Implementation of ARRA in Tennessee

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Implementation of the American Recoveryand Reinvestment Act

A local government perspective

Jerry E. Durham, CPA, CGFM, CFE

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Implementation of ARRAin Tennessee

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County Audit Response to ARRA:Additional Audit/Review Procedures:

Completing a Questionnaire for all ARRA grants.Performing real-time audit procedures (commando

raids).Put governments on notice that we are looking.Determine the ability to report for direct grants.

Established New Investigative TeamComposed of four investigatorsHeaded by Kevin Huffman, Investigative Coordinator

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County Audit Response to ARRA:Results of Real-time ARRA grant reviews:

Forty-six grants amounting to $15,389,964 in 11 Counties.Four grants did not have separate accounting records.Segregation of Duties controls were inadequate for 13

grants.Risk Assessments had not been performed for 13 grants.Action Plans had not been prepared for nine grants.Section 1512 reports had not been filed for two direct

grants.

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Implementation of ARRA

State –Prime

RecipientSubrecipient

or Vendor

Subrecipient or Vendor

Local Govnt. -

Prime or Sub-

recipient

Federal

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County or City

• Funds• Budgets• Types of Funds• Departments

Compon-ent Units

• Schools• E-911

Other Agencies

• Development Districts

• Human Resource Agencies

• State Agencies

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TARP ARRA

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Before - Non-ARRA Grant After - ARRA grant

• Title 1 Grant • Amount = $500,000• Certain Allowable Costs• Old CFDA Number• Standard Risk Assessment

to determine high risk programs.

• Normal Reporting

• Title 1 ARRA Grant• Amount = $500,000• Same Allowable Costs• New CFDA Number• Defined by OMB as High

Risk

• Normal reporting plus new reporting to TRAM Track and/or Federalreporting.gov

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Before - Non-ARRA Grant After - ARRA grant

• Title 1 Grant (cont’d) • Amount = $500,000• Not a cluster program• A-133 Internal Control

requirements

– N/A– N/A

• Ability to identify grants

• Title 1 ARRA (cont’d)• Amount = $500,000• New Cluster Program• A-133 Internal Control

Requirements plus TRAM requirements+?– Risk Assessment– Action Plan

• Separate Accounting

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Before - Non-ARRA Grant Before - ARRA grant

• Title 1 Grant (cont’d)• Amount = $500,000• N/A• Compliance Req.

• N/A

• What if this amount was $1,500,000?

• Title 1 ARRA (cont’d)• Amount = $500,000• Track Jobs

Created/Retained• More Compliance Req.

• Subject to IGs Audit

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Status Report:For June 30, 2009, very few grants were actually

received (39 Audits = 8 grants for $4,265,852). Most ARRA grants will be received for FYE June

30, 2010.Jobs created to date are relatively few (TN. First

Report, 9/30/09 for Grants = 8754.)OIGs are coming. (DOE, Justice, USDA)

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What this means to You - General: Laser beam focused on auditors and governments. Single Audits performed in the same way generally. Recipients Signed a contract to follow TRAM Directives. Recipients Signed a contract to follow ARRA. (Standard

Terms and Conditions for ARRA Grants). (e.g. Should contain requirement to report Fraud, Waste, and

Abuse to appropriate IG - M-09-10 & M-09-15)

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What this means to You: Compliance Supplement Addendum #1

Effective for Single Audits performed on or after June 30, 2009.

Cross-cutting requirements:Cannot use ARRA funds for Casino, Gambling Establishment,

Aquarium, Zoo, Golf Course, or swimming pool.Davis Bacon Act Applies.Buy American provision for Public Building Projects. Identify to first-tier subrecipients requirements to register with

CCR including obtaining a DUNS number.

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What this means to You: Compliance Supplement Addendum #1 (cont’d)

Cross-cutting requirements (cont’d):Special Tests and Provisions:

Separate accountability in accounting records.Separate Identification and presentation of ARRA grants

on SEFA and Data Collection Form.Communication to subrecipients of ARRA award

information including Federal Award Number, CFDA number, amount of ARRA funds, and separate identification requirements on SEFA and Data Collection Form.

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New Reporting to Federalreporting.gov.Major Program Determination:

Methodology used to identify A & B programs is unchanged.Any federal award that exceeds the Type A threshold and

contains “any” amount of ARRA expenditures is automatically a high-risk Type A program.

Any cluster exceeding the Type A threshold that includes an ARRA program is considered a “new” program and would automatically be a high-risk Type A program.

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Changes have been made to program-specific requirements.

OMB anticipates additional amendments to compliance supplement. They will be effective for various dates.

In the future, extensions of time to submit the Single Audit will be difficult, if not impossible, to get approved.

In the future, submission deadline will be less that nine mos.

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Monitoring SubrecipientsWhitehouse.gov/omb/

circulars_a133_compliance_09toc

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What this means to You:ARRA Reporting Requirements:

M-09-21guidance (whitehouse.gov/omb/recovery_default):Report no later than 10th day after the end of each calendar

quarter beginning on September 30, 2009. Prime recipients may delegate reporting responsibilities. Subrecipients are non-federal entities that are awarded funding

through a legal instrument of the prime recipient. Terms and conditions of the Federal award are carried forward to the subrecipient. A vendor is not a subrecipient.

Prime recipient must report the identity of any vendor that receives payments of over $25,000.

