Intro to Single Audit/Uniform Guidance - Checkpoint … to Single Audit/Uniform Guidance Presented by: ... U.S. Department of Health and Human Services ... Block Grants for Prevention

5/9/2017

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Intro to Single Audit/Uniform Guidance

Presented by: Andrew D. Kehl, CPA, Audit Manager

Nicole M. Yuengel, Audit Senior

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Agenda

• What is the Single Audit Act / Uniform Guidance?

• Who is Subject to a Single Audit?

• Auditor Responsibilities

• Schedule of Expenditures of Federal Awards

• Compliance Requirements

• Sampling in a Single Audit

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Objective

Provide an overview of the Single Audit Act / Uniform Guidance and an understanding of the audit requirements of a Single Audit.

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The Single Audit Act

• Enacted to streamline and improve the effectiveness of audits of federal awards.

• Reduce the audit burden on nonfederal entities.

• Requires independent auditors to perform single and program-specific audits of federal awards in accordance with Government Auditing Standards.

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Uniform Guidance

• Uniform Guidance, or Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.

• Replaces OMB Circular A-133.

• Establishes audit requirements and guidelines on performing single or program-specific audits.

• Provides guidelines and policies of aspects of managing federal awards.

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Interchangeable Terminology

• When you hear someone talk about:• Single Audit• OMB Circular A-133• Uniform Guidance

They are all talking about the same thing.

• Likewise, when you hear someone talk about:• Yellow Book audit• Audit in accordance with Government Auditing

Standards

They are all talking about the same thing.

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Who is Subject to Single Audit Requirements?

• Nonfederal entity that expends $750,000 or more of federal awards in a reporting year are required to have a single or program-specific audit.

• A nonfederal entity is defined as:• State, local government, Indian tribe, institution of higher

education, or nonprofit organization that carries out a federal award as a recipient or subrecipient.

• Keyword is expends, or expenditures.

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What qualifies as expended?

• A federal award is considered expended in the period that the activity related to the award occurs. Such events include:

• Expenditure or expense transactions have been incurred.

• Disbursement of funds to subrecipients.• Use of loan proceeds under loan and loan guarantee

programs.• Receipt of property• Receipt or use of program income• Distribution or use of food commodities• Events that require the auditee to comply with terms and

conditions of the federal award(s).

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Auditor Requirements / Deliverables

• Audit of the entity’s financial statements and reporting on the supplementary schedule of expenditures of federal awards.

• Are the financial statements presented fairly in accordance with GAAP (or another basis of accounting)?

• Audit is performed in accordance with generally accepted auditing standards (GAAS) and Government Auditing Standards.

• Are the schedule of expenditures of federal awards, or SEFA, stated fairly in all material respects?

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Auditor Requirements / Deliverables

• Compliance audit of federal awards• Performed in accordance with GAAS, Government

Auditing Standards, and a governmental audit requirement (i.e. Uniform Guidance).

• Requires testing to obtain reasonable assurance about whether noncompliance with the types of applicable compliance requirements that have a direct and material effect on a major program has occurred.

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Single Audit Due Date

• Due 9 months after end of the audit period• Data Collection Form

• Form required to be completed and filed with the Federal Audit Clearinghouse (who operates on behalf of OMB). Federal Audit Clearinghouse distributes reporting packages to federal agencies.

• It is an electronic form completed and submitted online, with an upload of the entity’s financial and compliance report

• If the reporting package is not submitted within the required timeframe, this automatically qualifies the entity as a high-risk auditee for Single Audit purposes in following fiscal year.

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Schedule of Expenditures of Federal Awards

• The SEFA is the primary basis for the auditor’s major program determination.

• The appropriate determination and identification of major programs is dependent on the accuracy and completeness of the information presented in the SEFA.

• As a result, in a perfect world, the SEFA should be the start of planning and performing a single audit.

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Important to Note

• The preparation of the SEFA is the responsibility of the auditee, or client; not the auditor.

• Auditor’s responsibility is to determine and report on whether the SEFA is stated fairly.

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• Required Components• List individual federal programs by federal agency.• If federal awards received as a subrecipient, include the

name of the pass-through entity and the identifying number assigned to the grant by the pass-through entity.

• Provide the total federal awards expended for each individual federal program.

• Provide the Catalog of Federal Domestic Assistance (CFDA) number or other identifying number when the CFDA information is not available.

• Include the total amount of federal awards expended for loan or loan guarantee programs.

