Transcript SA Fundamentals Part IV Reporting Requirements and Resources

AICPA
Governmental Audit Quality Center
Member Event
Single Audit Fundamentals Part IV:
Overview of Single Audit Reporting Requirements
and Available Resources
March 18, 2010
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Continuing Professional Education
• Must have registered for CPE credit prior to this event;
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Single Audit Fundamentals Series
Sponsored by the GAQC
• What is GAQC?
– Voluntary membership Center for CPA firms and State Audit
Organizations (SAOs), with approximately 1,400 members
– Designed to help CPAs meet the challenges of performing
quality governmental audits, including single audits
– Member benefits/membership requirements
– For more information, please visit the membership section at
www.aicpa.org/GAQC or call Cynthia Dillon at 202-434-9207
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A Note on the Recovery Act
• In February 2009, the American Recovery and
Reinvestment Act of 2009 (ARRA) was passed
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Approximately $300 billion additional federal funds being passed down;
much of which is subject to single audits
Recovery Act does have implications on reporting for single audits
Today’s call is focusing on the reporting requirements of a single audit
and the resources available to auditors
A future GAQC event (not yet scheduled) will provide additional
information on the Recovery Act, including its impact on the reporting
requirements of a single audit
Review the GAQC Recovery Act Resource Center
(www.aicpa.org/GAQC) for previous calls and guidance issued
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Today’s Presenters
Barbara Cevallos, CPA
PricewaterhouseCoopers LLP
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Scott Simpson, CPA
Moss Adams LLP
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Moderator
Corey Arvizu, CPA
Heinfeld, Meech Co., PC
Chair, GAQC Executive Committee
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Fundamentals Courses
• Part I – Basic Background & Overview of the Single Audit
– Scope of the Single Audit
– Auditee & Auditor Responsibilities
– Unique Requirements & Provisions of OMB Circular A-133
– Description & Characteristics of Federal Awards
– Pass-through Awards and Subrecipients
• Part II – Understanding Major Program Determination
– Applying the Risk-Based Approach for Determining Major
Programs
– Low-Risk Auditee Determination and Distinguishing from
Other Risk Assessments Performed in a Single Audit
– Communications with Cognizant or Oversight Agency
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Fundamentals Courses
• Part III - Understanding Compliance Testing & IC over
Compliance Requirements
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Description & Characteristics of the 14 Compliance Requirements
Description & Characteristics of Internal Control over Compliance
Substantive Tests of Applicable Compliance Requirements
Tests of Internal Control over Compliance
Documentation Requirements
Introduction to and Using the Annual OMB Compliance
Supplement
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Fundamentals Courses
• Part IV - Reporting Requirements and an Overview of Available
Circular A-133 Resources
– Reporting Requirements of the Single Audit
– Overview and Use of the AICPA Audit Guide Government Auditing
Standards and Circular A-133 Audits and Audit Risk Alert
– Understanding the OMB Cost Circulars and their Applicability to
Audit Procedures
– Use of www.cfda.gov and other Web Sites to Facilitate a Single
Audit
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TOPICS to be COVERED
• Reporting Requirements
• Overview and use of the AICPA Audit Guide
Government Auditing Standards and Circular A133 Audits and Audit Risk Alert
• OMB Cost Circulars
• Use of www.cfda.gov and other Web Sites
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Reporting Requirements
• Reporting Package
– Financial Statement Related:
• Opinion on Financial Statements (in accordance with GAGAS)
• Report on I/C over Financial Reporting & on Compliance and Other Matters
(Yellow Book)
• Schedule of Expenditures of Federal Awards – in relation to opinion
– Compliance Related
• Report on Compliance with Requirements Applicable to Each Major Program
& on Internal Control over Compliance in Accordance with OMB Circular A133
• Schedule of Findings and Questioned Costs
– Data Collection Form
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Reporting Requirements
Financial Statement Related
• Opinion on Financial Statements
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Required by A-133 §.310
In accordance with Government Auditing Standards
Same organizational unit as the compliance audit
Same fiscal year as the compliance audit
• Report on Compliance and Internal Control (Yellow
Book Report)
– Carries the same date as financial statement opinion
– Reports significant deficiencies & material weaknesses
– Reports material non-compliance (at the financial statement
level).