Subrecipients may be required by the prime recipient to report certain data elements.

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What this means to You:ARRA Reporting Requirements (cont’d):

M-09-21 guidance (cont’d):Reporting will begin the quarter in which an award is made.Reporting is on a cumulative basis (except jobs).Ramifications of non-compliance with reporting requirements.

Flagged as non-compliant.Withholding funds.Termination.Suspension and debarment.

How to report payments.Key activities and time frames.

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M-09-21 guidance (cont’d):Key Activities and Time Frames (Original)

Days 1-10.Days 11-21Days 22-29Day 30

Extensions for Late Filing?

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In-bound Recipient Reporting (FederalReporting.gov) Timeline and Activities

Next quarterly reporting

cycle begins- updates reflected

cumulatively

Agency, Prime and Sub

Recipient Registration

1 – 15 days after end of Quarter



30 days after end

of QuarterPrime

Recipients & Subs Enter Draft

Reporting Data

Initial Submission

1

2

10 days after end

of Quarter

Prime Recipients

Review Data Submitted By Sub(s)

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Prime Recipients & Subs Make Corrections

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Agency Review of

Data Submitted

Recipient Reports

Published on

Recovery.gov

Prime Recipients & Subs Make Corrections

5 7

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Agency “View Only” Agency Comment Period

Continuous

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8

33 -90 days after end of

Quarter

Recipient Report Adjustments Possible

Report Status: Draft Initial Submission

Final Submission Published

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M-09-21 guidance (cont’d):Illustration – Federal agency awards $1,000,000 ARRA

grant to University A. A spends $200,000 to purchase equipment from XYZ Corp. A sub-awards the $500,000 to University B. B spends $50,000 to purchase equipment from 123 Corp.

Aggregate payments less than $25,000.Sub-awards Payments to individualsPayments to vendors

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M-09-21 guidance (cont’d):Calculating the number of jobs.

Full-time equivalents basis.Collecting information from subrecipients and vendorsDirect jobs vs. Indirect jobs.New Guidance (M-10-08, 12/18/09)

Simplified calculation.Report Jobs for each quarter rather than cumulative.

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What this means to You:Other OMB Guidance:

M-09-10 and 15 guidance.Standard terms and conditions.

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What this means to You:OMB General:

Pilot Project (Internal Controls Reporting).AICPA Letter.Not responsible for auditing Job count.Build America and Cobra compliance not subject to

Single Audit.Capacity not subject to audit.No more extensions to complete Single Audits.Be sure private information is protected since on

website.

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What this means to You:OMB General (cont’d):

Enter findings on Data Collection Form next year.Report as a cluster when grant is “expended”.M-10-05, 11/30/09.

Identifying and Reporting Noncompliance.M-10-08, 12/18/09.

Changes to job number calculations.Additional Guidance is coming.

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What this means to You:GAO:

Fraud, Waste, and Abuse.First report on Compliance with Section 1512.

RATB:New reporting will be required of all grants in the

future.Late Filing Extensions. (9/30, and 12/31)

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What this means to You:Inspector General Report (DOE):

Internal Controls.Capacity.Communication.Reports to Three Local Education Agencies

Correct Previous Dept. of Audit Findings

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What to anticipate:We anticipate numerous findings related to the

TRAM Directives and reporting. These findings will be reported to the Federal Government to be posted on their website. Based on our experience, we do not expect wide-spread fraud.

Lessons from 9/11/2001 - Abuse. Vs. TARP/ARRA. We are now required to report abuse.

Prosecutions – President, RATB, Comptroller, DAs.

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What to anticipate:Direct Grants reporting noncompliance.Subrecipient monitoring responsibilities

noncompliance.Fraud in contracts.

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Transparency and Accountability Funding:Inspector Generals = $224,000,000.GAO = $25,000,000Recovery Act Transparency Board =

$84,000,000OMB = ??

Department of Audit = $0,000,000.

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Ten Steps to ARRA Compliance:– The following websites are of importance with regard to

ARRA compliance: – http://www.recovery.gov/- Federal ARRA Information Website– https://www.federalreporting.gov – Website where all ARRA

grant revenues and expenditures are reported by grant recipients.– http://www.tnrecovery.gov/ - ARRA General Information

website for the State of Tennessee.– http://www.tn.gov/comptroller/ -Tennessee Comptroller’s

General Information and ARRA Website.

http://www.recovery.gov/

https://www.federalreporting.gov/

http://www.tnrecovery.gov/

http://www.tn.gov/comptroller/

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Recovery Act and Related Bonds:Build America Bonds.Recovery Zone Economic Development Bonds.Qualified School Construction Bonds.Qualified Energy Conservation Bonds.Qualified Zone Academy Bonds.Other Bonds.

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How do we deal with ARRA?

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How do we deal with ARRA?A simple solution.Responses to current internal control and

questioned cost findings.A place to start for Local Governments -

County/Municipal Audit ARRA websites.

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ARRA Questions?www.tn.gov/comptroller

Jerry E. Durham, CPA, CGFM, CFE

Technical Manager Division of County

Audit 615.401.7951

[email protected]

The Opinions expressed during this presentation were my own. They do not necessarily represent the views of the Comptroller, his representatives, or the Department of Audit.

http://www.tn.gov/comptroller

Documents

Implementation of ARRA in Tennessee