Grants Blog

Posts Tagged ‘Single Audit’

The Office of Management and Budget is working on a draft “omnibus circular” that would consolidate and revise the current uniform administrative requirements, cost principles, and audit circulars.

While details are sketchy, the new circular could represent a significant change for grants management. For example, OMB may raise the single audit threshold, consolidate the current cost principles into one set, and set standards for merit-based reviews of grant applications.

OMB officials say a Federal Register notice inviting comments on the proposal will be published before the end of February. You will have 60 days to comment, and then OMB will review all of the input before issuing a second notice. If all goes according to OMB’s schedule, the new circular could be in effect by early fall. However, for those of us in the grants management community, we know this is an ambitious goal. Nonetheless, I wanted to give everyone a heads-up about the coming notice so you can be prepared to submit comments.

Keep watching this blog for more information. In addition, our annual Federal Grants Update seminar will cover this proposal in detail once it is published.

There has been a lot of talk in Congress about grants accountability, but mostly in the realm of post-award administration. Now comes a bill that addresses those topics before an award is made. HR 3433, the s-called GRANT Act, would call for some rather dramatic shifts in the way discretionary grants are awarded.

For example, federal agencies would have to establish and publish merit-based selection criteria. And before an award is made, agencies would have to evaluate whether the applicant is capable of properly managing federal awards and successfully completing the project. This seems fairly noncontroversial to me and aligns with current OMB circulars and administrative requirements.

But the legislation would make all of the preaward information available to the public — everything from the applicant’s proposal to the award notice and the final award decision and applicant rankings.

Further, agencies would post each recipient’s final report on a public website, along with any other information that could be useful to “future researchers or the public.”

As for A-133 single audits, the proposed legislation would require OMB to report on how the process could be made more useful and efficient, something OMB has been working on for years.

This legislation, which you can read here, is just now beginning to make its way through Congress, but I thought some of the above points are very interesting and show lawmakers’ continued interest in grants. Do you see anything else in the bill that you find interesting?

December Update: It is now final. In mid-December, GAO released the final version of the Yellow Book. Click on the link below to access the standards, as well as a summary of the major changes.

GAO just released a new version of the Yellow Book that “contains the intended content for the final 2011 Revision of Government Auditing Standards. GAO plans to formally issue the 2011 Revision Government Auditing Standards later this year after the AICPA has completed its clarity revisions.”

In the 2011 revision, GAO is establishing a “conceptual framework” for making independence determinations based on each situation’s unique facts and circumstances. Auditors would identify potential risks to independence, evaluate the significance of those threats, and apply safeguards to eliminate the risks if necessary. Rather than issuing a specific list of prohibited activities, GAO offers examples of threats to independence, for example an audit organization having undue dependence on income from a particular entity or a member of the audit team entering into employment negotiations with an audited entity.

 The independence section also identifies specific nonaudit services that would impair auditor independence in the government environment. These include, for example, preparing accounting records or financial statements.

 Grants management officials may also find the new Yellow Book’s appendix helpful not only in preparing for or conducting an aduit, but also in improving overall organizational operations. As part of their responsibilities, auditors review the organization’s internal controls. In the Yellow Book, GAO provides more than a dozen indicators of internal control problems that can serve as an alert for grants management officials. GAO also offers examples of activities that could indicate fraud or abuse in government-funded programs and activities.

The Yellow Book is only available online at www.gao.gov/yellowbook.

I’ve been looking at the recently released 2011 A-133 Compliance Supplement and found several items of interest (at least to me) that I thought I would pass along. 

OMB added a a new element to the core compliance requirements to alert auditors and program officials as to whether the reporting requirements of the Transparency Act apply to a particular program. The compliance supplement also explains that, at the current time, “this reporting at the program level may be “Not Applicable” for several different reasons: (1) there are no subawards under the program; (2) the program is exempt from this requirement because it is ARRA-funded; or (3) the program is other than a grant or cooperative agreement program. In the latter case, this designation may change once additional types of financial assistance are made subject to the Transparency Act’s reporting requirements.”

Also, when determining compliance with Recovery Act reporting requirements, auditors are only required to test for compliance with basic information such as the CFDA number and financial information such as expenditures. While the number of jobs created or retained is a required data element for Recovery Act reporting, OMB specifically says that the auditor is not required to test this data.

Feel free to post to our blog with anything else you may find of interest in the new Compliance Supplement.

Finally, the Office of Management and Budget has released the 2011 Circular A-133 audit guidance document.

As usual, new programs have been added, other programs have been deleted, and individual program descriptions have been updated. In addition, OMB has added guidance and references relating to Transparency Act reporting, and clarified reporting requirements and auditors’ responsibilities relating to Recovery Act funding.

Watch this blog for additional information in the future. In the meantime, go here to view or download the Compliance Supplement.

Enjoy!

So are we.

Nearly two months ago I wrote in this blog that OMB might be close to meeting its goal of releasing the 2011 Circular A-133 Compliance Supplement by the end of March. But it’s now May and OMB has yet to publish the annual audit guidance.

In fact, at the recent National Grants Management Association annual conference, OMB’s Gil Tran said it might be “several weeks” before the document is released. This would put the publication date well into mid- or late May.  Auditors, grantees. and federal program personnel who rely on the guidance — which will be effective for audits of fiscal years beginning after June 30, 2010 — will have to wait a little longer.

Keep watching this post for further information. You can also learn more about A-133 audit developments and other grants management issues at Management Concepts’ Federal Grants Update seminar. Click here for more on the topics, dates, locations, and registration information.

Information about Management Concepts’ annual Federal Grants Update seminar is now available. This one-day course is a great way to keep track of the latest developments in grants management and to learn about pending changes that may impact your day-to-day grants work.

This year we’ll be discussing GPRA, subaward reporting, transparency and accountability, audit guidance, presidential and congressional priorities, and more.

Classes start the first week in April and run throughout the summer in cities around the country. We can also bring the course to your location. Click here to see dates, locations, topics, and registration options.

Are you interested in audits? Do your job responsibilities entail audit reviews? Want to know what a quality audit looks like? The Council of Inspectors General on Integrity & Efficiency (CIGIE) has a revised Guide for Quality Control Reviews of OMB Circular A-133 Audits.

The guide is a fairly easy-to-understand tool that offers a checklist of issues to consider when evaluating the quality and reliability of a single audit. It will help reviewers determine whether the audit was conducted in accordance with applicable standards and identify any follow-up work needed to support the audit report opinions. It is organized by audit standards and elements of an A-133 audit, focusing on the portions that are of most interest to federal officials.

Visit the IGnet website here to download a copy.

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.

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 (lhayes@managementconcepts.com), 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.