Subrecipient Monitoring Under the Office of Management and Budget’s Circular A-133 Presented to the American Association of State Highway and Transportation Officials 2011 Conference July 27, 2011 Dianne E. Ray, State Auditor

Agenda Subrecipient monitoring basics Taking it a step further Risk-based approach Suggestions Questions/comments

Objectives Provide some basic information and address common concerns related to subrecipient monitoring for internal auditors, external auditors, and other stakeholders

Basics OMB’s Circular A-133 Compliance Supplement outlines requirements for auditors related to subrecipient monitoring Includes collecting audit reports for applicable subrecipients and reviewing findings

Basics, Continued Circular A-133 Responsibilities, Subpart D— Federal Agencies and Pass-Through Entities (Section.400) – Identify Federal awards to subrecipients – Advise subrecipients of requirements under law – Monitor activities of subrecipients to ensure award used for authorized purposes – Ensure subrecipients receiving more than $500k are meeting audit requirements

Basics, Continued – Issue a management decision letter on findings within 6 months of receipt of audit report and follow up on subrecipeint action – Consider if subrecipient audit report necessitates adjustment of entity’s own records – Require subrecipients to allow entity and auditors to have access to all applicable records

Basics, Continued Specific Compliance Requirements, a pass- through entity is responsible for: – Determining subrecipient eligibility – Central contractor registration – Award identification – During-the-award monitoring – Subrecipient audits – Ensuring accountability of for-profit subrecipients – Pass-through entity impact

Basics, Continued Factors that may affect the nature, timing, and extent of during-the-award monitoring: – Program complexity – Programs with complex compliance requirements have a higher risk of noncompliance – Percentage passed through – The larger the percentage of program awards passed through the greater the need for subrecipient monitoring – Amount of Awards – Larger dollar awards of greater risk – Subrecipient risk – Subrecipients may be evaluated as higher risk or lower risk to determine the need for closer monitoring. Generally, new subrecipients would require closer monitoring. For existing subrecients, may require closer monitoring if (1) history of noncompliance, (2) new personnel, (3) new or substantially changed system

Basics, Continued Forms of monitoring noted in Compliance Supplement: – Reporting – Reviewing financial and performance reports submitted by subrecipients – Site visits – Performing site visits at the subrecipient to review financial and programmatic records and observe operations – Regular contact – Regular contacts with subrecipients and appropriate inquiries concerning program activities

Take This a Step Further Is reviewing the audit reports enough? – No. Can’t rely on audit report alone to meet federal requirements A risk-based approach should be developed to determine what other steps are needed

Risk-Based Approach Audit reports may not have findings related to your transportation program because it may not be considered a major program at the subrecipient level Still need to consider risks for program at the statewide level May need to do additional monitoring of subrecipients to provide adequate coverage for federal program requirements

Suggestions Network with other state agencies that may have more experience with Single Audit issues. – Such as your state’s Department of Human/Social Services or state’s transportation departments

More Suggestions The Compliance Supplement is not a secret Let your subrecipients and program staff know that the Compliance Supplement is the basis for audits and it should be reviewed each year Compliance Supplement – compliance_supplement_ compliance_supplement_2011.

Questions/Comments ???

Contacts Colorado Office of the State Auditor – –