Single Audits The Cornerstone of Grants Management Financial Assistance Training Seminar Grants Management: Exploring New Frontiers Phoenix, Arizona June 9 – 11, 2009 Morgan Aronson National Single Audit Coordinator Office of Inspector General

WHY ARE SINGLE AUDITS SO IMPORTANT ???

Steep Rise in Federal Grants $ Billions $7B $24B $91B $200B $450B CFDA lists more than 1,800 Federal assistance programs

DOI Federal Assistance YEARDOLLARS 20001,049,773, ,782,948, ,580,521, ,800,055, ,205,153, ,224,926, ,321,709, ,914,254, ,214,344,780 Sources: USAspending.gov, as of 5/27/2009; CFDA.gov, as of 5/27/2009. ~ 4,500 recipients per year 195 programs in the CFDA

ARRA Funding Bureau of Reclamation $ 1 billion National Park Service $ 750 million Bureau of Indian Affairs $ 500 million Bureau of Land Management $ 320 million U.S. Fish and Wildlife Service $ 280 million U.S. Geological Survey $ 140 million

OMB Guidance for ARRA OMB M-09-15, Section 5.6 Non-federal entities are required by the Single Audit Act Amendments of 1996 and OMB Circular A-133 to have an annual audit of their Federal awards. Federal agencies will perform a risk analysis of Recovery Act programs and request OMB to designate any high risk programs as Single Audit major programs.

OMB Guidance for ARRA OMB M-09-15, Section 5.7 OMB will use the Compliance Supplement to notify auditors of compliance requirements which should be tested for Recovery Act awards. OMB will issue interim updates as necessary to keep Recovery Act requirements current. OIGs will perform quality control reviews to ensure single audits are properly performed. OIGs will perform follow-up reviews of Single Audit quality with emphasis on Recovery Act funds.

OMB Guidance for ARRA OMB M-09-15, Section 5.8 For fiscal years ending September 30, 2009 and later, all Single Audit reports filed with the FAC will be made publicly available on the internet. Federal agencies will prepare and submit to OMB synopses of single audit findings relating to obligations and expenditures of Recovery Act funding.

SINGLE AUDIT Accountability Transparency

MAXIMIZE THE USABILITY AND EFFECTIVENESS OF THE SINGLE AUDIT FOR GRANT MONITORING The Objective

Today’s Topics Utilize the single audit in grantee risk assessments. – Timely submissions – Audit opinions – Types of findings Add programs to the Compliance Supplement. – Purpose and applicability – Overview – Input from the Department – Issuance timeline – ARRA

Single Audit Submissions Considerations: Has the grantee been audited in at least one of the two most recent periods? Has the grantee submitted its single audit report timely?

Prior Audits Single audit is required if grantee expended at least $500,000 in federal funds in a fiscal year. If grantee expended less than $500,000, there may still be prior audits. – “Yellow Book” audit Opinion on financial statements Review of internal controls Report deficiencies in internal control, fraud, illegal acts, violations of provisions of contracts or grant agreements, and abuse. – State or local government requirement – Debt requirement – Management decision

Single Audit Submission To the Federal Audit Clearinghouse (FAC). Earlier of: – 30 days after receipt of audit report from auditor; OR – Nine months after end of audit period. Extensions – Currently, still permitted under Circular A-133. – Extension provision will be removed from Circular A- 133 revision. – Ask grantee for proof of extension (agency correspondence).

How do I determine existence of prior single audits and timely submissions? Federal Audit Clearinghouse Operates on behalf of OMB. Responsibilities: – Disseminate audit information to Federal agencies and the public. – Support OMB oversight and assessment of Federal award audit requirements. – Assist Federal cognizant and oversight agencies in obtaining Circular A-133 data and reporting packages. – Help auditors and auditees minimize the reporting burden of complying with Circular A-133 audit requirements.

Initial Date Received Form Date Received Component Date Received

Audit Opinions Consideration: Opinion(s) on major program compliance.

Opinion Unit Major Program – Determined by the auditor. – Larger dollar programs (often but not always). – Detailed internal control and compliance testing. – Applicable compliance requirements.

Types of Opinions Unqualified opinion – auditee complied, in all material respects, with the requirements of the major program. Qualified opinion – auditee complied, except for certain instances of material noncompliance, in all material respects with the requirements of the major program. Adverse opinion – auditee did not comply, in all material respects, with the requirements of the major program. Disclaimer of opinion – the scope of the auditor’s work is insufficient to express an opinion on the auditee’s compliance with the requirements applicable to the major program.

