Audits of Federal Awards AGA-Olympia October 20, Brad White, SAO

TOPICS Increase in the Single Audit Threshold Frequent Federal Findings Payroll Time and Effort Cash Management Reminder Suspension and Debarment Change Subrecipient Monitoring Guidance DUNS number Title 2 – Regulations are on the move!

What is a Single Audit? An audit conducted under OMB Circular A-133 that encompasses: (1)Federal Awards (a.k.a., “major programs”) Internal Controls over Federal Awards Compliance With Federal Requirements Schedule of Expenditures of Federal Awards (2) Opinion on Financial Statements

Who Needs a Single Audit? State of Washington Single Audit (SWSA) Any local government that expends over $500,000 in federal awards in a year. Any Not-for-Profit that expends over $500,000 in federal awards in a year. NOTE: The threshold changed from $300,000 to 500,000 for all audits of FY04.

Impact of Change in A-133 Threshold Fewer single audits performed at local governments in Washington. More monitoring needed by state agencies. Fewer single audits nationwide.

What Types of Federal Awards are Covered under A-133? Grants Loans Commodities / Vaccines Equipment / Supplies Program Income Cooperative Agreements

What Areas are Examined?

What Findings Are Reported? Internal Control Weaknesses Material Non-Compliance Questioned Costs exceeding $10,000 Known Fraud

State Agency Findings FY93-03 Allowable Costs / Cost Principles80 Eligibility 21 Reporting19 Cash Management17 Subrecipient Monitoring15 Procurement 3 Suspension and Debarment 3 Matching, Level of Effort, Earmarking 2 Period of Availability 2 Program Income 1 Davis-Bacon Act 1 Schedule of Exp of Federal Awards 1

Local Governments FY99-04 Frequency of Occurrence Allowable Costs / Cost Principles54% Davis-Bacon Act 5% Schedule of Exp of Federal Awards 5% Eligibility of Participants 5% Recording and monitoring expenditures 4% Matching, Supplanting, Earmarking 4% Procurement/Suspension & Debarment 4% Cash Management 4% Subrecipient Monitoring 4% Audit Reporting Delay 3% Accurate Financial/Program Reports 2% Period of Availability 2% Other: (Equipment; Grant specific areas) 4%

Suspension and Debarment “Covered transactions” include: All non-procurement transactions (e.g., grants, loans, cooperative agreements) – this includes awards to subrecipients. Procurements over $25,000 made under a covered non-procurement transaction.

How to Comply? Suspension and Debarment – Perform one of the following for your lower tier transactions: a)Checking the Excluded Parties List System (EPLS) at or subscribing to the hard copy; b)Collecting a certification from the person; or c)Adding a clause or condition to the covered transaction with the person.

How to Comply? THIS SLIDE IS NOT IS NOT IN YOUR HANDOUT Suspension and Debarment -- In addition to checking the status of your lower tier party (e.g., contractor or subrecipient), you must also inform the lower tier party in writing that they must ensure that any of their covered transactions meet these rules and that they must communicate these rules to the next lower tier.

Payroll Time and Effort OMB Circular A-87 ATTACHMENT B - Section 8(h) Single cost objective employees must prepare semi-annual certifications. Multiple-activity employees must prepare monthly personnel activity reports.

Multiple Cost Objective Time and Effort Reports must reflect an after-the-fact accounting of the actual activity of the employee. Reports must account for the total activity for which the employee is compensated. Reports must be signed. Reports must be prepared monthly.

Cash Management Subrecipient Awards: Pass-through agencies must limit payments to the subrecipient’s immediate cash needs. Local governments should not maintain an excessive cash balance.

Subrecipient Monitoring Incorrectly classifying subrecipients as “vendors”. Not informing subrecipients of pertinent federal requirements (e.g., A-87, A-133, CFDA numbers). Not reviewing subrecipient financial records to ensure costs are allowable.

Subrecipient Monitoring “Pass-through entities should not rely on audit reports as their only monitoring tool.” “Monitoring activities normally occur throughout the year and may take various forms.”

Homeland Security Awards THIS SLIDE IS NOT IS NOT IN YOUR HANDOUT Equipment and supplies purchased with federal funds are subject to audit under Circular A-133. Recipients of “equipment” must keep property records and perform a physical inventory every two years. Pass-through agencies should inform its subrecipients of these requirements and periodically monitor for compliance.

How Much is Enough? The nature and extent of your monitoring depends on: The number of subrecipients. Dollar amount awarded to subs. Complexity of program. Subrecipient’s experience level and audit history. Pass-Through staffing needs.

What is the DUNS? The Data Universal Numbering System (DUNS) number is a unique nine digit identification number provided by the commercial company Dun & Bradstreet (D&B). This number is reported on the Data Collection Form. If you have multiple DUNS numbers … good luck!

Title 2 of the CFR OMB is beginning to relocate the following circulars under a single CFR – Title 2: Circular A-102Circular A-122 Circular A-110Circular A-133 Circular A-21Suspension/Debar. Circular A-87Lobbying guidance

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