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Here are five steps to help recipients of federal grants follow the Uniform Guidance and use the OMB Compliance Supplement to most effectively prepare for the single audit.

Regulations

OMB’s Compliance Supplement Can Make Your Single Audit Easier

  • Allison Slife
  • 8/24/2016

Implementation of the Office of Management and Budget’s (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance, formerly referred to as Omni Circular, Super Circular, and Uniform Grant Guidance) is in full swing for recipients of federal funds. You might think that planning for your organization’s single audit is even more cumbersome and overwhelming with the new requirements, but don’t despair: OMB still provides a step-by-step guide to help you comply. 

The OMB’s most recent Compliance Supplement (2016) will be indispensable to your organization if you have federal programs that undergo single audits; it will help you fully prepare for your auditors’ rigorous testing of your programs’ internal controls and compliance with the requirements. The Compliance Supplement clearly lays out program requirements and outlines the steps auditors will take to perform testing. 

Here are five tips to help you make the best use of the Compliance Supplement and most effectively apply it to your single audit preparation. 

1. Understand the Compliance Supplement layout 

  • Part 1 — Background, Purpose, Applicability discusses the background of the single audit requirement and emphasizes one of the key changes under Uniform Guidance (UG): The audit threshold is increased to $750,000 for auditee fiscal years beginning on or after December 26, 2014. 
  • Part 2 — Matrix of Compliance Requirements identifies federal programs by Catalog of Federal Domestic Assistance (CFDA) number and indicates which of the 12 types of compliance requirements are applicable for each federal program. 
  • Part 3 — Compliance Requirements walks through each of the 12 types of compliance requirements (excluding special tests and provisions) and provides audit objectives and suggested audit procedures for each area. This should help you better understand what auditors are focused on for each major program selected for testing so you can plan more accurately. 
  • Part 4 — Agency Program Requirements is categorized by federal agency, then specific CFDA number, and includes specific program requirements and additional audit procedures to consider for each federal program. 
  • Part 5 — Clusters of Programs explains that a cluster is a group of related programs that have similar compliance requirements. A cluster of programs is considered a single program and is tested that way as part of the single audit. 
  • Part 6 — Internal Control emphasizes that auditors are required to understand your internal controls over federal programs and report on internal controls over compliance. This section provides a great overview of things to consider for the five components of internal controls and examples of each of these components. 
  • Part 7 – Guidance for Auditing Programs Not Included in This Compliance Supplement notes that there are a number of federal programs that are not separately listed in Part 4. This section provides information on how auditors identify compliance requirements and testing approaches for these programs. If your organization has received some unique grants, this guidance will be particularly useful to you. 
  • Appendices contain a variety of information that could have relevance to your federal programs. This includes a federal agency-level contact list of people who can help with questions or clarifications (Appendix III) and a list of changes for the 2016 Compliance Supplement (Appendix V). 

2. Review your grant agreements 

A grant agreement for federal programs is another key document to understand while planning for a single audit. Review it for areas that could apply as a “special test or provision” compliance requirement, among other specifics for your grants. Grants received from a pass-through entity often have special requirements, so is important to review those documents for relevant language. 

3. Discuss and document relevant areas for program and financial staff 

Read through the Compliance Supplement and grant agreements and hold discussions with programmatic and fiscal contacts at your organization about the essential areas of review — and make sure you document them! The key contacts involved with grants could be program personnel, members of governance, or employees from a number of different departments, including accounting and finance, procurement and purchasing, and contract and legal. Holding meetings internally with these individuals is important to define expectations, roles, points of contact, concerns, and timelines related to the single audit process. Involve your auditors throughout the process to help with interpretation of regulations, identification of planning tools, and development of a proactive audit plan. 

4. Verify you have proper internal controls in place 

There is now explicit reference to existing internal control requirements noted in the UG’s administrative obligations. Previously, internal controls were discussed as part of the audit and after the costs were incurred. Now the words “must” and “should” are clarified, and there are many “musts” as it relates to controls in the UG. Your organization must establish and maintain effective internal controls over federal awards. Make sure you consider this during your single audit planning process and have documented the key controls for each program. 

5. Ensure your SEFA is compliant with UG changes 

There are some key changes in the UG related to your organization’s Schedule of Expenditures of Federal Awards (SEFA) presentation and notes, including: 

  • Clusters need to be presented on face of SEFA. This now requires the cluster name, list of individual federal programs within the cluster, and the applicable federal agency name to be shown on the face of the SEFA. 
  • For amounts your organization receives as a subrecipient, the name of the pass-through entity and identifying number assigned by it are to be shown on the face of the SEFA. 
  • You are now required to show the total amount provided to subrecipients for each federal program on the face of the SEFA. 
  • Loan and loan guarantee programs must now be identified in the notes to the SEFA and show balances outstanding at the end of the audit period. This requirement is in addition to including the total federal awards expended for loan or loan guarantee programs on the face of the SEFA. 
  • You are now required to describe significant accounting policies used to prepare the SEFA and to note whether your organization elected to use the 10 percent de minimus cost rate. 

How we can help 

State and local government agencies, nonprofit organizations, and colleges and universities receiving federal funding are impacted by the Uniform Guidance and single audit process. Our public sector industry professionals provide grant compliance services that help you navigate and manage federal grants and can find effective strategies for your needs, including trainings, consultations, and other services.