internal control  Known or likely questioned costs that exceed 5% of the total expenditures of the program Written request by Federal awarding agency to audit as major (180 days notice) 2 Eliminated 1 st year option to audit all Type A programs

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS 2. Select All High-Risk Type A Programs Based on Risk Assessment A-133 auditor judgment criteria: Federal or pass-thru entity oversight Results of audit follow-up Changes in personnel or systems Inherent risk Uniform Guidance auditor judgment criteria: Federal or pass-thru entity oversight Results of audit follow-up Changes in personnel or systems Eliminates “inherent risk” from auditor judgment. SFA and RD likely will be low-risk Type A programs 2

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS 3. Select High-Risk Type B Programs Based on Risk Assessment A-133 Two Type B risk assessment options:  Option 1 - Perform risk assessments on all Type B programs* and select one half of Type B programs identified as high risk up to number of low-risk Type A programs  Option 2 - Perform risk assessments on all Type B programs* until as many high-risk Type B programs have been identified as there are low- risk Type A programs * subject to de minimus threshold Uniform Guidance Perform risk assessments on Type B programs* until high-risk Type B programs have been identified up to 25% of the number of low-risk Type A programs * subject to a revised de minimus threshold 3 Creates important planning considerations.

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS 3. Select High-Risk Type B Programs Based on Risk Assessment (continued) Auditors use cumulative knowledge and professional judgment of factors below to determine if Type B program is considered low or high risk: 3 There are no significant changes to the Type B criteria for Federal program risk assessments. Current and prior audit experience Oversight exercised by Federal agencies and pass-through entities Inherent risk of program

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS 4. Select Additional Programs to Meet Percentage of Coverage Requirement (if necessary) The fourth step is to select additional programs if necessary to meet the minimum coverage requirement.  The minimum coverage required is reduced as follows: 4 Type of AuditeeA-133Uniform Guidance Not Low Risk50%40% Low Risk25%20%

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS 4. Select Additional Programs to Meet Percentage of Coverage Requirement (if necessary) Low Risk Auditee if meet all criteria for the last two years:  Annual audits in accordance with A-133/ Uniform Guidance o Single audit reporting package and data collection form submitted (accepted) within required timeframe ‒ Financial statements prepared in accordance with GAAP or based on accounting prescribed by applicable state law ‒ Unmodified opinion on FS and SEFA ‒ Auditor did not report substantial doubt about going concern  No material weaknesses in internal over financial reporting  No Type A program had: o Material weakness o Modified opinion on compliance o Questioned costs > 5% of Federal awards expended 4 No low-risk auditee waivers will be granted.

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Major Program Determination OMB believes the changes to the major program determination will result in the following: A more targeted audit coverage of programs with internal control weaknesses. Appropriate burden relief for entities that materially comply as evidenced by an unmodified audit opinion and no material weaknesses in internal controls or material questioned costs. Incentive for entities to focus on correcting the deficiencies that indicate underlying weaknesses in internal controls. 4

Findings and Reporting

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Finding Elements Finding Elements Program Information Criteria Condition Found Context Questioned Costs Cause & Effect Recommendation Views of Responsible Officials Whether Sampling was Statistically Valid Repeat Finding from Prior Year §

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Suggested Findings Format ElementAdditional information (Italics is KPMG view) Finding #In format required by DCF Program informationSee UG (b)(1) Criteria ConditionIncludes context, perspective, cause and effect. Also includes separate discussion of control deficiency, if applicable Recommendation Questioned costsKnown questioned costs must be identified by CFDA # and applicable award identification # Repeat findingYes/No. Related to immediate prior audit. Consider including prior audit finding number Whether sampling was statistically valid Yes/No. Views of responsible official Stand alone answer not referenced to corrective action plan 4

Federal Audit Clearinghouse

© 2016KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS Federal Audit Clearinghouse (FAC) Amounts in data collection form should be the same as SEFA Reporting package submitted to FAC must be unlocked and unencrypted Reports submitted to FAC will be publicly available except for Indian tribes Senior level representative of auditee must sign statement that: Auditee complied with requirements Reporting package does not include protected personally identifiable information FAC is authorized to make the reporting package available on the web (except for Indian tribes) §

© 2015 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. Susan Warren