Billy Swindell Shelley Fleming, CPA State of Oklahoma Single Audit 1

2 History of the Single Audit  Single Audit Act of 1984  Before the Act-No audit coordination, audit overlap, inefficiencies  The act created a single organization-wide financial and compliance audit for state and local governments receiving more than $100,000

History of the Single Audit  Four Major Purposes of the Act  Promote efficient and effective use of audit resources  Establish uniform requirements for audits  Ensure that federal funds are audited in accordance with requirements of Single Audit Act  Improve state and local governments financial management of federally funded programs through more effective auditing 3

History of the Single Audit  Single Audit Act amendments of 1996  Federal expenditures equal to or greater than $300,000  Major programs based on risk assessments rather than solely on dollar amount of expenditures  OMB Circular A-133-set standards for obtaining consistency and uniformity among Federal agencies for audits of States, local govt, and non-profit org Note: Circular A-133 has since been replaced with the Uniform Grant Guidance 4

5 History of the Single Audit  Effective for FY Threshold for conduct of audit based on federal expenditures of  $750,000 or more - a single audit or a program- specific audit, based on criteria included in 2CFR § , is required  less than $750,000 – no audit required  Additional changes were made to reduce compliance requirements and number of major programs being audited as part of the Uniform Grant Guidance

History of the Single Audit 6  Single Audit requires auditors to follow generally accepted government auditing standards (GAGAS)  GAO “Yellowbook”  AICPA  OMB

State of OK Single Audit 7  FY15 OK Single Audit issued on 3/31/16  The FY15 SEFA included $7,020,897,114 in federal expenditures for the State  There were a total of 28 programs audited as major programs  18 of the programs were audited by the State Auditor’s Office; the other 10 were audited by outside CPA firms

State of OK Single Audit 8  We issued an unmodified opinion for all programs other than:  The Disability Insurance/SSI Cluster received a qualified opinion on the Special Tests requirement  The Disaster Grants – Public Assistance program received a qualified opinion on the Subrecipient Monitoring and Special Tests requirements  One difference to note regarding qualifications – for Single Audit opinions are issued by compliance requirement rather than by program. A program may receive a qualification on a compliance requirement but receive an unmodified opinion on all remaining requirements. This is different from the way opinions are issued in a financial audit

State of OK Single Audit 9  The Single Audit included a total of 35 reportable findings covering a combination of noncompliance and/or internal control issues.  27 of those 35 findings noted some sort of noncompliance issue  33 of the 35 findings noted internal control issues with 7 of those internal control issues being material weaknesses  If you are interested in reviewing the State of Oklahoma Single Audit in more detail, it is also available on the SAI website (

Schedule of Expenditures of Federal Awards (SEFA) 10  The Office of Management and Enterprise Services is responsible for the preparation/reconciliation of the SEFA schedule based on receipt of the GAAP Package Z from each agency that receives federal awards  The SEFA (modified accrual expenditures) serves as the primary basis for major program determination

UNIFORM GUIDANCE FOR FEDERAL AWARDS AS IT RELATES TO SEFA AND SIGNIFICANT CHANGES FROM A  SEFA requirements in the UG are located in Subpart F  Subpart F is effective for audits of fiscal years beginning on or after December 26, 2014  e.g., June 30, 2016 year end for agencies

UNIFORM GUIDANCE FOR FEDERAL AWARDS AS IT RELATES TO SEFA AND SIGNIFICANT CHANGES FROM A  Significant differences in the Uniform Guidance  Total for cluster programs on face of the SEFA  Amounts provided to subrecipients from each federal program on face of SEFA  Include on SEFA face all Federal awards expended including: 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

UNIFORM GUIDANCE FOR FEDERAL AWARDS AS IT RELATES TO SEFA AND SIGNIFICANT CHANGES FROM A  Significant differences in the Uniform Guidance  Loans and loan guarantees: Identify in SEFA notes the loan balances outstanding at the end of the audit period  SEFA notes disclose whether or not non-federal entity elected to use to 10% de minimus cost rate

Elements of the SEFA 14  Minimum SEFA requirements in 2 CFR§ (B)  For federal awards received as a subrecipient  Name of pass-through entity  Identifying number assigned by pass-through entity  Total federal awards expended for each individual federal program and the CFDA number  Use other identifying number when CFDA info not available  For a cluster, also provide cluster total (2CFR§ (b)(3))  Total amount provided to subrecipients from each federal program (New under 2CFR§ (b)(4))  Previous guidance only required “to the extent practical”

Elements of the SEFA 15  Minimum SEFA Requirements 2CFR§ (B)  SEFA footnotes: Describe significant accounting policies used Include in the notes to the SEFA whether or not non-federal entity elected to use the 10% de minimis cost rate (New under UG – 2 CFR§ (b)(5))

