OMB Circular A-133 Compliance Supplement - Provisional 6/97TABLE
OF CONTENTS
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| CFDA | Types of Compliance Requirements | |||||||||||||
| A. | B. | C. | D. | E. | F. | G. | H. | I. | J. | K. | L. | M. | N. | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 10 -- United States Department of Agriculture (USDA) | ||||||||||||||
| 10.551 10.561 |
Y | Y | Y | See Part 4 |
Y | Y | Y | Y | Y | Y | Y | |||
| 10.557 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | |||
| 14 -- Department of Housing and Urban Development (HUD) | ||||||||||||||
| 14.182 14.855 14.856 14.857 |
Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | |||
| 14.218
14.219 |
Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | |
| 14.228 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | |
| 14.231 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | ||
| 14.235 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | |
| 14.238 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y |
| 14.239 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y |
| 14.241 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y |
| 14.862 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | ||
| 17 -- Department of Labor (DOL) | ||||||||||||||
| 17.225 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | ||||
| 20 -- Department of Transportation (DOT) | ||||||||||||||
| 20.106 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | |
| 20.205 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | |
| 83 -- Federal Emergency Management Administration (FEMA) | ||||||||||||||
| 83.516 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | |
| 84 -- Department of Education (ED) | ||||||||||||||
| 84.010 | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | |||
| 84.032 | See
Part 4 |
Y | Y | |||||||||||
| 93 -- Department of Health and Human Services (HHS) | ||||||||||||||
| 93.775
93.777 93.778 |
Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | |||
| Clusters of Programs | ||||||||||||||
| R&D | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y |
| SFA | Y | Y | Y | Y | Y | Y | Y | Y | Y | Y | ||||
Legend:
-
Y -- Yes, this
type of compliance requirement may apply to the Federal program.
An empty box indicates the program normally does not have activity subject to this type of compliance requirement.
PART
3 - COMPLIANCE REQUIREMENTS
INTRODUCTION
The objectives
of most compliance requirements for Federal programs administered
by States, local governments, Indian tribal governments, and non-profit
organizations are generic in nature. For example, most programs
have eligibility requirements for individuals or organizations.
While the criteria for determining eligibility vary by program,
the objective of the compliance requirement that only eligible individuals
or organizations participate is consistent across all programs.
Rather than
repeat these compliance requirements, audit objectives, and suggested
audit procedures, for each of the programs contained in Part 4 -
Agency Program Requirements, they are provided once in this part.
For each program in this Compliance Supplement (this Supplement),
Part 4 contains additional information about the compliance requirements
that arise from laws and regulations applicable to each program,
including the requirements specific to each program that should
be tested using the guidance in this part.
Administrative
Requirements
The administrative
requirements that apply to most programs arise from two sources:
the "Uniform Administrative Requirements for Grants and Cooperative
Agreements to State and Local Governments" (also known as the "A-102
Common Rule") and OMB Circular A-110, "Uniform Administrative Requirements
for Grants and Agreements with Institutions of Higher Education,
Hospitals, and Other Non-Profit Organizations, " and the agencies'
codification of OMB Circular A-110. The applicable guidance followed
depends on the type of organization undergoing audit. Other administrative
compliance requirements unique to a single program or a cluster
of programs, are provided in the Special Tests and Provisions section
of Part 4.
State,
Local, and Indian Tribal Governments
Governmentwide
guidance for administering grants and cooperative agreements to
States, local governments, and Indian tribal governments is contained
in the A-102 Common Rule which was codified by each Federal funding
agency in its volume of the Code of Federal Regulations.
The A-102 Common Rule section numbers are referred to without the
Federal agency's part number (e.g., §____.37 would refer to
sections in all agency regulations). This allows auditors to refer
to the same section numbers when discussing administrative issues
with different Federal funding agencies.
These requirements
apply to all grants and subgrants to governments, except where they
are inconsistent with Federal statutes or with regulations authorized
in accordance with the exception provision of the A-102 Common Rule.
Block grants authorized by the Omnibus Budget Reconciliation Act
of 1981 and several other specifically identified grants or payment
programs are exempted from the A-102 Common Rule. Appendix I to
this Compliance Supplement lists legislation and programs where
exclusions exist.
In some cases
the A-102 Common Rule permits States to follow their own laws and
procedures, e.g., when addressing equipment management. These are
noted in the sections that follow. The auditor will have to refer
to an individual State's rules in those situations.
The basic cost principles applicable to State, local, and Indian tribal governments can be found in OMB Circular A-87, "Cost Principles for State, Local, and Indian Tribal Governments."
Non-Profit
Organizations
The major source
of requirements applicable to non-profit organizations is OMB Circular
A-110. The provisions of OMB Circular A-110 are codified in agency
regulations, generally following the section numbers in the circular.
The OMB Circular A-110 section numbers are referred to similar to
the A-102 Common Rule references. However, unlike the A-102 Common
Rule, agencies with OMB approval, could modify certain provisions
of A-110 to meet their special needs. OMB Circular A-110 states
"Federal agencies responsible for awarding and administering grants . . . shall
adopt the language in the circular unless different provisions are
required by Federal statute or are approved by OMB." Subpart A,
§____.4, of OMB Circular A-110 states that "Federal awarding
agencies may apply more restrictive requirements to a class of recipients
when approved by OMB." Federal awarding agencies may apply less
restrictive requirements when awarding small awards, except for
those requirements which are statutory. Exceptions on a case-by-case
basis may also be made by Federal awarding agencies.
Appendix II
to this supplement contains a list of agencies that have codified
OMB Circular A-110 and the CFR citations for these codifications.
The cost principles
applicable to non-profit organizations can be found in OMB Circulars:
A-21 "Cost
Principles for Educational Institutions"
A-122 "Cost
Principles for Non-Profit Organizations"
Subrecipients
Governmental
subrecipients are subject to the provisions of the A-102 Common
Rule. However, the A-102 Common Rule permits States to impose their
own requirements on their governmental subrecipients, e.g., equipment
management or procurement. Thus, in some circumstances, the auditor
may need to refer to State rules and regulations rather than Federal
requirements.
All non-profit
subrecipients, regardless of the type of organization making the
subaward, shall follow the provisions of OMB Circular A-110 as implemented
by the agency when awarding or administering subgrants except under
block grants authorized by the Omnibus Budget Reconciliation Act
of 1981 and the Job Training Partnership Act where State rules apply
instead.
Compliance
Requirements, Audit Objectives, and Suggested Audit Procedures
Auditors shall
consider the compliance requirements and related audit objectives
in Parts 3 and Part 4 (for programs included in this Supplement)
in every audit of non-Federal entities conducted under OMB Circular
A-133 with the exception of program-specific audits performed in
accordance with a Federal agency's program-specific audit guide.
In making a determination not to test a compliance requirement,
the auditor must conclude that the requirement either does not apply
to the particular non-Federal entity or that noncompliance with
the requirement could not have a material effect on a major program
(e.g., the auditor would not be expected to test Procurement if
the non-Federal entity charges only small amounts of purchases to
a major program).
The suggested
audit procedures are provided to assist auditors in planning and
performing tests of non-Federal entity compliance with the requirements
of Federal programs. Auditor judgment will be necessary to determine
whether the suggested audit procedures are sufficient to achieve
the stated audit objective and whether additional or alternative
audit procedures are needed.
The suggested
procedures are in lieu of specifying audit procedures for each of
the programs included in this Supplement. This approach has several
advantages. First, it provides guidelines to assist auditors in
designing audit procedures that are appropriate in the circumstance.
Second, it helps auditors develop audit procedures for programs
that are not included in this Supplement. Finally, it simplifies
future updates to this Supplement.
Internal
Control
Because of
the diversity of systems in place among non-Federal entities, Part
3 does not include suggested audit procedures to test internal control.
The auditor must determine appropriate procedures to test internal
control on a case by case basis considering factors such as the
non-Federal entity's internal control, the compliance requirements,
the audit objectives for compliance, the auditor's assessment of
control risk, and the audit requirement to test internal control
as prescribed in OMB Circular A-133.
A.
ACTIVITIES ALLOWED OR UNALLOWED
Compliance
Requirements
The specific
requirements for activities allowed or unallowed are unique to each
Federal program and are found in the laws, regulations, and the
provisions of contract or grant agreements pertaining to the program.
For programs listed in the Compliance Supplement, the specific requirements
can be found in Part 4. This type of compliance requirement specifies
the activities that can or cannot be funded under a specific program.
Audit
Objectives
Determine whether
Federal awards were expended only for allowable activities.
Suggested Audit Procedures
1. Allowability
of Specific Transactions and Activities
a. Identify
the types of activities which are either specifically allowed or
prohibited by the laws, regulations, and the provisions of contract
or grant agreements pertaining to the program.
b. When allowability
is determined based upon summary level data, perform procedures
to verify that:
1. Activities
were allowable.
2. Individual
transactions were properly classified and accumulated into the activity
total.
c. When allowability
is determined based upon individual transactions, select a sample
of transactions and perform procedures to verify that the transaction
was for an allowable activity.
d. The auditor
should be alert for large transfers of funds from program accounts
which may have been used to fund unallowable activities.
2. Allowable Activities for Subrecipients
(This requirement
only applies to pass-through entities)
Test a sample
of approved subrecipient agreements to verify that the activities
covered by the agreement were allowable.
B.
ALLOWABLE COSTS/COST PRINCIPLES
Applicability
of OMB Cost Principles Circulars
The following
OMB cost principles circulars prescribe the cost accounting policies
associated with the administration of Federal awards by non-profit
organizations, States, local governments, and Indian tribal governments.
However, for block grants authorized by the Omnibus Budget Reconciliation
Act of 1981 and the Job Training Partnership Act, State rules for
expenditures of State funds apply (Appendix 1). Federal awards include
Federal programs and cost-type contracts and may be in the form
of grants, contracts, and other agreements.
- OMB Circular
A-87, "Cost Principles for State, Local and Indian Tribal Governments"
- OMB Circular
A-21, "Cost Principles for Educational Institutions"
- OMB Circular
A-122, "Cost Principles for Non-Profit Organizations"
All institutions
of higher education are subject to the cost principles contained
in OMB Circular A-21. States, local governments, and Indian tribal
governments are subject to OMB Circular A-87. Non-profit organizations
are subject to OMB Circular A-122, except those non-profit organizations
listed in Attachment C of OMB Circular A-122. These non-profit organizations
are not subject to OMB Circular A-122 but are subject to the standards
issued by the Cost Accounting Standards Board (48 CFR part 99) and
the commercial cost principles contained in the Federal Acquisition
Regulation (FAR).
Federal awards
administered by publicly-owned hospitals and other providers of
medical care are exempt from OMB's cost principles circulars, but
are subject to requirements promulgated by the sponsoring Federal
agencies (45 CFR part 74, appendix E).
The cost principles
applicable to a non-Federal entity apply to all Federal awards received
by the entity, regardless of whether the awards are received directly
from the Federal Government or indirectly through a pass-through
entity.
The circulars
describe selected cost items, allowable and unallowable costs, and
standard methodologies for calculating indirect costs rates (e.g.,
methodologies used to recover facilities and administrative costs
(F&A) at institutions of higher education).
The cost principles
articulated in the three circulars are in most cases substantially
identical but a few differences do exist. These differences are
necessary because of the nature of the Federal/State/local/non-profit
organization relationship, programs administered, and breadth of
services offered by some grantees and not others. Exhibit 1, Selected
Cost Items Not Treated the Same Among the Circulars, lists selected
cost items for which treatment are not substantially identical among
the cost principles circulars. Exhibit 2, Selected Unallowable Cost
Items, lists selected items that are unallowable in one or more
of the cost principles circulars.
Compliance
Requirements - Allowability of Costs - General Criteria (applicable
to both direct and indirect costs)
The general
criteria affecting allowability of costs under Federal awards are:
- Costs must
be reasonable and necessary for the performance and administration
of Federal awards.
- Costs must
be allocable to the Federal awards under the provisions of OMB's
cost principles circulars. A cost is allocable to a particular cost
objective (e.g., a specific function, program, project, department,
or the like) if the goods or services involved are charged or assigned
to such cost objective in accordance with relative benefits received.
- Costs must
be given consistent treatment through application of those generally
accepted accounting principles appropriate to the circumstances.
A cost may not be assigned to a Federal award as a direct cost if
any other cost incurred for the same purpose in like circumstances
was allocated to the Federal award as an indirect cost.
- Costs must
conform to any limitations or exclusions set forth in the circulars,
Federal laws, State or local laws, sponsored agreements or other
governing regulations as to types or amounts of cost items.
- Costs must
be net of all applicable credits that result from transactions that
reduce or offset direct or indirect costs. Examples of such transactions
include purchase discounts, rebates or allowances, recoveries or
indemnities on losses, insurance refunds or rebates, and adjustments
for overpayments or erroneous charges.
- Costs must
be documented in accordance with OMB Circular A-110 for non-profit
organizations or the A-102 Common Rule for State, local and Indian
Tribal governmental units.
Compliance
Requirements - Indirect Costs
Indirect costs are those costs that benefit common activities and, therefore, cannot be readily assigned to a specific direct cost objective or project.
In order to
recover indirect costs, organizations must prepare cost allocation
plans (CAPs) which apply only to States, local and Indian tribal
governments or indirect cost rate proposals (IDCRPs) in accordance
with the guidelines provided in OMB's circulars. States, major local
governments, Indian tribal governments, institutions of higher education,
and non-profit organizations must submit CAPs or IDCRPs to the Federal
cognizant agency for indirect cost negotiation for approval. Other
organizations, such as smaller local governments, must prepare the
appropriate CAPs or IDCRPs and maintain them on file for review.
These other organizations may use the allocation methods and indirect
cost rate maintained on file for cost recovery.
At institutions
of higher education, indirect costs include the following categories:
building and equipment depreciation or use allowance, operation
and maintenance expenses, interest expenses, general administrative
expenses, departmental administration expenses, library expenses,
and student administration expenses.
At non-profit
organizations, indirect costs generally include general administrative
costs (e.g., the president's office, payroll, general accounting)
and facility costs (e.g., rental costs, operations and maintenance,
interest expense) that are not treated as direct costs.
The indirect
cost proposals prepared by institutions of higher education and
other non-profit organizations are based on the most current financial
data supported by the organization's accounting system and audited
financial statements. These indirect cost proposals can be used
to either establish predetermined or fixed indirect cost rates,
or to establish or finalize provisional rates.
There are three
types of plans/proposals submitted by States, local governments,
and Indian tribal governments:
1. State
and Local Governmentwide CAPs - These plans are used to allocate
service center costs (or Section I costs) to individual departments
and agencies and describe the methods used for charging billed costs
(or Section II costs) to individual user organizations or activities.
2. Department
or Local IDCRP - These rate proposals combine the billed and
allocated costs from the State-wide or local-wide plan with departmental
or local level indirect costs and compute an indirect cost rate
to be used in charging indirect costs to individual programs and
activities.
3. Public
Assistance CAPs - These CAPs describe the methods for allocating
State-wide or local-wide allocated and/or billed indirect costs
and departmental indirect, administrative, and operating costs of
State or local welfare or human services organizations to the Medicaid,
Food Stamps and welfare programs, etc. These plans are required
by the terms of 45 CFR part 95, which incorporates OMB Circular
A-87 by reference, and they must be revised and resubmitted to the
Federal Government whenever an organizational or programmatic change
invalidates the currently-approved allocation method.
At States,
local governments, and Indian tribal governments, indirect costs
are accumulated at two levels: the State/local-wide level and the
department/agency level. At the State/local-wide level, indirect
costs include: (1) central service costs that are allocated (referred
to as Section I costs, which typically include general accounting,
personnel, and purchasing); and ,(2) central service costs that
are billed (referred to as Section II costs, which typically include
computer services, motor pool, insurance, and fringe benefits).
Certain costs, such as facilities and operations and maintenance,
can be classified as Section I or Section II costs by State/local
governments.
At State or
local governmental departments or agencies, where Federal awards
are usually carried out, indirect costs normally include the facilities
and administrative costs of each department or agency and the allocated
central service costs distributed through the State/local-wide CAP.
Additionally, Section II costs are direct charges to these departments
or agencies. As such, these direct billings may be charged directly
to Federal awards or be included in the department or agency indirect
cost pools.
CAPs are comprised
of two parts: a narrative section that describe the service cost
center and allocation methodologies, and a mathematical allocation
of these service center costs to the user departments using the
described allocation methods. CAPs and IDCRPs prepared by States,
local governments, and Indian tribal governments usually are prepared
on a prospective basis using actual financial data for a prior year
or budget data for the current year. When the actual costs for the
year covered by the CAP (or a rate agreement with respect to a fixed
rate) are determined, the difference between the costs recovered
based on the CAP (or rate agreement) and the costs that would have
been recovered had the CAP or rate agreement been based on actual
results is either carried forward to a subsequent CAP or IDCRP or
used to adjust individual awards on a retroactive basis, with the
approval of the Federal cognizant agency for indirect cost negotiation.
Three different
types of indirect cost rates can be used by the Federal cognizant
agency for indirect cost negotiation: predetermined, fixed, and
provisional/final. Predetermined rates are established for the current
or multiple future period(s) based on current data (usually data
from the most recently ended fiscal year, known as the base period).
Predetermined rates are not subject to adjustment, except under
very unusual circumstances. Fixed rates are based on current data
in the same manner as predetermined rates, except that the difference
between the costs of the base period used to establish the rate
and the actual costs of the current period is carried forward as
an adjustment to the rate computation for a subsequent period. Provisional
rates are temporary rates used for funding and billing indirect
costs, pending the establishment of a final rate for a period.
Special
Compliance Requirements - Institutions of Higher Education
OMB Circular
A-21 requires institutions of higher education that receive more
than $25 million in Federal funding in a fiscal year to prepare
and submit a Disclosure Statement (DS-2) that describes the institution's
cost accounting practices. These institutions are required to submit
a DS-2 within six months after the end of the institution's fiscal
year that begins after May 8, 1996, unless the institution is required
to submit a DS-2 earlier due to a receipt of a cost accounting standard
(CAS) covered contract in accordance with 48 CFR section 9903.202-1.
These institutions
are responsible for maintaining an accurate DS-2 and complying with
disclosed cost accounting practices. They are also responsible for
filing amendments to the DS-2 when disclosed practices are changed
or modified.
Audit
Objectives (Direct and Indirect Costs)
Determine whether
the organization complied with the provisions of the applicable
OMB cost principles circulars (OMB Circulars A-87, A-21, A-122)
as follows:
1. Direct charges
to Federal awards were for allowable costs.
2. Charges
to cost pools used in calculating indirect cost rates were for allowable
costs.
3. For States,
local governments, and Indian tribal governments, charges to cost
pools allocated to Federal awards though CAPs were for allowable
costs.
4. The methods
of allocating the costs are in accordance with the applicable provisions
of the cost principles circulars and produce an equitable distribution
of costs (e.g., cost allocation bases include all allowable and
unallowable base costs to which allowable indirect costs are allocable
and the cost allocation methodology complies with the applicable
cost principles and provides equitable and consistent allocation
of indirect costs to benefitting cost objectives).
5. Indirect
cost rates were applied in accordance with approved rate agreements
and associated billings were the result of applying the approved
rate to the proper base amount(s).
6. For States,
local governments, and Indian tribal governments, cost allocations
were in accordance with CAPs approved by the Federal cognizant agency
for indirect cost negotiation or, in cases where such plans are
not subject to approval, in accordance with the plan on file.
7. Cost accounting
practice disclosures, described in the DS-2, represented actual
practice consistently applied (only applies to institutions of higher
education that are required to submit the DS-2).
Suggested
Audit Procedures (Direct and Indirect Costs)
General
1. The following
procedures apply to direct charges to Federal awards as well as
to charges to cost pools that are allocated wholly or partially
to Federal awards or used in formulating indirect cost rates used
for recovering indirect costs from Federal awards. If the auditor
identifies unallowable costs, the auditor should be aware that "directly
associated costs" may have been charged. Directly associated costs
are costs incurred solely as a result of incurring another cost,
and would not have been incurred if the other cost had not been
incurred. For example, fringe benefits are "directly associated"
with payroll costs. When an unallowable cost is incurred, directly
associated costs are also unallowable.
Test a sample
of transactions for conformance with the following criteria contained
in the "Basic Guidelines" section of applicable OMB cost principles
circulars.
a. For State
and local governments, authorized or not prohibited under State
or local laws or regulations.
b. Approved
by the Federal awarding agency, if required.
c. Conform
with the allowability of costs provisions of applicable OMB cost
principles, or limitations in the program agreement, program regulations,
or program statute.
d. Conform
with the allocability provisions of applicable OMB cost principles
circulars.
e. Represent
charges for actual costs, not budgeted or projected amounts.
f. With respect
to fringe benefit allocations, charges, or rates, such allocations,
charges, or rates are based on the benefits received by different
classes of employees within the organization.
g. Applied
uniformly to Federal and non-Federal activities.
h. Given consistent
accounting treatment within and between accounting periods. Consistency
in accounting requires that costs incurred for the same purpose,
in like circumstances, be treated as either direct costs only or
indirect costs only with respect to final cost objectives.
i. Calculated
in conformity with generally accepted accounting principles or another
comprehensive basis of accounting, when required under the cost
principles circulars. Costs for post-employment benefits must be
funded to be allowable.
j. Not included
as a cost or used to meet cost sharing requirements of other federally-supported
activities of the current or a prior period.
k. Net of all
applicable credits, e.g., volume or cash discounts, insurance recoveries,
refunds, rebates, trade-ins, and scrap sales.
l. Not included
as both a direct billing and as a component of indirect costs, e.g.,
excluded from cost pools included in CAPs and/or IDCRPs, if charged
directly to Federal awards.
m. Supported
by appropriate documentation, such as approved purchase orders,
receiving reports, vendor invoices, canceled checks, and time and
attendance records, and correctly charged as to account, amount,
and period. Documentation requirements for salaries and wages, and
time and effort distribution are described in applicable OMB cost
principles circulars. Documentation may be in an electronic form.