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Reporting Requirements
Schedule of Expenditures of Federal Awards (SEFA)
• Determine whether presented fairly in all material respects in
relation to the auditee’s financial statements taken as a whole
• SEFA is a client-prepared schedule
• Reports the total expenditures of federal awards and serves as the
primary basis for the auditor’s major program determination
• Circular A-133 §.310(b) includes the requirements
• Practice aids available on the GAQC Web site:
www.aicpa.org/GAQC
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Reporting Requirements
Schedule of Expenditures of Federal Awards (SEFA)
Federal Awards
Basis for Determining When Expended
Grants, cost reimbursement contracts, cooperative
agreements, and direct appropriations
When the expenditure or expense transactions occur
Amounts passed through to subrecipients
When the disbursement is made to the subrecipient
Loan and loan guarantees
When the loan proceeds are used (See the further
discussion on loans and loan guarantees in table 7-2 and
paragraph 7.20.)
When the property is received
Donated property, including donated surplus property
Food commodities
Insurance
When the food commodities are distributed or
consumed
When amounts are disbursed entitling the entity to the
subsidy
When the insurance is in force
Endowments
When federally restricted amounts are held
Program income
When received or used
Interest subsidies
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Note that footnotes
have been excluded.
Example Entity
Schedule of Expenditures of Federal Awards
for the Year Ended June 30, 20x1
Federal Grantor/Pass-through Grantor/Program or Cluster Title
Department of Agriculture Direct Programs
Summer Food Service Program for Children - Commodities
Total Department of Agriculture Direct Programs
Federal
CFDA
Number
Pass-Through
Entity
Identifying
Number
Federal
Expenditures
10.559
$
$
46,000
46,000
14.218
14.871
$
1,235,632
800,534
2,036,166
Department of Housing and Urban Development Direct Programs
Community Development Block Grants/Entitlement Grants
Section 8 Housing Choice Vouchers
Total Department of Housing and Urban Development Direct Programs
Department of Education Direct Programs
Impact Aid
Literacy Through School Libraries
Subtotal Department of Education Direct Programs
$
84.041
84.364
$
$
372,555
28,655
401,210
$
$
1,239,398
1,640,608
$
3,722,774
Department of Education Pass Through Programs From:
State Department of Education - Title I Grants to Local Educational Agencies
Total Department of Education
Total Expenditures of Federal Awards
84.010
23-8345-7612
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Reporting Requirements
Schedule of Findings & Questioned Costs
• Part 1: Summary of the Auditor’s Results
• Part 2: Financial Statement Findings
• Part 3: Federal Award Findings & Questioned
Costs
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Reporting Requirements
Schedule of Findings & Questioned Costs
Part 1: Summary of the Auditor’s Results
• Financial Statements
– Type of auditor’s report issued [unqualified, qualified,
adverse or disclaimer]
– Internal Control over Financial Reporting
• Material weakness(es) identified?
• Significant deficiency(ies) identified?
• Noncompliance material to financial statements noted?
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Reporting Requirements
Schedule of Findings & Questioned Costs
Part 1: Summary of the Auditor’s Results
• Federal Awards
– Internal Control over Major Programs
• Material weakness(es) identified?
• Significant deficiency(ies) identified?
– Type of auditor’s report issued on compliance for major
programs [unqualified, qualified, adverse, or disclaimer]
– Any audit findings disclosed that are required to be reported in
accordance with §510(a)
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Reporting Requirements
Schedule of Findings & Questioned Costs
Part 1: Summary of the Auditor’s Results
• Federal Awards
– Identification of major programs including CFDA number and
name of federal program or cluster
– Dollar threshold used to distinguish between type A and type B
programs
– Auditee qualified as low-risk auditee?
