UNIVERSITY OF TEXAS AT ARLINGTON OMB A133 AUDIT

UNIVERSITY OF TEXAS AT ARLINGTON OMB A-133 AUDIT UPDATE 501 W. President George Bush Highway · Suite 130 · Richardson, Texas 75080 Phone: 972. 669. 9730 · Fax: 972. 238. 1286 · Website: www. pdshcpas. com Members American Institute of Certified Public Accountants and Texas Society of Certified Public Accountants

Learning Objectives UNDERSTAND THE IMPACT OF THE NEW UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS Ø Effective Dates Ø Nonfederal entities’ responsibilities for internal control and evaluation and monitoring of compliance with federal statutes, regulations and terms and conditions of federal awards Ø New procurement standards Ø Requirements for Pass-Through Entities Ø Effect on indirect cost rates Ø Changes in audit requirements, major program determination and determination of low risk and other than low risk auditee DESCRIBE THE KEY CHANGES TO THE OMB CIRCULAR A-133 2015 FINAL COMPLIANCE SUPPLEMENT Ø Part 3 Compliance Requirements includes transition guidance in effect for continuing federal awards under A-133 requirements and new federal awards under Uniform Guidance for Federal Awards requirements

Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance for Federal Awards or UGFA) Ø Overview Ø Supersedes Circulars A-21, A-87, A-89, A-102, A 110, A-122, A-133 Ø Incorporates Circular A-50, Audit Follow-up Ø Located in 2 CRF 200 Subparts A – F Ø 11 appendixes

Effective Dates ØFederal agencies required to adopt guidance December 26, 2014 Ø Nonfederal entities (defined as state, local government, Indian tribe, institution of higher education, or nonprofit organization that carries out a federal award as a recipient or subrecipient) implementation date is December 26, 2014 for all new federal awards and for any incremental funding on existing awards made after December 26, 2014. Ø In 2015, a non-federal entity receiving federal awards may have funding subject to both the old and new administrative requirements and cost principles

Effective Dates, continued Ø Audit requirements in Subpart F are effective for fiscal years beginning on or after December 26, 2014 (Years ending December 31, 2015 and after) Highlights of UGFA Ø Subpart A – Ø Includes acronyms and definitions Ø Replaces “Vendor” with “Contractor” Ø Discusses Personally Identifiable Information (PII) and Protected PII Ø Program income Ø State

Highlights of UGFA, continued Ø Subpart B – Ø Ø Ø applicability for grant agreements; cooperative agreements, cost-reimbursement contracts fixed amount awards, agreements for loans and loan guarantees, interest subsidies, and insurance must establish conflict of interest policies Must disclose all violations of criminal law ØSubpart C – Ø Ø Ø discussion of federal agencies’ requirements to provide information to non-federal entities standard format for contracts/agreements Federal agency must consider risk prior to making an award

Highlights of UGFA Ø Subpart D – Ø information for both federal agencies and federal entities regarding responsibilities after a federal award is granted Ø Nonfederal entities responsibility for Ø internal controls – awardee specific requirements, Ø for compliance with federal statutes, regulations, and the terms and conditions of federal awards, Ø for evaluation and monitoring of compliance with federal statutes, regulations, and terms and conditions of federal awards, Ø for taking prompt action when instances of noncompliance are identified and Ø for taking reasonable measure to safeguard protected PII

Highlights of UGFA, continued Ø Subpart D – Procurement Standards Ø Ø Ø Micro-purchases ($3, 000 aggregate) Small purchase procedures (currently > $150, 000) Sealed bids Competitive proposals Noncompetitive proposals Ø Subpart D – Subrecipient Monitoring and Management Ø Ø Ø Risk assessment before subaward Information to be provided to subawardee Indirect cost rate information Permissions for auditors to access records Monitoring procedures Closeout terms and conditions

Highlights of UGFA, continued Ø Subpart E – Cost Principles ØConsolidates Circular A-21, A-87 and A-122 ØIndirect Costs ØFederal agencies accept nonfederal entity’s negotiated indirect rates ØPass-through entities required to honor negotiated indirect cost rates, negotiate a rate in accordance with federal guidelines or provide a minimum flat rate of 10% ØNonfederal entities have one time option to extend negotiated indirect cost rate for up to 4 years ØNonfederal entities that have never received a negotiated indirect cost rate may elect to charge a de Minimis rate of 10% ØCost allocations ØSpecial considerations ØProvisions for selected items of cost

