Transcript Student Financial Assistance Cluster

Presented by
Tim Ray, CPA, CGFM
Federal Compliance Coordinator
Georgia Department of Audits
Education Audit Division
1
 Where
We’ve Been
 Where We Are
 Where We’re Going
 Q&A
2
 FY
12 Audit Results
◦ 65 Federal Compliance Findings
 30 Activities Allowed or Unallowed
and Allowable Costs/Cost
Principles
 4 Cash Management
 4 Eligibility
 10 Equipment and Real Property
Management
3
 FY
12 Audit Results
◦ 65 Federal Compliance Findings
 3 Matching, Level of Effort,
Earmarking
 2 Period of Availability of Funds
 6 Procurement and Suspension and
Debarment
4
 FY
12 Audit Results
◦ 65 Federal Compliance Findings
 2 Program Income
 7 Reporting
 6 Special Tests and Provisions
5
 FY
12 Audit Results
◦ 134 Federal Management Letter
Comments (MLCs)
6
 Majority
of Findings and
Management Letter
Comments result of
deficiencies in Internal
Control.
◦ Usually there’s noncompliance associated
with the Internal Control deficiency.
7

What’s the difference between the
level of deficiency for a finding and a
MLC?
◦ MLC - A deficiency in internal control
over compliance exists when the design
or operation of a control over
compliance does not allow management
or employees, in the normal course of
performing their assigned functions, to
prevent, or detect and correct,
noncompliance with a type of
compliance requirement of a Federal
program on a timely basis.
8

What’s the difference between the level of
deficiency for a finding and a MLC?
◦ Finding – 2 types
 1- A significant deficiency in internal
control over compliance is a deficiency,
or a combination of deficiencies, in
internal control over compliance with a
type of compliance requirement of a
Federal program that is less severe than
a material weakness in internal control
over compliance, yet important enough
to merit attention by those charged with
governance.
9

What’s the difference between the level of
deficiency for a finding and a MLC?
◦ Finding – 2 types
 2- A material weakness in internal
control over compliance is a deficiency,
or combination of deficiencies, in
internal control over compliance, such
that there is a reasonable possibility
that material noncompliance with a type
of compliance requirement of a Federal
program will not be prevented, or
detected and corrected, on a timely
basis.
10
 Who
is Responsible for Internal
Controls for a Federal Program?
◦ Program managers?
◦ Program staff?
◦ Finance personnel?
11
 Numerous
and Effort
Deficiencies for Time
◦ OMB Circular A-87, Cost Principles for
State, Local and Indian Tribal
Governments, Attachment B.8.h states:
 Support of salaries and wages. These
standards regarding time distribution are
in addition to the standards for payroll
documentation.
12

Time and Effort
◦ OMB Circular A-87, Cost Principles for State, Local
and Indian Tribal Governments, Attachment
B.8.h(3) states: Where employees are expected to
work solely on a single Federal award or cost
objective, charges for their salaries and wages will
be supported by periodic certifications that the
employees worked solely on that program for the
period covered by the certification. These
certifications will be prepared at least semiannually and will be signed by the employee or
supervisory official having first hand knowledge of
the work performed by the employee.
13

Time and Effort
◦ OMB Circular A-87, Cost Principles for State,
Local and Indian Tribal Governments,
Attachment B.8.h(4) states: Where
employees work on multiple activities or cost
objectives, a distribution of their salaries or
wages will be supported by personnel activity
reports or equivalent documentation which
meets the standards in subsection (5) unless
a statistical sampling system (see subsection
(6)) or other substitute system has been
approved by the cognizant Federal agency.
Such documentary support will be required
where employees work on:
14
 Time and Effort
◦ OMB Circular A-87, Attachment B.8.h(4)
{cont’d} states:
 (a) More than one Federal award,
 (b) A Federal award and a non-Federal award,
 (c) An indirect cost activity and a direct cost
activity,
 (d) Two or more indirect activities which are
allocated using different allocation bases, or
 (e) An unallowable activity and a direct or
indirect cost activity.
15

Time and Effort
◦ OMB Circular A-87, Attachment B.8.h(5) states:
 (5) Personnel activity reports or equivalent
documentation must meet the following
standards:
 (a) They must reflect an after-the-fact
distribution of the actual activity of each
employee,
 (b) They must account for the total activity for
which each employee is compensated,
 (c) They must be prepared at least monthly and
must coincide with one or more pay periods,
and
 (d) They must be signed by the employee.
16

