OMB Super Circular 101 – Grant Requirements and Compliance Melisa F. Galasso, CPA Carlene Kamradt, CPA

Objectives  At the end of this course, participants should be able to…  Understand the new single audit requirements.  Describe the changes to administrative and cost principles. 2

Super Circular  December 26, 2013 – Office of Management and Budget (OMB) issued the Super Circular  Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards  December 19, 2014  OMB issued technical corrections  Federal awarding agencies issued implementing regulations & exceptions  CFR updated 12/26/14 ( 3

Super Circular Purpose  Overarching purposes and impact  Increase efficiency and effectiveness  Eliminate unnecessary and duplicative requirements  Focus audit efforts  Reduce administrative burden for non-Federal entities receiving Federal awards while reducing the risk of waste, fraud and abuse 4

A-21Cost Principles for Educational Institutions A-50Audit Follow-Up, related to Single Audit A-87Cost Principles for State, Local, and Indian Tribal Governments A-89Federal Domestic Assistance Program Information A-102Awards and Cooperative Agreements with State and Local Governments A-110Uniform Administrative Requirements for Awards and Other Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations A-122Cost Principles for Non-Profit Organizations A-133Audits of States, Local Governments and Non-Profit Organizations Streamlining of Circulars 5

 Title 2 in the Code of Federal Regulations (2 CFR) – Grants and Agreements  Part Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards 6 About the Law Subpart AAcronyms and Definitions Subpart BGeneral Provisions Subpart C Pre-Federal Award Requirements and Contents of Federal Awards Subpart DPost Federal Award Requirements Subpart ECost Principles Subpart FAudit Requirements

Appendix IFull Text of Notice of Funding Opportunity Appendix IIContract Provisions for Non-Federal Entity Contracts Under Federal Awards Appendix IIIIndirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs) Appendix IVIndirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations Appendix VState/Local Government-wide Central Service Cost Allocation Plans Appendix VIPublic Assistance Cost Allocation Plans Appendix VIIStates & Local Government & Indian Tribe Indirect Cost Proposals Appendix VIIINonprofit Organizations Exempted From Subpart E Appendix IXHospital Cost Principles Appendix XData Collection Form (Form SF-SAC) Appendix XICompliance Supplement 7 Appendices

Effective Date 8

Federal Agencies  The regulations just issued by the federal agencies were required to adopt the guidance and implement policies and procedures for new awards by the effective date of December 26,  All federal agencies were expected to implement the guidance in unison to provide for a smooth transition for entities that are required to comply.  Existing Federal awards will continue to be governed by the terms and conditions of the award. 9

Non-Federal Entities  Non-federal entities will need to implement the new administrative requirements and Cost Principles for all new federal awards and to additional funding to existing awards (funding increments) made after December 26,  Some non-federal entities may end up having funding subject to the old Cost Principles and the new Cost Principles within the same fiscal year—for several years.  Per 2 CFR , 1 year delay to comply with Procurement Standards 10

Single Audits (Subpart F)  The audit requirements in Subpart F will be effective for fiscal years beginning on or after December 26,  Calendar year ends – December 31, 2015  June 30 year ends – June 30, 2016  Early implementation of Subpart F is not permitted. 11

Administrative & Cost Principles

Purpose  Purpose – to streamline and establish uniform administrative requirements, cost principles, and audit requirements for all types of non-Federal entities  Try to minimize exceptions to maximize consistency 13

Pre-Federal Award  Changes  Addition of Conflict of Interest requirements  Incorporates new coverage on fixed amount awards  Consistency in notices of funding opportunities  Federal awarding agency design and execute a merit review process  Requirement to have a Risk Review framework  Use of Standard Data Elements in awards 14

Post Federal Award  Moves internal control requirements to administrative requirements  Creates a new procurement method  Procurement by micro-purchases  Must use standard, OMB-approved data elements for collection of performance and financial information  Moves determination of subrecipient versus contractor from auditing to administrative  Standard elements in subawards  Includes a requirement for pass through entities to perform a subrecipient risk assessment 15

Key Changes to Cost Principles  Listing of items requiring prior written approval  Allows for direct charging of administrative costs in certain circumstances  Computers – are supplies if under threshold  Depreciation – follows GAAP, not GASB  Exchange rate fluctuations – allowable  Certain Idle Capacity costs - allowable  Foreign taxes (VAT) - allowable  Costs for collections of improper payments - allowable 16

Key Changes to Cost Principles  Negotiated indirect cost rates must be accepted by ALL federal agencies with limited exceptions  Establishes a de minimis rate of 10% of modified total direct costs (MTDC)  May apply for a one-time extension of current negotiated indirect cost rates for a period of up to four years 17

Goals  Family Friendly  Support for Shared Services  Efficient Use of IT  Strengthen Oversight 18

Audit Requirements

Subpart F - Audit Requirements  Key Changes  Increases audit threshold  Strengthens risk based approach to Major Program Determination  Provides for greater transparency of audit results  Strengthens audit findings follow up 20

Audit Requirements Increase in Single Audit Threshold  Current requirement:  Entities with $500,000 or greater of expenditures of federal awards in a single year are required to obtain a single audit.  New requirement:  Entities with $750,000 or greater of expenditures of federal awards in a single year are required to obtain a single audit. 21

