the recovery act: information you need to plan and perform your 2010 single audits a gaqc web event...

The Recovery Act: Information You Need to Plan and Perform Your 2010 Single Audits

A GAQC Web Event

May 19, 2010

Governmental Audit Quality Center

Administrative Notes

If you encounter any technical difficulties (e.g., audio issues) during this event please take the following steps:• Press the F5 key on your computer to refresh

• Close and re-start your browser

• Check your speakers, ensure they are not on mute

• Turn off your pop-up blocker

• Re-start you computer

• Call Genesys Tech support 866. 871.4881, Conf ID# 1457070

• If none of the above work, submit a request for help on the “Send a Question Box” located on the left hand side of your screen.

If are unable to get assistance from Genesys for some reason, e-mail [email protected] or call 202-434-9207

2


Administrative Notes

We encourage you to submit your technical questions – please limit your questions to the content of today’s program

To submit a question, type it into the “Send a Question” box on left side of your screen; we will answer as many as possible

You can also submit questions to the GAQC member forum for consideration by other members

This event is being recorded and will be posted in an archive format to the GAQC Web site

3


Continuing Professional Education

Must have registered for CPE credit prior to this event; a link to the CPE Credit Approval Form was e-mailed to youListen for announcement of 4 CPE codes (7 digit codes: ALL_ _ _ _ ) and 4 polling questions during the eventRecord CPE Codes on CPE Credit Approval Form and return completed form (by fax or mail) to AICPA Service Center for record of attendance; keep a copy for your records

If you are not receiving CPE for this call, ignore the CPE codes that we announce, but please answer the polling questions

4

Governmental Audit Quality Center 5

Today’s PresenterMandy Nelson, CPA

KPMG LLP

Moderating:Mary Foelster, CPA

AICPA


Today’s Agenda

ARRA – American Recovery and Reinvestment Act

2010 Compliance Supplement – Appendix VII (draft)

• Identification of ARRA expenditures

• Separate ARRA presentation

• ARRA Major Program Determination

• Other Appendix VII Issues

2010 Compliance Supplement (CS)

This presentation is based on the most recent drafts of the 2010 CS and discussions with OMB as of May 13, 2010

6


ARRA – American Recovery and Reinvestment Act of 2009

7


American Recovery and Reinvestment Act of 2009 (ARRA) (The Recovery Act)

The American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5) (ARRA) and the related OMB Guidance have significant implications for audits performed under OMB Circular A-133.

The ARRA imposes new transparency and accountability requirements on Federal awarding agencies and their recipients.

8


American Recovery and Reinvestment Act of 2009

History to Date:• Recovery Act passed February 2009; significant impact

expected for 2010 and 2011 year-end audits• Accountability and Transparency are key features of the law

- QCRs built into the OMB guidance – results to be placed on Recovery.gov (unclear how this will be done)

- Auditees significantly affected by Section 1512 reporting - New body, Recovery Act Transparency Board (RATB),

monitoring activity and looking for fraud, waste, and abuse• Much more interest in single audits by federal agencies and

Congress

9


ARRA and CFDA Numbers

Federal agencies are required to specifically identify

ARRA awards, regardless of whether the funding is

provided under a new or existing CFDA number. The

CFDA number should be included in the grant award

documents.

10


ARRA Programs not subject to A-133

Build America Bonds• Subsidy payment should not be included on the Schedule of

Expenditures of Federal Awards (SEFA) therefore not included in the scope of the single audit.

COBRA• Tax credits to employers should not be presented by auditees on

the SEFA, and they should not be included in the scope of the single audit.

11


2010 Compliance Supplement – Appendix VII (draft)

12

This information is based on the most recent drafts of the 2010 CS and discussions with OMB as of May 13, 2010


Identification of ARRA Funding

Early identification is critical• Should be separate award• Revised terms and conditions• Subrecipients – more challenging

Client should separately track ARRA expenditures

13



Direct recipients – Look to:• CDFA #• Federal awards terms

- Stating ARRA funded- Requiring separate SEFA presentation- Requiring notification of ARRA funding to1st tier

subrecipients- At sub-award dates- At disbursement of funds

14



1st tier subrecipients - Look to:• CFDA #• Awards terms

- Stating ARRA funded- Requiring separate SEFA presentation

15



Lower tier subrecipients• Look to

- CFDA #- Award terms stating ARRA funding

• Separate SEFA presentation required by Appendix VII


Separate ARRA Presentation

Separate presentation on Schedule of Expenditures Federal Awards (SEFA)• Even if same CFDA #• New level of detail for Research and Development (RD)

