1. Audits under the New EDGAR Uniform Grants Guidance
Leigh Manasevit, Esq.
Brustein & Manasevit, PLLC
Spring Forum 2016 1

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Uniform Grants Guidance (UGG) incorporated into EDGAR December, 2014 2
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3. Effective Date - For Audits
All audits of fiscal years beginning on or after December 26, 2014
For most ED programs-years beginning July 1, (this current year) 3
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Preparation
Preparation remains key to
Successful outcome
Self assessment critical 4
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Self Assessment
Self assessment – critical
Required –
Identify potential trouble spots
Review significant violations
from other processes
Review prior findings
Review performance data/outcomes 5
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6. Remedy Problem Areas or Develop Corrective Action Plan
E.g., Los Angeles Unified School District Internal Controls over Nonpayroll Purchases
No findings!!! 6
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7. Remedy Problem Areas or Develop Corrective Action Plan
[T]he independent public accountant determined that LAUSD staff had erroneously charged more than $84,000 to the Federal Teacher Incentive Fund grant ... LAUSD reported to the independent public accountant that it implemented monitoring and review procedures, including a monthly tracking system for the program expenditures, biweekly budget meetings, and a review process for budget reports. Although we did not verify that the corrective actions were implemented, the actions should improve controls over the Federal Teacher Incentive Fund grant program expenditures and help ensure that errors of this type do not occur in the future. 7
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8. Corrective Action Plan
Critical – have in place at time of visit, even if implementation will be in the future
Specific Measurable Objectives
Timelines
Clear Lines of Responsibility 8
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9. Corrective Action Plan
Corrective action plan. At the completion of the audit, the auditee must prepare … a corrective action plan to address each audit finding included in the current year auditor's reports. The corrective action plan must provide the name(s) of the contact person(s) responsible for corrective action, the corrective action planned, and the anticipated completion date. If the auditee does not agree with the audit findings or believes corrective action is not required, then the corrective action plan must include an explanation and specific reasons.
(c) 9
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10. Audit Resolution – The Uniform Grant Guidance
Audit threshold raised $500k to $750k 10
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Additional Audits
Federal agency, OIG or GAO may conduct additional audits at federal cost 11
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12. Auditee Responsibilities
Arrange single audit
Prepare financial statements
Follow up and corrective action on findings
Provide access 12
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Auditor Selection
Must follow procurement standards 13
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Audit Records Access
Can the auditee refuse to provide the auditors with requested documents?
GEPA 20 USC 1232(f) requires that ED and its representatives (which arguably includes A-133 auditors) “shall have access, for the purpose of audit examination, to any records maintained by a recipient that may be related, or pertinent to, grants”
(d) also indicates audit access to records without qualifiers.
If requested records are not provided, likely receive an audit limitation. 14
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The Audit
Major Program Determination
Risk based
Step 1- Type A + B
Thresholds for Type A
$750K to $25M $750K
$25M to $100M Awards x .03
$100M to $1B $3M
$1B to $10B Awards x .003
$10B to $20B M
Over $20B Awards x .0015
All others, type B
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16. Major Program Determination (cont.)
Step 2
Identify Type A- Low Risk
Consider:
Prior audit and monitoring findings
Control environment
Compliance
Multiple internal control systems
Weak monitoring
No recent audits
Complexity
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17. Major Program Determination (cont.)
Consider (cont.):
Newness
Modified opinion
Questioned costs above 5% of grant
Federal Awarding Agency Request + OMB approval - moves low to high 17
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18. Major Program Determination (cont.)
Step 3
Identify Type B- High Risk
Not more than 25% of
Type A Low Risk
Type B Risk Assessments only
If B exceeds 25% of threshold for A 18
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19. Major Program Determination (cont.)
