After two plus years of work by the Federal government, a significant overhaul by the Office of Management and Budget (OMB) has streamlined the Federal government’s guidance on Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.
This is the first major overhaul for Federal Awards in over 20 years and will impact all those receiving Federal and State monies. This major reform has the intention of improving the integrity of the financial management and operation of Federal programs and strengthens accountability surrounding Federal Dollars by improving policies to protect against waste, fraud and abuse.
Does this impact me?
Do you receive Federal or State funding? Have you been subject to a single audit in the past? If yes, you now are required to follow these new reforms. There have been significant changes that impact you now.
The OMB guidance, called “Uniform Guidance” is not to be taken lightly. This new guidance will impact all entities that receive any form of Federal monies and will likely impact anyone receiving monies from New York State, since most state grants require compliance with Federal requirements as a baseline.
Don’t ignore the changes
If you take this lightly, you might find yourself repaying significant amounts of grant monies back for failure to comply. The financial consequences are severe and may significantly impact your entity’s cash flows. You need to be making changes already…if you haven’t…you will have a significant task in front of you to comply. U.S. Office of Management and Budget (OMB) issued a significant grant reform in their guidance “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.” The Uniform Guidance, as we will further refer to it, streamlines several circulars previously issued by the OMB into one document, but also includes significant changes that auditees should be aware of.
- Internal Controls – this is a reminder that agencies receiving Federal Awards are required to establish and maintain effective internal controls to provide reasonable assurance that grants are in compliance with federal regulations;
- Cost Principles– a de minimis indirect cost rate is now available and numerous other costs have been more narrowly defined;
- Subrecipient monitoring– if you distribute federal grant funding to another organization, there are expanded monitoring requirements;
- Audit Requirements– the most significant modifications include:
a. Threshold – Increase in the Federal expenditure threshold requiring a single audit from $500,000 to $750,000;
b. Testing Determinations – Significant changes to how low-risk auditee status and major programs are determined and tested, significantly more emphasis has been placed on risk based auditing; and
c. New Compliance Supplement – Agencies may require testing under both the new and old requirements depending on grant award dates – Agencies need to provide auditors with award dates for each grant;
5. Schedule of Expenditures of Federal Awards (SEFA) – reminder that this document must be prepared by management and now must include all non-cash assistance and any awards to subrecipients; and
6. Procurement standards – significant modifications were made to standards and a one year extension was granted for implementing these changes for calendar year entities implementation is required in 2016. This is in addition to New York State requirements as per your grant documents.
Christina is in charge of non-profits in the areas of audit and attest engagements, financial statement preparation, internal control review and special agreed upon attest procedures. She can be reached at 315.701.6342 or email@example.com.