Internal
service, central service, pension, or similar activities or funds
2. When material
charges are made from internal service, central service, pension,
or similar activities or funds, the auditor should verify that the
charges from these activities or funds are in accordance with the
OMB cost principles circulars. The auditor should consider procedures,
such as:
a. For activities
accounted for in separate funds, ascertain if: (1) retained earnings/fund
balances (including reserves) were computed in accordance with the
applicable cost principles; (2) working capital was not excessive
in amount (generally not greater than 60 days for cash expenses
for normal operations incurred for the period exclusive of depreciation,
capital costs and debt principal costs); and, (3) refunds were made
to the Federal Government for its share of any amounts transferred
or borrowed from internal service or central service funds for purposes
other than to meet the operating liabilities, including interest
on debt, of the fund.
b. Test that
all users of services are billed in a consistent manner.
c. Test that
billing rates exclude unallowable costs, in accordance with applicable
cost principles.
d. Test, where
activities are not accounted for in separate funds, that billing
rates (or charges) are developed based on actual costs and were
adjusted to eliminate profits.
e. For organizations
that have self-insurance and a certain type of fringe benefit programs
(e.g. pension funds), ascertain if independent actuarial studies
appropriate for such activities are performed at least biennially
and that current period costs were allocated based on an appropriate
study which is not over two years old.
IDCRP (Testing
of the plan)
3. The IDCRP
is based upon costs charged to cost pools representing costs of
a base year. The base year often precedes the year in which the
IDCRP is prepared and the year the resulting Indirect Cost Rate
Agreement (IDCRA) is used to charge indirect costs. For example,
a non-Federal entity may submit an IDCRP in January 1998, based
upon costs incurred and charged to cost pools during fiscal year
ending June 30, 1997 (1997), the base year. The resulting IDCRA
negotiated during year ending June 30, 1998 (1998) would be used
as the basis for charging indirect costs to Federal awards in the
year ended June 30, 1999 (1999). For this example, the term IDCRA
will also include an IDCRP which is not required to be submitted
to the Federal agency for indirect cost negotiation but is retained
on file and is used to charge indirect costs to Federal awards the
same as an approved plan resulting in an IDCRA.
An audit timing
consideration is that the audit for 1997 (which covers the applicable
cost pools) may be completed before the IDCRP is submitted. Therefore,
as part of the 1997 audit, the auditor cannot complete testing of
the IDCRP. Also, if the auditor waits to test the IDCRP until 1999
(the year when this IDCRP is first used to charge Federal awards),
the auditor would be testing 1997 records which would then be two
years old.
Continuing
this example, when the IDCRA is the basis for material charges to
a major program in 1999, the auditor for 1999 is required to obtain
appropriate assurance that the costs collected in the cost pools
and allocation methods are in compliance with the applicable cost
principles circulars. The following are some acceptable options
the auditor may use to obtain this assurance:
- Perform interim
testing of the costs charged to cost pools (e.g., determine from
management the cost pools that management expects to include in
the IDCRP and test the costs charged to those pools for compliance
with the cost principles circulars) during the 1997 audit. As part
of the 1998 audit, complete testing and verify management's representation
against the IDCRP finally submitted in 1998.
- Test costs
charged to the cost pools underlying the IDCRP during the audit
of 1998, the year immediately following the base year. This would
require testing of 1997 transactions.
- Wait until
1999, the year in which charges from the IDCRA are material to a
major program and test costs charged to cost pools (1997) used to
prepare the IDCRP. This is a much more difficult approach because
it requires going back two years to audit the cost charged to cost
pools of the base year.
Advantages
of the first two methods are that the testing of the costs charged
to the cost pools occurs closer to the time when the transactions
occur (which makes the testing easier to perform) and should there
be audit exceptions, corrective action may be taken earlier to minimize
questioned costs (which makes audit exceptions easier to resolve).
When material indirect costs are charged to any Type A program (determined
in accordance with Circular A-133), auditors are strongly encouraged
to use one of the first two methods. This is because under the risk-based
approach, described in OMB Circular A-133, all Type A programs are
required to be considered major programs at least once in every
three years and the IDCRA is usually used to charge Federal awards
for at least three years.
When the auditee
submits the IDCRP, the auditee provides written assurances to the
Federal government that the plan includes only allowable costs.
Accordingly, any material unallowable costs reflected in the IDCRP
should be reported as an audit finding in the year in which they
are first found by audit.
An IDCRP may
result in an IDCRA that covers only one year, but most often results
in a multi-year IDCRA. When an IDCRP has been tested in a prior
year and this testing provides the auditor appropriate audit assurance,
in subsequent years the auditor is only required to perform tests
to ascertain if there have been material changes to the cost accounting
practices and, if so, that the Federal cognizant agency for indirect
cost negotiation has been informed.
The auditor
should take appropriate steps to coordinate testing of costs charged
to cost pools supporting an IDCRP with the auditee and, as appropriate,
with the Federal cognizant agency for indirect cost negotiation.
The auditor should consult with the auditee in the base year and
the year in which the IDCRP is submitted to determine the best (e.g.,
most efficient) alternative under the circumstances.
The following
procedures are applicable when material charges are made to a major
program based upon an IDCRP:
a. Ascertain
if the IDCRP has been tested in a prior year.
(1) When the
testing performed in a prior year provides appropriate audit assurance,
further review of the IDCRP is not required unless there have been
material changes to cost accounting practices supporting the IDCRP.
To ascertain if there have been material changes, the auditor should
inquire of auditee management as to whether any changes have been
made to the cost accounting practices and the likely effect of these
changes.
(2) When the
auditor believes the changes in cost accounting practices are material,
and the auditee is required the file the IDCRP with a Federal cognizant
agency for indirect cost negotiation, the auditor should ascertain
if the Federal cognizant agency for indirect cost negotiation has
been appropriately notified of the changes in cost accounting practices.
For colleges and universities that are required to file a DS-2,
this testing is performed in Step 6 "DS-2 Requirements."
When prior testing of the IDCRP does not provide appropriate audit assurance (e.g., was not performed).
b. Test the
cost pools which form the basis of the IDCRP and the resulting charges
to Federal awards to ascertain if they include only allowable costs
in accordance with the applicable OMB cost principles circulars.
Suggested audit procedure number 1 provides guidance for specific
tests.
c. Test the
methods of allocating the costs to ascertain if they are in accordance
with the applicable provisions of the cost principles circulars
and produce an equitable distribution of costs. Appropriate detailed
tests may include:
(1) Test statistical
data (e.g., square footage, case counts, salaries and wages) to
ascertain if the proposed allocation or rate bases are reasonable,
updated as necessary, and do not contain any material omissions.
(2) Review
time studies or time and effort reports (where and if used) to ascertain
if they are mathematically and statistically accurate, are implemented
as approved, and are based on the actual effort devoted to the various
functional and programmatic activities to which the salary and wage
costs are charged.
(3) Review
the allocation methodology for consistency and test the appropriateness
of methods used to make changes.
CAP (Testing
of the plan)
4. Since costs allocated through CAPs may include current year and prior year costs, the auditor should test the costs charged to cost pools supporting CAPs and the methods of allocating costs from CAPs in each year when these costs are material to a major program.
The auditor
should consider the following procedures:
a. Test the
cost pools which form the basis of the CAP and the resulting charges
to Federal awards to ascertain if they include only allowable costs
in accordance with the applicable OMB cost principles circulars.
Suggested audit procedure number 1 provides guidance for specific
tests.
b. Test the
methods of allocating the costs to ascertain if they are in accordance
with the applicable provisions of the cost principles circulars
and produce an equitable distribution of costs. Appropriate detailed
tests may include:
(1) Test statistical
data (e.g., square footage, case counts, salaries and wages) to
ascertain if the proposed allocation or rate bases are reasonable,
updated as necessary, and do not contain any material omissions.
(2) Review
time studies or time and effort reports (where and if used) to ascertain
if they are mathematically and statistically accurate, are implemented
as approved, and are based on the actual effort devoted to the various
functional and programmatic activities to which the salary and wage
costs are charged.
(3) Review
the allocation methodology for consistency and test the appropriateness
of methods use to make charges changes.
IDCRA and
CAPs (Testing of charges based upon plans)
5. Perform
the following procedures to test the application of charges to Federal
awards based upon an IDCRA and a CAP.
a. Ascertain
if material indirect costs or centralized or administrative services
costs were allocated or charged to a major program. If not, the
following suggested audit procedures b through e do not apply.
b. Obtain and
read the current IDCRA and/or CAP and determine the terms in effect.
Indirect
Cost Rate Agreements
c. Select a
sample of claims for reimbursement and verify that the rates used
are in accordance with the rate agreement, that rates were applied
to the appropriate bases, and that the amounts claimed were the
product of applying the rate to the applicable base.
Public
Assistance CAPs (for States, local governments, and Indian tribal
governments only)
d. Verify that
the methods of charging costs to Federal awards are in accordance
with the provisions of the approved CAP or prepared CAP on file.
State
and Local Government-Wide CAPs
e. Ascertain
if the amounts used for reimbursement of central service costs for
Federal awards were in accordance with the approved CAPs or plans
on file, when approval is not required.
DS-2 Requirements
(For applicable institutions of higher education only)
6. Perform
the following procedures for the DS-2
a. Read the
DS-2 and its amendments and ascertain if the disclosures agree with
the policies prescribed in the institution's policies and procedures
documents.
b. Test that
the disclosures agree with actual practices for the period covered
by audit, including whether the practices were consistent throughout
the period.
COMPARISON
AMONG OMB COST PRINCIPLES CIRCULARS
The following
two exhibits provide comparisons between the OMB cost principles
circulars. Exhibit 1 lists selected cost items for which treatment
are not substantially identical among the three circulars. Exhibit
2 lists selected items that are unallowable in one or more of the
cost principles circulars.
For several of the selected cost items, changes have already been proposed in OMB Circular A-122 to be consistent with OMB Circulars A-87 or A-21. Auditors should be alert for when these changes are finalized and effective. In addition, several cost items are unique to one type of entity and not to other entities (e.g., commencement & convocation costs are only applicable to universities). The numbers in parentheses refer to the cost item in the applicable circulars.
| Selected
Cost Items Not Treated the Same Among the Circulars Exhibit 1 |
|||
|---|---|---|---|
| Selected Cost Items | A-87 - State, Local & Indian Tribal Government | A-21 - Educational Institutions | A-122 - Non-Profit Organizations |
| Advertising & Public Relations | Allowable with restrictions - (2) | Allowable with restrictions - (1) | Allowable with restrictions - (1) |
| Bad Debts | Unallowable unless provided in program regulations - (7) | Unallowable | Unallowable - (2) |
| Bonding | Allowable - (8) | Not Addressed | Allowable - (4) |
| Civil Defense (local) | Not Addressed | Allowable with restrictions - (5) | Not Addressed |
| Compensation for Personal Service | Unique criteria for support - (1) | Unique criteria for support - (8) | Unique criteria for support - (6) |
| Defense & Prosecution of Criminal & Civil Proceedings | Allowable with restrictions - (14) | Allowable with restrictions - (11) | Allowable with restrictions (35.d, 48.e) |
| Goods or Services for Personal Use | Not Addressed | Unallowable - (19) | Not addressed but proposed unallowable |
| Housing & Personal Living Expenses | Not Addressed | Unallowable - (20) | Not addressed by proposed unallowable |
| Idle Facilities | Allowable with restrictions - (24) | Not Addressed | Allowable with restrictions - (16) |
| Interest, Fund Raising & Investment | Allowable with restrictions - (21, 26) | Allowable with restrictions - (22) | Allowable with restrictions - (19) |
| Lobbying | Unallowable except at State/local level - (27) | Unallowable - (17, 24) | Unallowable - (21) |
| Memberships, Subscriptions, & Professional Activities | Allowable for civic, community & social organizations with Federal approval - (30) | Unallowable for civic, community & social organizations - (28) | Civic, community & social organizations not addressed but proposed unallowable same as A-21 - (26) |
| Organizational Costs | Not Addressed | Not Addressed | Allowable with prior approval - (27) |
| Patents | Not Addressed | Allowable with restrictions - (29) | Allowable with restrictions - (31.b) |
| Professional Services Costs | Allowable with restrictions - (33) | Allowable with restrictions - (32) | Allowable with restrictions - (35) |
| Proposal Costs | Allowable with restrictions - (34) | Allowable with restrictions - (34) | Not Addressed |
| Public Information | Not Addressed | Not Addressed | Allowable with restrictions - (37) |
| Publication & Printing | Allowable (35) | Not Addressed | Allowable with restrictions - (38) |
| Recruiting Costs | Allowable with restrictions - (2) | Allowable with restrictions - 37.b) | Allowable with restrictions - (41) |
| Relocation Costs | Not Addressed | Allowable with restrictions - (37.b) | Allowable with restrictions - (42) |
| Royalties | Not Addressed | Allowable with restrictionis - (39) | Allowable with restrictions - (44) |
| Selling & Marketing | Not Addressed | Unallowable - (42) | Not addressed but proposed unallowable |
| Specialized Services Facilities | Not Addressed | Allowable with restrictions - (44) | Allowable with restrictions - (46) |
| Substantial Relocation - Interest Provision | Possible adjustment if relocated within useful life - (26) | Possible adjustment if relocated within 20 years - (22) | Possible adjustment if relocated within 20 years - (19) |
| Taxes | Allowable with restrictions - (39) | Allowable with restrictions - (46) | Allowable with restrictions - (47) |
| Termination Costs | Not Addressed | Allowable with restrictions - (49) | Allowable with restrictions - (49) |
| Training | Allowable for employee development - (40) | Allowable - (8.f) | Allowable with limitations - (49) |
| Travel | Allowable with restrictions - (41) | Allowable with restrictions - (48, 50) | Allowable with restrictions - (51) |
| Selected
Unallowable Cost Items Exhibit 2 |
|||
|---|---|---|---|
| Selected Cost Items | A-87 - State, Local & Indian Tribal Government | A-21 - Educational Institutions | A-122 - Non-Profit Organizations |
| Advertising & Public Relations | Allowable with restrictions - (2) | Allowable with restrictions - (1) | Allowable with restrictions - (1) |
| Alcoholic Beverages | (4) | (2) | Not addressed but proposedun allowable |
| Alumni Activities | Not Applicable | (3) | Not Applicable |
| Audit Services | Allowable with restrictions - (5) and as addressed in OMB Circular A-133 | Allowable with restrictions as addressed in OMB Circular A-133 | Allowable with restrictions as addressed in OMB Circular A-133 |
| Civil Defense (local) | Not Addressed | Allowable with restrictions - (5) | Not Addressed |
| Commencement & Convocations | Not Applicable | (6) | Not Applicable |
| Compensation - Institution Automobile | Not Addressed | (8.g) | Not addressed but proposed unallowable |
| Contingencies | (12) | (9) | (7) |
| Defense & Prosecution of Criminal & Civil Proceedings | Allowable with restrictions - (14) | Allowable with restrictions - (11) | Allowable with restrictions - (35.d, 48.e) |
| Donations & Contributions | (13) | (13) | (8,10) |
| Entertainment | (18) | (15) | (12) |
| Fines and Penalties | Allowable with restrictions - (20) | Allowable with restrictions - (18) | Allowable with restrictions - (14) |
| General Government Expenses | (23) | Not Applicable | Not Applicable |
| Goods or Services for Personal Use | Not Addressed | Unallowable - (19) | Not addressed but proposed unallowable |
| Housing & Personal Living Expenses | Not Addressed | (20) | Not addressed but proposed unallowable |
| Idle Facilities | Allowable with restrictions - (24) | Not Addressed | Allowable with restrictions - (16) |
| Insurance & Indemnification | Allowable with restrictions - (25) | Allowable with restrictions - (21) | Allowable with restrictions - (19) |
| Interest, Fund Raising & Investment | Allowable with restrictions - (21, 26) | Allowable with restrictions - (22) | Allowable with restrictions - (19) |
| Lobbying | Unallowable except at State/local level - (27) | (17, 24) | (21) |
| Losses on Other Sponsored Programs | (42) | (25) | (22) |
| Memberships, Subscriptions & Professional Activities | Allowable with restrictions - (30) | Allowable with restrictions - (28) | Allowable with restrictions - (26) |
| Organizational Costs | Not Addressed | Not Addressed | Allowable with prior approval - (27) |
| Patents | Not Addressed | Not Addressed | Allowable with restrictions - (31.b) |
| Pre-Agreement Costs | Allowable with restrictions - (32) | Allowable with restrictions - (31) | Allowable with restrictions - (34) |
| Public Information | Not Addressed | Not Addressed | Allowable with restrictions - (37) |
| Publication & Printing | Allowable (35) | Not Addressed | Allowable with restrictions - (38) |
| Recruiting Costs | Allowable with restrictions - (2) | Allowable with restrictions - (37.b) | Allowable with restrictions - (41) |
| Relocation Costs | Not Addressed | Allowable with restrictions - (37.b) | Allowable with restrictions - (42) |
| Taxes | Allowable with restrictions - (39) | Allowable with restrictions - (46) | Allowable with restrictions - (47) |
| Selling & Marketing | Not Addressed | (42) | Not addressed but proposed unallowable |
| Severance Pay | Allowable with restrictions - (11.g) | Allowable with restrictions - (43) | Allowable with restrictionis - (45) |
| Student Activity Costs | Not Applicable | (45) | Not Applicable |
| Taxes | Allowable with restrictions - (39) | Allowable with restrictions - (46) | Allowable with restrictions - (47) |
| Termination Costs | Not Addressed | Allowable with restrictions - (49) | Allowable with restrictions - (48) |
| Travel - First Class | (41) | (48) | (51) |
| Trustees | Not Applicable | (50) | Not addressed by proposed unallowable |
| Under recovery of Costs on Federal Agreements | (42) | (25) | (22) |
C.
CASH MANAGEMENT
Compliance Requirements
When entities
are funded on a reimbursement basis, program costs must be paid
for by entity funds before reimbursement is requested from the Federal
Government. When funds are advanced, recipients must follow procedures
to minimize the time elapsing between the transfer of funds from
the U.S. Treasury and disbursement. When advance payment procedures
are used, recipients must establish similar procedures for subrecipients.
Pass-through entities must establish reasonable procedures to ensure
receipt of reports on subrecipients' cash balances and cash disbursements
in sufficient time to enable the pass-through entities to submit
complete and accurate cash transactions reports to the Federal awarding
agency or pass-through entity. Pass-through entities must monitor
cash drawdowns by their subrecipients to assure that subrecipients
conform substantially to the same standards of timing and amount
as apply to the pass-through entity. Interest earned on advances
by local government grantees and subgrantees is required to be submitted
promptly, but at least quarterly, to the Federal agency. Up to $100
per year may be kept for administrative expenses. Interest earned
by non-State nonprofit entities on Federal fund balances is required
to be remitted to Department of Health and Human Services, Payment
Management System, Rockville, MD 20852.
Treasury regulations
at 31 CFR part 205, which implement the Cash Management Improvement
Act of 1990 (CMIA) (P.L. 101-453), require State recipients to enter
into agreements which prescribe specific methods of drawing down
(funding techniques) Federal funds for selected large programs.
The longest any of the CMIA funding methods allow funds to be requested
in advance is three days. The agreements also specify the terms
and conditions in which an interest liability would be incurred.
Any State which does not enter into a Treasury-State agreement is
subject to default procedures prescribed by Treasury.
The requirements
for cash management are contained in the OMB Circular 102 (Paragraph
2.a.), the A-102 Common Rule (§___.21), OMB Circular A-110
(§___.22), Treasury regulations at 31 CFR part 205, Federal
awarding agency regulations, and the terms and conditions of the
award.
Audit Objectives
Determine whether:
1. The recipient/subrecipient
followed procedures to minimize the time elapsing between the transfer
of funds from the U.S. Treasury and their disbursement.
2.. States
have complied with the terms and conditions of the Treasury-State
agreement or default procedures prescribed by Treasury.
3. The pass-through
entity implemented procedures to assure that subrecipients conformed
substantially to the same timing requirements that apply to the
pass-through entity.
4. Interest
earned was reported/remitted as required.
Suggested Audit Procedures
1. Select a
sample of advances of Federal funds and compare to the dates the
funds were disbursed and/or checks were presented to the banks for
payments. Using these data, verify that:
a. For States,
the timing of disbursements were in compliance with the CMIA Treasury/State
agreement or default procedures, whichever is applicable.
b. For advances
to other recipients and subrecipients, established procedures to
minimize the time elapsing between drawdown and disbursement were
followed.
2. Where applicable,
select a sample of reimbursement requests and trace to supporting
documentation showing that the costs for which reimbursement was
requested were paid prior to the date of the reimbursement request.
3. For audits
of States, review the calculation of the interest obligation owed
to or by the Federal Government, reported on the annual report submitted
by the State to ascertain that the calculation was in accordance
with Treasury regulations and the terms of the Treasury-State agreement
or default procedures. Trace amounts used in the calculation to
supporting documentation.
4. For audits
of other entities, review records to determine if interest was earned
on advances. If so, review evidence to ascertain whether it was
returned to the appropriate agency.
D.
DAVIS-BACON ACT
Compliance
Requirements
When required
by the Davis Bacon Act, the Department of Labor's (DOL) governmentwide
implementation of the Davis-Bacon Act, or by Federal program legislation,
all laborers and mechanics employed by contractors or subcontractors
to work on construction contracts in excess of $2000 financed by
Federal assistance funds must be paid wages not less than those
established for the locality of the project (prevailing wage rates)
by the DOL (40 USC 276a to 276a-7).
Audit
Objective
Determine whether
the non-Federal entity ensured that contractors and subcontractors
paid prevailing wage rates for projects covered by the Davis-Bacon
Act.
