Common Single Audit Findings - BeaconLivemhmediacf1.beaconlive.com/1420/107260/16773/Assessing Audit... · ©2016 Clark Nuber. All rights reserved. November 22, 2016 Common Single

©2016 Clark Nuber. All rights reserved.

November 22, 2016

Common Single Audit Findings

Troy Rector, CPA CGMA Principal


Session Overview

• The Auditors’ Work Product

• The Auditors’ Manual

• Data Collection Form Stats

• Common Single Audit Findings

• Q&A

2


The Auditors’ Work Product: Single Audit Reports

3

• Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards [aka GAGAS Report]

• Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance in Accordance With the Uniform Guidance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance [aka Single Audit Report]

©2016 Clark Nuber. All rights reserved. 4

The Auditors’ Work Product: GAGAS Report

• Significant deficiencies and material weaknesses in internal control over financial reporting

• Instances of fraud and noncompliance material to the financial statements

• Material abuse


• Significant deficiencies and material weaknesses in internal control over major program compliance

• Material major program noncompliance

• Known or likely questioned major program costs over $25,000

• Known questioned costs for a Federal program over $25,000

• Known or likely fraud impacting a Federal award

• Material misrepresentation of prior audit finding status

The Auditors’ Work Product: Single Audit Report


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.

The Auditors’ Work Product: Significant Deficiency Defined


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.

The Auditors’ Work Product: Material Weakness Defined


Material noncompliance with a type of major program compliance requirement Materiality = ~5% of major program expenditures

The Auditors’ Work Product: Material Noncompliance Defined


Uniform Guidance http://www.ecfr.gov/cgi-bin/text-idx?tpl=/ecfrbrowse/Title02/2cfr200_main_02.tpl

COFAR Frequently Asked Questions – latest update September 2015 https://cfo.gov/wp-content/uploads/2015/09/9.9.15-Frequently-Asked-Questions.pdf

2016 OMB Compliance Supplement https://www.whitehouse.gov/omb/circulars/a133_compliance_supplement_2016

Federal Agency Audit Guide, if available

The Auditors’ Manual

https://cfo.gov/wp-content/uploads/2015/09/9.9.15-Frequently-Asked-Questions.pdf










• Appendix XI to 2 CFR Part 200 and is “re-issued” annually in the Spring

• Assists Auditors in understanding Federal program’s objectives, procedures and compliance requirements relevant to the audit

• Suggested Audit Procedures – Part 3.2

• Federal program audit guidance – Part 4

• Program clusters – Part 5

• Other useful parts and appendices

The Auditors’ Manual: OMB Compliance Supplement


Data Collection Form Stat’s: % of Total 2015 Data Collection Forms

15% Major Program finding

36% High Risk Auditee*

10% MP Significant

Deficiency

1% MP Material Weakness

*-See Low Risk auditee criteria at 2 CFR Part 200.520


Data Collection Form Stat’s: The Top Ten – Findings by Federal Program

CFDA # Federal Program

# of

Findings

% of Total

Findings

84.268 Federal Direct Student Loans 2,018 3%

10.555 National School Lunch Program 1,858 3%

84.063 Federal Pell Grant Program 1,595 2%

93.778 Medical Assistance Program 1,409 2%

84.010 Title I Grants to Local Education Agencies 1,337 2%

84.033 Federal Work-Study Program 1,331 2%

10.553 School Breakfast Program 1,224 2%

84.027 Special Education Cluster 1,163 2%

84.007 Educational Opportunity Grants 1,037 2%

93.855 Allergy and Infectious Diseases Research 934 1%


Data Collection Form Stat’s: Findings by Compliance Requirement

Compliance Requirement

% of Total

Findings

Allowable Activities 13%

Allowable Costs 22%

Cash Management 6%

Eligibility 5%

Equipment and Real Property Management 5%

Matching, Level of Effort, Earmarking 2%

Period of Performance 3%

Procurement and Suspension and Debarment 5%

Program Income 1%

Reporting 17%

Subrecipient Monitoring 4%

Special Tests and Provisions 21%


GUIDANCE

• 200.305(b)

