The Impact of OMB Circulars (Super or Otherwise) on Federal ProgramsMichael Brustein, Esq.

mbrustein@bruman.com

Brustein & Manasevit, PLLC

Fall Forum 2012

1. What are “circulars”?

2. Do they matter?

3. Where do they stand in the legal hierarchy?

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Administrative Principles

A-102 – State/Locals 34 CFR Part 80A-110 Postsecondary and Nonprofits 34 CFR Part 74

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Cost Principles

A-87 State/Locals – 2 CFR Part 225A-21 Postsecondary - 2 CFR Part 220A-122 Nonprofits

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Audit Principles

A-133 State/Locals/Postsecondary/

Nonprofits

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So Why a Super Circular?

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Obama Executive Order 13563

“Regulatory Review”

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OMB Advance Notice of Proposed Rulemaking – February 12

What will be the effective date of changes?

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Council on Financial Assistance Reform (COFAR)

10 members from largest grant making agencies: HHS, AG, ED, Energy, DHS, HUD, DOL, DOT

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Expect Revisions to:

1) Cost PrinciplesA-21A-87A-122

2) Administrative PrinciplesA-110A-102

3) Federal Agency Audit ResolutionA-50

4) Single AuditA-133

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Super CircularIncrease consistencyDecrease complexity

But allows for disparate treatment depending on type of entity

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Single Audit Thresholda) Under $1 million in total federal

expenditures:No single auditAugmented pass-through role

b) Between $1 million and $3 millionMore “focused” single audit

c) Over $3 millionFull single audit

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“Focused Single Audit” ($1 to $3 Million)

Single auditors to review2 Compliance Requirements

1) Allowable/Unallowable2) Federal agency determines – but

priority on risk of improper payments, or fraud, waste, and abuse

(look to Compliance Supplement)

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Can SEA impose additional compliance requirements??

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“Full Single Audit” Over $3 Million

“Universal Compliance Requirements”1. Allowable Costs2. Eligibility3. Reporting4. Subrecipient Monitoring5. Period of Availability of Federal Funds6. Procurement Practices Comply with

Suspension/Debarment

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Federal Agencies to identify “non-universal” elements, with focus on preventing fraud, waste, and abuse

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Pass-Through Agencies

Attempt to reduce burden on pass-through (SEA)Federal Agencies to better coordinate review of subrecipient internal controls when 2 or more federal agencies funding

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OMB wants pass-through to focus on programmatic requirements of subawards

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Increasing threshold would increase burden on SEA for

monitoring and Limited Scope Audits

???

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How do your programs measure up against Circulars?

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Phil Maestri – AEFFA – 10/3/12 OIG “Perfect Lens”Program Officials “Reality”OGC ???

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Filter out “noise” on “Success” vs. “Compliance”

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“Costs must conform to federal laws”A-87A-21

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OIG Final Audit Report ED-OIG/A19K0009

“The Department’s External Audit Resolution Process” July 3, 2012

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OMB Circular A-50 “Audit Follow-Up” provides policies/procedures for use by federal agencies when considering audit reports* where follow-up is necessary

*OIG and A-133 Single Audit

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Audit is recommendation to Program Operating Component (POC):

1. Sustain Findings

2. Not Sustain Findings

3. Sustain in Part

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POC Issues Program Determination Letter (PDL)

1. Closes Matter

2. Recovery of Funds (Audit, Monitoring Report) 34 CFR 81.30

3. Corrective Action

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OMB A-50 requires resolution within maximum of 6 months after issuance of final audit report

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OIG Report on External Audit Resolution Process90% of audits between 2007-2010 not resolved within 6 months

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Audits were overdue for resolution by an average of 1,078 days and included questioned costs totaling $568 million

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ED lost $415 million due to the

5 year statute of limitations

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Why

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Lack of staffLack of knowledge among staffLack of organizational priority on audit activities

Overall lack of accountability

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OGC PositionBurden of establishing prima facie case

Determination of harm to federal interest

(See Appendix to 34 CFR Part 81)

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Are POCs more focused on success than compliance?

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But even if OIG, OGC, POC on same page, findings may still lack merit

The Tydings Cases

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Questions

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Disclaimer

This presentation is intended solely to provide general information and does not constitute legal advice.  Attendance at the presentation or later review of these printed materials

does not create an attorney-client relationship with Brustein & Manasevit, PLLC.  You should not take any action based

upon any information in this presentation without first consulting legal counsel familiar with your particular

circumstances.

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