Suggested Audit Procedures
1. Ascertain
if the non-Federal entity receives Federal funds for construction
projects; if so, review program/project requirements to ascertain
if the program/project is covered by the Davis-Bacon Act.
2. Select a
sample of construction contracts and subcontracts and verify that
the required prevailing wage rate clauses were included in contracts
for construction which exceed $2000.
3. Determine
the prevailing wage rates applicable at the time of the construction
payroll. (DOL's Wage and Hour Division publishes a Register of Wage
Determinations.)
4. Examine
a sample of contractor or subcontractor payroll submissions and
certifications and ascertain if such submissions indicate that laborers
and mechanics were paid the prevailing wage rates established by
the DOL for the locality at the time of the construction payroll.
E.
ELIGIBILITY
Compliance
Requirements
The specific
requirements for eligibility are unique to each Federal program
and are found in the laws, regulations, and the provisions of contract
or grant agreements pertaining to the program. For programs listed
in the Compliance Supplement, the specific eligibility requirements
are in Part 4. This compliance requirement specifies the criteria
for determining the individuals, groups of individuals, or subrecipients
that can participate in the program and the amounts for which they
qualify.
Audit
Objectives
Determine whether:
1. Only eligible
individuals or groups of individuals (including area of service
delivery) participated in the program.
2. Subawards
were made only to eligible subrecipients.
3. Amounts
provided to or on behalf of eligibles were calculated in accordance
with program requirements.
Suggested Audit Procedures
1. Eligibility
for Individuals
a. For some Federal programs with a large number of people receiving benefits, the non-Federal entity may use a computer system for processing individual eligibility determinations and delivery of benefits. Often these computer systems are complex and will be separate from the non-Federal entity's regular financial accounting system. Typical functions a computer system for eligibility may perform are:
- Perform calculations to assist in determining who is eligible and the amount of benefits
- Pay benefits (e.g., write checks)
- Maintain eligibility records, including information about each individual and benefits paid to or on behalf of the individual (regular payments, refunds, and adjustments)
- Track the period of time an individual is eligible and stop benefits at the end of a predetermined period unless, there is a redetermination of eligibility
- Perform matches with other computer data bases to verify eligibility (e.g., matches to verify earnings or identify individuals who are deceased)
- Control who is authorized to approve benefits for eligibles (e.g., an employee may be approving benefits on-line and this process may be controlled by passwords or other access controls)
- Produce exception
reports indicating likely errors which need follow-up (e.g., when
benefits exceed a certain amount, would not be appropriate for a
particular classification of individuals, or are paid more frequently
than normal)
Because of
the diversity of computer systems, both hardware and software, it
is not practical for the Compliance Supplement to provide suggested
audit procedures to address each system. However, generally accepted
auditing standards provide guidance for the auditor when computer
processing relates to accounting information that can materially
effect the financial statements being audited. Similarly, when eligibility
is material to a major program, and a computer system is integral
to eligibility compliance, the auditor should follow this guidance
and consider the non-Federal entity's computer processing. The auditor
should perform audit procedures relative to the computer system
for eligibility as necessary to support the opinion on compliance
for the major program. Due to the nature and controls of computer
systems, the auditor may choose to perform these tests of the computer
systems as part of testing the internal controls for eligibility.
b. Perform
procedures to ascertain if the non-Federal entity's records/database
includes all individuals receiving benefits during the audit period
(e.g., that the population of individuals receiving benefits is
complete).
c. Select a
sample of individuals receiving benefits and perform tests to ascertain
if the:
(1) Specific
individuals were eligible in accordance with the compliance requirements
of the program. (Note that some programs have both initial and continuing
eligibility requirements and the auditor should design and perform
appropriate tests for both.)
(2) Benefits
paid to or on behalf of the individuals were calculated correctly
and in compliance with the requirements of the program.
(3) Benefits
were discontinued when the period of eligibility expired.
d. In some
programs, the non-Federal entity is required to use a quality control
process to obtain assurances about eligibility. Review the quality
control process and perform tests to ascertain if it is operating
to effectively meet the objectives of the process and in compliance
with applicable program requirements.
2. Eligibility
for Group of Individuals or Area of Service Delivery
a. In some
cases, the non-Federal entity may be required to perform procedures
to determine whether a population or area of service delivery is
eligible. Test information used in determining eligibility and ascertain
if the population or area of service delivery was eligible.
b. Perform
tests to ascertain if :
(1) The population
or area served was eligible.
(2) The benefits
paid to or on behalf of the individuals or area of service delivery
were calculated correctly.
3. Eligibility
for Subrecipients
a. If the determination
of eligibility is based upon an approved application or plan, obtain
a copy of this document and identify the applicable eligibility
requirements.
b. Select a
sample of the awards to subrecipients and perform procedures to
verify that the subrecipients were eligible and amounts awarded
were within funding limits.
F.
EQUIPMENT AND REAL PROPERTY MANAGEMENT
Compliance
Requirements
Equipment
Management
Title to equipment
acquired by a non-Federal entity with Federal awards vests with
the non-Federal entity. Equipment means tangible nonexpendable property,
including exempt property, charged directly to the award having
a useful life of more than one year and an acquisition cost of $5000
or more per unit. However, consistent with a non-Federal entity's
policy, lower limits may be established.
A State shall
use, manage, and dispose of equipment acquired under a Federal grant
in accordance with State laws and procedures. Subrecipients of States
who are local governments or Indian tribes shall use State laws
and procedures for equipment acquired under a subgrant from a State.
Local governments
and Indian tribes shall follow the A-102 Common Rule for equipment
acquired under Federal awards received directly from a Federal awarding
agency. Non-profit organizations shall follow the provisions of
OMB Circular A-110. Basically the A-102 Common Rule and OMB Circular
A-110 require that equipment be used in the program which acquired
it or, when appropriate, other Federal programs. Equipment records
shall be maintained, a physical inventory of equipment shall be
taken at least once every two years and reconciled to the equipment
records, an appropriate control system shall be used to safeguard
equipment, and equipment shall be adequately maintained. When equipment
with a current per unit fair market value in excess of $5000, is
no longer needed for a Federal program, it may be retained or sold
with the Federal agency having a right to a proportionate (percent
of Federal participation in the cost of the original project) amount
of the current fair market value. Proper sales procedures shall
be used that provide for competition to the extent practicable and
result in the highest possible return.
The requirements
for equipment are contained in the A-102 Common Rule (§___.32),
OMB Circular A-110 (§___.34), Federal awarding agency program
regulations, and the terms and conditions of the award.
Real Property
Management
Title to real
property acquired by non-Federal entities with Federal awards vests
with the non-Federal entity. Real property shall be used for the
originally authorized purpose as long as needed for that purpose.
For non-Federal entities covered by OMB Circular A-110 and with
written approval from the Federal awarding agency, the real property
may be used in other federally-sponsored projects or programs that
have purposes consistent with those authorized for support by the
Federal awarding agency. The non-Federal entity may not dispose
of or encumber the title to real property without the prior consent
of the awarding agency.
When real property
is no longer needed for the federally-supported programs or projects,
the non-Federal entity shall request disposition instructions from
the awarding agency. (For purposes of this compliance requirement,
the awarding agency for recipients under OMB Circular A-110 or the
A-102 Common Rule and subrecipients under OMB Circular A-110 is
the Federal agency providing the funding. The awarding agency for
subrecipients under the A-102 Common Rule is the pass-through entity.)
When real property is sold, sales procedures should provide for
competition to the extent practicable and result in the highest
possible return. If sold, non-Federal entities are normally required
to remit to the awarding agency the Federal portion (based on the
Federal participation in the project) of net sales proceeds. If
retained, the non-Federal entity shall normally compensate the awarding
agency for the Federal portion of the current fair market value
of the property. Disposition instructions may also provide for transfer
of title in which case, the non-Federal entity is entitled to compensation
for its percentage share of the current fair market value.
The requirements
for real property are contained in the A-102 Common Rule (§___.31),
OMB Circular A-110 (§___.32), Federal awarding agency regulations,
and the terms and conditions of the award.
Audit
Objectives
Determine whether
the:
1. The non-Federal
entity maintains proper records for equipment and adequately safeguards
and maintains equipment.
2. Disposition
or encumbrance of any equipment or real property acquired under
Federal awards is in accordance with Federal requirements and that
the awarding agency was compensated for its share of any property
sold or converted to non-Federal use.
Suggested
Audit Procedures
(Procedures 1 and 2 only apply to subrecipients of States that are local governments or Indian tribal governments.)
1. Obtain entity's
policies and procedures for equipment management and ascertain if
they comply with the State's policies and procedures.
2. Select a
sample of equipment transactions and test for compliance with the
State's policies and procedures for management and disposition of
equipment.
(Procedures 3-4 only apply to non-profit organizations and Federal awards received directly from a Federal awarding agency by a local government or an Indian tribal government.)
3. Inventory
Management of Equipment
a. Inquire
if a required physical inventory of equipment acquired under Federal
awards was taken within the last two years. Test whether any differences
between the physical inventory and equipment records were resolved.
b. Identify
equipment acquired under Federal awards during the audit period
and trace selected purchases to the property records. Verify that
the property records contain the following information about the
equipment: description (including serial number or other identification
number), source, who holds title, acquisition date and cost, percentage
of Federal participation in the cost, location, condition, and any
ultimate disposition data including, the date of disposal and sales
price or method used to determine current fair market value.
c. Select a
sample of equipment identified as acquired under Federal awards
from the property records and physically inspect the equipment including
whether the equipment is appropriately safeguarded and maintained.
4. Dispositions
of Equipment
a. Determine
the amount of equipment dispositions for the audit period and perform
procedures to verify that dispositions were properly classified
between equipment acquired under Federal awards and equipment otherwise
acquired.
b. For dispositions
of equipment acquired under Federal awards, perform procedures to
verify that the dispositions were properly reflected in the property
records.
c. For dispositions
of equipment acquired under Federal awards with a current per-unit
fair market value in excess of $5000, test whether the awarding
agency was reimbursed for the appropriate Federal share.
(Procedure 5 applies to States, local governments, Indian tribal governments and non-profit organizations regardless of whether funding is received as a recipient or subrecipient)
5. Dispositions
of Real Property
a. Determine
real property dispositions for the audit period and ascertain such
real property acquired with Federal awards.
b. For dispositions
of real property acquired under Federal awards, perform procedures
to verify that the non-Federal entity followed the instructions
of the awarding agency which will normally require reimbursement
to the awarding agency for the Federal portion of net sales or fair
market value at the time of disposition, as applicable.
G.
MATCHING, LEVEL OF EFFORT, EARMARKING
Compliance
Requirements
The specific
requirements for matching, level of effort, and earmarking are unique
to each Federal program and are found in the laws, regulations,
and the provisions of contract or grant agreements pertaining to
the program. For programs listed in the Compliance Supplement, the
specific requirements can be found in Part 4, Agency Program Requirements.
However, for
matching, the A-102 Common Rule (§____.24) and OMB Circular
A-110 (§___.23) provide detailed criteria for acceptable costs
and contributions. The following is a list of the basic criteria
for acceptable matching:
- Are verifiable from the non-Federal entity's records.
- Are not included as contributions for any other federally-assisted project or program, unless specifically allowed by Federal program laws and regulations.
- Are necessary and reasonable for proper and efficient accomplishment of project or program objectives.
- Are allowed under the applicable cost principles.
- Are not paid by the Federal Government under another award, except where authorized by Federal statute to be allowable for cost sharing or matching.
- Are provided for in the approved budget when required by the Federal awarding agency.
- Conform to
other applicable provisions of the A-102 Common Rule and OMB Circular
A-110 and the laws, regulations, and provisions of contract or grant
agreements applicable to the program.
Matching, level
of effort and earmarking are defined as follows:
(1) Matching
or cost sharing includes requirements to provide contributions (usually
non-Federal) of a specified amount or percentage to match Federal
awards. Matching may be in the form of cash or in-kind contributions.
(2) Level
of effort includes requirements for (a) a specified level of
service to be provided from period to period, (b) a specified level
of expenditures from non-Federal or Federal sources for specified
activities to be maintained from period to period, and (c) Federal
funds to supplement and not supplant non-Federal funding of services.
(3) Earmarking
includes requirements that specify the minimum and/or maximum amount
or percentage of the program's funding that must/may be used for
specified activities, including funds provided to subrecipients.
Audit Objectives
1. Matching
- Determine whether the minimum amount or percentage of contributions
or matching funds was provided.
2. Level
of Effort - Determine whether specified service or expenditure
levels were maintained.
3. Earmarking
- Determine whether minimum or maximum limits for specified purposes
were met.
Suggested
Audit Procedures
1. Matching
a. Perform
tests to verify that the required matching contributions were met.
b. Ascertain
the sources of matching contributions and perform tests to verify
that they were from an allowable source.
c. Test records
to corroborate that the values placed on in-kind contributions are
in accordance with the OMB cost principles circulars, the A-102
Common Rule, OMB Circular A-110, program regulations, and the terms
of the award.
d. Test transactions
used to match for compliance with the allowable costs/cost principles
requirement. This test may be performed in conjunction with the
testing of the requirements related to allowable costs/cost principles.
2.1 Level of Effort - Maintenance of Effort
a. Identify
the required level of effort and perform tests to verify that the
level of effort requirement was met.
b. Perform
test to verify that only allowable categories of expenditures or
other effort indicators (e.g., hours, number of people served) were
included in the computation and that the categories were consistent
from year to year. For example, in some programs, capital expenditures
may not be included in the computation.
c. Perform
procedures to verify that the amounts used in the computation were
derived from the books and records from which the audited financial
statements were prepared.
d. Perform
procedures to verify that non-monetary effort indicators were supported
by official records.
2.2 Level
of Effort - Supplement Not Supplant
a. Ascertain
if the entity used Federal funds to provide services which they
were required to make available under Federal, State, or local law
and were also made available by funds subject to a supplement not
supplant requirement.
b. Ascertain
if the entity used Federal funds to provide services which were
provided with non-Federal funds in the prior year.
(1) Identify
the federally-funded services.
(2) Perform
procedures to determine whether the Federal program funded services
that were previously provided with non-Federal funds.
(3) Perform
procedures to ascertain if the total level of services applicable
to the requirement increased in proportion to the level of Federal
contribution.
3. Earmarking
a. Identify
the applicable percentage or dollar requirements for earmarking.
b. Perform
procedures to verify that the amounts recorded in the financial
records met the requirements (e.g., when a minimum amount is required
to be spent for a specified type of service, perform procedures
to verify that the financial records show that at least the minimum
amount for this type of service was charged to the program; or,
when the amount spent on a specified type of service may not exceed
a maximum amount, perform procedures to verify that the financial
records show no more than this maximum amount for the specified
type of service was charged to the program).
c. When earmarking
requirements specify a minimum percentage or amount, select a sample
of transactions supporting the specified amount or percentage and
perform tests to verify proper classification to meet the minimum
percentage or amount.
d. When the
earmarking requirements specify a maximum percentage or amount,
review the financial records to identify transactions for the specified
activity which were improperly classified in another account (e.g.,
if only 10 percent may be spent for administrative costs, review
accounts for other than administrative costs to identify administrative
costs which were improperly classified elsewhere and cause the maximum
percentage or amount to be exceeded).
H.
PERIOD OF AVAILABILITY OF FEDERAL FUNDS
Compliance
Requirements
Federal awards
may specify a time period during which the non-Federal entity may
use the Federal funds. Where a funding period is specified, a non-Federal
entity may charge to the award only costs resulting from obligations
incurred during the funding period and any pre-award costs authorized
by the Federal awarding agency . Also, if authorized by the Federal
program, unobligated balances may be carried over and charged for
obligations of the subsequent funding period. Obligations means
the amounts of orders placed, contracts and subgrants awarded, goods
and services received, and similar transactions during a given period
that will require payment by the non-Federal entity during the same
or a future period (A-102 Common Rule, §___.23; OMB Circular
A-110, §___.28).
Non-Federal
entities subject to the A-102 Common Rule shall liquidate all obligations
incurred under the award not later than 90 days after the end of
the funding period (or as specified in a program regulation) to
coincide with the submission of the annual Financial Status report
(SF-269). The Federal agency may extend this deadline upon request
(A-102 Common Rule, §___.23).
An example
used by a program to determine when an obligation occurs (is made)
is found under Part 4, Department of Education, CFDA 84.010 (Title
I).
Audit
Objective
Determine whether
Federal funds were obligated within the period of availability and
obligations were liquidated within the required time period.
Suggested
Audit Procedures
1. Review the
award documents and regulations pertaining to the program and determine
any award-specific requirements related to the period of availability
and document the availability period.
2. Test a sample
of transactions charged to the Federal award after the end of the
period of availability and verify that the underlying obligations
occurred within the period of availability and that the liquidation
(payment) was made within the allowed time period.
3. Test a sample
of transactions that were recorded during the period of availability
and verify that the underlying obligations occurred within the period
of availability.
4. Select a
sample of adjustments to the Federal funds and verify that these
adjustments were for transactions that occurred during the period
of availability.
I.
PROCUREMENT AND SUSPENSION AND DEBARMENT
Compliance
Requirements
Procurement
States, and
governmental subrecipients of States, shall use the same policies
and procedures used for procurements from non-Federal funds. They
also shall ensure that every purchase order or other contract includes
any clauses required by Federal statutes and executive orders and
their implementing regulations.
Local governments
and Indian tribal governments which are not subrecipients of States
will use their own procurement procedures provided that they conform
to applicable Federal law and regulations and standards identified
in the A-102 Common Rule.
Non-profit
organizations shall use procurement procedures that conform to applicable
Federal law and regulations and standards identified in OMB Circular
A-110. All non-Federal entities shall follow Federal laws and implementing
regulations applicable to procurements, as noted in Federal agency
implementation of the A-102 Common Rule and OMB Circular A-110.
Requirements
for procurement are contained in the A-102 Common Rule (§____.36),
OMB Circular A-110 (§____.40 through §____.48), Federal
awarding agency regulations, and the terms of the award. The specific
references for the A-102 Common Rule and OMB Circular A-110, respectively
are given for each procedure. (The first number listed refers to
the A-102 Common Rule and the second refers to A-110.)
Suspension
and Debarment
Non-Federal
entities are prohibited from contracting with or making subawards
under covered transactions to parties that are suspended or debarred
or whose principals are suspended or debarred. Covered transactions
include procurement contracts for goods or services equal to or
in excess of $100,000 and all nonprocurement transactions (e.g.,
subawards to subrecipients).
Contractors
receiving individual awards for $100,000 or more and all subrecipients
must certify that the organization and its principals are not suspended
or debarred. The non-Federal entities may rely upon the certification
unless it knows that the certification is erroneous. Non-Federal
entities may, but are not required to, check for suspended and debarred
parties which are listed in the List of Parties Excluded From
Federal Procurement or Nonprocurement Programs, issued by the
General Services Administration (GSA). The information contained
on the list is available in printed and electronic formats. The
printed version is published monthly. Copies may be obtained by
purchasing a yearly subscription from the Superintendent of Documents,
U.S. Government Printing Office, Washington, DC 20402, or by calling
the Government Printing Office Inquiry and Order Desk at (202) 783-3238.
The electronic version can be accessed on the Internet (http://www.arnet.gov/epls).
Please note that the user will be required to record their name
and organization for purposes of the Computer Matching and Privacy
Act of 1988.
Requirements
for suspension and debarment are contained in the Federal agencies'
codification of the governmentwide debarment and suspension common
rule (see Appendix II for CFR cites) which implements Executive
Orders 12549 and 12689, Debarment and Suspension, and the terms
of the award.
Audit
Objectives
Determine whether:
1. Procurements
were made in compliance with the provisions of the A-102 Common
Rule and OMB Circular A-110.
2. The non-Federal
entity obtained the required certifications for covered contracts
and subawards.
Suggested
Audit Procedures
(Procedures 1 - 5 apply only to non-profit organizations and Federal awards received directly from a Federal awarding agency by a local government or an Indian tribal government.)
1. Obtain entity's
procurement policies. Verify that the policies comply with applicable
Federal requirements (§____.36(b)(1) and §____.43).
2. Ascertain
if the entity has a policy to use statutorily or administratively-imposed
in-State or local geographical preferences in the evaluation of
bids or proposals. If yes, verify that these limitations were not
applied to Federal procurements except where applicable Federal
statutes expressly mandate or encourage geographic preference (§____.36(c)(2)
and §____.43).
3. Examine
procurement policies and procedures and verify the following:
a. Written
selection procedures require that solicitations incorporate a clear
and accurate description of the technical requirements for the material,
product, or service to be procured, identify all requirements that
the offerors must fulfill, and include all other factors to be used
in evaluating bids or proposals (§____.36(c)(3) and §____.44(a)(3)).
b. There is
a written policy pertaining to ethical conduct (§____.36(b)(3)
and §____.42).
4. Select a
sample of procurements and perform the following:
a. Examine
contract files and verify that they document the significant history
of the procurement, including the rationale for the method of procurement,
selection of contract type, contractor selection or rejection, and
the basis of contract price (§____.36(b)(9) and §____.46).
b. Verify that
procurements provide full and open competition (§____.36(c)(1)
and §____.43).
c. Examine
documentation in support of the rationale to limit competition in
those cases where competition was limited and ascertain if the limitation
was justified (§____.36(b)(1) and (d)(4); and §____.43
and §____.44(e)).
d. Verify that
contract files exist and ascertain if appropriate cost or price
analysis was performed in connection with procurement actions, including
contract modifications and that this analysis supported the procurement
action (§____.36(f) and §____.45).
e. Verify that
the awarding Federal agency approved procurements exceeding $100,000
when such approval was required. Procurements (1) awarded by noncompetitive
negotiation, (2) awarded when only a single bid or offer was received,
(3) awarded to other than the apparent low bidder, or (4) specifying
a "brand name" product (§____.36(g)(1) and §____.44(e)),
may require prior Federal awarding agency approval.
