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MAYER HOFFMAN MCCANN P.C. – AN INDEPENDENT CPA FIRM

A publication of the Professional Standards Group

MHMMessenger

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which were outlined in Subpart F of the new rules. These changes took effect for fiscal years beginning on or after December 26, 2014, which effectively means they apply to fiscal years that end on December 31, 2015, or thereafter.

Organizations should start preparing now for their first round of audits that will be subject to the Uniform Grant Guidance. You may need the time to make the necessary changes to your grant administration procedures to meet the new requirements.

Key Changes to Note

There is no substitute for a close read of the Uniform Grant Guidance, but the following are among the more significant changes from the old rules to the new requirements:

Internal Controls- Award recipients must demonstrate they have internal controls over their awards. OMB recommends that recipients use an internal control framework already in place, such as the Standards for Internal Control in the Federal Government (Green Book) that is issued by the Comptroller General of the U.S. or the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Procurement- The Uniform Grant Guidance establishes five procurement methods that entities

The final phase of the Office of Management and Budget’s Uniform Grant Guidance is nearly here, which means nonfederal agencies should be gearing up for the changes coming to their Single Audits.

OMB released 2 CFR 200: Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Grant Guidance) in December 2013. The Uniform Grant Guidance affects all nonfederal entities that receive grants and replaced rules in eight OMB Cost Circulars, including the A-133. Nonfederal entities began applying the changes to administrative requirements and cost principles to new federal awards received after December 26, 2014, and to additional funding to existing awards made after that date. For more information, please see, Implementing the Uniform Grant Reform Guidance.

Nonfederal entities will be using both the old requirements and the new requirements to manage their federal awards in the near future. Old requirements would apply to awards received prior to the effective date, while the new requirements would apply to awards made after the effective date.

The Uniform Grant Guidance also made a number of changes to the audit requirements for federal awards,

November 2015

Preparing for Subpart F of the Uniform Grant Guidance

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can use for services or supplies funded by grants. The complexity of the methods, particularly for colleges and universities, led to the OMB delaying the effective date of the standards for one fiscal year after the effective date of the uniform guidance. More detailed information about how the grace period would affect an entity’s single audit can be found in the Office of Executive Councils, Chief Financial Officers Council (COFAR) frequently asked questions.

Subrecipient Monitoring- Entities must distinguish between subrecipients and contractors, as vendor relationships will not be subject to the compliance requirements of the Uniform Grant Guidance. Subrecipients, on the other hand, will require pre-award and post-award assessments.

Conflict of Interest- Entities must establish a conflict of interest policy for federal awards and disclose in writing any potential conflict of interest to the federal awarding agency or pass-through entity. Entities must also disclose in writing any violations of criminal law that involve fraud, bribery or gratuity violations that could affect a federal award.

Audit Requirements

The changes in audit requirements outlined in Subpart F are designed to assist your auditor in evaluating your grant-funded programs, but your organization should also be aware of how the new audit requirements differ from the rules currently in OMB Circular A-133.

Auditors will be focusing more on the larger, riskier programs. The minimum threshold for a Single Audit increased, so that an audit will be required if organizations expend more than $750,000 in federal awards per fiscal year. The previous threshold was $500,000 in federal awards per fiscal year.

The focus on larger programs also brought changes to the Type A/B major program threshold. The Uniform Grant Guidance increases the Type A threshold—or the threshold for programs that may require an audit—from $300,000 to $750,000 for organizations that spend between $750,000 and $25 million in federal awards per fiscal year. Requirements that remain unchanged, but are important to mention are Type A programs are required to undergo an audit if they have not been tested as a major program in the previous two audit cycles or if they are considered high risk.

Another change in the Uniform Grant Guidance is the percentage of federal awards that must be audited decreases for both high risk and low risk entities.

For more information about the changes to the audit requirements, please see, OMB Makes Sweeping Changes to A-133 Audit Requirements.

Tips for Audit Preparation

Your organization should be carefully reviewing the Uniform Grant Guidance to determine the types of changes you may need to make to your grant policies and procedures. Gather a team together across applicable divisions of the organization to help you inventory your current policies and programs. Identify which programs will be subject to the old rules and which must use the new cost principles and administrative requirements.

As you go through the review, pay careful attention to your significant processes and internal controls. If changes need to be made, you’ll want to make sure that personnel are trained in the new procedures.

One area that will likely require a fresh look is your internal controls over federal grants. Creating the right

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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation. Please contact your MHM auditor to further discuss the impact on your audit or audit report.

system of internal controls for your awards will require a full-team effort. A grants administration program that incorporates the federal program compliance requirements with an effective internal control framework can help make sure you meet all of the new requirements.

Meeting with your audit team can also help the transition process, as they may be able to weigh in on whether the changes you are making will comply with the new requirements. You should also discuss with your audit team about your fees. Entities that receive federal grants will likely face more scrutiny with the new audit requirements because of the transitions involved.

Tips for the Audit

Provide the audit PBC list to your finance and grants management team as early as possible, and be sure it addresses the questions for which you know your auditor is looking. Particularly in the first year with the new requirements, you should also hold regular meetings with your audit team, so you can address concerns that arise promptly and mitigate the risk of “surprises” in the audit process.

For More Information

If you have specific comments, questions or concerns, please share them with Michelle Spriggs of the MHM’s Professional Standards Group. Michelle can be reached at mspriggs@cbiztofias.com or 774.206.8336.