© Grant Thornton. All rights reserved. Uniform Grants Guidance Update Jack Reagan, Audit Partner Grant Thornton LLP

© Grant Thornton. All rights reserved. Objectives What’s New with OMB: Uniform Administrative Requirements, Cost Principles, and Audit requirements for Federal Award “The Uniform Grant Guidance (UGG)” -Understand the overview/history of the UGG -Describe the major changes effective this year -Summarize how changes affect your entity, procedures and documentation -Describe changes to the compliance supplement 2

© Grant Thornton. All rights reserved. Challenge & Impact Challenge Under Previous GuidanceImpact of New Uniform Guidance 1. Eight Overlapping Sets of Compliance Requirements Eliminate Duplicative and Conflicting Guidance 2. High Levels of Administrative BurdenPerformance and International Controls Over Compliance for Accountability 3. Hundreds of Forms with Non-Standard Data Definitions Provides Framework for Standard Business Processes & Data Definition 4. Outdated Guidance Does Not Account for Modern Electronic Work Environment Promotes Efficient Use of IT and Shared Services 5. Inconsistent and Non-Transparent Treatment of Costs Requires Consistent and Transparent Treatment of Costs 6. Lack of Support for Policies with Work-Life Balance Encourages Non-Federal Entities to Have Family-Friendly Policies 7. Audit Findings Repeated Each Year = Waste Stronger Oversight & Target Audits on Risk of Waste, Fraud, and Abuse 8. Lack of Accountability for Effectively Correcting Financial Integrity Weakness Increased Accountability for Effective Resolution of Weaknesses 3

© Grant Thornton. All rights reserved. Guidance Reform History Nov. 2009: Executive Order: Reduce Improper Payments Feb. 2013: Notice of Proposed Guidance (public comments) Feb. 2011: Presidential Memo: Reduce Administrative Burden Dec. 2013: Final Uniform Guidance Feb. 2012: Advance Notice of Proposed Guidance (public comments) 4

© Grant Thornton. All rights reserved. Eliminating Duplicative and Conflicting Guidance A-102 & A-89 A-87 A-133 & A-50 A-110 A-21 A-110 A-122 Awards Received Subawards to universities Subawards to nonprofits Now: all OMB guidance streamlined in 2 CFR 200. Then: Grantee/Grantor must follow 5

© Grant Thornton. All rights reserved. Process Changes Driven by New Guidance Internal Control – Section Procurement – Section , 319 and 320 Personnel Costs – Section i 6

© Grant Thornton. All rights reserved. Internal Control must establish and maintain effective internal control over federal award in accordance with COSO comply with federal statutes, regulations and terms of awards evaluate and monitor the recipient's compliance with statute, regulations and terms and conditions of federal awards take prompt actions when instances of noncompliance are identified, including noncompliance identified in audit findings take reasonable measures to protect personally identifiable information 7

© Grant Thornton. All rights reserved. Procurement must use its own DOCUMENTED policies and procedures which reflect applicable federal, state and local laws must maintain oversight to ensure contractors perform in accordance with terms of the contracts procedures must be designed to avoid acquisition of unnecessary or duplicative items, including documenting an analysis of lease vs. buy considerations encouraged to use intergovernmental agreements where appropriate encouraged to use federal surplus property in lieu of purchasing encouraged to use "value engineering" clauses in construction projects of sufficient size 8

© Grant Thornton. All rights reserved. Procurement must maintain records sufficient to detail the history of the procurement –rationale for method of procurement –selection of contract type –contractor selection or rejection –basis for contract price may use time and materials only under certain circumstances –no other contract manner is suitable –terms include a contract ceiling that the contractor exceeds at its own risk must include a clear and accurate description of the technical requirements of the material, product or service identify all requirements which must be fulfilled in evaluation of bids 9

