How the Changes to
Single Audits and
Federal Grant Rules
Impact You
Agenda
 Overview and History of the Super Circular
 Changes to Single Audit Requirements
 Changes to Federal Cost Principles
 Changes to Administrative Requirements
 Action Steps for Entities Receiving Federal
Grants
2
Overview and History of the
Super Circular
Background
 Rules associated with federal grants are
overseen by the Office of Management and
Budget (OMB), which is part of the executive
branch of the federal government
 OMB issues “Circulars” which set forth the
various rules governing federal awards and
audits of federal awards
4
Background
 Historically, Single Audit requirements have
been located in OMB Circular A-133
 Historically, cost principles guidance has been
located as follows:
 OMB Circular A-21 – Educational Institutions
 OMB Circular A-87 – State Governments, Local
Governments, Indian Tribes
 OMB Circular A-122 – Not-for-Profit Organizations
5
Background
 Guidance has been complicated and difficult
to understand
 Cost principles differ between the three cost
circulars
 Thus, OMB undertook a major project to
overhaul and streamline federal award
guidance
6
Project Objectives
 Streamline the federal grant-making process
 Increase the efficiency and effectiveness of
federal programs
 Ease administrative burden for grant applicants
 Eliminate unnecessary and duplicative
requirements
7
Project Objectives
 Focus on areas that achieve better outcomes
at a lower cost
 Reduce the risk of waste, fraud and abuse
8
Project Timeline
 October 2011 – Council of Financial Assistance
Reform (COFAR) established
 February 28, 2012 – Advance Notice of
Proposed Guidance issued—contained
preliminary ideas OMB was considering and
was subject to public comment
9
OMB Super Circular
 January 31, 2013 – Proposed OMB Uniform
Guidance issued—contained more refined,
specific proposed OMB regulations and was
also subject to public comment
 December 26, 2013 – Uniform Administrative
Requirements, Cost Principles, and Audit
Requirements for Federal Awards issued—
represents final document containing final
regulations
10
OMB Super Circular
 Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal
Awards is codified into Title 2, Part 200, of the
Code of Federal Regulations
 Referred to as the “Super Circular” or “Omni
Circular”
11
Circulars Replaced or Modified by
Super Circular
12
Effective Dates
 Federal agencies must implement the
requirements by December 26, 2014
 Non-federal entities must implement the new
administrative requirements and cost principles
beginning December 26, 2014
 Applies to new and incrementally funded awards
issued on or after December 26, 2014
13
Effective Dates
 New Single Audit requirements are effective for
fiscal years beginning on or after December 26,
2014
 Thus, first effective for December 31, 2015 fiscal
year ends
 Early implementation is not permitted
14
Structure of Super Circular
 Subpart A: Sets forth definitions and acronyms
used throughout document
 Subpart B: General provisions including
purpose of guidance, its applicability, and
effective date
 Subpart C: Administrative requirements
directed at federal agencies related to preaward activities and content of federal awards
15
Structure of Super Circular
 Subpart D: Administrative Requirements
including procurement, internal control, and
subrecipient monitoring
 Subpart E: Cost Principles guidance previously
found in Circulars A-21, A-87 and A-122
 Subpart F: Single Audit requirements previously
found in Circulars A-133 and A-50
16
Questions
17
Changes to Single Audit
Requirements
Changes to Single Audit Threshold
 Single Audit threshold increased from $500,000
to $750,000
 It is estimated that approximately 5,000 entities
will be relieved from Single Audit requirement as
a result
 Entities below this threshold must still make
records available for review or audit by federal
agencies, pass-through entities, and the
Government Accountability Office
19
Major Program Determination Steps
 Determine Type A programs vs. Type B
programs
 Determine high-risk/low-risk Type A programs
 Determine high-risk/low-risk Type B programs
 Select programs to audit as major
 Determine that adequate percentage of
coverage has been achieved
20
Changes to Major Program
Determination
 Currently, for entities expending < $100 million in
federal awards, programs with greater than
$300,000 in expenditures or 3% of total
expenditures are considered “Type A”
 Makes it more likely they will be selected as major