(Procedure 5 only applies to States and Federal awards subgranted by the State to a local government or Indian tribal government.)
5. Test a sample
of procurements to ascertain if the State's laws and procedures
were followed and that the policies and procedures used were the
same as for State funds.
(Procedures 6 applies to all non-Federal entities)
6. Test a sample
of procurements and subawards and ascertain if the required suspension
and debarment certifications were received for subawards and covered
contracts. Alternatively, the auditor may test a sample of procurements
and subawards to the List of Parties Excluded From Federal Procurement
or Nonprocurement Programs, issued by the General Services
Administration (GSA) and ascertain if contracts were awarded to
suspended or debarred parties.
J.
PROGRAM INCOME
Compliance Requirements
Program income
is gross income received that is directly generated by the federally-funded
project during the grant period. If authorized by Federal regulations
or the grant agreement, costs incident to the generation of program
income may be deducted from gross income to determine program income.
Program income includes, but is not limited to, income from: fees
for services performed, the use or rental of real or personal property
acquired with grant funds, the sale of commodities or items fabricated
under a grant agreement, and payments of principal and interest
on loans made with grant funds. Except as otherwise provided in
the Federal awarding agency regulations or terms and conditions
of the award, program income does not include interest on grant
funds (covered under Cash Management), rebates, credits, discounts,
refunds, etc. (covered under Allowable Costs/Cost Principles), or
interest earned on any of them (covered under Cash Management).
Program income does not include the proceeds from the sale of equipment
or real property (covered under Equipment and Real Property Management).
Program income
may be used in one of three methods: deducted from outlays, added
to the project budget, or used to meet matching requirements. Unless
specified in the Federal awarding agency regulations or the terms
and conditions of the award, program income shall be deducted from
program outlays. However, for research and development activities
by colleges and universities and other non-profit organizations,
the default method is to add program income to the project budget.
Unless Federal awarding agency regulations or the terms and conditions
of the award specify otherwise, non-Federal entities have no obligation
to the Federal Government regarding program income earned after
the end of the grant period.
The requirements
for program income are found in the A-102 Common Rule (§____.25),
OMB Circular A-110 (§____.2 (program income definition) and
§____.24), Federal awarding agency laws, program regulations,
and the provisions of the contract or grant agreements pertaining
to the program.
Audit Objective
Determine whether
program income is correctly recorded and used in accordance with
the program requirements, A-102 Common Rule, and OMB Circular A-110,
as applicable.
Suggested Audit Procedures
1. Identify
Program Income
a. Review the
laws, regulations, and the provisions of contract or grant agreements
applicable to the program and ascertain if program income was anticipated
and, if so, the requirements for recording and using program income.
b. Inquire
of management and review accounting records to ascertain if program
income was received.
2. Recording
of Program Income - Perform tests to verify that all program
income was properly recorded in the accounting records.
3. Use
of Program Income - Perform tests to ascertain if program income
was used in accordance with the program requirements, the A-102
Common Rule, and OMB Circular A-110.
K.
REAL PROPERTY ACQUISITION AND RELOCATION ASSISTANCE
Compliance
Requirements
The Uniform
Relocation Assistance and Real Property Acquisition Policies Act
of 1970, as amended, (URA) provides for uniform and equitable treatment
of persons displaced by federally-assisted programs from their homes,
businesses, or farms. Property acquired must be appraised by qualified
independent appraisers. All appraisals must be examined by a review
appraiser to assure acceptability. After acceptance, the review
appraiser certifies the recommended or approved value of the property
for establishment of the offer of just compensation to the owner.
Federal requirements govern the determination of payments for replacement
housing assistance, rental assistance, and down payment assistance
for individuals displaced by federally-funded projects. The regulations
also cover the payment of moving-related expenses and reestablishment
expenses incurred by displaced businesses and farm operations.
Governmentwide
requirements for real property acquisition and relocation assistance
are contained in Department of Transportation's single governmentwide
rule at 49 CFR part 24, Uniform Relocation Assistance and Real Property
Acquisition Regulations for Federal and Federally-Assisted Programs.
Audit
Objective
Determine whether
the non-Federal entity complied with the real property acquisition,
appraisal, negotiation, and relocation requirements.
Suggested
Audit Procedures
1. Inquire
of management and review the records of Federal programs to ascertain
if the non-Federal entity administers federally-assisted programs
that involve the acquisition of real property or the displacement
of households or businesses.
2. Property Acquisitions
For a sample of acquisitions:
a. Appraisal
- Test records to ascertain if: (1) the just compensation amount
offered the property owner was determined by an appraisal process;
(2) the appraisal(s) was examined by a review appraiser; and, (3)
the review appraiser prepared a signed statement which explains
the basis for adjusting comparable sales to reach the review appraiser's
determination of the fair market value.
b. Negotiations
- Test supporting documentation to ascertain if: (1) a written offer
of the appraised value was made to the property owner; and (2) a
written justification was prepared if the purchase price for the
property exceeded the amount offered and that the documentation
(e.g., recent court awards, estimated trial costs, valuation problems)
supports such administrative settlement as being reasonable, prudent,
and in the public interest.
c. Residential
Relocations - Test supporting documentation to ascertain if
the non-Federal entity made available to the displaced persons one
or more comparable replacement dwellings.
3. Replacement
Housing Payments - For a sample, test the non-Federal entity's
records to ascertain if there is documentation that supports the
following;
a. The owner
occupied the displacement dwelling for at least 180 days immediately
prior to initiation of negotiations.
b. The non-Federal
entity examined at least three comparable replacement dwellings
available for sale and computed the payment on the basis of the
price of the dwelling most representative of the displacement dwelling.
c. The asking
price for the comparable dwelling was adjusted, to the extent justified
by local market data, to recognize local area selling price reductions.
d. The allowance
for increased mortgage cost "buy down" amount was computed based
on the remaining principal balance, the interest rate, and the remaining
term of the old mortgage on the displacement dwelling.
e. The non-Federal
entity prepared written justification on the need to employ last
resort housing provisions, if the total replacement housing payment
exceeded $22,500.
4. Rental
or Downpayment Assistance - For a sample, test the non-Federal
entity's records to ascertain if there is documentation that supports
the following:
a. The displacee
occupied the displacement dwelling for at least 90 days immediately
prior to initiation of negotiations.
b. The displacee
rented, or purchased, and occupied a decent, safe, and sanitary
replacement dwelling within one year.
c. The non-Federal
entity prepared written justification if the payment exceeded $5250.
5. Business
Relocations -
For a sample of business relocations:
a. Moving
Expenses - Test that payments for moving and related expenses
were for actual costs incurred or that fixed payments, in lieu of
actual costs, were limited to a maximum of $20,000 and computed
based on the average annual net earnings of the business, as evidenced
by income tax returns, certified financial statements, or other
reliable evidence.
b. Business
Reestablishment Expense - Verify that (1) the displacee was
eligible as a farm operation, a non-profit organization, or a small
business to receive reestablishment assistance, and (2) the payment
was for actual costs incurred and did not exceed $10,000.
L.
REPORTING
Compliance
Requirements
Financial
Reporting
Recipients
should use the standard financial reporting forms or such other
forms as may be authorized by OMB (approval is indicated by an OMB
paperwork control number on the form). These other forms may include
financial, performance, and special reporting. Each recipient must
report program outlays and program income on a cash or accrual basis,
as prescribed by the Federal awarding agency. If the Federal awarding
agency requires accrual information and the recipient's accounting
records are not normally maintained on the accrual basis, the recipient
is not required to convert its accounting system to an accrual basis
but may develop such accrual information through analysis. The awarding
agency may accept identical information from the recipient in machine-readable
format, computer printouts, or electronic outputs in lieu of the
prescribed formats. (The open-ended entitlement programs (Appendix
1) require quarterly reports.)
The reporting
requirements for subrecipients are as specified by the pass-through
entity. In many cases, these will be the same as or similar to the
following requirements for recipients.
The standard
financial reporting forms are as follows:
1. Financial
Status Report (FSR) (SF-269 (OMB No. 0348-0039) or SF-269A (OMB
No. 0348-0038)). Recipients use the FSR to report the status
of funds for all non-construction projects and for construction
projects when the FSR is required in lieu of the SF-271.
2. Request
for Advance or Reimbursement (SF-270 (OMB No. 0348-0004)).
Recipients use the SF-270 to request Treasury advance payments and
reimbursements under non-construction programs.
3. Outlay
Report and Request for Reimbursement for Construction Programs (SF-271
(OMB No. 0348-0002)). Recipients use the SF-271 to request
funds for construction projects unless advances or the SF-270 is
used.
4. Federal
Cash Transaction Report (SF-272 (OMB No. 0348-0003) or SF-272-A
(OMB No. 0348-0003)). Recipients use the SF-272 when payment
is by advances or reimbursements. The awarding agency may waive
the requirement for an SF-272 when electronic payment mechanisms
provide adequate data.
OMB is working on versions of these standard forms which will be located on the OMB Home Page on the Internet (/WH/EOP/omb). In the interim, copies of the standard forms can be obtained via OMB's FAX Information Line: 202-395-9068. The 4-digit fax-on-demand numbers for each form are indicated below.
SF-269, Financial Status Report (Long Form) (fax-on-demand #2690)
SF-269A, Financial Status Report (Short Form) (fax-on-demand #2691)
SF-270, Request for Advance or Reimbursement (fax-on-demand #2700)
SF-271, Outlay Report and Request for Reimbursement for Construction Programs fax-on-demand #2710)
SF-272, Federal Cash Transactions Report (fax-on-demand #2720)
SF-272A, Federal
Cash Transactions Report (fax-on-demand #2721)
Performance
Reporting
Recipients
shall submit performance reports at least annually but not more
frequently than quarterly. Performance reports generally contain,
for each award, brief information on each of the following:
1. A comparison
of actual accomplishments with the goals and objectives established
for the period.
2. Reasons
why established goals were not met, if appropriate.
3. Other pertinent
information including, when appropriate, analysis and explanation
of cost overruns or high unit costs.
Special
Reporting
Non-Federal
entities may be required to submit other reporting which may be
used by the Federal agency for such purposes as allocating program
funding.
Compliance
testing of performance and special reporting are only required for
data that are quantifiable and meet the following criteria:
1. Have a direct
and material effect on the program.
2. Are capable
of evaluation against objective criteria stated in the laws, regulations,
contract or grant agreements pertaining to the program.
Performance
and special reporting data specified in Part 4, Compliance Requirements,
meet the above criteria.
Reporting requirements
are contained in the following documents:
a. A-102 Common
Rule -- Financial reporting, §____.41; Performance reporting,
§____.40(b).
b. OMB Circular
A-110 -- Financial reporting, §____.52; Performance reporting,
§____.51.
c. The laws,
regulations, and the provisions of contract or grant agreements
pertaining to the program.
Audit
Objective
Determine whether
required reports for Federal awards include all activity of the
reporting period, are supported by applicable accounting or performance
records, and are fairly presented in accordance with program requirements.
Suggested
Audit Procedures
1. Review applicable
laws, regulations, and the provisions of contract or grant agreements
pertaining to the program for reporting requirements. Determine
the types and frequency of required reports. Obtain and review Federal
awarding agency, or pass-through entity in the case of a subrecipient,
instructions for completing the reports.
a. For financial
reports, ascertain the accounting basis used in reporting the data
(e.g., cash or accrual).
b. For performance
and special reports, determine the criteria and methodology used
in compiling and reporting the data.
2. Perform
appropriate analytical procedures and ascertain the reason for any
unexpected differences. Examples of analytical procedures include:
(a) Comparing
current period reports to prior period reports.
(b) Comparing
anticipated results to the data included in the reports.
(c) Comparing
information obtained during the audit of the financial statements
to the reports.
Note: The results
of the analytical procedures should be considered in determining
the nature, timing, and extent of the other audit procedures for
reporting.
3. Select a
sample of each of the following report types.
a. Financial
reports:
(1) Ascertain
if the financial reports were prepared in accordance with the required
accounting basis.
(2) Trace the
amounts reported to accounting records that support the audited
financial statements and the schedule of expenditures of Federal
awards and verify agreement or perform alternative procedures to
verify the accuracy and completeness of the reports and that they
agree with the accounting records.
b. Performance
and special reports:
(1) Trace the
data to records that accumulate and summarize data.
(2) Perform
tests of the underlying data to verify that the data were accumulated
and summarized in accordance with the required or stated criteria
and methodology, including the accuracy and completeness of the
reports.
c. When intervening
computations or calculations are required between the records and
the reports, trace reported data elements to supporting worksheets
or other documentation that link reports to the data.
d. Test mathematical
accuracy of reports and supporting worksheets.
4. Test the
selected reports for completeness.
a. For financial
reports, review accounting records and ascertain if all applicable
accounts were included in the sampled reports (e.g., program income,
expenditure credits, loans, and reserve funds).
b. For performance
and special reports, review the supporting records and ascertain
if all applicable data elements were included in the sampled reports.
5. Obtain written
representation from management that the reports provided to the
auditor are true copies of the reports submitted or electronically
transmitted to the Federal awarding agency or pass-through entity
in the case of a subrecipient.
M.
SUBRECIPIENT MONITORING
Compliance
Requirements
A pass-through
entity is responsible for:
- Identifying
to the subrecipient the Federal award information (e.g., CFDA title
and number, award name, name of Federal agency) and applicable compliance
requirements.
- Monitoring
the subrecipient's activities to provide reasonable assurance that
the subrecipient administers Federal awards in compliance with Federal
requirements.
- Ensuring
required audits are performed and requiring the subrecipient to
take prompt corrective action on any audit findings.
- Evaluating
the impact of subrecipient activities on the pass-through entity's
ability to comply with applicable Federal regulations.
Factors such
as the size of awards, percentage of the total program's funds awarded
to subrecipients, and the complexity of the compliance requirements
may influence the extent of monitoring procedures.
Monitoring
activities may take various forms, such as reviewing reports submitted
by the subrecipient, performing site visits to the subrecipient
to review financial and programmatic records and observe operations,
arranging for agreed upon procedures engagements for certain aspects
of subrecipient activities, such as eligibility determinations,
reviewing the subrecipient's single audit or program-specific audit
results and evaluating audit findings and the subrecipient's corrective
action plan.
The requirements
for subrecipient monitoring are contained in the A-102 Common Rule
(§___.37 and §___.40(a)), OMB Circular A-110 (§___.50(a),
Federal awarding agency program regulations, and the terms and conditions
of the award.
Audit
Objectives
Determine whether
the pass-through entity:
1. Identified
Federal award information and compliance requirements to the subrecipient.
2. Monitored
subrecipient activities to provide reasonable assurance that the
subrecipient administers Federal awards in compliance with Federal
requirements.
3. Ensured
required audits are performed and requires appropriate corrective
action on monitoring and audit findings.
4. Evaluates
the impact of subrecipient activities on the pass-through entity.
Suggested
Audit Procedures
(Note: The
auditor may consider coordinating the tests related to subrecipients
performed as part of Activities Allowed or Unallowed (tests that
subrecipient agreements were for allowable activities), Cash Management
(tests of cash reports submitted by subrecipients), Eligibility
(tests that subawards were made only to eligible subrecipients),
and Procurement (tests of suspension and debarment certifications)
with the testing of Subrecipient Monitoring.)
1. Discuss
subrecipient monitoring with the pass-through entity's staff to
gain an understanding of the scope of monitoring activities, including
the number, size, and complexity of awards to subrecipients.
2. Test award
documents to ascertain if the pass-through entity made subrecipients
aware of the award information and requirements imposed by laws,
regulations, and the provisions of contract or grant agreements
pertaining to the program. This testing should include procedures
to verify that the pass-through entity required subrecipients expending
$300,000 or more in Federal awards during the subrecipient's fiscal
year to have audits made in accordance with OMB Circular A-133.
3. Review the
pass-through entity's documentation of subrecipient monitoring to
ascertain if the pass-through entity monitored that subrecipients
used Federal funds for authorized purposes and takes actions in
response to monitoring findings. This review should include procedures
to verify that the pass-through entity monitored the activities
of subrecipients not subject to OMB Circular A-133, using techniques
such as those discussed in the Compliance Requirements provisions
of this section.
4. Verify that
the pass-through entity receives audit reports from subrecipients
required to have an audit in accordance with OMB Circular A-133,
issues timely management decisions on audit and monitoring findings,
and requires subrecipients to take timely corrective action on deficiencies
identified in audits and subrecipient monitoring.
5. Verify that
the effects of subrecipient noncompliance are properly reflected
in the pass-through entity's records.
N.
SPECIAL TESTS AND PROVISIONS
Compliance
Requirements
The specific
requirements for special tests and provisions are unique to each
Federal program and are found in the laws, regulations, and the
provisions of contract or grant agreements pertaining to the program.
For programs listed in this Supplement, the compliance requirements,
audit objectives, and suggested audit procedures for this type of
compliance requirement can be found in Part 4 - Agency Program Requirements.
For programs not listed in this Supplement, the auditor shall review
the program's contract and grant agreements and referenced laws
and regulations to identify the compliance requirements and develop
the audit objectives and audit procedures for Special Tests and
Provisions which could have a direct and material effect on a major
program. The auditor should also inquire of the non-Federal entity
to help identify and understand any Special Tests and Provisions.
Additionally,
for both programs included and not included in this Supplement,
the auditor shall identify any additional compliance requirements
which are not based in law or regulation (e.g., were agreed to as
part of audit resolution of prior audit findings) which could be
material to a major program. Reasonable procedures to identify such
compliance requirements would be inquiry of non-Federal entity management
and review of the contract and grant agreements pertaining to the
program. Any such requirements which may have a direct and material
on a major program shall be included in the audit.
PART
4 - AGENCY PROGRAM REQUIREMENTS
INTRODUCTION
For each Federal
program included in this Supplement, Part 4 provides "I. Program
Objectives" and "II. Program Procedures." Also, Part 4 provides
information about compliance requirements specific to a program
in "III. Compliance Requirements."
When five types
of compliance requirements ("A. Activities Allowed or Unallowed,"
"E. Eligibility," "G. Matching, Level of Effort, Earmarking," "L.
Reporting," and "N. Special Tests and Provisions") are applicable
to a program included in this Supplement, Part 4 will always provide
information specific to the program. The auditor should look to
Part 3 for a general description of the compliance requirements,
audit objectives, and suggested audit procedures and to Part 4 for
information about the specific requirements for a program. An exception
is that for "N. Special Tests and Provisions;" all such information
is included in Part 4.
The other nine
types of compliance requirements generally are not specific to a
program and therefore are usually not listed in Part 4. However,
when one of these other nine types of compliance requirements have
information specific to a program, this specific information will
be provided with the program in Part 4.
In
developing the audit procedures to test compliance with the requirements
for a Federal program, the auditor should first look to Part 2,
Matrix of Compliance Requirements, to identify which of the 14 types
of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.
For R&D
and SFA, Part 5 is the equivalent of Part 4; therefore the auditor
will need to consider Parts 2, 3, and 5 in developing the audit
program for these programs (program clusters).
PART
5 - CLUSTERS OF PROGRAMS
INTRODUCTION
Part 5 identifies
those programs that are considered to be clusters of programs as
defined by OMB Circular A-133 (§___.105). A cluster of programs
means Federal programs with different CFDA numbers that are defined
as a cluster of programs because they are closely related programs
that share common compliance requirements. This Part identifies
research and development (R&D) and Student Financial Aid (SFA)
as clusters, as well as certain other programs included in Part
4, Agency Program Requirements, that are deemed to be clusters.
For R&D and SFA, the following sections of this Part are the
equivalent of Part 4.
This Part also
defines other clusters of programs that are not
included in this Compliance Supplement. If a cluster is defined
in this Part, but not included in Part 4, the auditor will have
to determine the compliance requirements to test in accordance with
Part 7, Guidance for Auditing Programs Not Included in This Compliance
Supplement.
RESEARCH
AND DEVELOPMENT PROGRAMS
I.
PROGRAM OBJECTIVES
The Federal
Government sponsors research and development activities to achieve
objectives agreed upon between the sponsoring agency and the institution.
The types of research and development conducted under these agreements
vary widely. The objective of individual projects is explained in
the Federal award document.
II.
PROGRAM PROCEDURES
Research is
a systematic study directed toward fuller scientific knowledge or
understanding of the subject studied. Development is the systematic
use of knowledge and understanding gained from research directed
toward the production of useful materials, devices, systems, or
methods, including design and development of prototypes and processes.
The term research also includes activities involving the training
of individuals in research techniques where such activities utilize
the same facilities as other research and development activities
and where such activities are not included in the instruction function.
Research and
development grants and contracts are awarded to non-Federal entities
on the basis of research proposals submitted to Federal agencies
or pass-through entities. These proposals are sometimes unsolicited.
A grant or contract agreement is then negotiated in which the purpose
of the project is specified, the amount of the award is indicated,
and terms of administration are delineated.
III.
COMPLIANCE REQUIREMENTS AND SUGGESTED AUDIT PROCEDURES
In
developing the audit procedures to test compliance with the requirements
for a Federal program, the auditor should first look to Part 2,
Matrix of Compliance Requirements, to identify which of the 14 types
of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.
A.
Activities Allowed or Unallowed
The objective(s)
of individual research and development projects are explained in
the applicable award documents. Testing of compliance with this
requirement should ensure that funds were used only for activities
for the furtherance of such objective(s).
B.
Allowable Cost/Cost Principles
Individual
employee compensation and related benefits generally comprise a
significant portion of total costs charged to research and development
projects. The auditor should give particular attention to the allocability
of these costs. The distribution of individual employee compensation
and related benefits to Federally sponsored research projects must
follow the applicable Federal cost principles and the Federal award
document. Therefore, the auditor's testing should included tests
of the time and effort reporting system to support the distribution
of salaries and wages.