© Grant Thornton. All rights reserved. Procurement Competition must be conducted in a manner providing full and open competition the following are considered restrictive of competition –placing unreasonable requirements on firms in order to qualify –requiring unnecessary experience or bonding –noncompetitive contracts to consultants that are on retainer –organizational conflicts of interest –specifying only "brand name" products instead of allowing an "equal" product to be offered must be conducted in a manner that prohibits the use of statutorily or administratively imposed state or local geographic preference in evaluation of bids and proposals 10

© Grant Thornton. All rights reserved. Documentation of Personnel Costs (Time and Effort Reporting) must be based on records that accurately reflect the work performed –be supported by a system of internal control providing reasonable assurance that charges are accurate, allowable and properly allocated –be incorporated into the official records –reasonably reflect the total activity for which employee is compensated –encompass both federally assisted and all other activities compensating the employee –comply with established accounting policies and procedures –support the distribution of salary among specific activities or cost objectives if the employee works on more than one Federal award 11

© Grant Thornton. All rights reserved. Documentation of Personnel Costs (Time and Effort Reporting)- Budgeted Payroll Amounts Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: –The system for establishing the estimates produces reasonable approximations of the activity actually performed; –Significant changes in the corresponding work activity are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and –The system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. 12

© Grant Thornton. All rights reserved. Documentation of Personnel Costs (Time and Effort Reporting)- Statistical Sampling for Payroll Allocation The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results The entire time period involved must be covered by the sample The results must be statistically valid and applied to the period being sampled Allocating charges for the sampled employees’ supervisors, clerical and support staffs, based on the results of the sampled employees, will be acceptable 13

© Grant Thornton. All rights reserved. New Subrecipient Definition Determines who is eligible to receive what federal assistance Has its performance measured in relation to whether federal program objectives were met Has responsibility for programmatic decision making Is responsible for adherence to applicable federal program requirements Uses the federal funds to carry out a program for a public purpose specified as opposed to providing goods or services for benefit of pass through entity 14

© Grant Thornton. All rights reserved. Pass Through Entities Must Ensure every subaward is clearly identified: –Federal award identification –Subrecipient name –Federal award identification number –Federal award date –Subaward period of performance –Total amount of federal award –Federal award project description –Name of federal awarding agency and contact official –CFDA number and name –Indirect cost rate applicable for the award 15

© Grant Thornton. All rights reserved. Pass Through Entities Must Evaluate each subrecipients risk of noncompliance –Subrecipient’s prior experience with same award –Results of previous audits –Whether subrecipient has new personnel or new systems –Extent and results of federal monitoring Monitoring activities should include –Reviewing financial and programmatic reports –Follow up on deficiencies detected through audits and on site reviews –Issuing management decisions for audit findings 16

© Grant Thornton. All rights reserved. Pass Through Entities Must No safe harbors –you must do your own risk assessment and monitoring Very high degree of visibility at federal level –increased oversight –increased number of site visits 17

© Grant Thornton. All rights reserved. Audit Threshold Raise audit threshold from $500K to $750K. Still will cover 99.7% of all federal awards with a Single Audit 81% of all recipients will still receive a Single Audit 5,000 out of 37,500 entities that previously received a Single Audit will no longer get one 18

© Grant Thornton. All rights reserved. Major Program Determination Federal Awards ExpendedType A/B Threshold >$750,000 but < $25 Million$750,000 >$25 Million but < $100 Million.03 x federal awards expended >$100 million but < $1 Billion$3 Million >$1 Billion but < $10 Billion.003 x federal awards expended >$10 Billion but < $20 Billion$30 Million >$20 Billion.0015 x federal awards expended 19

© Grant Thornton. All rights reserved. Low Risk Auditee Status Two year lookback on the following: single audits performed –including whether submitted to clearinghouse timely unmodified GAAP opinion no GAGAS material weaknesses no material weaknesses on internal control at major program level no modified opinion on compliance at major program level no known or likely questioned costs that exceed 5% of program expenditures 20