 Have to be audited as major at least once every
three years
 Super Circular increases the Type A threshold to
$750,000
21
Changes to Major Program
Determination
 Currently, Type A programs are considered high
risk (and therefore must be audited as major) if:
 Program was NOT audited as a major program in one
of the two preceding years; OR
 In the most recent year audited, the program had
findings
22
Changes to Major Program
Determination
 The Super Circular makes a Type A program
high risk if, in the most recently audited period,
the program:
 Did not receive an unmodified opinion;
 Had a material weakness in internal control;
 Had questioned costs exceeding 5% of the program’s
expenditures
23
Changes to Major Program
Determination
 Currently, threshold for performing risk
assessment of Type B programs is $100,000 or
0.3% of total federal expenditures
 The Super Circular changes the Type B risk
assessment threshold to 25% of the Type A
threshold
24
Changes to Major Program
Determination
 Under current guidance, the high-risk Type B
programs selected as major must be:
 ½ of the high-risk Type B programs, OR
 One high-risk Type B for each low-risk Type A
 The Super Circular changes the first criteria to ¼
of the low-risk Type A programs
25
Changes to Major Program
Determination
 Under current guidance, % of federal dollars
that must be audited as major is:
 50% for high-risk entities
 25% for low risk entities
 Under the Super Circular, % of federal dollars
that must be audited as major is:
 40% for high-risk entities
 20% for low risk entities
26
Changes to Low-Risk Auditee Criteria
 Currently, an entity is a low risk auditee if:
 Single Audits were performed in each of the past two
years
 unmodified opinions on the financial statements and
SEFA in past two years
 No material weaknesses in internal control in the past
two years
 No material noncompliance or questioned costs >5%
of expenditures for a given award in past two years
27
Changes to Low-Risk Auditee Criteria
 The Super Circular includes modifications to this,
such as:
 Clearly indicates that the federal clearinghouse
submission must have been submitted on time
 The auditor must NOT have indicated that there is
substantial doubt about the entity’s ability to continue
as a going concern
 Removes the option for waivers in this area
28
Findings
 Currently, a Single Audit finding is required if
known or likely questioned costs exceed
$10,000
 The Super Circular increases this threshold to
$25,000
 Must include a description of how questioned
costs were calculated
29
Findings
 Findings will now include a perspective section,
indicating whether finding is isolated or systemic
and the type of sampling used
 Repeat findings must be identified as such and
prior year finding number provided
 Summary schedule of prior audit findings must
include financial statement findings also, and
provide a reason why findings recurred
30
Compliance Requirements
 Proposed OMB Uniform Guidance issued on
January 31, 2013 by the OMB suggested a
reduction of the types of compliance
requirements from 14 to 6
31
Compliance Requirements
32
Compliance Requirements
 Changes to Compliance Requirements have
been deferred and will be considered as part of
the annual Compliance Supplement process
 2015 Compliance Supplement is expected to be
published in April 2015
 Will include changes as a result of the Super Circular,
and any changes to compliance requirements
33
Federal Audit Clearinghouse
Submission Reminders
 New federal audit clearinghouse (FAC) website became effective starting with fiscal year
2013 submissions
 The FAC web-site began accepting fiscal year
2014 submissions on October 20, 2014
34
Federal Audit Clearinghouse
Submission Reminders
 FAC website has posted notices indicating that
the following requirements will be effective with
submissions made on or after January 2, 2015:
 Must use new standard finding numbering system
(2014-001 through 2014-999)
 Audit submissions must be unlocked, unencrypted
and in a text-searchable PDF format
35
Questions
36
Changes to Federal Cost
Principles
Cost Principles– Key Changes
 Indirect Cost Rates
 Time and Effort Reporting
 Other Miscellaneous Changes
38
Indirect Cost Rates
 Non-federal entities have the option to extend
negotiated indirect cost rate for up to four
years
 Only allowed once per negotiated rate cycle
 Approval of cognizant agency is required
 There must be no major changes to the entity’s
indirect costs
 Cannot negotiate rate during the extension period
39
Indirect Cost Rates
