Auditees:

Making Sense of Uniform Guidance

Presented by:

Brittany Bischoff

Rob Kitchen

Today’s Presenters:

Brittany Bischoff Rob Kitchen

Learning Objectives

• Gain a better understanding of policies and

procedures requirements under Federal

Uniform Guidance

• Learn how to determine if awards are

federal and best practices to implement as

part of auditee’s Schedule of Expenditures

of Federal Awards review process

• Gain a better understanding of Uniform

Guidance related reports and the impact of

significant deficiencies and material

weaknesses on future periods

Definition of a Federal Award

Federal financial assistance and federal cost

reimbursement contracts that non-federal entities

receive directly from Federal awarding agencies or

indirectly from pass-through entities

• It does not include procurement contracts, under

grant or contracts, used to buy goods or services

• An expenditure means charges made by a non-

Federal entity to a project or program for which a

federal award was received

• Cash or accrual basis as long as the methodology

is disclosed and is consistently applied

Examples

Grants

Contracts

Loans

Loan Guarantees

Property

Food commodities

Interest subsidies

Insurance

Noncash assistance

Internal Control

2 Code of Federal Regulations (CFR)

section 200 requires that non-Federal

entities receiving Federal awards

establish and maintain internal control

over the Federal awards

• Internal controls that provide

reasonable assurance that

non-Federal entities are in

• Compliance with Federal

statutes and

• Terms and conditions of

the Federal awards

Internal Control (continued)

Therefore auditors are required to

obtain an understanding of the non-

Federal entity’s internal control over

Federal programs

Through this process if a deficiency in

internal control over compliance is

identified the auditor must assess the

deficiency

Controls

Procedures designed

to prevent, detect and

correct errors resulting

from processing of

accounting information

Objectives of Internal Control over Compliance

• Transactions are properly recorded

and accounted for in order to:

• Permit the preparation of

reliable financial statements

and Federal reports

• Maintain accountability over

assets

• Demonstrate compliance with

Federal statutes, regulations,

and the terms and conditions of

the Federal award

Objectives of Internal Control over Compliance

• Transactions are executed in

compliance with:

• Federal statutes, regulations

and the terms and conditions

of the Federal award that

could have a direct and

material effect on a Federal

program

• Any other Federal statutes

and regulations that are

identified in the Compliance

Supplement

Objectives of Internal Control over Compliance

• Funds, property, and other assets are safeguarded against loss from

unauthorized use or disposition

Internal Controls

Control activities may be preventative

or detective

• A preventive control is designed to

avoid an unintended event or

result at the time of the transaction

• A detective control is designed to

discover an unintended event or

result after the initial processing

has occurred but before the

ultimate objective has concluded

COSO

Five elements of internal control

were introduced in Internal

Control-Integrated Framework,

published by the Committee of

Sponsoring Organizations of the

Treadway Commission

Five Components of Internal Controls

• Control Environment (management’s attitude about controls)

• Risk Assessment (how did you learn that the control activity was necessary to ensure

compliance)

• Control Activities (how you are certain that your organization is in compliance)

• Information and Communication (how and when do you notify people the control activity is

required)

• Monitoring (process used to ensure the control activity is performed correctly and

consistently

Control Activities

• Management should design control

activities to achieve objectives and

respond to risk

• Activities allowed / allowable costs

• Supervisors review and approve

invoices, cost allocations, efforts

of personnel, fringe benefits and

indirect charges for allowability,

adherence to cost principles,

accuracy and completeness

Control Activities

Cash Management

• Requests for reimbursement are

reviewed/authorized prior to

submission by reviewing

supporting documents/reports

Eligibility

• Accuracy and completeness of

data used to determine eligibility

requirements are reviewed and

agreed to support by staff and

knowledgeable supervisor

Deficiencies in Internal Control

A deficiency exists when the design or operation of a control over compliance does not

allow management or employees, in the normal course of performing their assigned

functions, to prevent, or detect and correct noncompliance with a type of compliance

requirement of a federal program on a timely basis.

Deficiencies in Internal Control

When a deficiency or combination of deficiencies creates a reasonable possibility that

material noncompliance with a type of compliance requirement of a federal program will

not be prevented, or detected and corrected on a timely basis.

A MATERIAL WEAKNESS will be reported by the AUDITOR in their report

Deficiencies in

Internal ControlWhen a deficiency or combination of

deficiencies is less severe than a material

weakness yet important enough to merit

attention by those charged with governance

A SIGNIFICANT DEFICIENCY will be reported

by the AUDITOR in their “Uniform Guidance”

report

Suggestions

Document your controls using COSO

Make sure everyone in your organization knows your control system

Review the internal control system and see if it is working

Closely monitor new employees for strict compliance with policies

Control activities should be documented and made available

What’s Next

The finding is reported in the schedule of findings and questioned costs

The auditee must prepare a corrective action plan (CAP).