© Grant Thornton. All rights reserved. Type B Program Risk Assessments Must only do risk assessments on Type B programs until arrive at ¼ the number of low risk type A programs Need only perform risk assessments on the Type B programs that exceed 25% of the Type A program threshold other historical Type B risk assessment considerations apply 21

© Grant Thornton. All rights reserved. Percentage of Coverage High risk auditee – 40% of federal awards expended Low risk auditee – 20% of federal awards expended 22

© Grant Thornton. All rights reserved. Audit Findings: MUST include Federal program name and CFDA # Pass-through entity (if applicable) Criteria - what is requirement Condition – what did you find Statement of Cause Possible asserted effect Questioned costs Information to provide proper perspective - # of errors, size of sample, size of population (also known as context) 23

© Grant Thornton. All rights reserved. Audit Findings: What MUST be included Whether or not repeat finding Recommendations Views of responsible officials 24

© Grant Thornton. All rights reserved. Audit Findings Follow Up by Auditee Must prepare a summary schedule of prior audit findings –If corrected, list the prior finding and state corrective action was taken –If partially corrected or not corrected, must describe the reasons for the finding’s recurrence and planned corrective action taken. –If auditee believes finding is no longer valid, must describe position why no longer valid and must include: o Two years have passed since finding reported to FAC o Federal agency is not following up with auditee on finding o Management decision was not issued 25

© Grant Thornton. All rights reserved. Audit Findings Follow Up by Auditee Corrective Action Plan elements –Address each audit finding in current year report –Name of contact person responsible for remediation –The remediation plan –Completion date for remediation plan –If disagree with audit finding, reasons behind disagreement must be disclosed 26

© Grant Thornton. All rights reserved. Questioned Costs Known questioned costs > $25k Likely questioned costs > $25k 27

© Grant Thornton. All rights reserved. Single Audit Reporting Package Audited Financial Statements –Financial statement reporting period must agree with single audit reporting period Audited Single Audit report –Letter of internal control over financial reporting. If separate letter was issued, need to include in issued report –Letter of internal control and compliance over major programs –Schedule of Expenditures of Federal Awards (SEFA) –Schedule of findings and questioned costs 28

© Grant Thornton. All rights reserved. Single Audit Reporting Package Summary Schedule of Prior Audit Findings Corrective Action Plan, don’t forget: –employee contact information –Timeframe when corrective action will be implemented Data Collection Form, the earlier of: –30 days after issuance or, –9-months after year end –Non-compliance results in a reportable finding 29

© Grant Thornton. All rights reserved. Single Audit Report: SEFA Reminder Schedule of Expenditures of Federal Awards (SEFA)- Required Elements –Individual federal programs by federal agency –Catalog Federal Domestic Award # (CFDA#) –For awards received as subrecipient, name of pass through entity and identifying number assigned. –Include total amount provided to subrecipient. May be reported in the notes to the SEFA or on the face of the SEFA. 30

© Grant Thornton. All rights reserved. Single Audits: Public Document Federal Audit Clearinghouse (FAC) will make the reporting packages available to the public. For Subrecipients: only required to submit report to FAC & no longer required to submit to recipient For Pass-through entities: no longer required to retain copy of subrecipient single audit 31

© Grant Thornton. All rights reserved. Audit Applicability: When do the changes affect you OMB implemented the New Uniform Grant Guidance, December 26, Federal agencies had 6-months to comply. Nonprofits, colleges, universities and state and local governments must comply for audits of fiscal years beginning after December 26, 2014 (i.e..Calendar year 2015 or Fiscal year 2016) 32

© Grant Thornton. All rights reserved. Other Major Changes Indirect cost rates –combined 4 circulars with different guidance into a single piece of guidance –generally will result in lower rates as rules are tightened Single Audit Coordinator at each federal agency –single point of contact at each federal agency –will drive subrecipient monitoring –faster management decisions –more robust oversight 33

© Grant Thornton LLP. All rights reserved. 34 What questions do you have? Jack Reagan Audit Partner (703)