Implementation of the American Recovery and Reinvestment Act A local government perspective Jerry E. Durham, CPA, CGFM, CFE 1

Implementation of ARRA in Tennessee 2

 County Audit Response to ARRA:  Additional Audit/Review Procedures:  Completing a Questionnaire for all ARRA grants.  Performing real-time audit procedures (commando raids).  Put governments on notice that we are looking.  Determine the ability to report for direct grants.  Established New Investigative Team  Composed of four investigators  Headed by Kevin Huffman, Investigative Coordinator 4

Implementation of ARRA in Tennessee  County Audit Response to ARRA:  Results of Real-time ARRA grant reviews:  Forty-six grants amounting to $15,389,964 in 11 Counties.  Four grants did not have separate accounting records.  Segregation of Duties controls were inadequate for 13 grants.  Risk Assessments had not been performed for 13 grants.  Action Plans had not been prepared for nine grants.  Section 1512 reports had not been filed for two direct grants. 5

Implementation of ARRA in Tennessee 6

Implementation of ARRA 7 State – Prime Recipient Subrecipient or Vendor Local Govnt. - Prime or Sub- recipient Local Govnt. - Prime or Sub- recipient Federal

Implementation of ARRA 8 County or City FundsFunds BudgetsBudgets Types of FundsTypes of Funds DepartmentsDepartments Compon- ent Units SchoolsSchools E-911E-911 Other Agencies Development DistrictsDevelopment Districts Human Resource AgenciesHuman Resource Agencies State AgenciesState Agencies

Implementation of ARRA 9 TARPARRA 787 B Unprecedented Transparency & Accountability OMB, GAO, IGs, RATB, TRAM 700 B No Transparency & Accountability

Implementation of ARRA Before - Non-ARRA Grant After - ARRA grant 10 Title 1 Grant Amount = $500,000 Certain Allowable Costs Old CFDA Number Standard Risk Assessment to determine high risk programs. Normal Reporting Title 1 ARRA Grant Amount = $500,000 Same Allowable Costs New CFDA Number Defined by OMB as High Risk Normal reporting plus new reporting to TRAM Track and/or Federalreporting.gov

Implementation of ARRA Before - Non-ARRA Grant After - ARRA grant 11 Title 1 Grant (cont’d) Amount = $500,000 Not a cluster program A-133 Internal Control requirements – N/A Ability to identify grants Title 1 ARRA (cont’d) Amount = $500,000 New Cluster Program A-133 Internal Control Requirements plus TRAM requirements+? – Risk Assessment – Action Plan Separate Accounting

Implementation of ARRA Before - Non-ARRA Grant Before - ARRA grant 12 Title 1 Grant (cont’d) Amount = $500,000 N/A Compliance Req. N/A What if this amount was $1,500,000? Title 1 ARRA (cont’d) Amount = $500,000 Track Jobs Created/Retained More Compliance Req. Subject to IGs Audit

Implementation of ARRA  Status Report:  For June 30, 2009, very few grants were actually received (39 Audits = 8 grants for $4,265,852).  Most ARRA grants will be received for FYE June 30,  Jobs created to date are relatively few (TN. First Report, 9/30/09 for Grants = 8754.)  OIGs are coming. (DOE, Justice, USDA) 13

Implementation of ARRA  What this means to You - General:  Laser beam focused on auditors and governments.  Single Audits performed in the same way generally.  Recipients Signed a contract to follow TRAM Directives.  Recipients Signed a contract to follow ARRA. (Standard Terms and Conditions for ARRA Grants).  (e.g. Should contain requirement to report Fraud, Waste, and Abuse to appropriate IG - M & M-09-15) 14

Implementation of ARRA  What this means to You:  Compliance Supplement Addendum #1  Effective for Single Audits performed on or after June 30,  Cross-cutting requirements:  Cannot use ARRA funds for Casino, Gambling Establishment, Aquarium, Zoo, Golf Course, or swimming pool.  Davis Bacon Act Applies.  Buy American provision for Public Building Projects.  Identify to first-tier subrecipients requirements to register with CCR including obtaining a DUNS number. 15

