1. 2017 Single Audit - Uniform Guidance Update
Presented By: WARREN BROUDY, CPA, RMA, CGFM, CGMA, PSA, Managing Director and DiGESH PATEL, CPA, MBA, CGMA, PSA, DIRECTOR
Government Finance Officers Association of NJ Fall Conference | September 2017

2. Agenda Single Audit Background 2017 OMB Compliance Supplement
Key Topics & Common Reporting Errors
Schedules of Expenditures of Federal Awards & State Financial Assistance
Single Audit Resources

3. Single Audit Background
The Single Audit Act of 1984 established requirements for audits of states, local governments, and Indian tribal governments that administer federal financial assistance programs.
On June 30, 1997, OMB issued revisions to OMB Circular A- 133 (62 FR 35278) to implement the 1996 Amendments, extend the circular’s coverage to states, local governments, and Indian tribal governments, and rescind OMB Circular A- 128.
On December 26, 2013, OMB Circular A-133 was superseded by the issuance of 2 CFR part 200, subpart F (Uniform Guidance).

4. Single Audit Background
Uniform Guidance - $750,000 Threshold
Type A vs. Type B Programs
Determined by $ value of expenditures
Type A - Larger of 3% of expenditures and $750,000
Type B - 25% of Type A threshold
Low Risk vs. High Risk Programs
Determined by prior year findings and rotation of tested programs
Low vs. High Risk Auditees
Factors:
Prior year findings
Annual audits performed
Timely submission to State and Federal Clearinghouse (Data Collection Form)
Internal control deficiencies
Questioned Costs

5. 2017 OMB Compliance Supplement
Located at:
agencies/circulars#state
Issued throughout 2017
Effective for fiscal years beginning after June 30, 2016
Identifies all programmatic compliance requirements by Catalog of Federal Domestic Assistance (CFDA) Number

6. Breakdown of the Supplement
Part 1 – Background, purpose, supplement overview
Part 2 – Matrix of generally-applicable compliance requirements
Part 3 – Compliance requirements by area
Parts 4 & 5 – Specific federal program and clusters of program objectives, program procedures and compliance requirements
Part 6 – Internal controls

7. Background & Matrix of Compliance Requirements
Areas of Focus:
General Overview of Single Audit
Applicable Thresholds & Audit Periods
Auditee & Auditor Responsibilities

10. General Compliance Requirements
Areas of Focus:
Section provides generic compliance requirements applicable to most federal programs
Provides breakdown of requirements between A-133 (section 3.1) and Uniform Guidance (section 3.2)
IMPORTANT: For programs with expenditures against multiple funding years – track activity by year to apply the proper standards to the proper activity.
Both sets of standards must be applied – can’t blanket apply A-133 or UG across all years
Cutoff is based on program award date – before December 26, 2014, use old standards
Example – Allowable Cost Principles for Direct/Indirect Costs – Guidance under A-87 now under 2 CFR part 200 Appendices 3 to 7
Helpful tables of allowable cost types and location of specific guidance in sections 3.1 and 3.2

11. 2017 OMB Compliance Supplement
Auditees
Old awards:
Old OMB cost principles and administrative requirements
(e.g., OMB Circulars A-87, A-110, A-122, etc.)
New awards and incremental funding:
Subpart D and E of the Uniform Guidance
Certain sections of Subpart F
(e.g., § through .512)
*Chart provided by GAQC

12. Programs & Clusters Areas of Focus:
Specific federal program and clusters of program objectives, program procedures, and compliance requirements
Very important to review for specific requirement criteria beyond the general requirements noted in section 3.
Will identify specific items like allowable costs, eligibility requirements, reports by program
Clusters
Groups of unique CFDA number programs that are treated as one program for reporting and auditing purposes
Grouped due to the similar objectives and requirements of the programs
Common area of error on SEFA schedule preparations

13. Internal Control Areas of Focus: Audit focus on internal control
Important to have effective internal controls for financial and programmatic areas
Have written SOPs
2 CFR 200 Subpart D :
The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non- Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.