Separate presentation on Data Collection Form (DCF)• Revised DCF

17


Single Audits for Periods Ending Before June 30, 2010

2009 Compliance Supplement, Appendix VII

Addendum #1 to 2009 Compliance Supplement – Issued August 2009

GAQC Alert #123 – Clarifying Guidance on Effect of Recovery Act Funds on Major Program Determination

18


Single Audits for Periods Ending on/after June 30, 2010

Impact of Recovery Act on 2010 Compliance Supplement:• Guidance from 2009 CS Addendum #1 incorporated (e.g., in Part 3)• Updated Appendix VII

- Low-Risk Auditee Status- Extensions- Loans- Major program determination for ARRA funded awards

• Part 3, 4, and 5

19


Low Risk Auditee and Extensions

M-10-14, Updated Guidance on the American Recovery and Reinvestment Act (March 22, 2010) - See also GAQC Alert #141

“Due to the importance of the Single Audits and the reliance of Federal agencies on the audit results to monitor the accountability of Recovery Act programs, agencies should not grant any extension request to grantees for fiscal years 2009 through 2011. In order to meet the criteria for a low-risk auditee (OMB Circular A-133 §__.530) in the current year, the prior two years audits must have met the requirements of OMB Circular A-133, including report submission to the FAC by the due date (OMB Circular A-133 § __.320).”

20


When applying the risk-based approach to determine which Federal programs are major programs: • The inclusion of large loan and loan guarantees (loans) should

not result in the exclusion of other programs as Type A programs.

• When a Federal program providing loans significantly affects the number or size of Type A programs, the auditor shall consider this Federal program as a Type A program and exclude its values in determining other Type A programs.

Impact of Loan Programs

21


Impact of Loan Programs

Safe Harbor for Treatment of a Large Loan and Loan Guarantee Programs in Type A Program Determination• Each individual loan and loan guarantee program that does not exceed

four times the largest non-loan program is not considered to be large.

22


Impact of Loan ProgramsExample #1 University

Step 1 – Identify the largest non-loan program:

Program Name Amount

SFA Cluster (Loan Program)

Pell Grants 4,000,000

Perkins – Current Year Loans 500,000

Beginning Loans 5,800,000

FFEL – Current Year Loans 2,100,000

FWS 500,000

Total SFA Cluster 12,900,000

R&D Cluster (non-loan program) 2,000,000

TRIO Cluster(non-loan program) 300,000

Program Name Amount

SFA Cluster (Loan Program)

Pell Grants 4,000,000

Perkins – Current Year Loans 500,000

Beginning Loans 5,800,000

FFEL – Current Year Loans 2,100,000

FWS 500,000

Total SFA Cluster 12,900,000

R&D Cluster (non-loan program) 2,000,000

TRIO Cluster(non-loan program) 300,000

23


Step 2 – Calculate if loan program is greater than 4X largest non-loan program:

Impact of Loan Programs Example #1 University (Continued)

24


Impact of Loan ProgramsExample #1 University (Continued)

R&D Cluster 2,000,000

TRIO Cluster 300,000

Sum of Programs used to calculate Type A

2,300,000

Calculated Type A Threshold* $300,000

Step 3 – Calculate Type A Threshold

* Calculated to be $69,000, therefore defaulted to minimum of $300,000

25


Impact of Loan Programs Example #2 Governmental Entity

Step 1 – Identify the largest non-loan program:

Program Name Amount

CDBG (Loan Program)

Loans 12,000,000

Grant Expenditure 3,000,000

Sub-total CDBG 15,000,000

Home (Loan Program)

Loans 9,600,000

Grant Expenditures 400,000

Sub-total HOME 10,000,000

WIC 2,600,000

26


Impact of Loan Programs Example #2 Governmental Entity (Continued)

Step 2 – Calculate if loan program is greater than 4X

largest non-loan program:

27


Impact of Loan Programs Example #2 Governmental Entity (Continued)

Step 3 – Calculate Type A Threshold

$378,000Calculated Type A Threshold

.03Type A Factor (Expenditures $300K to $100M)

12,600,000Sum of Programs used to calculate Type A

2,600,000WIC

10,000,000HOME

Not includedCDBG

$378,000Calculated Type A Threshold

.03Type A Factor (Expenditures $300K to $100M)

12,600,000Sum of Programs used to calculate Type A

2,600,000WIC

10,000,000HOME

Not includedCDBG

28


Clusters of programs specifically listed in the Supplement with a new ARRA CFDA number added during the current year that also has current year expenditures, should be considered a new program and would not qualify as a low-risk Type A program• Cluster will not meet the requirement of having been audited as a major

program in at least one of the two most recent audit periods as the Federal program funded under the ARRA did not previously exist.