Implementation of ARRA  What this means to You:  Compliance Supplement Addendum #1 (cont’d)  Cross-cutting requirements (cont’d):  Special Tests and Provisions:  Separate accountability in accounting records.  Separate Identification and presentation of ARRA grants on SEFA and Data Collection Form.  Communication to subrecipients of ARRA award information including Federal Award Number, CFDA number, amount of ARRA funds, and separate identification requirements on SEFA and Data Collection Form. 16

Implementation of ARRA  What this means to You:  Compliance Supplement Addendum #1 (cont’d)  New Reporting to Federalreporting.gov.  Major Program Determination:  Methodology used to identify A & B programs is unchanged.  Any federal award that exceeds the Type A threshold and contains “any” amount of ARRA expenditures is automatically a high-risk Type A program.  Any cluster exceeding the Type A threshold that includes an ARRA program is considered a “new” program and would automatically be a high-risk Type A program. 17

Implementation of ARRA  What this means to You:  Compliance Supplement Addendum #1 (cont’d)  Changes have been made to program-specific requirements.  OMB anticipates additional amendments to compliance supplement. They will be effective for various dates.  In the future, extensions of time to submit the Single Audit will be difficult, if not impossible, to get approved.  In the future, submission deadline will be less that nine mos. 18

Implementation of ARRA  What this means to You:  Compliance Supplement Addendum #1 (cont’d)  Monitoring Subrecipients  Whitehouse.gov/omb/circulars_a133_compliance_09toc 19

Implementation of ARRA  What this means to You:  ARRA Reporting Requirements:  M-09-21guidance (whitehouse.gov/omb/recovery_default):  Report no later than 10 th day after the end of each calendar quarter beginning on September 30,  Prime recipients may delegate reporting responsibilities.  Subrecipients are non-federal entities that are awarded funding through a legal instrument of the prime recipient. Terms and conditions of the Federal award are carried forward to the subrecipient. A vendor is not a subrecipient.  Prime recipient must report the identity of any vendor that receives payments of over $25,000.  Subrecipients may be required by the prime recipient to report certain data elements. 20

Implementation of ARRA  What this means to You:  ARRA Reporting Requirements (cont’d):  M guidance (cont’d):  Reporting will begin the quarter in which an award is made.  Reporting is on a cumulative basis (except jobs).  Ramifications of non-compliance with reporting requirements.  Flagged as non-compliant.  Withholding funds.  Termination.  Suspension and debarment.  How to report payments.  Key activities and time frames. 21

Implementation of ARRA  What this means to You:  ARRA Reporting Requirements (cont’d):  M guidance (cont’d):  Key Activities and Time Frames (Original)  Days  Days  Days  Day 30  Extensions for Late Filing? 22

23 In-bound Recipient Reporting (FederalReporting.gov) Timeline and Activities Next quarterly reporting cycle begins- updates reflected cumulatively Agency, Prime and Sub Recipient Registration 1 – 15 days after end of Quarter 16 – 22 days after end of Quarter 23 – 29 days after end of Quarter 30 days after end of Quarter Prime Recipients & Subs Enter Draft Reporting Data Initial Submission days after end of Quarter Prime Recipients Review Data Submitted By Sub(s) 3 Prime Recipients & Subs Make Corrections 4 Agency Review of Data Submitted Recipient Reports Published on Recovery. gov Prime Recipients & Subs Make Corrections Agency “View Only”Agency Comment Period Continuous days after end of Quarter Recipient Report Adjustments Possible Report Status: Draft Initial Submission Final Submission Published