Type A Threshold Groupings are based on dollars — Total Federal Awards ExpendedType A Threshold $750,000 to $25 million$750,000 Exceed $25 million and less than or equal to $100 million 3% of Total Federal Awards Expended Exceed $100 million, but less than or equal to $1 billion $3 million Exceed $1 billion, but less than or equal to $10 billion 0.3% of Total Federal Awards Expended Exceed $10 billion, but less than or equal to $20 billion $30 million Exceed $20 billion0.15% of Total Federal Awards Expended 22

Major Program Determination- Criteria for Low-Risk Type A Program Current Audited as a Major program in at least one of the 2 most recent audit periods and in the most recent audit period shall not have had:  Audit findings (Material Weakness or Significant Deficiency) Consider the Sec 525 Risk Assessment Criteria and apply professional judgment for Low Risk program New Audited as a Major program in at least one of the 2 most recent audit periods and in the most recent audit period shall not have had:  Material weaknesses  Other than an unmodified opinion on major programs.  Known or likely questioned costs that exceed 5% of total Federal awards expended for the program. 23

Major Program Determination- Type B Program- Risk Assessment Threshold Current Auditor is required to perform risk assessments on Type B programs exceeding: Larger of $100,000 or.3% of federal awards expended if Federal awards expended are more than $500,000 and less than or equal to $100 million. Larger of $300,000 or.03% of federal awards expended if federal awards expended are more than $100 million New The auditor is only required to perform risk assessments on Type B programs that exceed 25% of the Type A threshold. 24

Major Program Determination- Type B Programs Required for Audit Current  Number of High Risk Type B programs that must be tested:  Option 1- At least ½ of HR type B programs, but not more HR Type B programs than the number of LR Type A programs  Option 2- One HR Type B program for each Type A program identified as LR. New  Number of High Risk Type B programs that must be tested:  The Type B programs identified as HR, but not more HR Type B programs than at least ¼ of the number of LR Type A programs.  Allow the auditor to stop the Type B program risk assessment process after this number of high risk type B programs are identified. 25

Percentage of Coverage Reduces the minimum coverage required as follows: Type of Auditee CurrentNew Not Low Risk50%40% Low-Risk25%20% 26

Low Risk Auditee Same  Annual Single Audits  Unmodified SEFA in relation to opinion  No GAGAS material weaknesses  In either of preceding two years, none of the Type A programs had: Material Weaknesses Material Non-Compliance Questioned Costs that exceeded 5%  Timely filing with FAC 27

Low Risk Auditee Current  Unmodified opinion on financial statements prepared in accordance with GAAP  Auditor reporting a going concern did not preclude the auditee from being low risk  Waivers were granted from Federal agencies for entities that did not file timely with the FAC New  Unmodified opinion on FS prepared in accordance with GAAP or a basis of accounting required by state law.  No going concern reported.  Federal agencies may no longer issue waivers for filing with FAC 28

Audit Findings  Increases the threshold for reporting known and likely questioned costs from $10,000 to $25,000  Requires that questioned costs be identified by CFDA number and applicable award number  Requires Identification of whether audit finding is a repeat from the immediately prior audit and if so the prior year audit finding number  Provides that audit finding numbers be in the format prescribed by the data collection form 29

Finding Elements 30

Audit Finding Follow-Up  The auditee is responsible for follow-up and corrective action on all audit findings  Summary schedule of prior audit findings  Status of all prior year audit findings  If not corrected, must describe the reasons for the finding's recurrence  Clarifies the corrective action plan (CAP) is a separate document from the auditor’s finding 31

Single Audit Report Submission  All auditees must submit the reporting package and the data collection form electronically to the Federal Audit Clearinghouse (FAC)  FAC submission process will be changed to require that submissions be in text-based PDF and unlocked to improve accessibility.  FAC responsible to make the reports available on a Web site  Auditors and auditees must ensure reports do not include protected personally identifiable information (PPII) 32

Repository of Record  Federal agencies, pass-through entities, and others obtain copies by accessing FAC website.  Subrecipient only required to submit report to FAC and no longer required to submit to pass- through entity.  Pass-through entity no longer required to retain copy of subrecipient report as available on the Web. 33

Agency Responsibilities  Requiring agencies to implement audit-risk metrics  Federal awarding agency must  Ensure that audits are completed and reports are received in a timely manner  Engage in cooperative audit resolution  Monitor corrective action  Proactive to resolving weaknesses & deficiencies 34

Strengthening Audit Follow-Up  Federal Awarding Agencies must designate a Single Audit Accountable Official  Typically an agency senior policy official  Held accountable to improve the effectiveness of the single audit process  Designate Key Management Single Audit Liaison  Key Management Single Audit Liaison  Serve as the Federal awarding agency's management point of contact for the single audit process both within and outside the Federal government  Promote interagency coordination  Oversee training  Coordinate agency audit follow up to ensure timely corrective action on audit findings 35

Compliance Supplement  Now in Appendix XI to Part 200  Supplement is published as separate process so the final changes are not included in the Guidance  Future changes will be based on available evidence of past audit findings & potential impact of non- compliance  Further public outreach will be conducted prior to making structural changes 36

Melisa Galasso – Carlene Kamradt –