Indirect costs
is a second major category of cost charged to research and development
projects. The third most prevalent type of cost charged is supplies
and equipment.
The auditor
should determine if journal entries, computer generated costs (e.g.,
payroll, benefits, supplies, computer usage), and transfers were
made to the research and development projects. If so, a representative
sample of these should be included as a part of allowable costs
testing.
G.
Matching, Level of Effort, Earmarking
1.
Matching
Non-Federal
entities may be required to share in the cost of research either
on an overall entity or individual grant basis. The specific program
regulations or individual Federal award will specify matching requirements
if applicable.
2.
Level of Effort - Not Applicable
3.
Earmarking - Not Applicable
L.
Reporting
1.
Financial Reporting
The specific
program regulations or the Federal award will specify the required
financial reports. The auditor is responsible for testing the standard
Federal financial reports or alternate forms that report the same
or similar information.
2.
Performance Reporting - Not Applicable
3.
Other Special Reports - Not Applicable
N.
Special Tests and Provisions
The larger
R&D awards may contain special terms and conditions which could
have a direct and material effect on the Research and Development
Cluster. The auditor should make inquiries of the non-Federal entity's
management and review a sample of the larger R&D awards to ascertain
if such special terms and conditions exist. When special terms and
conditions exist which could be material to this Cluster, the auditor
should develop the audit objectives, audit procedures, and perform
tests for test compliance with the special terms and conditions.
STUDENT FINANCIAL ASSISTANCE PROGRAMS
Department of Education
Department of Health and Human Services
CFDA
84.007 FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT PROGRAM
(FSEOG)
CFDA 84.032 FEDERAL FAMILY EDUCATION LOAN PROGRAM (FFEL)
CFDA 84.033 FEDERAL WORK STUDY (FWS)
CFDA 84.038 FEDERAL PERKINS LOAN PROGRAM (FPL)
CFDA 84.063 FEDERAL PELL GRANT PROGRAM (PELL)
CFDA 84.268 WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM
(DIRECT LOAN)
CFDA 93.108 HEALTH EDUCATION ASSISTANCE LOAN PROGRAMS (HEAL)
CFDA 93.342 HEALTH PROFESSIONS STUDENT LOAN (HPSL)
CFDA 93.364 NURSING STUDENT LOAN (NSL)
CFDA 93.820 SCHOLARSHIP PROGRAM FOR STUDENTS OF EXCEPTIONAL
NEED (EFNS)
I.
PROGRAM OBJECTIVES
The objective
of the student financial assistance programs is to provide financial
assistance to eligible students attending institutions of postsecondary
education.
II.
PROGRAM PROCEDURES
Institutions
must apply to either the Secretary of Education or Secretary of
Health and Human Services to participate in their particular SFA
programs. Some applications must be filed annually, others upon
initial entry and once approved, periodically thereafter. Institutions
may be approved to participate in only one program or a combination
of programs. Institutions are responsible for" (1) determining student
eligibility; (2) verifying student data (when required); (3) calculating,
as required, the amount of financial aid a student can receive;
(4) completing and/or certifying parts of various loan applications
and/or promissory notes; (5) drawing funds from the Federal government
and disbursing or delivering SFA funds to students through disbursement
and/or credits to students' accounts; (6) making borrowers aware
of loan repayment responsibilities; (7) submitting, as requested,
data on borrowers listed on student status confirmation reports;
(8) making refunds to students, lenders and programs, as appropriate,
if students withdraw, drop out or are expelled from their course
of study; (9) collecting SFA overpayments; (10) establishing, maintaining
and managing (including collecting loan repayments) a revolving
loan fund for applicable programs; and, (11) reporting the use of
funds. Institutions may contract with third-party servicers to perform
many of these functions.
Title
IV Programs - General
The programs
cited in this cluster that are administered by the Department of
Education (those with CFDAs beginning with 84) are authorized by
Title IV of the Higher Education Act of 1965 (the Act), as amended,
and collectively are referred to as the "Title IV programs." Because
they are administered at the institutional level, the Federal Perkins
Loan Program, Federal Work-Study Program and Federal Supplemental
Education Opportunity Grant program are referred to collectively
as the "campus-based programs." In addition to the Act and implementing
regulations found in Title 34 of the CFR, the Department of Education
annually publishes the Federal Student Financial Aid Handbook,
which provides detailed guidance on administering the Title IV programs.
These and other guidance material are available from the Department
of Education by calling 1-800-4FEDAID (1-800-433-3243) or on the
Internet (http://sfa.ed.gov/).
For Title IV
programs, students complete an application (Free Application for
Federal Student Aid (FAFSA) and send it to a central processor (a
contractor of the Department of Education that administers the Central
Processing System). The central processor provides Student Aid Reports
(SARs) to applicants and provides Institutional Student Information
Records (ISIRs) to institutions. Among other things, the SAR contains
the applicant's Expected Family Contribution. Students take their
SARs to the institution (or the institution uses the ISIR) to help
determine student eligibility, award amounts and disbursements.
(Note: The central processor is a service organization of the Department
of Education, not of the schools. Therefore, Statement on Auditing
Standards No. 70 does not apply when auditing the schools.)
Federal
Pell Grant (Pell) (CFDA 84.063)
The Federal
Pell Grant program provides grants to eligible undergraduate students
and is intended to provide a foundation of financial aid. The program
is administered by the Department of Education and postsecondary
educational institutions. Maximum and minimum Pell grant awards
are established by statute. The Department of Education provides
funds to the institution based on actual and estimated Pell expenditures.
Federal
Perkins Loan (FPL) (CFDA 84.038)
Health Professions Student Loan (HPSL) (CFDA 93.342)
Nursing Student Loan (NSL) (CFDA 93.364)
The FPL, HPSL,
and NSL programs provide long-term low-interest loans to students
who demonstrate the need for financial aid to pursue their course
of study at postsecondary educational institutions. Revolving loan
funds are established and maintained at institutions through applications
to participate in the programs. The funds are started with the Federal
Capital Contribution (FCC) and a matching Institutional Capital
Contribution (ICC). Repayments of principal and interest, new FCC,
and new ICC are deposited in the revolving funds. The institution
is fully responsible for administering the program (i.e., approving,
disbursing and collecting the loans).
Federal
Work Study (FWS) (CFDA 84.033)
The Federal
Work Study (FWS) program provides part-time employment to students
who need the earnings to help meet costs of postsecondary education.
This program also authorizes the establishment of the Job Location
and Development (JLD) program, the purpose of which is to expand
off-campus part-time or full-time employment opportunities for all
students, regardless of their financial need, who are enrolled in
eligible institutions and to encourage students to participate in
community service activities.
Funds are provided
to institutions upon submission of an annual application, Fiscal
Operations Report and Application to Participate (FISAP) (this
application covers all campus-based programs), and in accordance
with statutory and regulatory formulae. FWS funds are matched with
institutional funds. The institution decides the award amount, places
the student in a job, and pays the student or arranges to have the
student paid by an off-campus employer. The institution may use
a portion of FWS funds for a JLD program.
Federal
Supplemental Education Opportunity Grant (FSEOG) (CFDA 84.007)
The FSEOG program
provides grants to eligible undergraduate students. Priority is
given to Federal Pell recipients who have the lowest expected family
contributions. The institution decides the amount of the grant,
which can be up to $4000 but not less than $100, for an academic
year. Federal funds are matched with institutional funds (34 CFR
sections 676.10 and 676.20).
Federal
Family Education Loan Program (FFEL) (CFDA 84.032)
William D. Ford Federal Direct Loan Program (Direct Loan)
(CFDA 84.268)
(Both programs include subsidized, unsubsidized, and PLUS
loans)
The FFEL and
Direct Loan programs make interest subsidized or unsubsidized loans
available to students or parents of dependent students (PLUS loan)
to pay for the cost of attending postsecondary educational institutions.
FFEL loans are made by eligible lenders (e.g. banks, savings and
loan institutions, etc.) and insured by State or not-for-profit
guaranty agencies. In some cases, institutions of higher education
are approved as eligible lenders. The Federal Government reinsures
the guaranty agencies. Direct Loans are made by the Secretary of
Education. The student's SAR or ISIR, along with other information,
is used by the institution to certify (for FFEL) or originate (for
Direct Loan) a student's loan. The student financial aid administrator
is also required to provide and confirm certain information.
Direct Loan
is a new program that is changing annually. Institutions participate
in loan origination options: Option 1, Option 2 or Standard. Functions
performed by loan origination option vary and are described in the
Direct Loan School Guide. Direct Loan is an electronic
program except for the promissory note. Electronic records are created,
batched, transmitted (exported) to a loan origination center (LOC)
and acknowledged (imported from) by the LOC, on a cycle approach.
A cycle is not complete until the last activity in it is finished,
i.e., an action has been accepted by the LOC and the school's system
reflects the acceptance. Direct Loan has five types of cycles: Loan
Origination Records (one for each loan), Promissory Note Manifests,
Disbursement Records, Change Records, and Reconciliation Records.
For a loan to be "booked" the institution must have electronically
transmitted to the LOC, and the LOC must have accepted these records:
(1) the loan origination record; (2) the Promissory Note Manifest
(matched with the paper promissory note sent by the school/student);
and, (3) the first disbursement of loan proceeds. The borrower's
original accepted promissory note is maintained at the LOC; the
institution is not required to keep a copy.
When auditing
institutions of higher education, tests of the compliance requirements
are not expected to be made at the FFEL lending institutions (e.g.,
banks, credit unions, etc.) or the Direct Loan LOC. However, if
the institution is participating in FFEL as an eligible lender,
and SFA is a major program, the auditor's compliance opinion on
SFA includes compliance with requirements associated with its role
as a lender. Therefore, if the lending activity under FFEL is material
to SFA as a whole, the auditor would need to perform procedures
to support his or her opinion with respect to the institution's
role as a FFEL lender. Compliance requirements associated with lenders
under the FFEL program are not included in this compliance supplement,
but are identified in an audit guide available from the Department
of Education: Compliance Audits (Attestation Engagements) for
Lenders and Lender Servicers Participating in the Federal Family
Education Loan Program, dated December 1996.
The FFEL program
at Guaranty Agencies (84.032) is not part of the Student Financial
Assistance Cluster and is included in Part 4, Agency Program Requirements.
Health
Education Assistance Loans (HEAL) (CFDA 93.108)
HEAL encourages
lenders to provide loans to graduate students enrolled in eligible
educational programs in specified health professions at participating
institutions of higher education. HEAL loans are made by eligible
lenders and are insured by the Federal Government. Students complete
an application and submit it to the institution. The institution
is responsible for certifying the loan application and confirming
certain information. Tests of the compliance requirements are not
expected to be made at the lender when auditing participating institutions.
Scholarship
Program for Students of Exceptional Financial Need (EFNS) (CFDA
93.820)
EFNS encourages
those needy students, who might otherwise be reluctant to do so,
to pursue a career as a health professional. These scholarships
are awarded without a service or financial obligation to health
professional students of exceptional financial need. Annual awards
are made to participating health professional schools. Each school
makes awards to eligible students.
III.
COMPLIANCE REQUIREMENTS
In
developing the audit procedures to test compliance with the requirements
for a Federal program, the auditor should first look to Part 2,
Matrix of Compliance Requirements, to identify which of the 14 types
of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.
Note:
While the programs included in this cluster are generally similar
in their intent, administration and documentation, etc., there are
differences among them. Because of space considerations, we could
not list all of the differences, exceptions to general rules or
nuances pertaining to specific programs. Auditors should utilize
regulations and guidance applicable to the year(s) being audited
when auditing the SFA programs.
A.
Activities Allowed or Unallowed
1.
Allowability of Specific Transactions and Activities
Generally,
SFA funds can be used only for making awards to students and for
administration of the programs. Other allowable uses for specific
programs are as follows:
Federal
Perkins Loan (FPL)
Certain billing,
collection, and litigation costs must first be charged to the borrower
and cannot be charged to the loan fund. If amounts recovered from
the borrowers are not sufficient to pay these collection costs,
program funds can be used to pay these costs with certain limits
(34 CFR sections 674.8 and 674.47).
A school may
transfer up to a total of 25 percent of its Federal Capital Contribution
for an award year to either or both the Federal Supplemental Educational
Opportunity Grant (FSEOG) or Federal Work Study programs. A school
may transfer up to 100 percent of its initial and supplemental allocations
to an approved Work Colleges program. (see 34 CFR section 675.41)
Transferred funds must be used according to the requirements of
the program to which they are transferred. A school that transfers
funds to the Federal Work Study , FSEOG or Work Colleges programs
must transfer any unexpended funds back to the Federal Perkins Loan
program at the end of the award year (34 CFR section 674.18).
Federal
Work Study (FWS)
The institution
may use FWS funds only for awards to students, a Job Location and
Development (JLD) Program, Work-Colleges Program, administrative
costs, and transfers to FSEOG (34 CFR sections 675.18 and 675.33).
Health
Professions Student Loan (HPSL), CFDA 93.342
Nursing Student Loan (NSL), CFDA 93.364
Funds from
both programs may also be used for capital distribution in Section
743, or, as agreed to by the Secretary for costs of litigation;
costs associated with membership in credit bureaus and, to the extent
specifically approved by the Secretary, for other collection costs
that exceed the usual expenses incurred in the collection of loan
funds. Funds may also be used for repayments of principal and interest
on Federal capital loans (HPSL, 42 CFR section 57.205(a); NSL, 42
CFR section 57.305(a)).
2.
Allowable Activities for Subrecipients - Not Applicable
C.
CASH MANAGEMENT
ED pays an
institution in advance, or by reimbursement. Under the reimbursement
method, the institution must disburse funds to the students before
requesting funds from ED. Under the advance payment method, the
institution's request must not exceed the amount immediately needed
to disburse funds to students. The institution must make the disbursements
as soon as administratively feasible, but no later than three business
days following the receipt of funds. Any amounts not disbursed by
the end of the third business day are considered to be excess cash
and generally are required to be promptly returned to ED. However,
an excess cash balance tolerance is allowed if that balance: (1)
during a peak period of enrollment, was less than three percent
of its total prior-year drawdowns; (2) for any other period was
less than one percent of its prior-year drawdowns; and, (3) is eliminated
within the next seven calendar days. Except for the Federal Perkins
Loan Program earnings, interest earnings greater than $250 must
be returned to the ED. Federal Perkins Loan earnings are reinvested
in the Federal Perkins Loan revolving fund (34 CFR section 668.166).
For the HHS
programs, requests for new FCC must only be made when needed. Any
idle cash including any interest earned must be deposited in an
income-producing account and all excess cash must be returned to
HHS (HPSL, 42 CFR sections 57.203 and 57.205; NSL, 42 CFR parts
303 and 305).
E.
ELIGIBILITY
1.
Eligibility for Individuals
The requirements
for student eligibility are contained in Appendix A.
The determination
of SFA award amounts is based on financial need. Financial need
is generally defined as the student's cost of attendance (COA) minus
financial resources reasonably available. In determining the financial
resources available for the HHS programs, the school must use one
of the national need analysis systems or any other procedures approved
by the Secretary of Education. The school must also take into account
other information that it has regarding the student's financial
status. For Title IV programs, the financial resources available
is generally the Expected Family Contribution (EFC) that is computed
by the central processor and included on the student's SAR and the
ISIR provided to the institution.
For the HHS
programs and the FPL, the costs reasonably necessary for the student's
attendance include any special needs and obligations which directly
affect the student's ability to attend the school. The school must
document the criteria used for determining these costs. For Title
IV programs the COA is generally the sum of the following: tuition
and fees; an allowance for books, supplies, transportation and miscellaneous
personal expenses; an allowance for room and board; where applicable,
allowances for costs for dependent care; costs associated with study
abroad and cooperative education; costs related to disabilities;
and fees charged for student loans. There are exceptions for students
attending less than half time, correspondence students, and incarcerated
students. The financial aid administrator also has authority to
use professional judgement to adjust the COA on a case-by-case basis
to allow for special circumstances (FPL, 34 CFR section 674.9; FWS,
34 CFR section 675.9; FSEOG, 34 CFR section 676.9; FFEL, 34 CFR
section 682.603; Direct Loan 34 CFR sections 685.200 and 301; Pell
34 CFR section 690.75; HPSL, 42 CFR section 57.206(b); NSL, 42 CFR
section 57.306(b); EFNS, 42 CFR section 57.2804(b), 57.2806; HEAL,
42 CFR section 60.51(f)); Sections 471 and 472 of the Act).
In addition
to the following described requirements and limits, awards must
be coordinated among the various programs and with other Federal
and nonfederal aid to assure that total aid is not awarded in excess
of the student's financial need (FPL, 34 CFR sections 674.14 and
674.15; FWS, 34 CFR sections 675.14 and 675.15; FSEOG, 34 CFR sections
676.14 and 676.15; FFEL, 34 CFR section 682.603; Direct Loan, 34
CFR section 685.301; HPSL, 42 CFR section 57.206; NSL, 42 CFR section
57.306(b); HEAL, 42 CFR section 60.51(f); EFNS, 42 CFR section 57.2806).
Health
Professions Student Loan (HPSL), CFDA 93.342
Nursing Student Loan (NSL), CFDA 93.364
The total amount
of HPSL loans made to a student for a school year may not exceed
$2,500 plus the cost of tuition (42 CFR section 57.207). For medical
and osteopathic students who are applying for a HPSL loan, the school
must make its selection based on the order of greatest financial
need, taking into consideration the other resources available to
the student. The resources may include summer earnings, educational
loans, veteran (G.I.) Benefits, and earnings during the school year
(HPSL, 42 CFR section 57.206(c)). The total amount of NSL loans
made to a student for an academic year may not exceed $2,500 except
that for each of the final two academic years of the program the
total must not exceed $4000. The total of all NSL loans may not
exceed $13,000 (NSL, 42 CFR section 57.307).
Health
Education Assistance Loans (HEAL), CFDA 93.108
The maximum
amount allowable under this program is determined by health professions
as follows: (1) a medical, osteopathy, dentistry, veterinary medicine,
optometry or podiatry student may receive no more than $20,000 per
academic year and $80,000 in total; and, (2) a public health, pharmacy
or chiropractic student and a graduate in health administration,
clinical psychiatry and allied health may received no more than
$12,500 per academic year and $50,000 in total. The lender may disburse
funds only for making loans in accordance with the HEAL Insurance
Contract (42 CFR sections 60.10(a) and 60.33).
Scholarship
Program for Students of Exceptional Financial Need (EFNS), CFDA
93.820
This program
applies to the health profession only. Scholarships must be awarded
successively to the eligible individual with the greatest financial
need at that school (42 CFR section 57.2803(b)). A scholarship will
include the student's tuition for the first year of study, the cost
of all other reasonable educational expenses, and a stipend of $400
per month (adjusted in accordance with Section 751(g)(3) of the
Act) for 12 consecutive months beginning with the first month of
the school year (42 CFR section 57.2805). If a recipient ceases
to be a full-time student at the school, the school must discontinue
all scholarship payments to a student and remit the unused balance
of the scholarship to the Federal Government (42 CFR section 57.2807)).
Federal
Pell Grants (Pell)
Each year,
based on the maximum Pell grant established by Congress, ED provides
to institutions Payment and Disbursement Schedules for determining
Pell awards. The Payment or Disbursement schedule provides the maximum
annual amount a student would receive for a full academic year for
a given enrollment status, EFC and COA. The Payment Schedule is
used to determine the annual award for a full-time student. There
are separate Disbursement Schedules for three-quarter time, half-time
and less than half-time students. All of the schedules, however,
are based on the COA of a full-time student for a full academic
year (see Chapter 4 of the Federal SFA Handbook for the
year(s) being audited for guidance on selecting formulas for calculating
cost of attendance, prorating costs for programs less or greater
than an academic year, and determining payment periods). The steps
to determine Pell awards are as follows:
(1) Determine
the student's enrollment status (full-time, three-quarter time,
half-time or less than half-time).
(2) Calculate
the cost of attendance. This is always based on the cost for a full-time
for a full academic year. If the student is enrolled in a program
or enrollment period that is longer or shorter than an academic
year, the costs must be prorated so that they apply to one full
academic year. There are two allowable proration methods. Costs
can be on an actual cost-per-student basis or an average cost for
groups of similar students. If the student is enrolled less than
half-time, the only allowable cost components are tuition and fees,
allowance for books and supplies, transportation allowance, and
allowance for dependent care.
(3) Determine
the annual award, based on the cost of attendance calculated above
and the Expected Family Contribution, from the Payment or Disbursement
Schedule for the student's enrollment status (i.e., full-time, three
quarter-time, half-time or less than half-time).
(4) Determine
the payment period. For term programs (semester, trimester, quarter),
the payment period is the term.
(5) Calculate
the payment for the payment periods. The calculation of the payment
for the payment period may vary depending on the formula used, the
length of the program compared to the academic year, and whether
the institution uses an alternative calculation for students who
attend summer terms (See Chapter 4 of the Federal SFA Handbook).
(6) Disburse
funds at prescribed times (This is tested under section N, Special
Tests and Provisions) (34 CFR sections 690.3, 690.61 through 690.
67, Pell Grant Payment Schedules and Federal SFA Handbook).
Campus-Based
Programs (FPL, FWS, FSEOG)
The maximum
amount that can be awarded under the campus-based programs is equal
to the student's financial need (COA minus EFC) minus aid from other
SFA programs and other resources. For programs of study or enrollment
periods less than or greater than an academic year, the COA for
loans and campus-based aid is based on the student's actual costs
for the period for which need is being analyzed, rather than being
prorated to the costs for a full-time student for a full academic
year. The financial aid administrator has discretion in awarding
amounts from each program, subject to certain limitations.
FSEOG
The FSEOG program
provides grants to eligible undergraduate students. Priority is
given to Federal Pell recipients who have the lowest expected family
contributions. The institution decides the amount of the grant,
which can be up to $4000 but not less than $100, for an academic
year (34 CFR sections 676.10 and 676.20).