24

Implementation of ARRA  What this means to You:  ARRA Reporting Requirements (cont’d):  M guidance (cont’d):  Illustration – Federal agency awards $1,000,000 ARRA grant to University A. A spends $200,000 to purchase equipment from XYZ Corp. A sub-awards the $500,000 to University B. B spends $50,000 to purchase equipment from 123 Corp.  Aggregate payments less than $25,000.  Sub-awards  Payments to individuals  Payments to vendors 25

Implementation of ARRA  What this means to You:  ARRA Reporting Requirements (cont’d):  M guidance (cont’d):  Calculating the number of jobs.  Full-time equivalents basis.  Collecting information from subrecipients and vendors  Direct jobs vs. Indirect jobs.  New Guidance (M-10-08, 12/18/09)  Simplified calculation.  Report Jobs for each quarter rather than cumulative. 26

Implementation of ARRA  What this means to You:  Other OMB Guidance:  M and 15 guidance.  Standard terms and conditions. 27

Implementation of ARRA  What this means to You:  OMB General:  Pilot Project (Internal Controls Reporting).  AICPA Letter.  Not responsible for auditing Job count.  Build America and Cobra compliance not subject to Single Audit.  Capacity not subject to audit.  No more extensions to complete Single Audits.  Be sure private information is protected since on website. 28

Implementation of ARRA  What this means to You:  OMB General (cont’d):  Enter findings on Data Collection Form next year.  Report as a cluster when grant is “expended”.  M-10-05, 11/30/09.  Identifying and Reporting Noncompliance.  M-10-08, 12/18/09.  Changes to job number calculations.  Additional Guidance is coming. 29

Implementation of ARRA  What this means to You:  GAO:  Fraud, Waste, and Abuse.  First report on Compliance with Section  RATB:  New reporting will be required of all grants in the future.  Late Filing Extensions. (9/30, and 12/31) 30

Implementation of ARRA  What this means to You:  Inspector General Report (DOE):  Internal Controls.  Capacity.  Communication.  Reports to Three Local Education Agencies  Correct Previous Dept. of Audit Findings 31

Implementation of ARRA  What to anticipate:  We anticipate numerous findings related to the TRAM Directives and reporting. These findings will be reported to the Federal Government to be posted on their website. Based on our experience, we do not expect wide-spread fraud.  Lessons from 9/11/ Abuse. Vs. TARP/ARRA. We are now required to report abuse.  Prosecutions – President, RATB, Comptroller, DAs. 32

Implementation of ARRA  What to anticipate:  Direct Grants reporting noncompliance.  Subrecipient monitoring responsibilities noncompliance.  Fraud in contracts. 33

Implementation of ARRA  Transparency and Accountability Funding:  Inspector Generals = $224,000,000.  GAO = $25,000,000  Recovery Act Transparency Board = $84,000,000  OMB = ??  Department of Audit = $0,000,

Implementation of ARRA Ten Steps to ARRA Compliance: – The following websites are of importance with regard to ARRA compliance: – Federal ARRA Information Website – – Website where all ARRA grant revenues and expenditures are reported by grant recipients. – - ARRA General Information website for the State of Tennessee. – -Tennessee Comptroller’s General Information and ARRA Website. 35

Implementation of ARRA  Recovery Act and Related Bonds:  Build America Bonds.  Recovery Zone Economic Development Bonds.  Qualified School Construction Bonds.  Qualified Energy Conservation Bonds.  Qualified Zone Academy Bonds.  Other Bonds. 36

Implementation of ARRA How do we deal with ARRA? 37

Implementation of ARRA  How do we deal with ARRA?  A simple solution.  Responses to current internal control and questioned cost findings.  A place to start for Local Governments - County/Municipal Audit ARRA websites. 38

39 ARRA Questions? Jerry E. Durham, CPA, CGFM, CFE Technical Manager Division of County Audit The Opinions expressed during this presentation were my own. They do not necessarily represent the views of the Comptroller, his representatives, or the Department of Audit.