14. Key Topics & Common Reporting Errors

15. Single Audit Areas That Changed
Procurement
Subrecipient Monitoring
Indirect Costs
Internal Controls
Findings & Corrective Action
SEFA Schedule Errors

16. Procurement 2 CFR 200 Subpart D - 200.317 to .326: Key Considerations:
The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified.
Key Considerations:
Conflict of Interest
Responsible Contractors
Shared Services/Cooperative Contracts
Part – Procurement Methods
Micro-purchase
Small Purchase
Sealed Bid
Competitive Proposal
Noncompetitive Proposal (Special Circumstances)

17. Subrecipient vs. Vendor
Subrecipient Definition:
2 CFR 200 Subpart D :
Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity:
Determines who is eligible to receive what Federal assistance;
Has its performance measured in relation to whether objectives of a Federal program were met;
Has responsibility for programmatic decision making;
Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and
In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.

18. Subrecipient vs. Vendor (cont’d.)
Vendor Definition:
2 CFR 200 Subpart D :
Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the contractor:
Provides the goods and services within normal business operations;
Provides similar goods or services to many different purchasers;
Normally operates in a competitive environment;
Provides goods or services that are ancillary to the operation of the Federal program; and
Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons.

19. What To Do If You Have Subrecipients (200.331)
Clearly identify to the subrecipient:
Federal Award Identification
CFDA Number
Program Name and Description
Award Date
Period of Performance
Awarding Agency
Proportion of direct Federal to other funding sources
Indirect Cost Rate (Rate approved or de minimis)
Applicable compliance requirements
Evaluation of risk of noncompliance
Review Financial & Performance Reports
Ongoing Subrecipient Monitoring & Training

20. Indirect Cost Definitions
Indirect cost means those costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of indirect costs. Indirect cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived.
Allocated central services means central services that benefit operating agencies but are not billed to the agencies on a fee-for-service or similar basis. These costs are allocated to benefitted agencies on some reasonable basis. Examples of such services might include general accounting, personnel administration, purchasing, etc.
Billed central services means central services that are billed to benefitted agencies or programs on an individual fee-for-service or similar basis. Typical examples of billed central services include computer services, transportation services, insurance, and fringe benefits.

21. Indirect Cost Examples
A separate indirect cost rate(s) is usually necessary for each department or agency of the governmental unit claiming indirect costs under Federal awards.
Typical examples of indirect costs may include:
Certain state/local-wide central service costs,
General administration of the non-Federal entity accounting and personnel services performed within the non-Federal entity
Depreciation on buildings and equipment
The costs of operating and maintaining facilities.

22. Indirect Cost Methods Simplified Method
Classifying the non-Federal entity's total costs for the base period as either direct or indirect.
Dividing the total allowable indirect costs (net of applicable credits) by an equitable distribution base.
Result = an indirect cost rate which is used to distribute indirect costs to individual Federal awards
Used where a governmental unit's department or agency has only one major function encompassing a number of individual projects or activities
Exclude capital expenditures and unallowable costs
Multiple Allocation Base Method
Indirect costs benefit major functions in varying degrees
Accumulate indirect costs into separate cost groupings.
Special Indirect Cost Rates

23. Indirect Cost Rates Submission of Indirect Rate Proposals
Other Policies:
Fringe Benefit Rates
Billed Services
Indirect Cost Allocations not Using Rates
If a non-federal entity has never received a negotiated indirect cost rate, it may elect to charge a de minimis rate of 10% of the modified total direct costs.
This rate may be used indefinitely or until the entity chooses to negotiate a rate.
De minimis rates must be used consistently for all of its federal awards and costs must be consistently charged as direct and indirect (See 2 CFR Subpart E section through 417)

24. Indirect Cost Services
For states, local governments and Indian tribes, certain services, such as motor pools, computer centers, purchasing, accounting, etc., are provided to operating agencies on a centralized basis. Since Federal awards are performed within the individual operating agencies, there needs to be a process whereby these central service costs can be identified and assigned to benefitted activities on a reasonable and consistent basis. The central service cost allocation plan provides that process.
The cost of services provided by one agency to another within the governmental unit may include allowable direct costs of the service plus a pro-rated share of indirect costs. A standard indirect cost allowance equal to ten percent of the direct salary and wage cost of providing the service (excluding overtime, shift premiums, and fringe benefits) may be used in lieu of determining the actual indirect costs of the service. These services do not include centralized services included in central service cost allocation plans as described in Appendix V to Part 200—State/Local Government and Indian Tribe-Wide Central Service Cost Allocation Plans.