• The plan should document differences between planned and previously reported

corrective actions

• The CAP must be on client letterhead

• Must identify action taken by the auditee that corrects the identified deficiency or

demonstrates that the audit finding is either invalid or does not warrant auditee action

CAP

Finding must be identified as reported by

the auditor

Planned corrective action

Name of the contract person responsible

for the corrective action

Anticipated completion date

What’s Next

In the following year prepare a summary schedule of

prior audit findings

• must include the fiscal year in which the finding

initially occurred

• should be on client letterhead

• If a Type A program had a material weakness in

internal control over compliance in one of the two

preceding years then the auditee cannot be low risk

(ie. The auditor must test twice the federal

expenditures)

Why is Internal Control important

• Noncompliance is uncovered early

• Fulfills fiduciary responsibility

• Assures the integrity of funded programs

Schedule of Expenditures of

Federal Awards

WHAT IS A FEDERAL AWARD?

• Awards received from the government

(directly or through a pass through agency)

• Reimbursement

• Fee for services

• Loans

• Commodities

• Not all government funding should be

considered a federal award and included

on a SEFA

• Procurement contracts

• Vendors

What is the Schedule of Expenditures

of Federal Awards? (SEFA)

• Lists the reimbursable

expenditures for each grant

(federal award) during the period

covered by the Organization’s

financial statements.

• Used by the auditor to determine

the major program that will be

audited in accordance with

Uniform Guidance.

Auditee’s Responsibilities –

preparation of the SEFA

• Identify all awards received and expended and

Federal programs under which they were received

• Including federal financial or noncash

assistance

• List individual programs by federal agency and

include pass-through entity information, if

applicable

• Include CFDA number for each program

• Identify clusters of programs

• Show the total amount provided to subrecipients

for each program

Verifying Clusters are Properly Reported

• What is a cluster?

• Federal programs with different CFDA

numbers that are closely related and

share common compliance

requirements

• IE- if a school receives funding from

the USDA for both breakfast and lunch

programs, this is considered a cluster

as the two programs are so similar.

• Clusters of Programs are listed in Part

5 of the OMB Compliance Supplement

1. Periodic meetings with development and finance departments

a. When an award is determined to be expended- how is this communicated?

b. How are noncash awards recognized and measured in accordance with Uniform

Guidance?

2. A second person should review the SEFA after preparation

3. Ensure SEFA properly includes direct and indirect costs and excludes cost sharing or

matching amounts

4. Compare and reconcile the SEFA to trial balance

5. Compare to prior year SEFA

a. Any new grants this year?

b. Any grants that were not renewed?

Best Practices- Reviewing the SEFA

Common SEFA Related

Errors• Incorrect grant names or incorrect CFDA #s

• Program is not properly included in a cluster

• Incorrect expenditures reported on the SEFA

• Noncash transactions are not reported on the SEFA

• Subgrant awards assigned by pass-through entities

not included

Uniform Guidance Policies,

Procedures & Standards of

Conduct

Policies, procedures and standards

of conduct required by UG• Cash management – transfer of funds timing

• Payments

• General procurement standards

• Competitive contracts – selection and awarding

• Subrecipient monitoring

• Determination of allowable costs under cost principles

• Compensation

• Relocation costs of employees

• Travel costs

• Conflicts of interest

** Note: This listing is not all-inclusive.

Procurement Standard

• Effective for fiscal years beginning on or after 12/31/2017

• Requires having documented policy that outlines procurement methods to be followed

• Micro-purchases, small purchases, sealed bids, competitive proposals and

noncompetitive (sole source)

• Required:

• Must maintain documentation of selection process

• Written rules of conduct covering conflicts of interest and governing actions of

employees engaged in the selection, award and administration of contracts.

• OMB June 20, 2018 memorandum changes

• Increased simplified acquisition threshold to $250,000 (from $150,000)

• Increased micro-purchase threshold to $10,000 (from $3,500)

$10K

$250K

$250K

$250K

Payment Standard

• Written procedures should consider the

requirements in 2 CFR 200.305

• Process for federal disbursements to

the Not-for-Profit

• Cash advance payments

• Maintain in interest-bearing

accounts

• Interest earned up to $500 per

year may be retained by the Not-

for-Profit; additional interest must

be remitted back to the federal

government

• Payment by reimbursement

Allowable Costs Procedures

• Uniform Guidance requires written

procedures for determining if costs are

allowable under Subpart E.

• Goal is to ensure compliance with

Uniform Guidance.

• Uniform Guidance SS 200.403 details

factors that affect allowability of cost

• EX- Cost is necessary and

reasonable; not included as part

of a match or cost sharing; not

included as both direct and

indirect

Questions?

Brittany Bischoff Rob Kitchen