1. SINGLE AUDIT (webcast)
Mark Thomas, Partner, KPMG LLP
Liezl Sangalang, Senior Manager, KPMG LLP

2. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
APRIL 2017
Learning Objectives
Define a Single Audit and identify specific changes to the Uniform Guidance
Define the major programs covered in the CSU SEFA
Understand issues around compliance and control
Understand the nature, timing and extent of the audit

3. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
What is a Single Audit?
Established requirements for audits of entities that administer federal financial assistance programs
The Office of Management and Budget (OMB) issued Circular A-133 in 1997 to implement the requirements of the Single Audit Act and provide specific criteria to be followed as required by Federal regulations
The Uniform Guidance (2 CFR part 200, subpart F) was issued in 2013 to replace Circular A-133, and is effective for Federal awards received after December 26, 2014
A Compliance Supplement describe the compliance requirements under the Uniform Guidance

4. What is a Single Audit? (cont.)
APRIL 2017
YEAR-END GAAP TRAINING
What is a Single Audit? (cont.)
The Uniform Guidance requires the auditor to:
Obtain an understanding of the entity’s internal control over Federal programs
Perform testing of internal control over compliance requirements relevant to each major program
Test compliance requirements relevant to each major program
The Single Audit Reports includes:
A report on internal controls over compliance
An opinion on compliance with applicable federal regulations for the programs audited
One consolidated “in relation to” opinion on the Schedule of Expenditures of Federal Awards

5. Auditee Responsibilities
APRIL 2017
YEAR-END GAAP TRAINING
Auditee Responsibilities
Completeness and accuracy of the schedule of expenditures and federal awards
Establish and maintain effective internal controls over Federal awards
Complying with laws, regulations, and the provisions of contracts or grant agreements related to each of its federal programs
Following up and taking corrective action on audit findings

6. Uniform Guidance “New”
June 2017
YEAR-END GAAP TRAINING 6
OMB Circular
A-133
“Old”
Uniform Guidance “New”
Topic
Likely Impact
Audit Coverage
Low Risk – 25%
High Risk – 50%
Low Risk – 20%
High Risk – 40%
No impact
Type A Threshold
.003 times Federal Awards
.003 times Federal Awards
No impact
High Risk triggers
Significant deficiency, material weakness
Material weakness
Moderate impact on program selection
Program Selection
Focus on Type A programs
Focus on high risk programs
Moderate to High impact on program selection
Compliance Requirements 14 12
Moderate Impact
Questioned Cost threshold
$10,000 known or likely
$25,000 known or likely
Moderate impact
Internal Controls
Required but not well defined
Must have internal controls over compliance
Moderate to High impact

7. Uniform Guidance – Audit Specific Changes
APRIL 2017
YEAR-END GAAP TRAINING
Uniform Guidance – Audit Specific Changes
Combination of cost circulars (A-87, A-21, A-122)
Governments, non profits and universities will all follow the same cost principles as included in 2 CFR part 200
Strengthens Subrecipient Monitoring requirements
Requires establishment of documented time and effort policies
Must have written policies for:
Financial Management
Compensation
Payment
Relocation Costs
Procurement
Travel Costs
Prescribes five procurement methods
Different purchase thresholds will have different compliance requirements
Requires the entity to maintain effective internal control over compliance

8. Uniform Guidance – Audit Specific Changes
APRIL 2017
YEAR-END GAAP TRAINING
Uniform Guidance – Audit Specific Changes
Subrecipient Monitoring
written risk assessment and monitoring policies and processes for awards to subrecipients
compliance procedures will include testing whether:
Subaward agreements include standard data elements
Monitoring activities
Review of financial and programmatic reports;
that campus verify each subrecipient is audited; and,
that follow up on corrective actions is occurring
Management evaluated and documented each subrecipients risk of noncompliance to determine monitoring approach
Monitoring activities are documented and consistent with results of risk assessment

9. Uniform Guidance – Audit Specific Changes
APRIL 2017
YEAR-END GAAP TRAINING
Uniform Guidance – Audit Specific Changes
Time and Effort Reporting
Written policies and processes for allocation of compensation, fringe benefits, relocation and travel costs (time and effort reporting) to Federal expenditures, and evaluate compliance with federal regulations
Compliance procedures:
Allocation to Federal awards is in compliance with policy
Procedures could vary depending on the policies and processes put in place
Such policies are documented, regardless of whether policies and processes changed

10. Uniform Guidance – Audit Specific Changes
APRIL 2017
YEAR-END GAAP TRAINING
Uniform Guidance – Audit Specific Changes
The “Musts” For Other Written Policies included in the Uniform Guidance
Financial Management:
Policies and procedures for determining the allowability of costs in accordance with the Uniform Guidance
Payment:
Policies and procedures to ensure that funds received on an advance basis are promptly disbursed
Procurement:
Documented procurement procedures which reflect applicable state and local laws and regulations
written standards of conduct covering conflicts of interest
governing the actions of its employees