Time and Effort
◦ OMB Circular A-87, Attachment B.8.h(5) {cont’d} states:
 (e) Budget estimates or other distribution percentages
determined before the services are performed do not qualify
as support for charges to Federal awards but may be used
for interim accounting purposes, provided that:
 (i) The governmental unit's system for establishing the
estimates produces reasonable approximations of the activity
actually performed;
 (ii) At least quarterly, comparisons of actual costs to
budgeted distributions based on the monthly activity reports
are made. Costs charged to Federal awards to reflect
adjustments made as a result of the activity actually
performed may be recorded annually if the quarterly
comparisons show the differences between budgeted and
actual costs are less than ten percent; and
 (iii) The budget estimates or other distribution percentages
are revised at least quarterly, if necessary, to reflect changed
circumstances.
17
 Time
and Effort
◦ What does all this in addition to
mean?
 Feds want to ensure that charges
are allocable to the program.
 Charges made to cost objective
in accordance with relative
benefits received.
18
 Procurement
and Suspension
and Debarment
◦ 2 parts
 Procurement
 Suspension and Debarment
19

Suspension and Debarment
◦ Requirements set forth in 2 CFR part
180.
 Non-Federal entities (School Districts)
are prohibited from contracting with or
making subawards under covered
transactions to parties that are
suspended or debarred or whose
principals are suspended or debarred.
20
 Suspension
and Debarment
 Contract
 An agreement with specific terms
between two or more persons or
entities in which there is a promise
to do something in return for a
valuable benefit known as
consideration.
21
 Suspension
and Debarment
 Contract
 A voluntary, deliberate, and legally
binding agreement between two or
more competent parties.
 Generally have to do with
employment, sale or lease, or
tenancy.
22
 Suspension
and Debarment
◦ Requirements set forth in 2 CFR
part 180.
 Parties
 Principals
 These two elements have been
included in the CFR.
 FY 2013 first year Principles
included in OMB Compliance
Supplement.
23
 Suspension
and Debarment
 OMB released a Q&A on testing
principals.
 Not required to report audit findings
based solely on tests for principals.
 States this is not a new requirement.
 2014 Compliance Supplement will
provide additional guidance for
future years.
24
 Suspension
and Debarment
◦ Requirements set forth in 2 CFR
part 180.
 “Covered transactions” include
those procurement contracts for
goods and services awarded under
a nonprocurement transaction
(e.g., grant or cooperative
agreement) that are expected to
equal or exceed $25,000.
25
 Suspension
and Debarment
◦ Requirements set forth in 2 CFR
part 180.
 All nonprocurement transactions
entered into by a recipient (i.e.,
subawards to subrecipients),
irrespective of award amount, are
considered covered transactions,
unless they are exempt as provided
in 2 CFR section 180.215.
26

Suspension and Debarment
◦ Requirements set forth in 2 CFR part
180.
 When a non-federal entity (School
District) enters into a covered
transaction with an entity at a lower
tier, the non-federal entity must verify
that the entity and its principals, as
defined in 2 CFR section 180.995 and
agency adopting regulations, are not
suspended or debarred or otherwise
excluded from participating in the
transaction.
27

Suspension and Debarment
◦ 2 CFR part 180.995
 Principal means—
 (a) An officer, director, owner, partner, principal
investigator, or other person within a participant
with management or supervisory responsibilities
related to a covered transaction; or
 (b) A consultant or other person, whether or not
employed by the participant or paid with Federal
funds, who—
 (1) Is in a position to handle Federal funds;
 (2) Is in a position to influence or control the use
of those funds; or,
 (3) Occupies a technical or professional position
capable of substantially influencing the
development or outcome of an activity required
to perform the covered transaction.
28

Suspension and Debarment
◦ This verification may be accomplished by
 (1) checking the Excluded Parties List System
(EPLS) maintained by the General Services
Administration (GSA) (Note: EPLS is no longer a
separate system; however, the OMB guidance
and agency implementing regulations still
refer to it as EPLS) and available at
https://www.sam.gov/portal/public/SAM/),
 (2) collecting a certification from the entity, or
 (3) adding a clause or condition to the covered
transaction with that entity.
29

Suspension and Debarment
◦ What happens if I do business with an
excluded person in a covered
transaction?
 If as a participant you knowingly do
business with an excluded person,
the Federal agency responsible for
your transaction may disallow costs,
annul or terminate the transaction,
issue a stop work order, debar or
suspend you, or take other remedies
as appropriate.
30
 Suspension
◦ Temporary status, suspended
person given opportunity to
contest the suspension and
have it lifted.
 Debarment
◦ Imposed for a specified period
that a person is not presently
responsible.
31
Where
to find CFR
http://www.gpo.gov/
fdsys/
32
Where
to find CFR
33
 Federal
Programs Overview
◦ 1) U.S. Code – Congress passes
legislation in the form of a Public
Law or authorizing statute that
creates the grant program.
 Provides Federal agencies and
grantees information about the
public need that should be
addressed and what types of
programs and activities are
allowable under the program.
34