25. Internal Controls Staff must be aware of internal controls
Identify procedures in place that prevent or detect an error
Aware of differences between process and controls and compliance and controls

26. Findings & Corrective Action
For findings identified, views of responsible officials is not equal to corrective action
Corrective Action must be a separate document to include in the Data Collection Form submission
Aware of differences between process and controls and compliance and controls

27. SEFA Schedule Errors Clustering of programs Funding Sources
Pass through entity identifying number
Subrecipient expenditures
Incorrect CFDA Numbers
Anatomy of the CFDA Number
Prefix connotates the Federal Department funding source
Suffix connotates the program
Critical review of CFDA Number
Changes in program numbers over time
Cfda.gov (See Resources later in slides)
Confirm Federal program funds passed through the State

28. SEFA Schedule Errors (cont’d.)
When CFDA is not available:
Indicate that the CFDA number is not available and include a different identifying number that is available, such as a contract or grant number
Apply the guidance in the instructions to the data collection form for when a program does not have a CFDA number. If the program has a contract or grant number, the number shown as the CFDA number could be the awarding agency's 2-digit prefix listed in an appendix to the instructions (or 99, if the agency is not listed) followed by the contract or grant number. If the program does not have a contract or grant number, the number shown as the CFDA number could be the awarding agency's 2-digit prefix (or 99) followed by “UNKNOWN.”

29. Schedules of Expenditures of Federal Awards (SEFA)
& State Financial Assistance

30. SEFA Defined Critical schedule
Primary basis for major program determination
Face of the SEFA MUST include:
All federal awards expended (Including Noncash, Loan Programs, Loan Guarantees, Funds passed through to Subrecipients)
Footnotes MUST include:
Loan balances
Indirect cost rate or de minimis rate used
Significant accounting policies
Expenditures may exceed awards when additional nonfederal sources provide support not required by the award. In these instances, the federal portion of the expenditures should be separately identified.
When pass-through entity is unable to identify federal portion of an award, the subrecipient should report the entire amount as federal funds and indicate in a note to the schedule that federal portion is not determinable.

31. SEFA Requirements
Minimum requirements for a schedule from 2 CFR section (b) are:
The period covered by the schedule must be the same as that covered by the financial statements.
Total federal awards expended.
The federal programs listed individually by federal agency.
Total federal awards expended for each individual federal program.
Total federal awards expended for each cluster of programs.
For research and development clusters, federal awards expended either by individual award or by federal agency and major subdivision within the agency.
The Catalog of Federal Domestic Assistance (CFDA) numbers or other identifying number when a CFDA number is not available.

32. Minimum Requirements Continued
For federal awards received by a subrecipient, the name of the pass-through entity and the identifying number assigned by the pass-through entity.
Total amount provided to subrecipients from each federal program. (Previously, this information could be presented on the face of the schedule or included in the notes to the schedule. The SEFA should now include an additional column to present this information on the face of the schedule, when applicable.)
Total federal awards expended for loan or loan guarantee programs, including the value of new loans made during the period, the beginning balance of loans from previous years for which the federal government imposes continuing compliance requirements, and any interest subsidy, cash, or administrative cost allowance.
The value of federal awards expended in the form of noncash assistance such as food commodities, insurance, and free rent.

33. Notes Should Describe:
Significant accounting policies used in preparing the schedule
Whether the entity did or did not elect to use the 10% de minimis indirect cost rate and if the entity has an approved indirect rate
Balances of loans and loan guarantee programs outstanding at the end of the audit period for loans described in 2 CFR section (b)

34. AICPA Practice Aid & Disclosure Checklist

35. Single Audit Resources
Cfda.gov
Ecfr.gov
AICPA
GAQC
Federal Audit Clearinghouse
Research Previously Submitted Data Collection Forms

36. Questions?

37. Contact:
Warren Broudy, CPA, RMA, CGFM, CGMA, PSA Managing Director (609) | Digesh Patel, CPA, MBA, CGMA, PSA Director (609) |