 Entities that have never had a negotiated
indirect cost rate may utilize a minimum flat rate
of 10%
 Only available if entity receives less than $35 million in
federal funding per year
 Must keep documentation of this decision on file
40
Indirect Cost Rates
 Pass-through entities required to either:
 Honor the indirect cost rate negotiated by a
subrecipient at the federal level
 Negotiate a rate with the subrecipient in accordance
with federal guidelines
 Provide a minimum flat rate
41
Time and Effort Reporting
 Big picture changes:
 Greater flexibility in time and
effort reporting
 Focuses on internal controls
that should be in place to
justify salaries and wages, and
provides latitude in meeting
those standards
 Personnel activity reports
encouraged but no longer
required
42
Time and Effort Reporting
 Records supporting salaries and wages must:
 Be supported by a system of internal control which
provides reasonable assurance that charges are
accurate, allowable, and properly allocated
 Be incorporated into the entity’s official records
 Reasonably reflect the total activity for which the
employee is compensated, not exceeding 100% of
compensated activities
43
Time and Effort Reporting
 Records supporting salaries and wages must:
 Comply with the established accounting policies and
practices of the entity
 Support the distribution of the employee’s salary or
wages among specific activities or cost objectives
44
Time and Effort Reporting
 Budget estimates determined before services
are performed:
 Do NOT qualify as support for payroll costs
 May be used for interim accounting purposes under
certain circumstances if trued up later
45
Time and Effort Reporting
 Use of percentages and estimates:
 Records may reflect distribution of time as a
percentage as opposed to by hours
 Rules acknowledge that some estimates are
necessary to allocate time between teaching,
research, service and administration in an academic
setting
46
Time and Effort Reporting
 If records meet the requirements described
above, entities will not be required to provide
any additional support or documentation for
the work performed
 If records do NOT meet the requirements
described above, the federal government may
require personal activity reports, certifications,
or equivalent documentation
47
Time and Effort Reporting
 For non-exempt employees, records indicating
the total number of hours worked each day are
still required pursuant to Department of Labor
regulations
 The regulations encourage cognizant agencies
to approve alternative proposals based on
outcomes or milestones for program
performance. If approved, these would be an
acceptable alternative for the time and effort
reporting requirements.
48
Dependent Care Costs for Conferences
 In an effort to encourage entities to have
family-friendly policies, the following costs are
allowable:
 For hosts of conferences, the cost of identifying (but
not providing) locally available child-care resources
 Temporary dependent care costs that result directly
from travel to conferences
49
Required Certifications
 The annual and final fiscal reports or vouchers
requesting payment under a federal award
must include a certification
 Certification must be signed by an official that
can legally bind the organization
50
Certification Language
“By signing this report, I certify to the best of my
knowledge and belief that the report is true,
complete, and accurate, and the expenditures,
disbursements and cash receipts are for the
purposes and objectives set forth in the terms and
conditions of the Federal award. I am aware that
any false, fictitious, or fraudulent information, or the
omission of any material fact, may subject me to
criminal, civil or administrative penalties for fraud,
false statements, false claims or otherwise. (U.S.
Code Title 18, Section 1001, and Title 31, Sections
3729-3730 and 3801-3812).”
51
Other Requirements
 Section 200.407 of the Super Circular provides
one location that entities can consult for all
circumstances in which prior approval from the
federal awarding agency is required.
 Increases the threshold to $50 million from $25
million for filing a cost-accounting disclosure
statement for approval by the funding agency
52
Other Requirements
 For fiscal years beginning on or after January 1,
2016, financing costs associated with patents
and computer software are allowable
 Note that the cost principles included in
Subpart E do not include cost principles for
hospitals. OMB has indicated that these will be
added at a later date.