Audit Findings

• Improperly excluded Federally funded grants or contracts from the SEFA • Improperly excluded Federally funded loans or loan guarantees with compliance

requirements • Federal assistance reported does not agree to supporting records, includes

matching costs in error

Key Strategies: Guidance:

• Training of responsible person(s) • Proper grant/loan intake procedures • Award tracking system • Adequate financial management

system • Review of the SEFA

• 200.101 – UG applicability table • 200.502 – Basis for determining

Federal awards expended

Common Single Audit Findings: The Schedule of Expenditures of Federal Awards


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Allowable Costs

Audit Finding

The entity’s procedures over personnel costs were not in compliance with the Uniform Guidance including use of unadjusted budget estimates and allocations of time not being based on all hours worked even if exempt.


• Compare the entity’s personnel expense practices against the UG’s Standards for Documentation of Personnel Expenses

• 2 CFR Part 200.430(i)


GUIDANCE

• 200.305(b)


Audit Finding

Costs reimbursed by the grant included cost considered unallowable by the grant or were unsupported


• Ensure written procedures over the review of costs for allowability also include consideration of whether documentation (receipts, invoices, etc.) exists

• Review of costs claimed on the award should take into consideration requirements in Subpart E of the UG and specific limitations of the award agreement

• 2 CFR Part 200.400 • 2 CFR Part 200.403(g)


GUIDANCE

• 200.305(b)


Audit Finding

Direct allocation of costs to the grant award were had either unsupported allocation methods or were based on budgeted and not actual allocation data


• Develop a Direct Allocation Plan to document direct cost allocation methodologies

• Review allocation methodologies used to ensure that actual data is used in the allocations computation and not budgeted data

• 2 CFR Part 200.405


GUIDANCE

• 200.305(b)


Audit Finding

Improper calculation and billing of indirect costs using the De Minimis indirect cost rate


• Ensure that a detailed calculation exists in the invoice backup to support the indirect cost recovery being billed using the De Minimis indirect cost rate

• Consider use of a worksheet to require the format for documenting the De Minimis indirect cost recovery

• 2 CFR Part 200.414(f)


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Cash Management

Audit Finding

Lack of adequate procedures to minimize the time lapse between the drawdown of funds and the expenditure of those funds


• Written cash management procedures in compliance with the UG

• Review and approval of cash drawdowns

• 2 CFR Part 200.305(b)


GUIDANCE

• 200.305(b)


Audit Finding

Indirect costs are invoices equally throughout the award period and not in relation to the actual direct costs incurred



• Grant intake and kick-off activities • Documented discussion with program

officer

• 2 CFR Part 200.305


GUIDANCE

• 200.305(b)


Audit Finding

Pass-through entity does not have adequate procedures to determine a subrecipient’s compliance with the cash management requirements in their invoices to the pass-through entity



• Understanding of subrecipient’s invoice process

• Subrecipient Monitoring

• 2 CFR Part 200.302(b)(6) • 2 CFR Part 200.305 • 2 CFR Part 200.331(d)(1)


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Eligibility

Audit Finding

Lack of support or proper determination of participant’s eligibility and/or benefit calculation


• Understanding and training over program regulations

• Written eligibility determination and documentation procedures

• Use of documentation checklist • “Internal Audit” procedures

performed over eligibility documentation

• Award terms and conditions, program regulations


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Eligibility

Audit Finding

Lack of required, timely re-certification of income eligibility


• Understanding and training over program regulations

• Written eligibility determination and documentation procedures

• Notifications from eligibility systems • “Internal Audit” procedures

performed over re-certifications



GUIDANCE

• 200.305(b)

Common Single Audit Findings: Equipment and Real Property Management

Audit Finding

Property records of Federally funded equipment do not include all information required by the Uniform Guidance


• Understand the information required to be maintained in the property records

• Add required documentation to property records

• Adequate control system

• 2 CFR Part 200.313(d)(1)