Highlights of UGFA, continued Ø Subpart F: Audit Requirements Ø Threshold to determine single audit requirement is $750, 000 Ø Schedule of Expenditures of Federal Awards is expanded to include total federal awards including noncash assistance and beginning and ending loan balances on face of schedule (not in notes) ØSEFA notes must include disclosure or whether entity elected to use 10% de Minimis cost rate ØAudit finding reference numbers must be full year-three digit identifier and must be the same as that used in the data collection form submission (2015 -001, 2015 -002 etc. )

Highlights of UGFA, continued Ø Subpart F: Audit Requirements (continued) Ø Current year audit finding detail must indicate whether a finding is a repeat of a finding in the immediate prior audit and the prior year audit finding number must be included Ø Explicit requirement for a statement of cause Ø Finding detail should indicate whether sampling method was statistically valid Ø Questioned costs threshold is $25, 000 Ø Removed requirement for subrecipient to submit reporting package to a pass-through entity Ø Summary schedule of prior audit findings must include reasons for a finding’s recurrence and the planned correction (if not corrected) Ø Auditee’s corrective action plan must be separate document from the schedule of findings and questioned costs

Highlights of UGFA, continued ØSubpart F: Audit Requirements (continued) Ø Federal agency responsible for designating a “single audit accountable official” ØData Collection Form – Both auditees and auditors must ensure that their reporting packages do not include PII Ø Subpart F: Major Program Determination ØLarge loan and loan guarantees and clusters of programs are to be determined as a type A programs ØMinimum threshold for A/B programs is $750, 000 ØLow risk type A program criteria is modified (auditor no longer has to consider inherent risk, PY significant deficiency in internal control for major program no longer criteria for high risk, known or likely questioned costs exceeding 5% of total program expenditures is part of new threshold criteria

Highlights of UGFA, continued Ø Subpart F: Major Program Determination (cont’d) Ø% of coverage is 20% for a low risk auditee and 40% for an other than low risk auditee ØHigh risk type B program assessment only performed on type B programs that exceed 25% of type A threshold and until 25% of the number of high risk type A programs is identified ØSubpart F: Low risk auditee determination modified ØNonfederal entity with biennial audits no longer qualifies as low risk auditee ØCognizant or oversight agency can no longer provide a waiver ØAuditor did not report a substantial doubt about the auditee’s ability to continue as a going concern

Highlights of UGFA, continued Ø Subpart F: Low risk auditee determination (cont’d) Ø Ø No federal program classified as type A had audit findings in either of the two preceding periods No deficiencies in internal control identified as material weaknesses Auditor’s opinion on financial statements and SEFA were unmodified Annual single audits performed and timely submitted to Federal Audit Clearinghouse

2015 Compliance Supplement ØIssued July 2, 2015 ØPart – 1 Background changed for UGFA and effective date ØPart 2 – Removed Davis-Bacon Act and Real Property Acquisition from Matrix ØPart 3 – Compliance Requirements includes transition guidance between prior requirements and new UGFA Ø Part 3. 1 includes the audit of federal awards subject to the existing cost principles and administrative rules. Deleted “D” Davis-Bacon Act and “K” Real Property Acquisition and Relocation Assistance and as compliance requirements and deleted “L” Reporting coverage of the subaward reporting requirements under Federal Funding Accountability and Transparency Act (FFATA)

2015 Compliance Supplement, cont’d ØPart 3 – Compliance Requirements includes transition guidance between prior requirements and new UGFA (cont’d) Ø Ø Part 4 – Agency Requirements Ø Ø Part 3. 2 includes the audit of federal awards subject to the new UGFA cost principles and administrative rules and enhanced Federal Acquisition Regulation (FAR)based cost-reimbursement contracts includes program changes removed FFATA reporting (not tested for compliance) removed Subaward Reporting under the Transparency Act Part 5 Clusters: includes changes from UGFA

2015 Compliance Supplement, cont’d ØPart 6 – Compliance Requirements includes transition guidance between prior requirements and new UGFA (cont’d) Ø Ø Internal Control: added statement of OMB’s intent to revise Part 6 for the 2016 Supplement based on changes to the internal control requirements Part 7 – Ø Ø Removed Davis-Bacon Act, Real Property Acquisition and Relocation Assistance compliance requirements Removed subaward reporting under the FFATA and ARRA from Appendix VII. Programs not in Compliance Supplement are updated for UGFA

Summary thoughts Ø Engage with your clients and employer in discussions related to Uniform Guidance changes earlier rather than later Ø For Internal Control reference material see GAO Green Book and Internal Control Management Tool available at http: //www. gao. gov/greenbook/overview and COSO reference material available at http: //www. coso. org/guidance. htm Ø Single Audit changes effective with 12/31/15 year ends and after Ø 2015 new or updated Federal Awards under new UGFA guidance and continuing Federal Awards under old guidance

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