53
Questions
54
Changes to Administrative
Requirements
Administrative Requirements – Key
Changes
 Procurement Requirements
 Contractor vs. Subrecipient Determination
 Pass-Through Entity Responsibilities
 Internal Control
 Property Standards
 Interest Earned on Advances
 Personally Identifiable Information
56
Procurement Requirements
 The Super Circular defines five methods of
procurement to be used:
 Micro purchases – less than $3,000 (or $2,000 for
construction subject to Davis Bacon)
 Small purchases – $3,000 to $150,000 (the Simplified
Acquisition Threshold)
 Sealed bid purchases – Over $150,000; preferred for
construction
57
Procurement Requirements
 The Super Circular defines five methods of
procurement to be used:
 Competitive proposal purchases – Over $150,000;
used when a sealed bid is not appropriate
 Noncompetitive purchases – special circumstances
applicable to all levels
58
Micro Purchases
 Purchase orders may be awarded without
soliciting competitive quotations if costs are
considered reasonable by the entity
 To the extent possible, purchases must be
distributed equitably among qualified suppliers
59
Small Purchases
 Price or rate quotations must be obtained from
an adequate number of qualified sources
 The number of quotations obtained and the
form of the quotations (e.g. writing, orally, price
list on website, generated by online search
engine) are up to the entity
60
Sealed Bid Purchases
 Bids are publicly solicited
 Firm, fixed price contract awarded to lowest
responsible bidder
 Invitation for bids must be publicly solicited
providing sufficient response time before the
bid opening
 Invitation must include necessary specifications
for the bidder to properly respond
61
Sealed Bid Purchases
 Bids are opened at the time and place
prescribed in the invitation for bids
 Any and all bids may be rejected if there is a
sound documented reason
62
Conditions Necessary for Sealed Bid
Purchases
 Complete, adequate, and realistic
specification or purchase description is
available
 Two or more responsible bidders are willing and
able to compete effectively for the business
 The procurement lends itself to a firm fixed price
contract and the selection of a successful
bidder can be made principally on the basis of
price
63
Competitive Proposal Purchases
 Used when conditions are not appropriate for
sealed bids
 Requests for proposals are publicized and
identify evaluation factors
 Proposals solicited from an adequate number
of qualified sources
 Must use written method for conducting
technical evaluations of the proposals received
64
Competitive Proposal Purchases
 Contracts awarded to the
responsible firm whose proposal is
most advantageous to the
program, with price and other
factors considered
 For architectural and engineering
services, it is acceptable to
evaluate competitors’
qualifications, select the most
qualified, and then negotiate a
fair and reasonable price
65
Noncompetitive purchases
 Only permitted when one or more of the
following circumstances apply:
 The item is only available from a single source
 Public exigency or emergency
 Federal awarding agency or pass-through entity
authorizes noncompetitive proposals
 After solicitation of a number of sources, competition
is determined inadequate
66
The Procurement “Claw”
67
Contractor vs. Subrecipient
 The term “contractor” replaces the term
“vendor” going forward
 The Super Circular provides guidance to
differentiate between contractor and
subrecipient
 Must look to substance of the award, not
merely titles used
68
Subrecipient
 A subaward is for the purpose of carrying out a
portion of the Federal Award
 Creates a Federal assistance relationship with
the subrecipient
69
Characteristics of a Subrecipient
 Determines who is eligible to receive assistance
 Has its performance measured against
objectives of a federal program
 Has a responsibility for programmatic decision
making
 Must adhere to federal program requirements
 Uses funds to carry out a program for a public
purpose
70
Contractor
 A contract is for the purpose of obtaining
goods and services for entity’s own use
 Creates a procurement relationship with the
contractor
71
Characteristics of a Contractor
 Provides goods/services within normal business
operations
 Provides similar goods/services to many
purchasers
 Normally operates in a competitive
environment
 Provides goods/services ancillary to program
 Not subject to federal compliance
requirements
72
Pass-Through Entity Responsibilities
 The Super circular requires that pass-through
entities clearly communicate that an award is
federal in origin and specifies data elements
that pass-through entities must provide to
subrecipients.