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Equipment and Real Property Management

Audit Finding

Required biennial physical inventory over federally funded equipment was not performed or adequately documented


• Understanding and communication of the requirement of the physical inventory over Federally funded equipment

• Documentation standards for the physical inventory and related reconciliation to property records

• Adequate control system

• 2 CFR Part 200.313(d)(2)


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Matching

Audit Finding

Matching costs claimed on the grant’s financial reports were unsupported


• Written procedures to ensure matching costs are adequately tracked, documented and meet the allowability provisions of Subpart E of the UG

• Review and approval of matching costs claimed on financial reports submitted under the award

• 2 CFR Part 200.306(b)


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Matching

Audit Finding

Costs claimed as matching are considered unallowable under Subpart E of the Uniform Guidance


• Written procedures to ensure matching costs are adequately tracked, documented and meet the allowability provisions of Subpart E of the UG

• Ensure adequate review of matching costs claimed is performed including consideration of allowable costs

• 2 CFR Part 200.306(b)


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Level of Effort

Audit Finding

Lack of support for the Level of Effort data reported under the grant


• Adequate procedures to ensure Level of Effort data is retained to support programmatic and other reports submitted where Level of Effort is being reported

• Check Level of Effort support during the review and approval of grant reports to be submitted



GUIDANCE

• 200.305(b)

Common Single Audit Findings: Period of Performance

Audit Finding

Pre-award costs charged to the award were not properly approved when prior approval was required by terms of the award.


• Adequate award close-out procedures • Emphasized review and approval of

costs billed at the start of the award

• 2 CFR Part 200.308(d)(1) • 2 CFR Part 200.458


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Period of Performance

Audit Finding

Costs charged to the award that were incurred subsequent to the end of the period of performance including subrecipient invoices paid by a pass through entity


• Adequate award close-out procedures • Emphasized review and approval of

costs billed at the end of the award

• 2 CFR Part 200.309 • 2 CFR Part 200.343


GUIDANCE

• 200.305(b)

Common Single Audit Findings: UG Procurement

Audit Alert

Entity did not properly document their election of the procurement grace period under the Uniform Guidance


• Document election of the grace period in the entity’s “internal procurement procedures”

• 2 CFR Part 200.110


GUIDANCE

• 200.305(b)


Audit Finding

An entity lacks written procurement procedures or the written procurement procedures do not conform to the Uniform Guidance including all of the “musts”


• Established written procurement procedures that, in part, meet the requirements of the Uniform Guidance

• Compare entity’s written procurement procedures to the Uniform Guidance, including the “musts”, and identify needed revisions

• Communicate, train and monitor activities related to revisions made to procurement procedures

• 2 CFR Part 200.318(a)


GUIDANCE

• 200.305(b)


Audit Finding

Lack of written standards of conduct that cover conflicts of interest and govern the performance of its employees engaged in the selection, award, and administration of contracts


• Evaluate what, if any, existing written standards exist covering standards of conduct as required by the UG

• 2 CFR Part 200.318(c)(1)


GUIDANCE

• 200.305(b)


Audit Finding

Procurement method used was not in accordance with the entity’s written procurement procedures or requirements of the Uniform Guidance


• Ensure written procurement procedures include consideration of the new procurement methods defined by the UG

• Monitoring over the changes made to existing procurement procedures especially in a decentralized environment

• 2 CFR Part 200.320


GUIDANCE

• 200.305(b)


Audit Finding

Lack of adequate documentation to support a procurement’s history


• Ensure written procurement procedures meet the minimum procurement record requirements of the UG

• Consider need for new tools or changes to existing forms to incorporate changes to existing documentation requirements as a result of implementing the UG

• 2 CFR Part 200.318(i)


GUIDANCE

• 200.305(b)


Audit Finding

Procurement by noncompetitive proposal was not used in an acceptable circumstance


• Compare existing procedures and practices around noncompetitive proposals (sole source) to the restriction on its use in the UG

• Consider need for a tool to document the noncompetitive proposal justification considering one of the allowable circumstances

• 2 CFR Part 200.318(i)


GUIDANCE

• 200.305(b)


Audit Finding

Cost or price analysis was not performed for a Federally funded procurement in excess of the Simplified Acquisition Threshold


• Ensure written procurement procedures address the requirement for a cost or price analysis to be performed, as well as, the negotiation of profit if applicable to Federally funded activities.