Subrecipient vs Contractor (“Vendor”) 16  Subrecipient and contractor determinations (2 CFR§ )  Substance of the relationship over form or name of agreement  Subrecipient performs part of program activities  Federal awards expended as a subrecipient are subject to single audit  Contractor provides goods or services in support of project activities  Payments received for goods or services provided as a contractor are not federal awards  An auditee may simultaneously be a recipient, a subrecipient, and a contractor  Important Note: The UG changes terminology from “vendor” to “contractor”; determination is the same

Common SEFA Errors 17  Incorrect or missing CFDA number  Sub-grant award numbers not included  Names of pass-through entities omitted  Missing pass-through contract number  Federal agency names missing  Clusters not shown as such  Non-cash awards missing  Federal expenditures not totaled

Major Program Determination Risk-Based Approach  Four steps:  Identify Type A programs  Identify low-risk Type A programs  Identify high-risk Type B programs up to at least ¼ the count of the low-risk Type A’s  Determine major programs to audit 18

Major Program Determination Step 1-Determine Type A Programs 19 Total Federal awards expendedType A Threshold Equal to or exceed $750,000 but less than or equal to $25 million $750,000 Exceed $25 million but less than or equal to $100 million Total federal awards expended times 0.03 Exceed $100 million but less than or equal to $1 billion $3 million Exceed $1 billion but less than or equal to $10 billion Total federal awards expended times Exceed $10 billion but less than or equal to $20 billion $30 million Exceed $20 billionTotal federal awards expended times

Major Program Determination Step 1-Determine Type A Programs 20  According to the table on the previous slide, the State of Oklahoma’s Type A program threshold will be set as the total federal awards expended times since we fall in the $1 billion to $10 billion category  The preliminary Type A program threshold for FY16 is $21,062,691 (FY15 total expenditures = $7,020,897,114 x.003 = $21,062,691)

Major Program Determination Step 1-Determine Type A Programs  All federal programs are classified as Type A or Type B  All programs below the Type A threshold are Type B programs  Based on the preliminary Type A threshold noted on the previous slide, Oklahoma has 24 Type A programs  All others programs are Type B 21

Major Program Determination Step 2- Identify Low-Risk Type A Programs 22  To make the low-risk determination, follow criteria in 2CFR§ :  To be low-risk Type A program, it must have been audited as a major program in at least one of the two most recent audit periods;  In the most recent audit period, the program must not have had internal control deficiencies identified as material weaknesses;  In the most recent audit period, the program must not have had a modified opinion or known or likely questioned costs exceeding 5% of total program expenditures;  There must not have been request from the federal awarding agency (approved by OMB) that the program not be considered low-risk

Major Program Determination Step 2- Identify Low-Risk Type A Programs 23  Professional judgment criteria:  Have there been significant changes in program personnel or systems significantly affecting the program?  Do the results of audit follow-up indicate significant impact on program?  Has recent federal or pass-through entity oversight indicated significant problems?  Has the program been identified in the OMB Compliance Supplement as a program of higher risk?  Can no longer consider inherent risk or complexity in the risk assessment

Major Program Determination Step 2- Identify Low-Risk Type A Programs 24  For Oklahoma, we have completed the preliminary risk assessments for FY16 on the 24 Type A programs identified  We have determined that 10 are precluded from being low-risk based on the above noted criteria; therefore, we have 10 high-risk Type A’s and 14 low-risk Type A’s

Major Program Determination Step 3 - Identify High-Risk Type B Programs  Once the low-risk Type A program count is determined, identify high-risk Type B programs up to at lest ¼ the count of Type A programs  No requirement to risk assess Type B programs with expenditures that are equal to or less than 25% of the Type A threshold  For Oklahoma, we are not required to assess Type B programs with expenditures of $5,265,673 or less (Type A threshold $21,062,691 x 25% = $5,265,673) 25

Major Program Determination Step 3 - Identify High-Risk Type B Programs 26  Perform risk assessments by applying criteria listed in 2CFR § to the Type B programs. Once high- risk Type B programs have been identified up to the count of ¼ the number of low-risk type A programs the process is complete  If high risk Type B programs are identified over the count of ¼ the number of low-risk Type A’s, those high- risk Type B programs must be audited  For Oklahoma, since we identified 14 low-risk Type A programs for FY16, we are required to identify 4 high- risk Type B programs for audit

Major Program Determination Step 4 – Determine Major Programs to Audit 27  Audit as major programs:  All Type A programs not identified as low-risk  All Type B programs identified as high-risk  Additional programs, if any, necessary to meet the percentage-of-coverage rule

Major Program Determination – Percentage of Coverage 28  Required to audit enough programs to encompass at least 40% of total federal expenditures. Unless:  The auditee meets the criteria as a low- risk auditee. Then, required to audit as major programs federal programs with expenditures that encompass at least 20% of total federal expenditures  Oklahoma has never been a low-risk auditee and therefore must meet the 40% rule

FY16 OK Single Audit Planning 29  For Oklahoma’s Single Audit, the results of our preliminary planning require us to audit 14 major programs for FY of these are Type A programs and 4 are Type B programs  Questions?