• Include the total amount provided to subrecipients from each federal program.

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• Important to Note• In circumstances where the program does not have

a contract or grant number, and the CFDA number is also not known, the number shown as the CFDA number could be the awarding agency’s 2-digit prefix (or 99) followed by “UNKNOWN.”

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• Other Components• Other information may be requested by federal

awarding agencies and pass-through entities to make the SEFA easier to use.

• Example – list the amount of federal awards expended for each award year under a federal program separately.

• Example – Cash receipts received and beginning/ending accounts receivable and deferred revenue balances.

• Food commodifies and donated property received under federal programs are considered noncash awards and should be reported on the SEFA.

• Amount expended equals the fair value at the time of receipt or the assessed value provided by the federal agency.

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• In order to opine on whether the SEFA is fairly stated, the auditor should determine that all of the following conditions are met:

• The information contained in the SEFA was derived from, and relates directly to, the underlying accounting and other records used the prepare the financial statements.

• The information relates to the same reporting period as the financial statements.

• The financial statements were audited and an adverse or disclaimer of opinion was not issued.

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• Audit procedures (using the same materiality level used in the audit of the financial statements):

• Inquire of management regarding the criteria used to prepare the SEFA.

• Determine that the form and content complies with the Uniform Guidance.

• Obtain an understanding about the methods used to prepare the SEFA.

• Compare and reconcile the SEFA to underlying accounting or other records.

• Inquire of management about any assumptions or interpretations regarding the measurement or presentation of the SEFA.

• Evaluate the appropriateness and completeness of the SEFA based on the results of procedures performed.

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Schedule of Expenditures of Federal Awards - Example

• Federal Grantor/

Pass‐Through Grantor/

Program Title

Federal

CFDA

Number

Pass‐Through

Grantor's

Number

Passed Through

to

Subreceipents

Receivable

(Deferred) at

June 30, 2015 Receipts Expenditures

Receivable

(Deferred) at

June 30, 2016

U.S. Department of Health and Human Services (HHS)

Passed through the Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs

Passed through the County of Berks

Block Grants for Prevention and Treatment of Substance Abuse 93.959 SAP4100053160 $ 1,520,466 $ 147,826 $ 1,711,953 $ 1,707,678* $ 143,551

Total U.S. Department of Health and Human Services (HHS)

1,520,466 147,826 1,711,953 1,707,678 143,551

U.S. Department of Housing and Urban Development (HUD) PA0354L3T061406

PA0354L3T061507

Continuum of Care Program 14.267 PA0172L3T061407 228,777 65,707 245,665 247,322 67,364

Total U.S. Department of Housing and Urban Development (HUD)

228,777 65,707 245,665 247,322 67,364

A A A A A

A ‐ Required per Uniform Guidance

B BB

B ‐ Required per funding agency or client preference

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Schedule of Expenditures of Federal Awards – Example (cont.)

Federal Grantor/

Pass‐Through Grantor/

Program Title

Federal

CFDA

Number

Pass‐Through

Grantor's

Number

Passed Through

to

Subreceipents

Receivable

(Deferred) at

June 30, 2015 Receipts Expenditures

Receivable

(Deferred) at

June 30, 2016

U.S. Department of Justice Bureau of Justice Assistance

Passed through the Commonwealth of Pennsylvania, Commission on Crime and Delinquency

Edward Byrne Memorial Justice Assistance Grant Program 16.738

2010‐JG‐04‐

22957 $ ‐ $ 13,395 $ 60,676 $ 69,246 $ 21,965

Total U.S. Department of Justice Bureau of Justice Assistance

‐ 13,395 60,676 69,246 21,965

Total Federal Awards Expended$ 1,749,243 $ 226,928 $ 2,018,294 $ 2,024,246 $ 232,880

A A A AA

A

B B B

B

‐ Required per Uniform Guidance

‐ Required per funding agency or client preference

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Identifying Direct and Material Compliance Requirements of Major Programs

• Following the determination of auditee risk and the identification of major programs to be tested, the auditor should determine the direct and material compliance requirements to be tested and reported on in the Uniform Guidance compliance audit.

