Archive for July, 2010
The 2010 A-133 Compliance Supplement is now available on the OMB website. As usual, changes have been throughout the guidance to reflect new statutory and regulatory requirements, and to make technical and clarifying revisions. But perhaps the most important change, at least for this year, is the information on the Recovery Act and its impact on single audits.
The Recovery Act discussion is found in Appendix VII, which is called a rather vaguely named ”Other OMB Circular A-133 Advisories.” The guidance addresses the impact of these new funds on the SEFA, major program determination, and risk assessment.
I’ll post more information once I have looked through the supplement, but for now, I just wanted to alert everyone to the release.
President Obama has signed the Improper Payments Elimination and Recovery Act of 2010, requiring federal agencies to identify programs most at risk of improper payments, take steps to address those risks, and use a variety to tools to recapture payments that were made in error.
Specifically, the head of each federal agency must review agency programs and activities every three fiscal years and identify those that are susceptible to “significant” improper payments. Significant improper payments are those that total either $100 million, or 2.5 percent of total program outlays for programs expending $10 million or more per year. Agencies must explain why the programs are at risk, what steps it plans to take to reduce those risks, and the resources it has or needs in terms of personnel, technology systems, and internal controls. The plans will also describe how agency managers, programs, and where appropriate, state and local governments, are held accountable for preventing, detecting and recovering improper payments.
The new legislation (PL 111-204) also focuses on the use of recovery audits to return improper payments to federal agencies. Also, under the measure, agencies may keep the funds that are recaptured through recovery audits rather than returning them to the Treasury. The money may be reinvested back into the original program, used for agency OIG activities, or support financial management improvement activities.
Well, it’s been a while since I posted to this blog, so this one will make up for the lack of frequency in the amount of volume.
I attended the Association of Government Accountants Professional Development Conference earlier this week and want to share a summary of some of the sessions I attended. My notes are fairly basic and lack some context, so if you need more info, please feel free to contact me directly (firstname.lastname@example.org), or post to the blog.
Here we go…
Grants Management Line of Business
Danny Werfel, Controller of OMB’s Office of Federal Financial Management, discussed the agency’s view of lines of business. While he was specifically speaking about financial management systems, the overall principles he discussed also may be applicable to the Grants Management Line of Business (GMLoB). OMB still believes in the concept, but has learned that the model of forcing agencies to move to a complete service center doesn’t work. Instead they are looking to focus more on “shared services.” For example, an agency may share a vendor invoicing service with other agencies but would not have to migrate their entire financial system to a common source.
Federal Grants Reporting
The implementation of the Federal Funding Accountability and Transparency Act’s subrecipient reporting requirements in October means a lot of things need to be changed, such as grant terms and conditions, according to Werfel. He said OMB is working on these changes, but gave no details on exactly what actions will be taken or when.
He also specifically noted one of the most significant and pervasive Recovery Act reporting problems: subsequent reports from the same recipient on the same project often don’t get “linked.” For instance, a change in identifying information, such as a correction to a DUNS number or grant number, means reports are not connected to one another. Anyone looking at a particular entity or project might assume a recipient just stopped reporting on the project, and that another project was started. Werfel emphasized that federal agencies, recipients, and pass-through entities need to be aware of this.
Recovery Act A-133 Pilot Demonstration Project
OMB plans a second A-133 Recovery Act pilot project that will be announced later this month (July). It will include more states, and probably different programs this time, according to John Fisher, of the HHS Office of Inspector General, and a lead in the implementation of the first pilot project. The second pilot is also likely to focus more on audit resolution. The Recovery Act requires federal entities to make management decisions on the findings that were reported in the pilot project within 3 months (March 31, 2010). But a significant number of the findings still had not been resolved as of July 8, he commented. (It’s important to note that slow and incomplete audit resolution by federal agencies came up in almost every grants session, and several presenters, including Danny Werfel, said OMB and Congress will be taking a close look at this issue.)
On a side note, Gil Tran was supposed to make this presentation but was not at the conference because he was still working on the A-133 Compliance Supplement, which was supposed to be out “this week,” meaning July 15 or16. One interesting tidbit: Gil has to get sign-off from 19 different federal officials before he can release the supplement.
Reducing Improper Payments
Werfel said one of the most promising and interesting ideas they are looking at to reduce improper payments is revising A-87 (2 CFR Part 225. the state and local cost principles) to allow states to recapture more indirect costs. This incentive would reward states that reduce improper payments by allowing them to keep more for administrative expenses and offset the costs of program administration. OMB is seriously looking at how A-133 audits can be used more effectively in preventing, rather than simply detecting, improper payments. This could mean anything from speeding up the audit timeline to focusing more on larger entities or larger grant programs. However, he gave no specifics on A-133 revisions.
Werfel also told attendees that in the fall, OMB plans to launch a grant program to support innovative streamlining and grants management partnership projects. The goal is to promote efficiency while improving program services and is based on ideas submitted to Partner4Solutions.gov.
Yellow Book Update
The Government Accountability Office is drafting a revised Yellow Book and expects that draft to be ready for public comment in late July or early August, with the final revision complete by February or March 2011. But those are moving targets because GAO is attempting to align the Yellow Book with AICPA standards, which are still in the process of being revised.
Most of the changes that auditors will see are technical in nature or align Yellow Book requirements with other standards. But one area that will change is the standard for auditor independence. Marcia Buchanan, Assistant Director for Auditing Standards at GAO, said Chapter 3, on auditor independence, will be restructured. There will be a conceptual framework that will serve as a guideline for determining whether an auditor is independent, but there will no longer be a laundry list of prohibited activities. This will give auditors more flexibility and allow them to apply judgment in unique situations.