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Reporting Requirements
Schedule of Findings & Questioned Costs
Part 2: Financial Statement Findings
• Findings to include:
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Criteria or specific requirement
Condition
Context
Effect
Cause
Recommendation
Views of responsible officials and planned corrective action
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Reporting Requirements
Schedule of Findings & Questioned Costs
Part 3: Federal Award Findings & Questioned Costs
• Findings to include:
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Information on the federal program
Criteria or specific requirement
Condition
Questioned costs
Context
Effect
Cause
Recommendation
Views of responsible officials and planned corrective action
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Reporting Requirements
Report on Internal Control & Compliance
• Compliance
– Express an opinion on compliance for EACH major
program
– Identify instances of noncompliance
• Internal Control over Compliance
– No opinion on the effectiveness of internal control
over compliance
– Report significant deficiencies and material
weaknesses
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Reporting Requirements
Data Collection Form
• Completed by auditee & auditor
• Not technically part of the reporting package –
rather a summary of the information contained in
the reporting package
• Reporting package and data collection form are
submitted electronically to the Federal Audit
Clearinghouse
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TOPICS to be COVERED
• Reporting Requirements
• Overview and use of the AICPA Audit Guide
Government Auditing Standards and Circular
A-133 Audits and Audit Risk Alert
• OMB Cost Circulars
• Use of www.cfda.gov and other Web Sites
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AICPA Audit Guide: GAS/A-133 Audits
• Two main sections of the guide
– Chapters 2-4: Yellow Book audits
– Chapters 5-13: A-133 audits
– Chapter 14: Program-specific audits
• Appendices
– Single Audit Act
– Circular A-133
– Risk Assessment Standards
– Schedule of changes from prior edition
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 1: Introduction
– Purpose and applicability
– Adherence to professional standards and
requirements
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 2: Planning Considerations of
Government Auditing Standards
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Discusses ethics chapter of Yellow Book
General standards
Fieldwork standards
Other planning considerations
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 3: Financial Statement Audit
Considerations of Government Auditing
Standards
– Internal control over financial reporting
– Consideration of financial statement
misstatements, including compliance
– Abuse
– Representation letters
– Reasonable assurance
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 4: Auditor Reporting Requirements and Other
Communication Considerations of Government Auditing
Standards
– GAAS and GAGAS requirements
• Reporting requirements
• Internal control over financial reporting
• Fraud, illegal acts, violations of provisions of contracts
or grant agreements, abuse
– Report on the financial statements
– “Yellow Book” report
– Appendix contains sample reports
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 5: Overview of the Single Audit Act,
Circular A-133 and the Compliance Supplement
– Single Audit Act and Circular A-133 requirements
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General audit requirements
Determining when federal awards are expended
Major program determination (high level)
Auditee responsibilities
Responsibilities of other parties (fed agency,
pass thru, cognizant agency)
– Compliance Supplement
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 6: Planning Considerations of Circular A133
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Audit risk considerations
Audit materiality considerations
Efficiency
Joint audits and reliance on others
State and local compliance requirements
Desk reviews and on-site reviews
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 7: Schedule of Expenditures of Federal
Awards
– Auditor requirements
– Presentation requirements
• Pass through awards
• Non-cash assistance
– Example SEFAs for university/nfp entity
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 8: Determination of Major Programs
– Applying the risk based approach
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Determine type A/B
Risk assessment of programs
Determine major programs
Percentage of coverage/low risk auditee criteria
– Criteria for program risk
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 9: Considerations of Internal Control over
Compliance for Major Programs
– Overview of requirements, definition of IC over financial reporting
– COSO elements of internal control
– Each major program
– Direct and material compliance requirements
– Test of operating effectiveness for each major
program
– Significant deficiencies and material weaknesses
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 10: Compliance Auditing Applicable to
Major Programs
– Identifying direct and material compliance requirements
– Performing compliance testing
• Touches on sampling
– Evaluating and reporting noncompliance
– Follow-up procedures
– Management representations
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 11: Sampling Considerations in a Single
Audit
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Statistical vs. nonstatistical approach
Attribute vs. monetary sampling
Procedures that do not involve sampling
Population considerations
Sample sizes
Sample selection and evaluation
Projecting deviations and exceptions