FPL
Annual loan
maximums at an institution not participating in the Expanded Lending
Option (ELO) Program are: $3000 for a student who has not successfully
completed a program of undergraduate education ($15,000 cumulative),
or $5000 for a graduate or professional student ($30,000 cumulative,
including loans borrowed as an undergraduate student) ( 34 CFR section
674.12 and the Federal SFA Handbook).
Annual loan
maximums at institutions participating in the ELO Program are: $4000
for a student who has not successfully completed a program of undergraduate
education ($8000 cumulative for a student who has not successfully
completed two years of a program leading to a bachelor's degree,
$20,000 cumulative for a student who has successfully completed
2 years of a program leading to a bachelor's degree but who has
not completed the work necessary for the degree), or $6000 for a
graduate or professional student ($40,000 cumulative, including
loans borrowed as an undergraduate student) (34 CFR section 674.7
and the Federal SFA Handbook).
Federal
Family Education Loan Program (FFEL, CFDA 84.032)
William D. Ford Federal Direct Loan Program (Direct Loan,
CFDA 84.268)
In determining
loan amounts for subsidized loans, the financial aid administrator
subtracts from the COA the EFC and the estimated financial assistance
for the period of enrollment that the student (or parent on behalf
of the student) will receive from Federal, State, institutional
or other sources. Unsubsidized loans, PLUS loans, loans made by
a school to assist the student, and state-sponsored loans may be
used to substitute for EFC (34 CFR sections 682.200 and 682.603,
sections 685.102 and 685.301).
The annual loan limits apply to the length of the school's academic year. Except for PLUS loans and for graduate or professional students, proration of a loan is required when a program is less than an academic year in either clock hours or credit hours or number of weeks; or a program exceeds an academic year but the portion of the program in excess of an academic year remaining is less than an academic year in length. For the purpose of determining loan limits, the number of years that a student has completed in a program of undergraduate study includes any prior enrollment (at the same or another institution) in an eligible program of undergraduate education for which the student was awarded an associate or bachelor's degree, as long as the degree is required by the school for admission to the program in which the student is currently enrolled. The loan limits described below apply to both the FFEL and Direct Loan programs and are cumulative. For example, an undergraduate student who has borrowed $10,000 in subsidized FFEL and $13,000 in subsidized direct loans has reached the aggregate undergraduate limit of $23,000 for both programs (34 CFR sections 682.204 and 685.203).
Annual
Limits for Subsidized Loans
For an undergraduate
student who has not yet successfully completed the first year of
study: (1) up to $2,625 for a program of study at least an academic
year in length; (2) up to $1,750 for a program at least two-thirds
of an academic year but less than a full year; and (3) up to $875
for a program at least one third but less than two-thirds of an
academic year.
For an undergraduate
student who has successfully completed the first year but has not
successfully completed the second year of an undergraduate program:
(1) up to $3,500 for a program of study at least an academic year
in length, and (2) for programs with less than an academic year
remaining, the loan must be prorated.
For an undergraduate
student who has successfully completed the first and second year
of study but has not successfully completed the remainder of the
program or for a student in a program who has an associate or baccalaureate
degree which is required for admission into the program: (1) up
to $5,500 for a program of study at least an academic year in length,
and (2) for programs with less than an academic year remaining,
the loan must be prorated.
Graduate or
professional students may borrow up to $8,500 per academic year.
Annual
Limits for Unsubsidized Loans
A student may
receive an unsubsidized loan for the amount that is the difference
between the subsidized amount for which he or she was eligible and
the subsidized amount that he or she received. For dependent undergraduate
students, the unsubsidized loan is the difference between the student's
cost of attendance and the student's estimated financial assistance
(including a subsidized loan if the student qualifies for one).
Loan limits are the same as for subsidized loans.
Additional
eligibility for unsubsidized loans, beyond the base subsidized/unsubsidized
amount, is available to all independent students and to dependent
students whose parents are likely to be precluded by exceptional
circumstances from receiving a PLUS loan, as determined by the SFA
administrator.
For a student
who has not successfully completed the first two years of undergraduate
study: (1) up to $4000 for a program of study at least an academic
year in length; (2) up to $2,500 for a program at least two-thirds
of an academic year but less than a full year; and, (3) up to $1,500
for a program at least one third of an academic year but less than
two-thirds of an academic year.
For a student
who has successfully completed the first and second years of an
undergraduate program but who has not successfully completed the
remainder of the program: (1) up to $5000 for a program of study
at least an academic year in length; and, (2) for programs with
less than a full academic year remaining, the loan must be prorated.
Graduate or
professional students may borrow up to $10,000 per academic year
.
Exceptions:
Annual increased loan limits for certain health professions students
who previously borrowed under the HEAL program are authorized. See
Dear Colleague Letter GEN-96-14 and subsequent Dear Colleague Letters
for detailed information.
Aggregate
Loan Limits for Subsidized and Unsubsidized Loans
Aggregate loan
limits for subsidized and unsubsidized loans is $23,000 for a dependent
undergraduate student; $46,000 for an independent student; and $138,500
($65,500 subsidized and $73,000 unsubsidized) for a graduate or
professional student (includes loans for undergraduate study).
Parent
Loans for Undergraduate Students (PLUS)
PLUS loans
are limited to parent borrowers. A PLUS loan may not exceed the
student's estimated cost of attendance minus other financial aid
awarded during the period of enrollment for that student (FFEL,
34 CFR sections 682.201 and 682.204; Direct Loan, 34 CFR sections
685.200 and 685.203) .
2.
Eligibility for Group of Individuals or Area of Service Delivery
- Not Applicable
3.
Eligibility for Subrecipients - Not Applicable
G.
MATCHING, LEVEL OF EFFORT, AND/OR EARMARKING REQUIREMENTS
1.
Matching
Federal
Perkins Loan (CFDA 84.038)
The institution's
matching share (Institutional Capital Contribution (ICC)) is one
third of the Federal Capital Contribution (FCC) (or 25 percent of
the combined FCC and ICC), except that schools participating the
ELO program must provide a dollar for dollar match with the FCC
(34 CFR sections 674.7 and 674.8).
Federal
Supplemental Educational Opportunity Grant (CFDA 84.007)
The Federal
share of awards may not exceed 75 percent of the total FSEOG awards
made by the school. The Secretary may authorize 100 percent Federal
funding if certain conditions are met (34 CFR section 676.21).
Federal
Work Study (CFDA 84.033)
The Federal
share of Federal Work Study (FWS) compensation paid a student employed
other than by a private for-profit organization may not exceed 75
percent of the total FWS awards made by the school. The Federal
share of FWS for work at private-for-profit organizations is limited
to 50 percent. A Federal share of 100 percent is allowable in two
situations: (1) (a) the institution is designated an eligible institution
under the HEA Title III Strengthening Institutions Program or the
Strengthening Historically Black Colleges and Universities Program,
(b) the work is performed by the student for the institution, a
public agency, or a private nonprofit organization, and (c) the
increased Federal share was requested by the institution as part
of its FWS application for that year; or (2) (a) the student is
employed as a reading tutor for children who are in preschool through
elementary school, and (b) the work is performed by the student
for the institution, a public agency, or a private nonprofit organization
(34 CFR section 675.26).
Health
Professions Student Loan (HPSL), CFDA 93.342
Nursing Student Loan (NSL), CFDA 93.364
The institution's
matching share (ICC) is one ninth of the FCC and must be deposited
in a health professions student loan fund (42 CFR sections 57.202
and 57.302).
2.
Level of Effort - Not Applicable
3.
Earmarking
Federal
Work Study (CFDA 84.033)
An institution
shall use at least 5 percent of its allocation for an award year
to compensate students employed in community service activities
unless waived by the Secretary. The institution can only use up
to 10 percent of its FWS or $50,000 whichever is less for a JLD
program (34 CFR sections 675.18 and 675.32).
L.
REPORTING
1.
Financial Reporting
a. SF-269,
Financial Status Report - Not Applicable
b. SF-270,
Request for Advance or Reimbursement - Not Applicable
c. SF-271,
Outlay Report and Request for Reimbursement for Construction
Program - Not Applicable
d. SF-272,
Federal Cash Transaction Report - Not Applicable
e. ED/PMS-272,
Federal Cash Transactions Report - Status of Federal Cash and ED/PMS-272a,
Federal Cash Transactions Report (OMB No. 1880-0172) - These
reports replace the SF-272 for the Pell, FPL, FSEOG, and FWS. They
are required to be completed monthly or quarterly, depending on
the amount of funds received. The reports are sent by ED to the
institution and are completed and returned. This may done electronically
or with hard copy (34 CFR section 668.14, Federal SFA Handbook).
f. Pell
Payment Data (OMB 1840-0668) - The Pell Payment Data is the
term used to refer to the electronic or magnetic payment record
used to report to ED the Pell payments to students. The record contains
the EFC, COA, enrollment status and disbursement information. After
the school receives a SAR or ISIR, the school completes the Payment
Data by filling in awards information. The school periodically sends
payment data to ED in a batch on one of three automated systems:
Electronic Data Exchange, Recipient Data Exchange or Floppy Disk
Data Exchange. ED processes the Payment Data and returns Processed
Payment Data to the school. The Processed Payment Data includes
the information originally provided by the school along with ED
identification of what category each record was placed: Rejected,
Accepted with Assumptions, Duplicates and Accepted. In testing the
Pell Payment data, the auditor should be most concerned with the
data ED has categorized as accepted or accepted with assumptions
(34 CFR section 690.83 and Federal SFA Handbook).
2.
Performance Reports - Not Applicable
3.
Special Reports
Fiscal
Operations Report and Application to Participate (FISAP) (ED Form
646-1) (OMB No. 1840-0073)
- This electronic report is submitted annually to receive funds
for the campus-based programs. The school uses the Fiscal Operations
Report portion to report its expenditures in the previous award
year and the Application to Participate portion to apply
for the following year. FISAPs are required to be submitted by October
1 following the end of the award year (which is always June 30).
For example, by October 1, 1997, the institution should submit its
FISAP that includes the Fiscal Operations Report for the
award year ended June 30, 1997, and the Application to Participate
for the 1998-99 award year. Key items are as follows (FPL,
FWS, FSEOG 34 CFR section 674.3; FWS, 34 CFR section 675.3; FSEOG,
676.3, Instruction Booklet for Fiscal Operations Report and
Application to Participate):
Part II, Application
- Section C, Line 6 or 7 and 8, whichever is applicable
- Section D, Lines 22-24
- Section E, Lines 25-40 (Trace a sample of line items)
Part III, Fiscal
Operations Report
- Section A (Trace material line items)
- Sections B-D
Parts IV and
V
- All sections
Part VI
- Section A (Trace a sample of line items)
N.
SPECIAL TESTS AND PROVISIONS
1.
Separate Funds (HPSL, NSL, FPL)
Compliance
Requirement - The institution must maintain a separate
fund account for each program (HPSL, 42 CFR section 57.205; NSL,
42 CFR part 305; and FPL 34 CFR sections 674.8 and 674.19).
Audit
Objective - Determine whether separate fund account(s)
were established.
Suggested
Audit Procedures
Review accounting
records to verify that a separate fund was established for each
program.
2.
Verification
Compliance
Requirement - An institution shall require each applicant
whose application is selected by the central processor, based on
edits specified by ED, to verify the items specified in 34 CFR section
668.56. The institution is not required to verify the applications
of more than 30 percent of its total number of applicants. The institution
shall also require applicants to verify any information used to
calculate EFC it has reason to believe is inaccurate. The institution
is required to establish written policies and procedures that incorporate
provisions of 34 CFR section 668.53 for verifying this information.
Acceptable documentation for the items is listed in 34 CFR section
668.57.
Audit
Objective - Determine whether the institution established
policies and procedures to verify information in student aid applications,
and verified all required information of selected applications in
accordance with the requirements.
Suggested
Audit Procedures
a. Review the
institution's policies and procedures for verifying student applications
and verify that they meet the requirements of 34 CFR section 668.53.
b. Select a
sample of applications that were selected for verification and review
student aid files to ascertain whether the institution obtained
acceptable documentation to verify the information required.
3.
Disbursements To Or On Behalf of Students
Compliance
Requirement
Title IV
Programs - General
The institution
may not make a disbursement to a student for a payment period or
period of enrollment until the student is enrolled in classes for
the period. The earliest an institution may disburse SFA funds other
than FWS (either paying the student directly or crediting the student's
account) is 10 days before the first day of the payment period or
period of enrollment for which the disbursement is intended. However,
institutions may not disburse or deliver the first installment of
FFEL or Direct Loans to first year undergraduates who are first
time borrowers until 30 days after the student's first day of classes.
If a student
received financial aid while attending one or more other institutions,
the financial aid administrator must request a financial aid transcript
(FAT) from the other institutions or obtain the information from
the National Student Loan Data System (See Dear Colleague Letter
96-13). Once the FAT is requested, the institution can pay the student
Pell and campus-based aid for one payment period only and can certify
a FFEL loan or originate a Direct Loan. However, the institution
can't release the proceeds of FFEL or Direct Loans or make any subsequent
payments under the Pell or campus-based programs until the FAT is
received (34 CFR sections 668.19).
For students
whose applications were selected for verification, if the institution
has reason to believe that information included in the application
is inaccurate, the institution may not: (1) disburse any Pell or
campus-based aid; (2) employ the applicant in its FWS program; or
(3) certify FFEL loans or originate Direct Loans (or process proceeds
of previously certified or originated loans) until the applicant
verifies or corrects the information. If the institution doesn't
have any reason to believe that the information is inaccurate, the
institution may withhold payment aid and loan certification, or
may make one disbursement of Pell or campus-based aid, employ or
allow an employer to employ an eligible student under FWS for the
first 60 consecutive days after the student's enrollment and may
certify the FFEL loan or originate the Direct Loan, but can't process
the proceeds. If the verification process is not complete after
45 days, the institution shall return the proceeds to the lender
(34 CFR section 668.58).
Pell
To disburse
Pell funds, the institution must have received a valid ISIR from
the central processor or a valid SAR from the student by the earlier
of the last work day in August following the end of the award year
or the last date that the student is still enrolled and eligible
for payment. The institution has discretion in disbursing funds
within a payment period, but must disburse the full amount before
the end of the payment period. The institution must review and document
the student's eligibility before it makes a payment (34 CFR sections
690.61 and, 690.75 through 690.78).
FPL
If the institution is making a loan for a full academic year and uses standard academic terms, the institution must advance a portion of the loan during each payment period. If standard academic terms are not used, it must advance funds at least twice during the academic year - once at the beginning and once at the midpoint. Loan payments must be supported by a signed promissory note (34 CFR section 674.16).
FFEL
The institution
must determine that the student has maintained eligibility for the
FFEL loan before each disbursement of loan proceeds. Multiple disbursements
are required and the institution is required to provide the lender
with a disbursement schedule. Loan funds provided by electronic
fund transfer or master check may not be requested earlier than:
27 days after the first day of classes of the first payment period
for a first-year, first-time Stafford Loan borrower; or 13 days
before the first day of classes for any subsequent payment period
for a first-year, first-time Stafford Loan borrower or for any payment
period for all other FFEL borrowers (34 CFR sections 682.603, 682.604
and 668.167).
Direct
Loan
Except in the
case of an allowable late disbursement (see 34 CFR Section 685.303(d)),
before disbursing the loan proceeds, the institution must determine
that the student maintained continuous eligibility from the beginning
of the loan period described in the promissory note. Option 1 and
Option 2 institutions may not disburse loan proceeds until they
have obtained a legally enforceable promissory note. Option 1 and
standard origination institutions may only disburse funds for students
listed on the Actual Disbursement Roster (34 CFR sections 685.301
and 685.303).
HEAL
Multiple disbursements
are normally required and correspond to the borrower's educational
expenses for the period for which the disbursement is made. The
school must indicated periods and expenses on the loan application
(HEAL, 42 CFR sections 60.33 and 60.52).
HPSL and
NSL
Student loans
may be paid to or on behalf of student borrowers in installments
considered appropriate by the school, except that a school may not
pay to or on behalf of any borrowers more than the school determines
the student needs for any given installment period (e.g., semester,
term, or quarter). At the time of payment a HSPL borrower must be
a full time student, a NSL borrower must be at least a half time
student (HPSL, 42 CFR section 57.209; NSL, 42 CFR section 57.309).
Each student loan must be evidenced by a properly executed promissory
note (HPSL, 42 CFR section 57.208; NSL, 42 CFR section 57.308).
FWS
The student's
wages are earned when the work is performed. The institution shall
pay the student at least once per month. The Federal share must
be paid by check or similar instrument the student can cash on his
or her endorsement (34 CFR section 675.16).
Audit
Objective - Determine whether disbursements to students
were made in accordance with required time frames and required reviews
were made and documents obtained before disbursing SFA funds.
Suggested
Audit Procedures
a. Review a
sample of disbursements to students and verify that they were made
in accordance with required timeframes and for Direct Loan Option
1 and standard origination institutions, only to the students listed
on the Actual Disbursement Roster.
b. Review loan
or other files to verify that the institution performed required
procedures and obtained required documents prior to disbursing funds.
4.
Refunds
Compliance
Requirement - A school is required to have a fair and equitable
refund policy under which the school shall make refunds of unearned
tuition, fees, room and board and other charges to a student who
received HEA Title IV Student Financial Assistance. Under the FFEL
program, the school pays to the original lender (or subsequent holder,
if the loan has been transferred and the school knows the new holder's
identity) the portion of the refund that is allocable to the loan.
Refund checks should be promptly processed (34 CFR section 668.22).
Calculation
of Amounts
The refund
policy should provide for a refund of at least the larger of the
amount provided by: (1) applicable State law; (2) the standards
established by the institution's nationally recognized accrediting
agency and approved by the Secretary of Education; or (3) the pro
rata refund calculation described below, for any student attending
the school for the first time, and who withdrew on or before the
60 percent point of the enrollment period. After calculating all
possible refund amounts (State, accrediting agency, and statutory
pro rata), the school must compare and use the calculation that
provides the largest refund. If the pro rata refund calculation
in (3) above does not apply (i.e., the student is not attending
the institution for the first time or withdrew after the 60% point
in time for the enrollment period) and there are no standards for
refunds established by State law or the accrediting agency, the
refund should be at least the larger of the amount provided by (1)
the Federal Refund calculation described below or (2) the school's
policy (the policy it uses for non-SFA students) (34 CFR section
668.22).
Refunds of
$25 or less may not have to be repaid. A refund returned to an SFA
loan program would reduce the amount of the loan that a student
would have to repay. A school may not keep any portion of a refund
that would be distributed to an SFA loan program unless the school
has written authorization from the student in the enrollment agreement
to do so. The enrollment agreement must explain clearly that the
student is permitting the school to keep the funds, rather than
having the funds used to reduce the student's debt, should the student
withdraw (34 CFR section 668.22).
The pro rata
refund referred to above means a refund of not less than that portion
of the tuition, fees, room, board, and other charges assessed the
student by the institution equal to the portion of the period of
enrollment for which the student has been charged that remains on
the withdrawal date, rounded down to the nearest 10 percent of that
period, less: (1) any unpaid amount of a scheduled cash payment;
(2) a reasonable administrative fee not to exceed the lesser of
5 percent or $100; and, (3) documented costs of equipment issued
to the student that is unreturnable or not returned in good condition
(34 CFR section 668.22).
The Federal
refund calculation referred to above means a refund of not less
than the portion of institutional charges to be refunded as follows
(34 CFR section 668.22):
1. If the student
withdraws, drops out, or is expelled before the first day of classes:
(a) Any amount
paid to the student under FPL, FSEOG and the Federal Pell grant
programs are considered an overpayment and must be returned to the
respective program. (See 34 CFR sections 668.21, 682.604(d) and
685.303)
(b) All loan
proceeds under the FFEL and Direct Loan programs should be returned
to the lender within 30 days of the first day of the period of enrollment.
2. If the institution
can't document that a student attended during the period of enrollment:
(a) Any amount
paid to the student under FPL, FSEOG and Pell grant programs are
considered an overpayment and must be returned to the respective
program.
(b) The institution shall return to FFEL or Direct Loan any loan proceeds directly credited to the student's account, and any amount paid by the student directly to the school, up to the amount of loan proceeds delivered by the school to the student.
3. If the student
withdraws on the first day of classes, the institution must refund
100 percent of institutional charges, less an administrative fee,
if any, not to exceed the lesser of 5 percent or $100.
4. If the student
withdraws any time after the first day of classes up to and including
the first 10 percent (in time) of the enrollment period, the institution
must refund at least 90 percent of institutional charges, less an
administrative fee, if any, not to exceed the lesser of 5 percent
or $100.
5. If the student
withdraws any time after the end of the first 10 percent of the
enrollment period up to and including the first 25 percent of the
enrollment period, the institution must refund at least 50 percent
of institutional charges, less an administrative fee, if any, not
to exceed the lesser of 5 percent or $100.
6. If the student
withdraws any time after the end of the first 25 percent of the
enrollment period up to and including the first 50 percent of the
enrollment period, the institution must refund at least 25 percent
of institutional charges, less an administrative fee, if any, not
to exceed the lesser of 5 percent or $100.
The withdrawal
date used to calculate the refund is the earlier of: (a) the date
that the student notifies an institution of the student's withdrawal,
or the date of withdrawal specified by the student, whichever is
later; or (b) if the student drops out of the institution without
notifying the institution (does not withdraw officially), the last
recorded date of class attendance by the student, as documented
by the institution.
Allocation
of Refunds to Programs
Refunds must
be distributed in the order prescribed below. The prescribed order
must be followed regardless of the school's agreements with other
State agencies or private agencies (34 CFR section 668.22(h) and
the Federal SFA Handbook).