73
Pass-Through Entity Responsibilities
 Data to communicate to subrecipients:
 Subrecipient name
 Subrecipient DUNS number
 Federal Award Identification Number (FAIN)
 Federal Award Date
 Subaward Period of Performance Start and End Date
 Amount of Federal Awards Obligated by This Action
74
Pass-Through Entity Responsibilities
 Data to communicate to subrecipients:
 Total Federal Awards Obligated to Subrecipient
 Total Amount of Federal Award
 Federal award project description
 Federal Award Date
 Name of Federal Awarding Agency
 Name of Pass-Through Entity
 Contact Name For Awarding Official
75
Pass-Through Entity Responsibilities
 Data to communicate to subrecipients:
 CFDA Number and Name
 Identification of Whether the Award is R&D
 Indirect Cost Rate for The Award (including if the de
minimis rate is used)
76
Pass-Through Entity Responsibilities
 The Super Circular requires entities to perform
risk assessment procedures over subrecipients
to determine the appropriate level of
subrecipient monitoring necessary
77
Pass-Through Entity Responsibilities
 Pass-through entities must monitor subrecipients
by:
 Reviewing financial and programmatic reports
required by the pass-through entity
 Ensuring timely and appropriate action is taken to
resolve all deficiencies pertaining to the federal
award identified through audits and on-site reviews
 Issuing a management decision for audit findings
pertaining to the federal award
78
Pass-Through Entity Responsibilities
 Pass-through entities must monitor subrecipients
by:
 Provide training to subrecipients as necessary
 Performing on-site reviews as necessary
 Arranging for agreed-upon procedures engagements
as necessary
 Verify that each subrecipient has a Single Audit
performed if required to do so
79
Internal Control
 The Super Circular explicitly requires that entities
establish and maintain effective internal control
that provides assurance that an entity is
managing federal awards in compliance with
federal statutes, regulations, and terms and
conditions of federal awards
 Much more explicit than current grant-related
requirements
80
Internal Control
 The Super Circular states that an entity’s internal
controls “should” be in compliance with:
 GAO’s Standards for Internal Controls in the Federal
Government (Green Book)
 COSO’s Internal Control Integrated Framework
 COFAR’s Q&A document issued in August 2014
clarifies that “should” in this context means
these frameworks are best practices, not a
prescriptive requirement
81
Property Standards
 Computers are considered to be supplies (not
equipment) if acquisition cost is below the lesser
of $5,000 or the client’s capitalization threshold
 Equipment no longer needed for federal award
with fair market value < $5,000 may be
retained, sold or disposed of with no further
obligation to the federal awarding agency
82
Property Standards
 For equipment no longer needed for federal
award with fair market value > $5,000, the entity
must request disposition instructions from the
federal awarding agency
 If no disposition instructions within 120 days,
entity may sell or dispose of the equipment
 Federal agency is entitled to its proportional
share of fair market value or sales proceeds
83
Interest Earned on Advances
 Threshold below which interest earnings may be
retained increased from $250 to $500
 All required interest earning remittances must
be remitted annually to specific Department of
Health and Human Services address
 Previously, entities were required to remit this interest
“promptly” to each federal awarding agency
84
Personally Identifiable Information
(PII)
 Super Circular defines protected
PII—first name or first initial and
last name in combination with:
 Social security number
 Passport number
 Credit card number
 Clearances
 Bank numbers
85
Personally Identifiable Information
(PII)
 Specifies protected PII—first name or first initial
in last name in combination with:
 Biometrics
 Date or place of birth
 Mother’s maiden name
 Criminal, medical and financial records
 Educational transcripts
86
Personally Identifiable Information
(PII)
 Requires entities to take reasonable steps to
safeguard protected PII
 Requires that auditee certify that there is no
protected PII in submitted Single Audit reporting
package
87
Questions
88
Action Steps
Action Steps to Prepare for
Implementation of Super Circular
 Determine that your procurement procedures
are in compliance with the Super Circular
 Determine that your time and effort reporting
system is in compliance with the Super Circular
 Evaluate whether you will request an indirect
cost rate extension or use the 10% de minimis
rate
 Using the new criteria in the Super Circular,
make contractor vs. subrecipient
determinations
90
Action Steps to Prepare for
Implementation of Super Circular
 Determine whether you are providing
subrecipients the required information and that
you are performing required monitoring steps
 Evaluate your internal control structure—does it
measure up to COSO and/or the Green Book?
 Determine that your financial reporting system
tracks and captures all necessary data for
federal awards
91
Action Steps to Prepare for
Implementation of Super Circular
 Evaluate property purchased with federal
funds—will you dispose of any of it given the
new guidelines?
 Ensure required certifications are in place for
annual and final reports and identify certifying
official
 Evaluate the impact of the changes to Single
Audit requirements, and determine the status of
prior year audit findings
92
Action Steps to Prepare for
Implementation of Super Circular
 Verify that your Single Audit report will meet the
latest FAC requirements for finding numbering
and text searchability
 Determine that you have appropriate internal
controls in place to safeguard PII
93
Questions
94