Dual purpose testing
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 12: Audit Considerations of Federal
Pass-Through Awards
– Characteristics of subrecipients vs vendors
– Single audit considerations of pass-through entities
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Pass-through entity responsibilities
Audit planning
Internal control over compliance
Subrecipient monitoring considerations
Reporting considerations
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 13: Auditor Reporting Requirements and Other
Communication Considerations in a Single Audit
– Recommended reporting
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FS and SEFA
Yellow Book
Major programs
Schedule of findings and questioned costs
– Summary schedule of prior audit findings and
corrective action plan
– Data collection form
– Appendix contains example reports
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AICPA Audit Guide: GAS/A-133 Audits
• Chapter 14: Program-Specific Audits
– Most applicable to for-profit entities that receive federal
awards
– Auditor’s responsibilities with/without program specific
audit guide
– Submission of report
– Appendix contains example reports
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AICPA Audit Risk Alert: GAS/A-133 Audits
• Discusses:
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Emerging practice issues
Auditing developments
Recovery Act
Updates on various standard setters
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OMB
GAO
HUD
Federal Audit Clearinghouse
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AICPA Publications
• To purchase AICPA products
– call AICPA Order Department at 888-777-7077
– visit www.cpa2biz.com
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TOPICS to be COVERED
• Reporting Requirements
• Overview and use of the AICPA Audit Guide
Government Auditing Standards and Circular
A-133 Audits and Audit Risk Alert
• OMB Cost Circulars
• Use of www.cfda.gov and other Web Sites
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OMB Circulars
States, local governments, and Indian Tribes follow:
– A-87 for cost principles, Relocated to 2CFR, Part 225
– A-102 for administrative requirements (common rule),
– A-133 for audit requirements
Educational Institutions (even if part of a State or local government)
follow:
– A-21 for cost principles, Relocated to 2CFR, Part 200
– A-110 for administrative requirements, Relocated to 2 CFR, Part 215,
– A-133 for audit requirements
Non-Profit Organizations follow:
– A-122 for cost principles, Relocated to 2 CFR, Part 230
– A-110 for administrative requirements, Relocated to 2 CFR, Part 215
– A-133 for audit requirements
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OMB Cost Circulars
• Cost circulars directly affect our testing
– Allowability of costs
– Referenced in grant agreements
• A-21, A-122 and A-87 were updated in 2004
with conforming language. But, differences
exist.
– Differences in the elements of cost and in the
treatment of certain key compliance requirements
• Example: effort reporting
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OMB Circular A-110
Uniform Administrative Requirements for Grants & Agreements with Institutions
of Higher Education, Hospitals, and other Non-Profit Organizations
• General
• Pre-Award Requirements
• Post-Award Requirements
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Financial & program management
Property standards
Reports & records
Termination & enforcement
• After-Award Requirements
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The Common Rule – Circular 102
Uniform Administrative Requirements to State & Local Governments
• Common Rule establishes uniform
administrative rules for federal grants &
cooperative agreements and sub-awards to
state, local, and Indian tribal governments
• Same format as Circular A-110
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OMB Circular A-122
Cost Principles for Nonprofit Organizations
• Attachment A – General Principles
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Allowable Costs
Allocable Cost
Applicable Credits
Direct Costs
Indirect Costs
Indirect Cost Rates
Negotiation & Approval of Rates
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OMB Circular A-122
Cost Principles for Nonprofit Organizations
• Attachment B – Selected Items of Costs
– Provides over 50 examples for establishing allowability
• Attachment C – Nonprofit Organizations Not
Subject to Circular
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Circular A-21
Cost Principles for Educational Institutions
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Allowability of Costs
Direct Costs
Facility & Administrative Costs
Selected Items of Cost
Certificate of F&A Costs
Certification of Charges
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OMB Circular A-87
Cost Principles for State, Local, and Indian Tribal Organizations
• Attachment A – General Principles
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Definitions
Allowability of Costs
Direct Costs
Indirect Costs
Interagency Services
Attachment B – Standards for Selected Items of Cost
Attachment C – State/Local Central Service Allocation Plans
Attachment D – Public Assistance Cost Allocation Plans
Attachment E – State & Local Indirect Cost Rate Proposals
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OMB Cost Circulars – Effort Reporting Example
• Cost principles for not-for-profits are found in A-122
Attachment B 8(m)
– Reports must reflect after the fact determination of actual activity
of each employee
– Must be signed by employee or someone with first hand
knowledge of the activities performed by the employee
– Certification is required at least monthly
– Must cover all time expended by employee, federal or not.