Step 4
Audit all
Type A’s not Low Risk
Type B’s High Risk
Additional as needed to comply with percentages
Must include Auditor’s Rule Assessment 19
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Reporting
Questioned costs above $25K- major program
If auditor becomes aware of questioned costs above $25K in non major program 20
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Audit Resolution
Schedule of Prior Findings
Corrective Action Plan
Include reference numbers and fiscal year 21
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22. Schedule of Prior Findings
Status of all findings in prior schedule
Unless corrected
Corrected findings – note only corrective action taken
Uncorrected
Reason for recurrence
Partial corrective action taken
Additional corrective action planned 22
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23. Schedule of Prior Findings
Auditee believes finding unwarranted
Basis:
No longer valid if:
2 years have passed and
Pass through entity not following up and
No management decision 23
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24. Corrective Action Plan
Addresses each finding
Separate from schedule of findings
Name of contact person
Corrective action planned
Anticipated completion date
If auditee disagrees…
Reasons 24
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25. Submission to Federal Audit Clearing House (FAC)
Reporting package
Financial statements
Schedule prior findings
Auditors report
Corrective action plan
Management letters
Copies available-Public 25
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26. Federal Agency Responsibility
Cognizant agency for audit provides predominant amount-funds
Responsibilities
TA to auditees
Quality control
Advice to auditors
Notice to auditors of audit deficiencies
Coordinate management decisions 26
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27. Federal Agency Responsibilities
Awarding agency responsibility
Ensure completion of audits – timely
TA to auditees and auditors
Follow up – ensure corrective action
Management decision
Monitor corrective action
Use CAROI 27
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28. Cooperative Audit Resolution ED term: CAROI
Cooperative Audit Resolution Oversight Initiative
Developed with ED and pilot states
Adopted by ED as standard audit resolution 28
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CAROI
Historically:
Rejected by most other agencies
Labor
Agriculture
Health Human Services 29
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30. Uniform Grant Guidance Applies Cooperative Audit Resolution
To all federal agencies –
Government wide policy 30
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31. Cooperative Audit Resolution 200.25
Audit and follow up that promotes prompt corrective action
Improve communication
Foster collaboration
Promote trust
Develop federal – non federal agency understanding 31
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32. Cooperative Audit Resolution
Basis
Leadership commitment to program integrity
Partnership, federal
Non federal and auditors
Focus
Current conditions and cooperative action 32
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33. Cooperative Audit Resolution (cont.)
Message:
Continued failure to correct: unacceptable 33
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34. Cooperative Audit Resolution (cont.)
Prompt corrective action as shown by audits
Federal agencies offer
Appropriate relief Past non-compliance 34
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35. Cooperative Audit Resolution (cont.)
Federal agency responsibilities
Use CAROI to improve outcomes
Audit resolution
Follow up
Corrective action 35
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Management Decision
Management Decision
Audit finding sustained or not sustained
Reasons for decision
Expected action
Repayment?
Corrective action
Appeal available
6 months of filing with Federal Audit Clearing House (FAC) 36
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37. Compliance Supplement37
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38. Compliance Supplement
What stays:
Activities Allowed or Unallowed
Allowable Costs (and Matching)
Cash Management (Minimizing time)
Eligibility
Reporting (financial and performance)
Subrecipient Monitoring
Requirements Unique to the Program 38
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39. Compliance Supplement
Elimination of 2 Compliance Requirements in 2015:
Davis-Bacon Act;
Some agencies have made this a Special Test and Provision for specified programs; and
Real Property Acquisition & Relocation Assistance.
Possible elimination of Compliance Requirements in 2016?
Equipment and Real Property Management;
Level of Effort, Earmarking;
Period of Availability of Federal Funds (except where tested to verify allowable/ unallowable costs);
Procurement, Suspension and Debarment; and
Program Income.
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40. Compliance Supplement
“While most commenters were in favor of the proposed reduction of the number of types of compliance requirements in the compliance supplement, many voiced concern about the process that would implement such changes”
– 78 CFR 78608 40
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41. Brustein & Manasevit, PLLC © 2016. All rights reserved.
Next Steps
Audits
Letter of final audit determination
Appeal
Office of Hearings and Appeals (ED) 41
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This presentation is intended solely to provide general information and does not constitute legal advice or a legal service.  This presentation does not create a client- lawyer relationship with Brustein & Manasevit, PLLC and, therefore, carries none of the protections under the D.C. Rules of Professional Conduct.  Attendance at this presentation, a later review of any printed or electronic materials, or any follow-up questions or communications arising out of this presentation with any attorney at Brustein & Manasevit, PLLC does not create an attorney-client relationship with Brustein & Manasevit, PLLC.  You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances. 42
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