Federal Programs Overview
◦ 2) Code of Federal Regulations (CFR) –
Administrative law that interprets how
U.S. Code should be executed (two
parts derived from OMB circulars).
 A) Cross-cutting administrative rules –
“Cross-cutting” means that the rules
apply to all grants (OMB Circular A102 [34 CFR 80]).
 Sets forth the rules on how grantees
should manage a federal grant.
35
 Federal
Programs Overview
◦ 2) Code of Federal Regulations
(CFR) – Administrative law that
interprets how U.S. Code should
be executed (two parts derived
from OMB circulars).
 B) Cross-cutting cost principles –
informs grantees how they are
allowed to spend their Federal
funds (OMB Circular A-87 [2 CFR
225).
36
 Federal
Programs Overview
◦ 3) Federal Agency and Program
Regulations.
 Provides grantees more
information on what rules apply
to the Federal agency and any
particular program under that
agency.
 Regulations may vary from
program to program under the
same Federal agency.
37
 Federal
Programs Overview
◦ 4) Grant terms and conditions.
 Awarding agency (including
GDOE) can supplement any of
the above guidance when
making an award.
 Additional requirements will
be outlined in the award
documents.
38
 Federal
Programs Overview
 OMB Circular A-21, Cost
Principles for Educational
Institutions (2 CFR 220)
 OMB Circular A-50, Audit
Followup
 OMB Circular A-87, Cost
Principles for State, Local and
Indian Tribal Governments (2 CFR
225)
 OMB Circular A-89, Catalog of
Federal Domestic Assistance
39

Federal Programs Overview
 OMB Circular A-102, Uniform Administrative
Requirements for Grants and Cooperative
Agreements to State and Local Governments
(various CFRs – by Federal agency)
 OMB Circular A-110, Uniform Administrative
Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals and
Other Non-Profit Organizations (2 CFR 215)
 OMB Circular A-122, Cost Principles for NonProfit Organizations (2 CFR 230)
 OMB Circular A-133, Audits of States, Local
Governments and Non-Profit Organizations
40
 Uniform
Administrative
Requirements, Cost Principles,
and Audit Requirements for
Federal Awards (2 CFR 200)
◦ Supercircular
◦ Omnicircular
◦ Megacircular
41
 Uniform
Administrative
Requirements, Cost Principles,
and Audit Requirements for
Federal Awards (2 CFR 200)
◦ October 2011 – OMB created the Council
on Financial Assistance Reform (COFAR).
 Comprised of representatives from
Federal grant making agencies who
were tasked to recommend grant
policies and revisions to OMB.
42
 Uniform
Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal
Awards (2 CFR 200)
◦ COFARs first priority was to issue proposed
grant reform guidance that targets waste,
fraud and abuse and reduces administrative
burden.
 March 26, 2012 issued an advanced notice
of proposed grant reform guidance.
43
 Uniform
Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal
Awards (2 CFR 200)
◦ On February 1, 2013 OMB issued “Proposed
OMB Uniform Guidance for Federal Financial
Assistance”.
 COFAR requested more comments on the
proposed guidance.
44
 Uniform
Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal
Awards (2 CFR 200)
◦ On December 26, 2013 OMB issued final
grant reform.
 Represents the biggest change in guidance
since the Single Audit Act of 1984.
45
 Uniform
Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal
Awards (2 CFR 200)
◦ Effective/applicability date (2 CFR 200.110)
 Federal agencies must implement the
requirements to be effective by December 26,
2014 (FY 15).
 Audit requirements will apply to audits of fiscal
years beginning on or after December 26,
2014 (FY 16).
46
 Uniform
Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal
Awards (2 CFR 200)
◦ Effective/applicability date (2 CFR 200.110)
 Administrative requirements and cost
principles will apply to new awards and to
additional funding (funding increments) to
existing awards made after December 26,
2014.
47
 Uniform
Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal
Awards (2 CFR 200)
◦ Effective/applicability date (2 CFR 200.110)
 Existing Federal awards will continue to be
governed by the terms and conditions of the
Federal award, except for Audit requirements.
48
 Factors
to be aware of in 2 CFR 200
◦ Focuses on stronger internal control for
personal services (time and effort)
documentation – the #1 audit finding.
◦ Provides for consistent treatment of cost Limits allowable costs to make the best use of
Federal funds.
◦ Sets conditions to limit departures from
approved indirect cost rates.
◦ Encourages effective, modern operating
environment for IT.
49
 Recommendations
for 2 CFR 200
◦ Study the new rules. This is the most
expansive grant reform since the Single
Audit Act of 1984.
◦ Make sure that your costs are reasonable and
allowable - study the new items of costs.
◦ Review your procurement policies - more
restrictions on sole sourcing.
◦ Work with GDOE to develop the best strategy
for meeting the new requirements
particularly in the human services area.
50
 Additional
resources
◦ COFAR
 https://cfo.gov/cofar/
◦ OMB Policy Statements
 http://www.whitehouse.gov/omb/grants
_docs
 Contains crosswalks and text comparisons
between previous and new guidance.
51
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404-657-5146
[email protected]
53