11. Uniform Guidance – Audit Specific Changes
APRIL 2017
YEAR-END GAAP TRAINING
Uniform Guidance – Audit Specific Changes
Internal Controls over Compliance
The Compliance Supplement requires that auditors test those controls over compliance and report on internal control over compliance.
“The entity must establish and maintain effective internal controls over Federal awards that provide reasonable assurance that awards are being managed in compliance with Federal statutes, regulation and the terms and conditions of the Federal award. “
OMB update: Delay in the inclusion of testing for Securing Student Information (Cybersecurity) in the SFA cluster ---- Will be part of the 2018 Compliance Supplement

12. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
Internal Controls
Internal Controls
Are policies and procedures organizations employ to make sure that the information being processed is complete and accurate
Answers the question, “How do you know it’s right?”
Controls need to be documented to demonstrate they are operating
Two general control categories: Preventive and Detective
Detective Controls Examples: Account reconciliations
Sampling transactions after the fact
Reviewing and addressing exception reports
Automated controls
Preventive Controls Examples:
Segregation of Duties
Supervisory Review
Reviewing and addressing exception reports
Automated controls

13. Internal Controls vs Process
APRIL 2017
YEAR-END GAAP TRAINING
Internal Controls vs Process
A process
includes the steps taken to compute an amount or record a transaction
include internal control components
An example of a student financial aid process (refunds) and a control in the process:
Process - Financial aid counselor computes a student’s refund by obtaining the student’s last day of attendance, referencing the campus refund policy, and applying that information to the student’s payment.
Control - The financial aid counselor’s knowledgeable supervisor reviews the refund computation, compares the information used in the computation to the information used by the financial aid counselor, and signs the refund computation, indicating that the review was performed.

14. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
Compliance
Compliance is actually getting the right answer.
Was the refund properly made in the right amount in the right timeframe?
There is a higher likelihood of compliance when effective internal controls are in place
Controls could be in place, but if they are not effective, errors could occur
Causes of ineffective controls
Supervisory review performed by someone who is not knowledgeable
Supervisory review performed, but underlying documents are not reviewed
Not occurring (assumed if not documented)

15. Major Programs Selection
APRIL 2017
YEAR-END GAAP TRAINING
Major Programs Selection
The selection process will be performed using the final consolidated Schedule of Federal Awards.
Compute a threshold to distinguish between Type A and Type B programs
Evaluate programs over the threshold based on inherent risk in the program
Programs over the threshold that are considered low risk are subject to audit every three years
Programs with the same CFDA number are considered the same program, even if on different campuses or from different agencies
Certain programs are audited as one program or cluster

16. Major Programs Selection
APRIL 2017
YEAR-END GAAP TRAINING
Major Programs Selection
Programs Subject to Audit in 2017
Student Financial Aid Cluster
Programs that may be subject to audit in 2017
Research and Development
Head Start
TRIO
Higher Education Institutional Aid
Foster Care Program – Title IV
Other smaller programs – to be determined

17. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
Audit Approach
GAAP Manual Chapter 15
Guidance in preparation for the audit
Comprehensive Single Audit PBC lists - SFA
Non-SFA PBC lists and other guidance applicable for audit testwork of non- SFA major programs will be provided directly to selected campuses once planned procedures are identified

18. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
KPMG Team
Partner
Mark Thomas
Senior Manager
Liezl Sangalang
SoCal Campus
SFA Team
Senior Associate
Staff Associate
NorCal Campus
Other Programs
Team

19. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
Student Financial Aid Cluster of Programs Included in Scope of Federal Single Audit
Pell Grants
Federal Supplemental Educational Opportunity Grants
TEACH Grants
Scholarships for Disadvantaged Students
Federal Work Study
Postsecondary Education Scholarships for Veteran’s Dependents
Federal Direct Student Loans
Federal Perkins Loans
Nursing Student Loans
Loan Programs
Grant Programs
Grant Programs 19

20. Student Financial Aid – Full Scope Campuses
APRIL 2017
YEAR-END GAAP TRAINING
Student Financial Aid – Full Scope Campuses
Fullerton
Sacramento
Pomona
Fresno
San Diego

21. Student Financial Aid – Audit Overview
APRIL 2017
YEAR-END GAAP TRAINING
Student Financial Aid – Audit Overview
Cash Management
Select a sample of cash receipts and compare with campus accounting records to test for compliance with applicable payment method (i.e. advance, reimbursement, etc.).
Eligibility and Disbursements
Select a sample of students and review campus records to ascertain appropriate determination of:
Student eligibility for various grant and loan programs
Calculation of benefits
Disbursements only occurring after certain criteria have been met
Proper disclosure to students with respect to repayment and cancellation of any loans or loan increments disbursed

22. Student Financial Aid (cont.)
APRIL 2017
YEAR-END GAAP TRAINING
Student Financial Aid (cont.)
Reporting
Obtain FISAP and test for accuracy and completeness by selecting a sample of line items reported and comparing to campus records.
Select a sample of students that received Pell Grants and compare the data reported on Pell origination and disbursement records to the COD to campus records for accuracy.
Verification
Select a sample of students that were selected for verification and obtain campus records to ascertain that verifications were performed in accordance with campus policies and federal requirements, generally prior to disbursement of aid.
Student Status Changes (Enrollment Reporting)
Select a sample of students to test for timing and accuracy of the status change data submitted to the NSLDS.