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OMB Cost Circulars – Effort Reporting Example, con’t
• Cost principles for colleges and universities can
be found in A-21, section J.10: “responsible
person with suitable means of verification that
the work was performed.”
– Plan-confirmation method – confirmation required at
least annually
– After the fact method – confirmation required at least
monthly or every six months, depending on employee
– Must cover all time expended by employee, federal or
not.
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OMB Cost Circulars – Effort Reporting Example, con’t
• Cost principles for Governments are found in A87 Attachment B 8(h)
– Reflect after the fact actual effort (no budget
estimates)
– Account for total activity of the employee
– Be signed by employee
– At least monthly and coincide with one or more pay
periods
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OMB Cost Circulars – Effort Reporting Example, con’t
• Cost principles for hospitals: 45CFR Appendix E to Part 74 aka
OASC-3
– Signed by individual or by person with first hand knowledge of
the work performed on each research agreement.
– Certification is required at least monthly.
– Generally only required when someone works on more than one
research award, or when someone splits their time between
research and other activities of the hospital.
– Estimates determined before the performance of services (like
annual budget estimates) do not qualify
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TOPICS to be COVERED
• Reporting Requirements
• Overview and use of the AICPA Audit Guide
Government Auditing Standards and Circular
A-133 Audits and Audit Risk Alert
• OMB Cost Circulars
• Use of www.cfda.gov and other Web Sites
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www.cfda.gov & Other Web sites
• Various websites and resources available to
auditors in completing the single audit
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www.cfda.gov & Other Web sites
• www.cfda.gov
– Lists programs by CFDA number, titles
– Searchable database
– Contains information relevant to auditor regarding purpose of the
program
• GAQC Alert #119 - Problem with CFDA.gov Leads to
Inaccurate Notation of Single Audit Applicability
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Other Web sites
• www.whitehouse.gov/omb/circulars_default/
– Listing of all OMB circulars and the compliance supplement
– Recovery Act related addenda to compliance supplement
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Other Web sites
• http://harvester.census.gov/sac/
– Search the single audit database
– File single audit reporting package
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Other Web sites
• www.aicpa.org/gaqc
– Dedicated Center Web site with a complete listing of
CPA firm members in your state
– Illustrative Auditor’s Reports with examples of
Government Auditing Standards, OMB Circular A-133 and
HUD reports
– Web seminars, webcasts, and teleconferences
updating you on a variety of technical, legislative,
regulatory, and practice management subjects
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Other Web sites
• www.recovery.gov
– Updated recovery act guidance
– Links to agency websites
• www.whitehouse.gov/omb/recovery_default/
– Recovery Act guidance from OMB
– Check back to this site regularly for ongoing guidance
•
http://gaqc.aicpa.org/Resources/Recovery+Act+Resource+Center.htm
– Tools & resource for auditors
– Open to the public
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RECAP: TOPICS COVERED TODAY
• Reporting Requirements
• Overview and use of the AICPA Audit Guide
Government Auditing Standards and Circular A133 Audits and Audit Risk Alert
• OMB Cost Circulars
• Use of www.cfda.gov and other Web Sites
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Questions ?????
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To Access the Archived 4 Part Single Audit
Fundamentals Web Events
• Archived versions of Part I, II and III are currently
available to members on www.aicpa.org/GAQC
• GAQC members will need to log on to access audio and slides
• Non-GAQC members can send a request to access the archives
to [email protected], please include your name, contact
information and organization.
• All four Parts will be available within a week.
– GAQC members via the GAQC web site
– Non-GAQC members will need to request access per
instructions above
– If you have questions, please e-mail us at: [email protected]
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