1. Federal
SLS Loan
2. Unsubsidized Federal Stafford Loan
3. Subsidized Federal Stafford Loan
4. Federal PLUS Loan
5. Unsubsidized Federal Direct Stafford Loan
6. Subsidized Federal Direct Stafford Loan
7. Federal Direct Plus Loan
8. Federal Perkins Loan
9. Federal Pell Grant
10. Federal Supplemental Education Opportunity Grant
11. Other SFA Programs
12. Other Federal, State, private, or institutional sources of aid
13. The student.
The school
must pay the portion of a refund that is allocated to a HEAL loan
directly to the original lender or a subsequent holder of a note.
The borrowers must be notified by the school of such action (42
CFR section 60.54).
Timing
of Refunds
Refunds due
to the SFA programs (including Direct Loan) are required to be deposited
to the SFA accounts within 30 days or returned to the appropriate
FFEL lender within 60 days of the date the student officially withdraws,
is expelled or the insitution determines the student unofficially
withdrew or no later than 30 days following the expiration of an
approved leave of absence. See Chapter 3 of the Federal SFA
Handbook for a detailed discussion on determining a withdrawal
date (34 CFR sections 668.22, 682.607, and 685.306).
Audit
Objective - Determine whether the institution is making
refunds in the proper amount and in a timely manner and is applying
the refunds to Federal programs as required.
Suggested
Audit Procedures
a. Identify
a sample of students who withdrew or dropped during the refund period.
Review refund determination/calculation for conformity with requirements.
b. Trace refunds
to disbursement and accounting records (including canceled checks
to lenders and students) to verify that refunds were applied to
programs in the required order, that disbursements to lenders and
students were made when applicable and that credits and payments
were made within required time frames.
c. For a sample
of students for which no refunds were made, review academic records
to ascertain whether the students completed the enrollment period.
For students who received all failing and/or incomplete grades,
review attendance records to ascertain whether the students had
dropped out and were due a refund.
5.
Student Status Changes (HEAL, FFEL and Direct Loan)
Compliance
Requirement - Each school must notify the holder of the
HEAL loan of any change in the student's enrollment status within
30 days following the change in status. The school must also notify
the lender of any change in the student's name or address. Under
the FFEL and Direct Loan programs, schools must complete and return
within 30 days of receipt student status confirmation reports sent
by guaranty agencies and the Secretary. Unless the school expects
to complete its next student status report within 60 days, the school
must notify lender or guaranty agency (for FFEL loans) or the Secretary
(for Direct Loans) within 30 days, if it discovers that a student
who received a loan either did not enroll or ceased to be enrolled
on at least a half-time basis ( HEAL, 42 CFR 60.53; FFEL, 34 CFR
section 682.610; Direct Loan 34 CFR section 685.309). (Note: This
process is undergoing revision. When revised, the institution will
receive/submit SSCR data to the National Student Loan Data System
maintained by ED (or a contractor), rather than to the guaranty
agencies.)
Audit
Objective - Determine whether the institution is promptly
notifying lenders (or other appropriate parties) of changes in student
status in a timely and accurate manner.
Suggested
Audit Procedures
a. Select a
sample of HEAL borrowers that graduated, withdrew or dropped out
during the period. Review loan or correspondence files to verify
that the institution notified the lender of the change in student
status within the required time frame.
b. Select a
sample of FFEL/Direct Loan borrowers that graduated, withdrew or
dropped out during the period. Verify that the change in student
status was reported to the lender or other appropriate party within
30 days, or was included in a student status confirmation report
within 60 days.
6.
Student Loan Repayments (FPL, HPSL and NSL)
Compliance
Requirement - Each student loan, including accrued interest,
will be repayable in equal or graduated periodic installments in
amounts calculated on the basis of a 10 year repayment period. Except
as required in 42 CFR section 57.210(a), a repayment of a HPSL loan
must begin one year after the student ceases to be a full time student.
For a NSL loan, repayment must begin nine months after the student
ceases to be a full time or half time student, except as required
in 42 CFR section 57.310(a). For a FPL loan, the institution must
establish a repayment plan. The repayment period begins after an
initial grace period of either six months or nine months after the
student ceases to be at least a half-time student at an institution
of higher education, depending on when the loan was made (34 CFR
section 674.31(b)(2).
Borrowers may
be eligible for loan deferments or cancellations under certain circumstances.
Examples of when loan payments may be deferred are when the borrower
is in certain student statuses at other eligible institutions, employed
as a full-time teacher at certain schools, employed full-time in
other specified occupations, or serving in the military or as a
volunteer in the Peace Corps, ACTION programs or other programs
deemed to be comparable. Loans may be canceled based on full-time
employment as a teacher at certain schools or specified fields,
other qualifying employment, military or other volunteer service,
and death or disability. Cancellation rates (amount of loan that
is canceled for each year of qualifying service) vary, depending
on the criteria. Specific requirements for deferment and cancellation
vary, depending on when the loan was made. To qualify for a deferment
or cancellation, the borrower is required to submit to the institution
to which the loan is owed a written request for the deferment or
cancellation, with documentation required by the institution, by
the date established by the institution (FPL, 34 CFR sections 674.33
through 674.40 and 674.51 through 674.62; HSPL, 42 CFR sections
57.201, 57.211 and 212; NSL, 42 CFR section 57.311 through 313a).
Institutions
must exercise due care and diligence in the collection of loans
(For HPSL and NSL see 42 CFR section 57.210(b) and 42 CFR section
57.310(b), respectively). For the FPL, such due diligence procedures
include the following:
(1) A requirement
to conduct an exit interview with the borrower before he or she
leaves the institution and to contact the borrower a minimum of
three times during the initial grace period for loans with nine
month grace periods or two times for loans with six month grace
periods (34 CFR section 674.42).
(2) Specific
billing procedures to notify borrowers of overdue payments and to
demand overdue amounts (see 34 CFR section 674. 43).
(3) Specific
collection procedures to recover amounts from defaulted borrowers
who do not respond satisfactorily to demands routinely made as part
of the institution's billing procedures, including litigation procedures
(see 34 CFR section 674.45).
Audit
Objective - Determine whether institutions are processing
deferment and cancellation requests and servicing loans as required.
Suggested
Audit Procedures
a. Select a
sample of loans that entered repayment during the audit period and
review loan records to verify that the conversion to repayment was
timely, and that a repayment plan was established.
b. Review the
institution's requirements for applying for and documenting eligibility
for loan deferments and cancellations. Select a sample of loan deferments
and loan cancellations and review documentation to ascertain whether
the deferments or cancellations were adequately supported.
c. Select a
sample of defaulted loans and review loan records to ascertain whether
the required interviews, contacts, billing procedures and collection
procedures were carried out.
7.
Federal Work Study Agreements
Compliance
Requirement - FWS students may be employed by the institution,
a Federal, State or local agency, a private not-for-profit organization
or a private for-profit organization but the employment must not:
(1) impair existing service contracts; (2) displace employees; (3)
fill jobs that are vacant because the employer's regular employees
are on strike; or (4) involve the construction, operation, or maintenance
of any part of a facility used or to be used for religious worship
or sectarian instruction. The institution must enter into a written
agreement with any agency or organization providing employment under
the FWS program. If the student is employed by a Federal, State,
local agency or a private-nonprofit organization, the work that
the student performs must be in the public interest. If a student
is employed by a private for-profit organization, the work that
the student performs must be academically relevant to the student's
educational program (34 CFR sections 675.20 through 675.23).
Audit
Objective - Determine whether written agreements with employers
are made as required.
Suggested
Audit Procedures
Select a sample
of participating students and ascertain if written agreements with
the employers were executed.
IV.
OTHER INFORMATION
Pell
Adjustments - The following is intended to alert auditors that their
clients may request them to perform additional audit work in conjunction
with the single audit, in order to claim Pell adjustments. It is
not intended that this be covered otherwise.
All Pell Payment Data for an award year must be submitted by September 30 after the award year. Adjustments for Pell grants not claimed by September 30 can be made if the first audit report for the period in which the unclaimed Pell grants were made contains a finding that the institution made proper Pell awards for which it has not received either reimbursement or credit. ED has issued a Dear Colleague Letter (GEN 94-14) that provides instructions to institutions for reporting the Pell adjustments and describes the auditor's responsibilities. As of the date of this Compliance Supplement, ED was in the process of issuing a new Dear Colleague Letter which will supersede GEN 94-14.
FEDERAL STUDENT FINANCIAL ASSISTANCE PROGRAMS
STUDENT ELIGIBILITY COMPLIANCE REQUIREMENTS
| Requirements | P E L L |
F W S |
F S E O G |
F P L |
F F E L P |
F D L |
H E A L |
H P S L |
N S L |
E F N S |
|
| 1. | A regular student enrolled or accepted for enrollment in an eligible program (34 CFR 600.2, 668.32, 690.75, 675.9, 676.9, 674.9, 682.201, 685.200, 42 CFR 60.5, 57.206(a), 57.306(a), 57.2804) | x | x | x | x | x | x | x | x | x | x |
| 2. | U.S. Citizen or National (34 CFR 668.32, 690.75, 675.9, 676.9, 674.9, 682.201, 685.200; 42 CFR 60.5, 57.206(a), 57.306(a), 57.2804) | x | x | x | x | x | x | x | x | x | x |
| 3. | Has Financial Need (34 CFR 675.9, 676.9, 674.9, 682.201, 685.200; 42 CFR 60.51(f), 57.206, 57.306 (b), 57.2804(b)(1)) | x | x | x | x | x(1) | x(1) | x | x | x | x |
| 4. | Does not owe a refund on a grant awarded under the Pell Grant, or FSEOG programs (34 CFR 668.32, 690.75, 675.9, 676.9, 674.9, 682.201, 685.200; 42 CFR 60.51(d), 57.206, 57.306) | x | x | x | x | x | x | x | x | x | |
| 5. | Not in default on any student loans (34 CFR 668.32, 690.75, 675.9, 676.9, 674.9, 682.201, 685.200; 42 CFR 60.51(d), 57.206, 57.306) | x | x | x | x | x | x | x | x | x | |
| 6. | Must maintain good standing, or satisfactory progress (34 CFR 668.32, 690.75, 675.9, 676.9, 674.9, 682.201, 685.200; 42 CFR 60.5(d), 57.306) | x | x | x | x | x | x | x | x | ||
| 7. | Has registered under Section 3 of the Military Selective Service Act (34 CFR 668.32, 668.37, 690.75, 675.9, 676.9, 674.9, 682.201, 685.200; 42 CFR 60.5, 57.206) | x | x | x | x | x | x | x | x | ||
| 8. | Has a correct social security number (34 CFR 668.32, 690.75, 675.9, 676.9, 674.9, 682.201, 685.200) | x | x | x | x | x | x | ||||
| 9. | High School Diploma or GED (34 CFR 668.32, 690.75, 675.9, 676.9, 674.9, 682.201, 685.200) | x | x | x | x | x | x | ||||
| 10. | Above the age of compulsory school attendance in the State in which the institution he or she is attending is located (34 CFR 600.2, 600.4, 600.6, 690.75, 675.9, 676.9, 674.9, 682.201, 685.200) | x | x | x | x | x | x | ||||
| 11. | Ability to Benefit (34 CFR 668.32, 668 Subpart J, 690.75, 675.9, 676.9, 674.9, 682.201, 685.200) | x | x | x | x | x | x | ||||
| 12. | In need of a loan (scholarship) to pursue a course of study at the school (42 CFR 60.5(h), 57.206(a), 57.306(a), 57.2804) | x | x | x | x | ||||||
| 13. | An undergraduate student has received for award year, a SAR or determination of eligibility or ineligibility for a Pell Grant (34 CFR 674.9, 682.201, 690.75) | x | x | x | |||||||
| 14. | Is not incarcerated (34 CFR 668.32) | x | x | x | |||||||
| 15. | Enrolled, as at least a half-time student, in a course of study necessary for enrollment in an eligible program for not longer than one 12-month period (34 CFR 668.32) | x | x | ||||||||
| 16. | Parents can receive a PLUS loan if conditions are met (34 CFR 682.201, 685.200) | x | x | ||||||||
| 17. | Exceptional financial need must be demonstrated (42 CFR 57.2804(b)(1)) | x | |||||||||
| 18. | Is not incarcerated in a Federal or State penal institution (34 CFR 668.32) | x |
|||||||||
| 19. | Student agrees loan funds will be used for tuition, educational, living and transportation expenses (42 CFR 60.5(g)) | x | |||||||||
| 20. | Non-Student borrowers (42 CFR 60.6) | x | |||||||||
| 21. | Special requirements for students enrolled in pharmacy, medical, dental or osteopathic programs (42 CFR 60.5(e) (f)) | x | |||||||||
| 22. | Student is willing to repay the loan (34 CFR 674.9,) | x | |||||||||
| 23. | Students with the lowest expected family contributions who will also receive Pell Grants in award year (34 CFR 676.10) | x | |||||||||
| 24. | Cannot be recipient of a National Health Services Corps Scholarship under Section 751 of the Act, or an Indian Health Scholarship, under Section 757 of the Act, (42 CFR 57.2804(c)) | x |
OTHER
CLUSTERS
Programs
Included in this Supplement Deemed to Be Other Clusters
Agency
CFDA No. Name of Other Cluster/Program
Food
Stamp Cluster
USDA 10.551 Food Stamp Program
10.561 State Administrative Funding for the Food Stamp Program
Section
8 Cluster
HUD 14.182 Section 8 New Construction and Substantial Rehabilitation
14.855 Section 8 Rental Voucher Program
14.856 Lower Income Housing Assistance Program - Section 8
Moderate Rehabilitation
14.857 Section 8 Rental Certificate Program
(No Number) Section 8 Moderate Rehabilitation Program for Single
Room
Occupancy Dwellings for Homeless Individuals
CDBG
- Entitlement and (HUD-Administered) Small Cities
Cluster
HUD 14.218 Community Development Block Grants/Entitlement Program
14.219 Community Development Block Grants/Small Cities Program
Medicaid
Cluster
HHS 93.778 Medical Assistance Program (Medicaid, Title XIX)
93.775 State Medicaid Fraud Control Units
93.777 State Survey and Certification of Health Care Providers and
Suppliers
Programs
Not Included in this Supplement Deemed to Be Other Clusters
Agency CFDA
No. Name of Other Cluster/Program
Nutrition
Cluster
USDA 10.553 School Breakfast Program
10.555 National School Lunch Program
10.556 Special Milk Program for Children
10.558 Child and Adult Care Food Program
10.559 Summer Food Service Program for Children
Rural
Rental Housing Cluster
USDA 10.415 Rural Rental Housing Loans
10.427 Rural Rental Assistance Payments
Transit
Capital Grants Cluster
DOT 20.500 Federal Transit Capital Improvement Grants
20.507 Federal Transit Capital and Operating Assistance Formula
Grants
HIV
Emergency Relief Cluster
HHS 93.914 HIV Emergency Relief Projects Grants
93.915 HIV Emergency Relief Formula Grants
Foster Grandparent, Senior Companion Cluster
Corporation
for National
and Community Service
94.011 Foster Grandparent Program
94.016 Senior Companion Program
1. Does not always apply to unsubsidized loans.
PART 6 - INTERNAL CONTROL
INTRODUCTION
The A-102 Common
Rule and OMB Circular A-110 require that non-Federal entities receiving
Federal awards (e.g., auditee management) establish and maintain
internal control designed to reasonably ensure compliance with Federal
laws, regulations, and program compliance requirements. OMB Circular
A-133 requires auditors to obtain an understanding of the non-Federal
entity's internal control over Federal programs sufficient to plan
the audit to support a low assessed level of control risk for major
programs, plan the testing of internal control over major programs
to support a low assessed level of control risk for the assertions
relevant to the compliance requirements for each major program,
and, unless internal control is likely to be ineffective, perform
testing of internal control as planned.
This Part 6
is intended to assist non-Federal entities and their auditors in
complying with these requirements by describing for each type of
compliance requirement, the objectives of internal control, and
certain characteristics of internal control that when present and
operating effectively may ensure compliance with program requirements.
However, the categorizations reflected in this Part 6 may not necessarily
reflect how an entity considers and implements internal control.
Also, this part is not a checklist of required internal control
characteristics. Non-Federal entities could have adequate internal
control even though some or all of the characteristics included
in Part 6 are not present. Further, non-Federal entities could have
other appropriate internal controls operating effectively that have
not been included in this Part 6. Non-Federal entities and their
auditors will need to exercise judgment in determining the most
appropriate and cost effective internal control in a given environment
or circumstance to provide reasonable assurance for compliance with
Federal program requirements.
The objectives
of internal control pertaining to the compliance requirements for
Federal programs (Internal control over Federal Programs), as found
in §____.105 of OMB Circular A-133, are as follows:
(1) Transactions are properly recorded and accounted for to:
(i) Permit the preparation of reliable financial statements and Federal reports;
(ii) Maintain accountability over assets; and
(iii) Demonstrate
compliance with laws, regulations, and other compliance requirements;
(2) Transactions are executed in compliance with:
(i) Laws, regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on a Federal program; and
(ii) Any other
laws and regulations that are identified in the compliance supplements;
and
(3) Funds,
property, and other assets are safeguarded against loss from unauthorized
use or disposition.
The characteristics
of internal control are presented in the context of the components
of internal control discussed in Internal Control-Integrated
Framework (COSO Report), published by the Committee of Sponsoring
Organizations of the Treadway Commission. The COSO Report provides
a framework for organizations to design, implement, and evaluate
control that will facilitate compliance with the requirements of
Federal laws, regulations, and program compliance requirements.
Statement on Auditing Standards No. 78 (SAS 78), Consideration
of Internal Control in a Financial Statement Audit, issued
by the Auditing Standards Board of the American Institute of Certified
Public Accountants (AICPA) and a related AICPA audit guide, Consideration
of Internal Control in a Financial Statement Audit, incorporate
the components of internal control presented in the COSO Report.
SAS 78 is effective for audits of financial statements for periods
beginning on or after January 1, 1997. Early application of the
provisions in SAS 78 are permitted, however, this Supplement does
not require early implementation of SAS 78.
This Part 6
describes characteristics of internal control relating to each of
the five components of internal control that should reasonably assure
compliance with the requirements of Federal laws, regulations, and
program compliance requirements. A description of the components
of internal control and examples of characteristics common to the
14 types of compliance requirements are listed below. Objectives
of internal control and examples of characteristics specific to
each of the 14 types of compliance requirements follow this introduction.
Control
Environment sets the tone of an organization influencing
the control consciousness of its people. It is the foundation for
all other components of internal control, providing discipline and
structure.
- Sense of conducting operations ethically, as evidenced by a code of conduct or other verbal or written directive.
- Management's positive responsiveness to prior questioned costs and control recommendation.
- Management's respect for and adherence to program compliance requirements.
- Key managers' responsibilities clearly defined.
- Key managers' have adequate knowledge and experience to discharge their responsibilities.
- Staff knowledgeable about compliance requirements and being given responsibility to communicate all instances of noncompliance to management.
- Management's commitment to competence ensures that staff receive adequate training to perform their duties.
- Management's support of adequate information and reporting system.
Risk
Assessment is the entity's identification and analysis
of relevant risks to achievement of its objectives, forming a basis
for determining how the risks should be managed.
- Program managers and staff understand and have identified key compliance objectives.
- Organizational structure provides identification of risks of noncompliance:
- Key managers have been given responsibility to identify and communicate changes.
- Employees who require close supervision (e.g. inexperienced) are identified.
- Management has identified and assessed complex operations, programs, or projects.
- Management is aware of results of monitoring, audits, and reviews and considers related risk of noncompliance.
- Process established to implement changes in program objectives and procedures.
Control
Activities are the policies and procedures that help ensure
that management's directives are carried out.
- Operating policies and procedures clearly written and communicated.
- Procedures in place to implement changes in laws, regulations, guidance, and funding agreements affecting Federal awards.
- Management prohibition against intervention or overriding established controls.
- Adequate segregation of duties provided between performance, review, and recordkeeping of a task.
- Computer and program controls should include:
- Data entry controls, e.g., edit checks.
- Exception reporting.
- Access controls.
- Reviews of input and output data.
- Computer general controls and security controls.
- Supervision of employees commensurate with their level of competence.
- Personnel with adequate knowledge and experience to discharge responsibilities.
- Equipment, inventories, cash, and other assets secured physically and periodically counted and compared to recorded amounts.
Information
and Communication are the identification, capture, and
exchange of information in a form and time frame that enable people
to carry out their responsibilities.
- Accounting system provides for separate identification of Federal and non-Federal transactions and allocation of transactions applicable to both.
- Adequate source documentation exists to support amounts and items reported.
- Recordkeeping system is established to ensure that accounting records and documentation retained for the time period required by applicable requirements; such as the A-102 Common Rule (§____.42), OMB Circular A-110 (§____.53), and the provisions of laws, regulations, contracts or grant agreements applicable to the program.
- Reports provided timely to managers for review and appropriate action.
- Accurate information is accessible to those who need it.
- Reconciliations and reviews ensure accuracy of reports.
- Established internal and external communication channels.
- Staff meetings.
- Bulletin boards.
- Memos, circulation files, e-mail.
- Surveys, suggestion box.
- Employees' duties and control responsibilities effectively communicated.
- Channels of communication for people to report suspected improprieties established.
- Actions taken as a result of communications received.
- Established channels of communication between pass-through entity and subrecipients.
Monitoring
is a process that assesses the quality of internal control performance
over time.
- Ongoing monitoring built-in through independent reconciliations, staff meeting feed back, rotating staff, supervisory review, and management review of reports.
- Periodic site visits performed at decentralized locations (including subrecipients) and checks performed to determine whether procedures are being followed as intended.
- Follow up on irregularities and deficiencies to determine the cause.
- Internal quality control reviews performed.
- Management meets with program monitors, auditors, and reviewers to evaluate the condition of the program and controls.