• The Research and Development cluster (R&D) is not subject to this guidance due to its nature (e.g., CFDA numbers are not listed in Supplement for R&D and in some cases R&D is not assigned a CFDA number).

• The Student Financial Aid (SFA) Cluster is also not subject to this guidance

Effect of ARRA Awards on Major Program Determination - Clusters

29


Effect of ARRA Awards on Major Program Determination - Type A Programs

Even though a Type A program otherwise meets the criteria as low-risk under Section 520(c) of OMB Circular A-133, due to the inherent risk associated with the transparency and accountability requirements governing expenditures of ARRA awards, any program or cluster with expenditures of ARRA awards would not qualify as a low-risk Type A. • Even a de minimus amount of ARRA expenditures would not

support identifying the program as low risk.• See next slide for exception.• However SFA is excluded from this guidance

30


Effect of ARRA Awards on Major Program Determination -Type A Programs (Continued)

31


Effect of ARRA Awards on Major Program Determination – Type A Example

2009 State Fiscal Stabilization Fund (SFSF)

Audited as a Major Program

No Control Deficiencies

No Noncompliance

CFDAProgram

NameExpenses

84.394 ARRA-Education Stabilization

$1,000,000

CFDAProgram

NameExpenses

84.394 ARRA-Education Stabilization

$1,000,000

2010 State Fiscal Stabilization Fund (SFSF)

Can this be assessed as a low risk Type A in 2010?

CFDAProgram

NameExpenses

84.394 ARRA -Education Stabilization

$2,000,000

CFDAProgram

NameExpenses

84.394 ARRA -Education Stabilization

$2,000,000

Did not meet 1 of the 4 criteria to be assessed as low risk: (3) current year ARRA expenditures are more than 20% of program cluster [since 100% of expenditures are ARRA]

32


Effect of ARRA Awards on Major Program Determination - Type B Programs

The auditor should consider all Type B programs and clusters with expenditures of ARRA awards to be programs of higher risk in accordance with Section 525(d) of OMB Circular A-133. The presumption is that Type B programs or clusters with ARRA expenditures would be audited as major when applying the provisions of Section 520(e)(2). However, the auditor is not precluded from selecting an especially risky Type B program that does not contain ARRA expenditures to audit as a major program in lieu of a Type B program or cluster with ARRA expenditures.

33


Appendix VII (draft): SFA and Major Program Determination

Appendix VII section: Effect of Expenditures of ARRA Awards on Major Program Determination• Clusters of Programs -- SFA Excluded• Type A Programs With ARRA Expenditures -- SFA

Excluded• Use pre-ARRA rules for risk assessment

34


2010 Compliance Supplement (CS)

35


Reporting• Testing1512 reports

Subrecipient monitoring• Verification of subrecipients filing their A-133’s with

Clearinghouse• Strong push on identifying pass-through entity information on

SEFA and amounts passed-through in SEFA footnotes

2010 Compliance Supplement - Part 3 Changes

36


Part 4

Incorporated information from 2009 Addendum #1

Part 5

Many new clusters and additions to existing clusters

2010 Compliance Supplement - Parts 4 and 5 Changes

37


Remember R&D definition in Section .105• Very broad• NSF believes its programs are RD

- Based on its CFDA #’s- NSF acknowledges rare instances can arise where

not R&D. Clients need to carefully read award agreement.

2010 Compliance Supplement – R&D Changes (draft)

38


Exempt from ARRA provisions for separate presentation

Likely will require an extra item in representation letter regarding whether college is under Zone Alternative

Changes to FFELP will generally be a 2011 single audit issue.

2010 Compliance Supplement - SFA Changes (draft)

39


Electronic medical records• In discussions with HHS due to unusual funding pattern

Energy grants to for-profits• Likely need program-specific audits

Pre-award certifications• Generally not possible under auditing standards

Determining if new/unusual programs are subject to Single Audit

Other Future ARRA Issues

40

Governmental Audit Quality Center 41

Questions ???

the recovery act: information you need to plan and perform your 2010 single audits a gaqc web event...

Documents