1. Federal Government Standards For Internal Control – Green Book
Terenzio Volpicelli, CPA, Partner
Tony Roselli, CPA, CGMA, Partner
Roselli, Clark and Associates
MA Municipal Accountants &Auditors Association Amherst, MA – March 13, 2017

2. Agenda Uniform Guidance Internal Controls Green Book/COSO
How does a community implement
Single Audit Report/Management Letter

3. Uniform Guidance
Title 2 US “Code of Federal Regulations” (CFR) Part 200, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards”
Referred to as “The Uniform Guidance”
Issued December 26, 2013 with an effective date for audits of fiscal years that begin after December 26, 2014 for non-Federal entities; (Massachusetts for fiscal years ending June 30, 2016 forward)

4. Uniform Guidance Non-Federal entities include:
States and Commonwealths
Agencies of States and Commonwealths
United States possessions
Indian Tribal Governments
Cities
Towns
School Districts
Special Purpose Districts
Housing Authorities
Redevelopment Authorities
All other Authorities and Districts
Non-Public Organizations

5. Uniform Guidance
Replaces the requirements under OMB A-133 and all eight previous OMB circulars in place prior to December 26, 2013
Includes many major changes
Objective of changes is to focus on higher dollar, higher risk rewards
End goal is to reduce administrative burden and the risk of fraud, waste and abuse

6. Uniform Guidance Major changes include:
Raised previous single audit requirement of $500,000 in federal expenditures to $750,000
Modified the manner in selecting major programs for audit
Increased threshold for questioned costs from $10,000 to $25,000
Introduced new internal control requirements ( and )

7. Uniform Guidance Evolution of Single Audit
1984 – OMB A-128 – threshold for audit was $100,000 in receipts; $25,000 for major programs
1997 – OMB A-133 – threshold for audit was $300,000 in expenditures; $100,000 for major programs
2003 – OMB A-133 increased threshold for audit to $500,000 in expenditures; $300,000 for major programs
2016 – The Uniform Guidance increased threshold for audit to $750,000 in expenditures; $750,000 for major programs
Expected to reduce number of required audits by 5,000

8. Uniform Guidance

9. Internal Control

10. Internal Control
The Uniform Guidance recommends that this internal control system be based on a recognized internal control framework
GAO – Green Book
COSO – Committee of Sponsoring Organizations – Treadway Commission

11. Internal Control

12. Internal Control
The use of the word “should” has raised some concern as it seems to imply that adopting an internal control framework is optional. However, Federal officials [and the AICPA] have made it clear that where Federal programs require effective internal controls, the expectation is that these systems meet or exceed the standards set by GAO.
Source: National Grant Management Association

13. Internal Control

14. Green Book/COSO
Green Book defines internal controls as a process affected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity are achieved. It is the first line of defense in safeguarding public resources.

15. Green Book/COSO

16. Green Book/COSO What are the objectives the Green Book is speaking to?
Operations – effectiveness and efficiency of operations
Reporting – reliability of reporting for internal and external use
Compliance – compliance with applicable laws and regulations [including The Uniform Guidance]
The Green Book’s internal control framework, which consists of five components of internal control, is remarkably consistent with the COSO internal control framework as illustrated on the following slide:

17. Green Book/COSO

18. Green Book/COSO

19. Green Book/COSO

20. How does a Community Implement
How does my community implement?
Become familiar with Green Book
Understand the 5 components
Understand the 17 principles
Review handout with guidelines

21. How does a Community Implement
Common inquiry
So, I have this Internal Control Manual for Federal Grants template that MASBO provided by School Business Manager. Can’t I just change the names in this report and be done with this?
The MASBO controls manual is very good. However, it is one component of the internal control system. It addresses the Control Activities component of internal control. It does not address the other 4 components.
The MASBO controls manual likely doesn’t cover your CDBG, public safety and other significant grants.

22. Single Audit Report/ Management Letter
Impact of non-compliance
Informational item - warning in fiscal year 2016 (just passed)
Management Letter finding in fiscal year 2017
Management Letter finding and Single Audit significant deficiency in fiscal year 2018

23. Questions