• Consider developing a tool to document the cost or price analysis

• 2 CFR Part 200.323


GUIDANCE

• 200.305(b)


Audit Finding

Lack of documentation that suspension and debarment procedures were performed when required


• Ensure written procurement procedures address the requirement to perform suspension and debarment procedures

• Establish standards for documenting the suspension and debarment procedure depending on which option in 2 CFR Part 180 is used

• 2 CFR Part 200.213 • 2 CFR Part 180


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Reporting

Audit Finding

Lack of support for costs or programmatic data reported in required grant reports


• Ensure the entity meets the financial management system standards for tracking federal award costs

• Required certification of the financial reports is completed by someone authorized to legally bind the entity

• 2 CFR Part 200.302(b)(1) • 2 CFR Part 200.415(a)


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Subrecipient Monitoring

Audit Finding

Pass through entity’s subaward agreement to subrecipient did not include the required provisions as outlined in the Uniform Guidance


• Compare the entity’s subaward agreement to the required provisions outlined in the Uniform Guidance including Federal award identification and indirect cost reimbursement

• 2 CFR Part 200.331(a)


GUIDANCE

• 200.305(b)


Audit Finding

Required risk assessed over the subrecipient was either not performed or properly documented


• Evaluate existing subrecipient monitoring activities to determine what changes to the subrecipient risk assessment process is needed including the documentation and frequency of subrecipient risk assessments

• Develop form for documenting the subrecipient risk assessment

• 2 CFR Part 200.331(b)


GUIDANCE

• 200.305(b)


Audit Finding

Required subrecipient monitoring was not performed or properly documented


• Ensure a clear link between the subrecipient risk assessment and the related subrecipient monitoring plan

• Assess whether current subrecipient monitoring includes the requirements of the Uniform Guidance and whether documentation of the monitoring is adequate.

• 2 CFR Part 200.331(d)-(e)


GUIDANCE

• 200.305(b)


Audit Finding

Pass through entity did perform a documented review of the subrecipient’s Single Audit


• Develop procedure to obtain the subrecipient’s Single Audit report from the Federal Audit Clearinghouse and perform a documented review

• Consider use of a tool to document the Single Audit report review

• 2 CFR Part 200.331(f)


GUIDANCE

• 200.305(b)


Audit Finding

Pass through entity did not issue the required Management Decision on a timely basis.


• Ensure the pass through entity’s review of the Single Audit report includes knowledge and communication

• Document performance of the Management Decision including communications

• 2 CFR Part 200.521(d)


GUIDANCE

• 200.305(b)

Common Single Audit Findings: Special Tests and Provisions

Audit Finding

When applicable, construction contract or subcontract did not include the required Federal prevailing wage rate requirements and/or verification of receiving the required, weekly payroll reports


• Knowledge and training of the Davis-Bacon Act requirements

• Advanced understanding of the required prevailing wage rate clauses and responsibilities for receiving and reviewing the weekly, certified payroll reports



GUIDANCE

• 200.305(b)

Common Single Audit Findings: Special Tests and Provisions

Audit Finding

When applicable, approval was not obtained for changes in key personnel


• Grant intake and proper kick-off • Monitoring of applicable key

personnel requirements



Questions

47

Troy Rector, CPA Principal 425-990-7603 [email protected]

Documents

Common Single Audit Findings - BeaconLivemhmediacf1.beaconlive.com/1420/107260/16773/Assessing Audit... · ©2016 Clark Nuber. All rights reserved. November 22, 2016 Common Single