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Resources

• The types of compliance requirements that may be applicable to a major program can be determined by reviewing the following:

• OMB Compliance Supplement• Part 2 – Matrix of Compliance Requirements• Part 3 – Compliance Requirements• Part 4 – Agency Program Requirements

• Grant Agreement• Program Information

• CFDA – www.cfda.gov• Agency website

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Types of Compliance Requirements

• A – Activities allowed or unallowed (almost always applies to Federal programs)

• B – Allowable costs/cost principles (almost always applies to Federal programs)

• C – Cash management (almost always applies to Federal programs)

• D – Reserved

• E – Eligibility (applies to most Federal programs which provide benefits to individuals, groups, or makes subwards)

• F – Equipment and real property management (applies to Federal programs which purchase equipment or real property)

• G – Matching, level of effort, earmarking (is not universal and would be specific to the Federal program)

• H – Period of performance (almost always applies to Federal programs)

• I – Procurement and suspension and debarment (applies any time the entity procures goods or services; suspension and debarment applies to certain procurements and all subawards)

• J – Program income (applies to any Federal program that generates program income)

• K – Reserved

• L – Reporting (almost always applies to Federal programs)

• M – Subrecipient monitoring (applies when Federal awards are passed through to a subrecipient)

• N – Special tests and provisions (unique to each Federal program)

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Compliance Requirements

• The auditor should consider the applicability of these types of compliance requirements to each of the auditee’s major programs.

• If the auditor determines that a type of compliance requirement identified as applicable is not to be tested, the auditor should conclude and document such conclusion, either that the requirement does not apply to the particular auditee or that noncompliance with the requirement would not have a direct and material effect on a major program.

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• Example:• A Federal program may be designed such that

subawards may be made to subrecipients, and, thus, the matrix in Part 2 of the Compliance Supplement would identify the subrecipientmonitoring as an applicable compliance requirement.

• The auditee may not have made any, or made only an immaterial amount of, subawards from the Federal program.

• Therefore, the auditor could conclude, and document, that this compliance requirement is notdirect and material.

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• General Notes• When performing an audit in accordance with

Uniform Guidance, the Compliance Supplement replaces any Federal agency audit guides and other audit requirement documents for individual Federal programs that are included in the Compliance Supplement.

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• General Notes (continued)• For Federal programs that are not addressed in the

Compliance Supplement, the auditor should follow the Compliance Supplement’s guide in Part 7 of the Supplement, including:

• Identify the compliance requirements that are applicable to the Federal program.

• Review Program Information – www.cfda.gov• Review Grant Agreement, etc.• Review Federal Agency Audit Guide

• Determine which of the compliance requirements identified above could have a direct and material effect on the major program.

• Determine which of the compliance requirements identified are susceptible to tested by the auditor.

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Sampling

Control & Compliance Testing Sample Size Table (Minimum Sample Size for Control and Compliance)

Significance of Control & Inherent Risk of Compliance Requirement

Desired Level of Assurance

Zero deviations/ exceptionsexpected

Very Significant and Higher Inherent Risk High 60

Very Significant and Limited Inherent Risk Or Moderately Significant and Higher Inherent Risk

Moderate 40

Moderately Significant and Limited Inherent Risk Low 25

• According to CAM 935.16M14 & 935.15M15, for populations of 250 items or more:

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Sampling

• According to CAM 935.16M16, suggested minimum sample sizes in testing small populations (less than 250 items) where frequency exists:

• For sample populations between 52 and 250 items, a sample size of at least 10% of the population should be tested.

• These are minimum suggested sample sizes. Based on more significant controls, or for more significant types of compliance requirements, the auditor should determine the appropriate sample size is on the higher end of the ranges.

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Sampling

• Make sure that the size of the population is determined by reference to the defined sampling unit. For example, if there are 40 employees who charge time to a Federal program, who are paid bi-weekly, the total population size is 1,040 (40 x 26 pay periods), and this would not be a small population.

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Single Audit Resources

• CFDA – www.cfda.gov• Federal Agencies website

• I.e. – Department of Health and Human Services –www.oig.hhs.gov

• Federal Audit Clearinghouse –https://harverster.census.gov/facweb/

• Governmental Audit Quality Center –www.aicpa.org/InterestAreas/GovernmentalAuditQuality/Pages/GAQC.aspx

• OMB Compliance Supplement –www.whitehouse.gov/omb/circulars_default

• PA DHS Compliance Supplement -http://www.dhs.state.pa.us/cs/groups/webcontent/documents/report/c_139647.pdf

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Questions?

Documents

Intro to Single Audit/Uniform Guidance - Checkpoint … to Single Audit/Uniform Guidance Presented by: ... U.S. Department of Health and Human Services ... Block Grants for Prevention