23. Student Financial Aid (cont.)
APRIL 2017
YEAR-END GAAP TRAINING
Student Financial Aid (cont.)
Return of Title IV Funds
Select a sample of students or students that did not begin attendance, and obtain campus calculation of amounts earned and due back. Obtain campus records, and test for accuracy and timeliness of returns (i.e. 45 days).
Borrower Data Transmission and Reconciliation (Direct Loans)
Select a sample of school account statements and ascertain that reconciliations are being performed.
Select a sample of borrowers and verify the accuracy of data in the Direct Loan Servicing System by comparing to campus records.

24. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
Other Major Programs
Allowable Activities/Allowable Costs
Select a sample of non-payroll-related expenditures charged to the program and test allowability in accordance with OMB Circular A-21 and the applicable program regulations.
Select a sample of payroll-related costs charged to the program and test if time and effort documentation is in accordance with OMB Circular A-21 and supports the expense charged to the program.
Obtain a copy of the approved indirect cost rate for the audit year and review the campus’ calculation to determine if an appropriate base was used and the rate was applied correctly.
Cash Management
Select a sample of cash receipts from the federal government along with campus records that support the related cost incurred. Test for compliance with applicable timing requirements for advance payments or reimbursements.

25. Other Major Programs (cont.)
APRIL 2017
YEAR-END GAAP TRAINING
Other Major Programs (cont.)
Eligibility
Select a sample of program participants and obtain the campus records that support their eligibility. Re-perform the eligibility determination in accordance with program guidelines.
Earmarking
Obtain the campus documentation for its calculations regarding any required program earmark amounts or participants. Perform procedures to verify that the records support that at least the minimum or no more than the maximum was achieved.
Reporting
Obtain the reports submitted and supporting documentation from the campus.
Test the reports for accuracy and completeness with the campus records.

26. Other Major Programs (cont.)
APRIL 2017
YEAR-END GAAP TRAINING
Other Major Programs (cont.)
Subrecipient Monitoring
Select a sample of program subrecipients and determine if the campus:
Provided appropriate federal award notification.
Monitored the activities and expenditures of the subrecipient in accordance with program regulations.
Obtained and reviewed the subrecipient’s single audit report.
Special Tests and Provisions
As applicable, test any additional program specific requirements contained in the Uniform Guidance Compliance Supplement.

27. Audit Timeline May/June/July August September October
APRIL 2017
YEAR-END GAAP TRAINING
Audit Timeline
May/June/July
August
September
October
Student Financial Aid – Higher Scope Campuses
Fieldwork
Review
FISAP Testing
Review and Reporting
Other Major Programs
System wide
(all campuses and CO)
SEFA Preparation
Update of SEFA (if needed)
and other deliverables

28. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
Audit Timeline (cont.)

29. 2016 Findings and Questioned Costs
APRIL 2017
YEAR-END GAAP TRAINING
2016 Findings and Questioned Costs
Student Financial Aid Cluster :
Compliance Requirement: Disbursements to and on behalf of students :
Compliance Requirement: Enrollment Reporting :
Compliance Requirement: Eligibility

30. Determination of Findings
APRIL 2017
YEAR-END GAAP TRAINING
Determination of Findings
The evaluation start with the issues identified at individual campuses individually as well as in aggregate across campuses for the CSU System as whole.
Section 717(a) of the Uniform Guidance, as amended, provides that the auditor should report the following instances as audit findings in the schedule of findings and questioned costs:
Significant deficiencies and material weaknesses in internal control over major programs and significant instances of abuse relating to major programs.
Material noncompliance with the provisions of laws, regulations, contracts, or grant agreements related to a major program.
Known questioned costs that are greater than $25,000 for a type of compliance requirement for a major program.
Known questioned costs that are greater than $25,000 for programs that are not audited as major.

31. Determination of Findings (cont.)
APRIL 2017
YEAR-END GAAP TRAINING
Determination of Findings (cont.)
For findings not associated with a question cost, the determination as to whether it will be reported as a finding will generally be based on the following criteria:
Noncompliance at any one particular campus that constitutes an error rate greater than 10% - 20% of the sample size depending on the particular compliance requirement
Combined noncompliance at more than one campus that constitutes an error rate greater than 5% of the sample size for any particular compliance requirement (for the system as a whole)

32. YEAR-END GAAP TRAINING
APRIL 2017
YEAR-END GAAP TRAINING
Questions?
Presenter’s Contact Details
Mark Thomas Liezl Sangalang
KPMG LLP KPMG LLP