1. The Impact of OMB Circulars (Super or Otherwise) on Federal Programs Michael Brustein, Esq. mbrustein@bruman.com Brustein & Manasevit, PLLC Fall Forum 2012

2. 1.What are “circulars”? 2.Do they matter? 3.Where do they stand in the legal hierarchy? 2

3. Administrative Principles  A-102 – State/Locals 34 CFR Part 80  A-110 Postsecondary and Nonprofits 34 CFR Part 74 3

4. Cost Principles  A-87 State/Locals – 2 CFR Part 225  A-21 Postsecondary - 2 CFR Part 220  A-122 Nonprofits 4

5. Audit Principles  A-133 State/Locals/Postsecondary/ Nonprofits 5

6. So Why a Super Circular? 6

7. Obama Executive Order 13563 “Regulatory Review” 7

8. OMB Advance Notice of Proposed Rulemaking – February 12 What will be the effective date of changes? 8

9. Council on Financial Assistance Reform (COFAR)  10 members from largest grant making agencies: HHS, AG, ED, Energy, DHS, HUD, DOL, DOT 9

10. Expect Revisions to: 1)Cost Principles  A-21  A-87  A-122 2)Administrative Principles  A-110  A-102 3)Federal Agency Audit Resolution  A-50 4)Single Audit  A-133 10

11. Super Circular  Increase consistency  Decrease complexity But allows for disparate treatment depending on type of entity 11

12. Single Audit Threshold a)Under $1 million in total federal expenditures:  No single audit  Augmented pass-through role b)Between $1 million and $3 million  More “focused” single audi t c)Over $3 million  Full single audit 12

13. “Focused Single Audit” ($1 to $3 Million)  Single auditors to review  2 Compliance Requirements 1)Allowable/Unallowable 2)Federal agency determines – but priority on risk of improper payments, or fraud, waste, and abuse (look to Compliance Supplement) 13

14.  Can SEA impose additional compliance requirements?? 14

15. “Full Single Audit” Over $3 Million “Universal Compliance Requirements” 1.Allowable Costs 2.Eligibility 3.Reporting 4.Subrecipient Monitoring 5.Period of Availability of Federal Funds 6.Procurement Practices Comply with Suspension/Debarment 15

16. Federal Agencies to identify “non-universal” elements, with focus on preventing fraud, waste, and abuse 16

17. Pass-Through Agencies  Attempt to reduce burden on pass-through (SEA)  Federal Agencies to better coordinate review of subrecipient internal controls when 2 or more federal agencies funding 17

18.  OMB wants pass-through to focus on programmatic requirements of subawards 18

19. Increasing threshold would increase burden on SEA for monitoring and Limited Scope Audits ??? 19

20. How do your programs measure up against Circulars? 20

21. Phil Maestri – AEFFA – 10/3/12  OIG“Perfect Lens”  Program Officials “Reality”  OGC ??? 21

22. Filter out “noise” on “Success” vs. “Compliance” 22

23.  “Costs must conform to federal laws”  A-87  A-21 23

24. OIG Final Audit Report ED-OIG/A19K0009  “The Department’s External Audit Resolution Process”  July 3, 2012 24

25.  OMB Circular A-50 “Audit Follow- Up” provides policies/procedures for use by federal agencies when considering audit reports* where follow-up is necessary *OIG and A-133 Single Audit 25

26. Audit is recommendation to Program Operating Component (POC): 1.Sustain Findings 2.Not Sustain Findings 3.Sustain in Part 26

27. POC Issues Program Determination Letter (PDL) 1.Closes Matter 2.Recovery of Funds (Audit, Monitoring Report) 34 CFR 81.30 3.Corrective Action 27

28.  OMB A-50 requires resolution within maximum of 6 months after issuance of final audit report 28

29. OIG Report on External Audit Resolution Process  90% of audits between 2007- 2010 not resolved within 6 months 29

30.  Audits were overdue for resolution by an average of 1,078 days and included questioned costs totaling $568 million 30

31.  ED lost $415 million due to the 5 year statute of limitations 31

32. Why 32

33.  Lack of staff  Lack of knowledge among staff  Lack of organizational priority on audit activities  Overall lack of accountability 33

34. OGC Position  Burden of establishing prima facie case  Determination of harm to federal interest (See Appendix to 34 CFR Part 81) 34

35.  Are POCs more focused on success than compliance? 35

36.  But even if OIG, OGC, POC on same page, findings may still lack merit The Tydings Cases 36

37. Questions 37

38. Disclaimer This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the presentation or later review of these printed materials 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. 38