Audit Findings Considerations: Financial statement findings vs. Federal award findings. Deficiencies in internal control. Instances of material noncompliance.

Financial Statement Findings “GAGAS Report” Focus on financial reporting – Effect on the financial statements – Material misstatements of financial information Usually, presented before Federal award findings in the audit report. Elements of a financial statement finding –Criteria –Condition –Cause –Effect –Recommendation

Federal Award Findings “A-133 Report” or “Major Program Report” Focus on major programs – Internal control over major programs – Noncompliance with laws, regulations, contracts, or grant agreements related to major programs Elements of a Federal award finding –Federal program identification –Criteria –Condition –Questioned costs –Information to judge perspective –Effect –Recommendation

Internal Control Deficiencies Significant deficiency vs. material weakness Financial statement findings – Deficiencies in internal control over financial report. – Examples Inadequate controls for safeguarding of assets. Inadequate segregation of duties in the procurement and disbursement process. Federal award findings – Deficiencies in internal control over major program compliance. – Examples Lack of management review and approval of financial status reports. Files of program beneficiaries do not include documentation verifying eligibility.

Material Noncompliance Financial statement findings – Violations of provisions of contracts or grant agreements that could have a material effect on the financial statements. – Examples Employees did not provide I-9 or W-4 forms to HR department. Grantee is using an incorrect indirect cost rate. Federal award findings – Instances of material noncompliance with requirements applicable to the major programs. – Examples Program funds were used for non-program purposes. Grantee did not submit financial status reports.

What is it? OMB-issued document to assist auditors in performing single audits. Issued annually (every Spring). OMB issued the 2009 Supplement on May edition is 1,259 pages long edition includes 165 programs.

Purpose Identifies existing important compliance requirements that the Federal government expects to be considered as part of a single audit. Without the Supplement, auditors would have to research the laws and regulations for each program to identify the requirements. More efficient and cost-effective single audit. Use of the Supplement is mandatory.

Important Requirements Activities Allowed or Unallowed Allowable Costs/Cost Principles Cash Management Davis-Bacon Act Eligibility Equipment and Real Property Management Matching, Level of Effort, Earmarking Period of Availability of Federal Funds Procurement, Suspension and Debarment Program Income Real Property Acquisition and Relocation Assistance Reporting Subrecipient Monitoring Special Tests and Provisions

Part 2 Matrix of Compliance Requirements Identifies the programs in the Supplement. – Federal agency – CFDA number Associates each program with the applicable requirements.

Part 3 Compliance Requirements Describes each of the 14 requirements. – General description – Audit objectives – Suggested audit procedures

Part 4 Agency Program Requirements Detailed listing of the 165 programs Program objectives, procedures, and requirements specific to each program. Most common program-specific requirements – Activities Allowed or Unallowed – Eligibility – Matching, Level of Effort, Earmarking – Period of Availability – Reporting – Special Tests and Provisions

Auditor’s Process 1.Review program listing in Part 2 to identify applicable requirements. 2.Follow Part 3 guidance for testing applicable requirements (Internal control and compliance). 3.Review Part 4 to identify which of the applicable requirements have program-specific requirements, and test accordingly.

The Department’s Role Prepare and submit program write-ups for inclusion in the Supplement. Review and revise, as necessary, the program write-ups already in the Supplement.

Revision Timeline Mid- to Late-SeptemberCore Team Kick-Off Meeting First week of OctoberAgency submits list of programs to be added or existing programs that require major re-writing First week of NovemberAgency submits drafts of added programs and major re-writes of existing programs Second week of NovemberAgency submits information on all other existing programs December – MarchVetting and clearance – contractor, OMB, agencies, Core Team, other constituencies AprilIssuance

COMPLIANCE SUPPLEMENT AND THE ARRA

2009 Supplement Appendix VII Background CFDA numbers – new or existing ARRA awards and major programs Award terms and conditions Presentation of ARRA awards in schedule of expenditures of federal awards Informing subrecipients

June 30, 2009 Addendum Listing of all new and existing CFDA numbers used to award ARRA funds Review of internal controls Special tests and provisions – separate accountability for ARRA funding – capability to manage increased funding under ARRA – competitive contracting Detailed write-ups (like Part 4) for ARRA programs

Future Addenda OMB will issue additional addenda as needed. – September 30 ? – December 31 ? Between the issuances of the addenda: – Recovery.doi.gov Recovery.doi.gov – – “Recovery Oversight Office” – Recovery.gov Recovery.gov

Contact Information Phone: Fax: Mail:Department of the Interior Office of Inspector General Sunrise Valley Drive Suite 230 Reston, VA 20191