- Internal audit routinely tests for compliance with Federal requirements.
A. ACTIVITIES ALLOWED OR UNALLOWED
and
B.
ALLOWABLE COSTS/COST PRINCIPLES
Control
Objectives
To provide
reasonable assurance that Federal awards are expended only for allowable
activities and that the costs of goods and services charged to Federal
awards are allowable and in accordance with the applicable cost
principles.
Control
Environment
- Management sets reasonable budgets for Federal and non-Federal programs so that no incentive exists to miscode expenditures.
- Management enforces appropriate penalties for misappropriation or misuse of funds.
- Organization-wide cognizance of need for separate identification of allowable Federal costs.
- Management provides personnel approving and pre-auditing expenditures with a list of allowable and unallowable expenditures.
Risk
Assessment
- Process for assessing risks resulting from changes to cost accounting systems.
- Key manager has a sufficient understanding of staff, processes, and controls to identify where unallowable activities or costs could be charged to a Federal program and not be detected.
Control Activities
- Accountability provided for charges and costs between Federal and non-Federal activities.
- Process in place for timely updating of procedures for changes in activities allowed and cost principles.
- Computations checked for accuracy.
- Supporting documentation compared to list of allowable and unallowable expenditures.
- Adjustments to unallowable costs made where appropriate and follow-up action taken to determine the cause.
- Adequate segregation of duties in review and authorization of costs.
- Accountability for authorization is fixed in an individual who is knowledgeable of the requirements for determining activities allowed and allowable costs.
Information
and Communication
- Reports, such as a comparison of budget to actual provided to appropriate management for review on a timely basis.
- Establishment of internal and external communication channels on activities and costs allowed.
- Training programs, both formal and informal, provide knowledge and skills necessary to determine activities and costs allowed.
- Interaction between management and staff regarding questionable costs.
- Grant agreements (including referenced program laws, regulations, handbooks, etc.) and cost principles circulars available to staff responsible for determining activities allowed and allowable costs under Federal awards.
Monitoring
- Management reviews supporting documentation of allowable cost information.
- Flow of information from Federal agency to appropriate management personnel.
- Comparisons made with budget and expectations of allowable costs.
- Analytic
reviews (e.g., comparison of budget to actual or prior year to
current year) and audits performed.
C.
CASH MANAGEMENT
Control
Objectives
To provide
reasonable assurance that the draw down of Federal cash is only
for immediate needs, States comply with applicable Treasury agreements,
and recipients limit payments to subrecipients to immediate cash
needs.
Control
Environment
- Appropriate assignment of responsibility for approval of cash draw downs and payments to subrecipients.
- Budgets for draw downs are consistent with realistic cash needs.
Risk
Assessment
- Mechanisms exist to anticipate, identify, and react to routine events that affect cash needs.
- Routine assessment of adequacy of subrecipient cash needs.
- Management has identified programs which receive cash advances and is aware of cash management requirements.
Control
Activities
- Cash flow statements by program are prepared to determine essential cash flow needs.
- Accounting system is capable of scheduling payments for accounts payable and requests for funds from Treasury to avoid time lapse between draw down of funds and actual disbursements of funds.
- Appropriate level of supervisory review of cash management activities.
- Written policy that provides:
- Procedures for requesting cash advances as close as is administratively possible to actual cash outlays;
- Monitoring of cash management activities;
- Repayment of excess interest earnings where required.
- For State programs subject to a Treasury-State agreement, a written policy exists which includes:
- Programs covered by the agreement;
- Methods of funding to be used;
- Method used to calculate interest; and
- Procedures
for determining check clearing patterns (if applicable for the funding
method).
Information
and Communication
- Variance reporting of expected versus actual cash disbursements of Federal awards and draw downs of Federal funds.
- Established channel of communication between pass-through entity and subrecipients regarding cash needs.
Monitoring
- Periodic independent evaluation (e.g. by internal audit, top management) of entity cash management, budget and actual results, repayment of excess interest earnings, and Federal draw down activities.
- Subrecipients requests for Federal funds are evaluated.
- Review of compliance with Treasury-State agreements.
D.
DAVIS-BACON ACT
Control
Objectives
To provide
reasonable assurance that contractors and subcontractors paid prevailing
wage rates for projects covered by the Davis-Bacon Act.
Control
Environment
- Management understands and communicates to staff, contractors, and subcontractors the requirements to pay wages in accordance with the Davis-Bacon Act.
- Management understands its responsibility for monitoring compliance.
Risk
Assessment
- Mechanisms in place to identify contractors and subcontractors most at risk of not paying the prevailing wage rates.
- Management identified how compliance will be monitored and the related risks of failure to monitor for compliance with Davis-Bacon Act.
Control
Activities
- Contractors informed in the procurement documents of the requirements for prevailing wage rates.
- Contractors and subcontractors required to submit certifications and copies of payrolls which meet the requirements to pay prevailing wage rates.
- Contractors' and subcontractors' payrolls monitored for compliance with prevailing wage rates.
Information
and Communication
- Prevailing wage rates are appropriately communicated.
- Reports provide sufficient information to determine if requirements are being met.
- Channels are established for staff, contractors, and workers to report misclassifications or failure to pay prevailing wages.
Monitoring
- Management reviews to ensure that contractors and subcontractors are being required to pay prevailing wage rates.
- On-site visits are performed to monitor classifications and wage rates.
- Monitoring reports from contractors are compared to independent checks.
E.
ELIGIBILITY
Control
Objectives
To provide
reasonable assurance that only eligible individuals and organizations
receive assistance under Federal award programs, that subawards
are made only to eligible subrecipients, and that amounts provided
to or on behalf of eligibles were calculated in accordance with
program requirements.
Control
Environment
- Staff size and competence provides for proper making of eligibility determinations.
- Realistic caseload/performance targets established for eligibility determinations.
- Lines of authority clear for determining eligibility.
Risk
Assessment
- Identification of risk that eligibility information prepared internally or received from external sources could be incorrect.
- Conflict-of-interest statements are maintained for individuals who determine eligibility.
- Process for assessing risks resulting from changes to eligibility determination systems.
Control
Activities
- Written policies provide direction for making and documenting eligibility determinations.
- Procedures to calculate eligibility amounts consistent with program requirements.
- Eligibility objectives and procedures clearly communicated to employees.
- Authorized signatures (manual or electronic) on eligibility documents periodically reviewed.
- Access to eligibility records limited to appropriate persons.
- Manual criteria checklists or automated process used in making eligibility determinations.
- Process for periodic eligibility re-determinations in accordance with program requirements.
- Verification of accuracy of information used in eligibility determinations.
- Procedures to ensure the accuracy and completeness of data used to determine eligibility requirements.
Information
and Communication
- Information system meets needs of eligibility decisionmakers and program management.
- Processing of eligibility information subject to edit checks and balancing procedures.
- Training programs inform employees of eligibility requirements.
- Channels of communication exist for people to report suspected eligibility improprieties.
- Management receptive to suggestions to strengthen eligibility determination process.
- Documentation of eligibility determinations in accordance with program requirements.
Monitoring
- Periodic analytical reviews of eligibility determinations performed by management.
- Program quality control procedures performed.
- Periodic audits of detailed transactions.
F.
EQUIPMENT AND REAL PROPERTY MANAGEMENT
Control
Objectives
To provide
reasonable assurance that proper records are maintained for equipment
acquired with Federal awards, equipment is adequately safeguarded
and maintained, disposition or encumbrance of any equipment or real
property is in accordance with Federal requirements, and the Federal
awarding agency is appropriately compensated for its share of any
property sold or converted to non-Federal use.
Control
Environment
- Management committed to providing proper stewardship for property acquired with Federal awards.
- No incentives exist to under-value assets at time of disposition.
- Sufficient accountability exists to discourage temptation of misuse of Federal assets.
Risk
Assessment
- Procedures to identify risk of misappropriation or improper disposition of property acquired with Federal awards.
- Management understands requirements and operations sufficiently to identify potential areas of noncompliance (e.g., decentralized locations, departments with budget constraints, transfers of assets between departments).
Control
Activities
- Accurate records maintained on all acquisitions and dispositions of property acquired with Federal awards.
- Property tags are placed on equipment.
- A physical inventory of equipment is periodically taken and compared to property records.
- Property records contain description (including serial number or other identification number), source, who holds title, acquisition date and cost, percentage of Federal participation in the cost, location, condition, and disposition data.
- Procedures established to ensure that the Federal awarding agency is appropriately reimbursed for dispositions of property acquired with Federal awards.
- Policies and procedures in place for responsibilities of recordkeeping and authorities for disposition.
Information
and Communication
- Accounting system provides for separate identification of property acquired wholly or partly with Federal funds and with non-Federal funds.
- A channel of communication exists for people to report suspected improprieties in the use or disposition of equipment.
- Program managers are provided with applicable requirements and guidelines.
Monitoring
- Management reviews the results of periodic inventories and follows up on inventory discrepancies.
- Management reviews dispositions of property to ensure appropriate valuation and reimbursement to Federal awarding agencies.
G.
MATCHING, LEVEL OF EFFORT, EARMARKING
Control
Objectives
To provide
reasonable assurance that matching, level of effort, or earmarking
requirements are met using only allowable funds or costs which are
properly calculated and valued.
Control
Environment
- Commitment from management to meet matching, level of effort, and earmarking requirements (e.g., adequate budget resources to meet a specified matching requirement or maintain a required level of effort).
- Budgeting process addresses/provides adequate resources to meet matching, level of effort, or earmarking goals.
- Official written policy exists outlining:
- Responsibilities for determining required amounts or limits for matching, level of effort, or earmarking.
- Methods of valuing matching requirements, e.g., "in-kind" contributions of property and services, calculations of levels of effort.
- Allowable costs that may be claimed for matching, level of effort, or earmarking.
- Methods of
accounting for and documenting amounts used to calculate amounts
claimed for matching, level of effort, or earmarking.
Risk
Assessment
- Identification of areas where estimated values will be used for matching, level of effort, or earmarking.
- Management has sufficient understanding of the accounting system to identify potential recording problems.
Control
Activities
- Evidence obtained such as a certification from the donor, or other procedures performed to identify whether matching contributions:
- Are from non-Federal sources.
- Involve Federal funding, directly or indirectly.
- Were used for another federally-assisted program.
Note: Generally, matching contributions must be from a non-Federal source and may not involve Federal funding or be used for another federally-assisted program.
- Adequate review of monthly cost reports and adjusting entries.
Information
and Communication
- Accounting system capable of:
- Separately accounting for data used to support matching, level of effort, or earmarking amounts or limits or calculations.
- Ensuring that expenditures or expenses, refunds, and cash receipts or revenues are properly classified and recorded only once as to their effect on matching, level of effort, or earmarking.
- Documenting the value of "in-kind" contributions of property or services, including:
-- Basis for local labor market rates for valuing volunteer services.
-- Payroll records or confirmation from other organizations for services provided by their employees.
-- Quotes,
published prices, or independent appraisals used as the basis for
donated equipment, supplies, land, buildings, or use of space.
Monitoring
- Supervisory review of matching, level of effort, or earmarking activities performed to assess the accuracy and allowability of transactions and determinations, e.g., at the time reports on Federal awards are prepared.
H.
PERIOD OF AVAILABILITY OF FEDERAL FUNDS
Control
Objectives
To provide
reasonable assurance that Federal funds are used only during the
authorized period of availability.
Control
Environment
- Management understands and is committed to complying with period of availability requirements.
- Entity's operations are such that it is unlikely there will be Federal funds remaining at the end of the period of availability.
Risk
Assessment
- The budgetary process considers period of availability of Federal funds as to both obligation and disbursement.
- Identification and communication of period of availability cut-off requirements as to both obligation and disbursement.
Control
Activities
- Accounting system prevents obligation or expenditure of Federal funds outside of the period of availability.
- Review of disbursements by person knowledgeable of period of availability of funds.
- End of grant period cut-offs are met by such mechanisms as advising program managers of impending cut-off dates and review of expenditures just before and after cut-off date.
- Cancellation of unliquidated commitments at the end of the period of availability.
Information
and Communication
- Timely communication of period of availability requirements and expenditure deadlines to individuals responsible for program expenditure, including automated notifications of pending deadlines.
- Periodic reporting of unliquidated balances to appropriate levels of management and follow up.
Monitoring
- Periodic review of expenditures before and after cut-off date to ensure compliance with period of availability requirements.
- Review by management of reports showing budget and actual for period.
I.
PROCUREMENT AND SUSPENSION DEBARMENT
Control
Objectives
To provide
reasonable assurance that procurement of goods and services are
made in compliance with the provisions of the A-102 Common Rule
or OMB Circular A-110, as applicable, and that no subaward, contract,
or agreement for purchases of goods or services is made with any
debarred or suspended party.
Control
Environment
- Existence and implementation of codes of conduct and other policies regarding acceptable practice, conflicts-of-interest, or expected standards of ethical and moral behavior for making procurements.
- Procurement manual that incorporated Federal requirements.
- Absence of pressure to meet unrealistic procurement performance targets.
- Management's prohibition against intervention or overriding established procurement controls.
- Board or governing body oversight required for high dollar, lengthy, or other sensitive procurement contracts.
- Adequate knowledge and experience of key procurement managers in light of responsibilities for procurements for Federal awards.
- Clear assignment of authority for issuing purchasing orders and contracting for goods and services.
Risk
Assessment
- Procedures to identify risks arising from vendor inadequacy, e.g., quality of goods and services, delivery schedules, warranty assurances, user support.
- Procedures established to identify risks arising from conflicts-of-interest, e.g., kickbacks, related party transactions, bribery.
- Management understands the requirements for procurement and suspension and debarment, and, given the organization's staff, departments, and processes, has identified where noncompliance could likely occur.
- Conflict-of-interest statements are maintained for individuals with responsibility for procurement of goods or services.
Control
Activities
- Job descriptions or other means of defining tasks that comprise particular procurement jobs.
- Contractor's performance with the terms, conditions, and specifications of the contract is monitored and documented.
- Establish segregation of duties between employees responsible for contracting and accounts payable and cash disbursing.
- Procurement actions appropriately documented in the procurement files.
- Supervisors review procurement and contracting decisions for compliance with Federal procurement policies.
- Procedures established to verify that vendors providing goods and services under the award have not been suspended or debarred by the Federal Government.
- Official written policy for procurement and contracts establishing:
- Contract files that document significant procurement history.
- Methods of procurement, authorized including selection of contract type, contractor selection or rejection, and the basis of contract price.
- Verification that procurements provide full and open competition.
- Requirements for cost or price analysis, including for contract modifications.
- Obtaining and reacting to suspension and debarment certifications.
- Other applicable requirements for procurements under Federal awards are followed.
- Official written policy for suspension and debarments that:
- Contains or references the Federal requirements;
- Prohibits the award of a subaward, covered contract, or any other covered agreement for program administration, goods, services, or any other program purpose with any suspended or debarred party; and
- Requires
staff to obtain certifications from entities receiving subawards
(contract and subcontract) over $100,000, certifying that the organization
and its principals are not suspended or debarred.
Information
and Communication
- A system in place to assure that procurement documentation is retained for the time period required by the A-102 Common Rule, OMB Circular A-110, award agreements, contracts, and program regulations. Documentation includes:
- The basis for contractor selection;
- Justification for lack of competition when competitive bids or offers are not obtained; and
- The basis for award cost or price.
- Employees' procurement duties and control responsibilities are effectively communicated.
- Channels of communication are provided for people to report suspected procurement and contracting improprieties.
Monitoring
- Management periodically conducts independent reviews of procurements and contracting activities to determine whether policies and procedures are being followed as intended.
J.
PROGRAM INCOME
Control
Objectives
To provide
reasonable assurance that program income is correctly earned, recorded,
and used in accordance with the program requirements.
Control
Environment
- Management recognizes its responsibilities for program income.
- Management's prohibition against intervention or overriding controls over program income.
- Realistic performance targets for the generation of program income.
Risk
Assessment
- Mechanisms in place to identify the risk of unrecorded or mis-coded program income.
- Variances between expected and actual income analyzed.
Control
Activities
- Pricing and collection policies procedures clearly communicated to personnel responsible for program income.
- Mechanism in place to ensure that program income is properly recorded as earned and deposited in the bank as collected.
- Policies and procedures provide for correct use of program income in accordance with Federal program requirements.
Information
and Communication
- Information systems identify program income collections and usage.
- A channel of communication for people to report suspected improprieties in the collection or use of program income.
Monitoring
- Internal audit of program income.
- Management compares program income to budget and investigates significant differences.
K.
REAL PROPERTY ACQUISITION ANDRELOCATION ASSISTANCE
Control
Objectives
To provide
reasonable assurance of compliance with the real property acquisition,
appraisal, negotiation, and relocation requirements.
Control
Environment
- Management committed to ensuring compliance with the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (URA).
- Written policies exist for handling relocation assistance and real property acquisition.
Risk
Assessment
- Identification of risk that relocation will not be conducted in accordance with the URA, e.g., improper payments will be made to individuals or businesses that relocate.
Control
Activities
- Employees handling relocation assistance and real property acquisition have been trained in the requirements of the URA.
- Review of expenditures pertaining to real property acquisition and relocation assistance by employees knowledgeable in the URA.
Information
and Communication
- A system is in place to adequately document relocation assistance and real property acquisition.
Monitoring
- Management monitors relocation assistance and real property acquisition for compliance with the URA.
L.
REPORTING
Control
Objectives
To provide
reasonable assurance that reports of Federal awards submitted to
the Federal awarding agency or pass-through entity include all activity
of the reporting period, are supported by underlying accounting
or performance records, and are fairly presented in accordance with
program requirements.
Control
Environment
- Persons preparing, reviewing, and approving the reports possess the required knowledge, skills, and abilities.
- Management's attitude toward reporting promotes accurate and fair presentation.
- Appropriate assignment of responsibility and delegation of authority for reporting decisions.
Risk
Management
- Mechanisms exist to identify risks of faulty reporting caused by such items as lack of current knowledge of, inconsistent application of, or carelessness or disregard for standards and reporting requirements of Federal awards.
- Identification of underlying source data or analysis for performance or special reporting that may not be reliable.
Control
Activities
- Written policy exists that establishes responsibility and provides the procedures for periodic monitoring, verification, and reporting of program progress and accomplishments.
- Tracking system which reminds staff when reports are due.
- The general ledger or other reliable records are the basis for the reports.
- Supervisory review of reports performed to assure accuracy and completeness of data and information included in the reports.
- The required accounting method is used (e.g., cash or accrual).
Information
and Communication
- An accounting or information system that provides for the reliable processing of financial and performance information for Federal awards.
Monitoring
- Communications from external parties corroborate information included in the reports for Federal awards.
- Periodic comparison of reports to supporting records.
M.
SUBRECIPIENT MONITORING
Control
Objectives
To provide
reasonable assurance that Federal award information and compliance
requirements are identified to subrecipients, subrecipient activities
are monitored, subrecipient audit findings are resolved, and the
impact of any subrecipient noncompliance on the pass-through entity
is evaluated. Also, the pass-through entity should perform procedures
to provide reasonable assurance that the subrecipient obtained required
audits and takes appropriate corrective action on audit findings.
Control
Environment
- Establishment of "tone at the top" of management's commitment to monitoring subrecipients.
- Management's intolerance of overriding established procedures to monitor subrecipients.
- Entity's organizational structure and its ability to provide the necessary information flow to monitor subrecipients is adequate.
- Sufficient resources dedicated to subrecipient monitoring.
- Knowledge, skills, and abilities needed to accomplish subrecipient monitoring tasks defined.
- Individuals performing subrecipient monitoring possess knowledge skills and abilities required.
- Subrecipients demonstrate that:
- They are willing and able to comply with the requirements of the award and
- They have accounting systems, including the use of applicable cost principles, and internal control systems adequate to administer the award.
- Appropriate sanctions taken for subrecipient noncompliance.
Risk
Assessment
- Key managers understand the subrecipient's environment, systems, and controls sufficient to identify the level and methods of monitoring required.
- Mechanisms exist to identify risks arising from external sources affecting subrecipients, such as risks related to:
- Economic conditions.
- Political conditions.
- Regulatory changes.
- Unreliable information.
- Mechanisms exist to identify and react to changes in subrecipients, such as:
- Financial problems that could lead to diversion of grant funds.
- Loss of essential personnel.
- Loss of license or accreditation to operate program.
- Rapid growth.
- New activities, products, or services.
- Organizational
restructuring.
Control
Activities
- Identify to subrecipients the Federal award information (e.g., CFDA title and number, award name, name of Federal agency, amount of award) and applicable compliance requirements.
- Include in agreements with subrecipients the requirement to comply with the compliance requirements applicable to the Federal program including the audit requirements of OMB Circular A-133.
- Subrecipient's compliance with audit requirements monitored using techniques such as the following:
- Determining by inquiry and discussions whether subrecipient met thresholds requiring an audit under OMB Circular A-133.
- If an audit is required, assuring that the subrecipient submits the report, report package or the documents required by OMB circulars and/or recipient's requirements.
- If a subrecipient was required to obtain an audit in accordance with OMB Circular A-133 but did not do so, following up with the subrecipient until the audit is completed. Taking appropriate actions such as withholding further funding until the subrecipient meets the audit requirements.
- Subrecipient's compliance with Federal program requirements monitored using such techniques as the following:
- Issuing timely management decisions for audit and monitoring findings to inform the subrecipient whether the corrective action planned is acceptable.
- Maintain a system to track and following-up on reported deficiencies related to programs funded by the recipient and ensure that timely corrective action is taken.
- Regular contacts with subecipients and appropriate inquiries concerning the Federal program
- Reviewing subrecipient reports and following-up on areas of concern.
- Monitoring subrecipient budgets.
- Performing site visits to subrecipient to review financial and programmatic records and observe operations.
- Offering subrecipients technical assistance where needed.
- Official written policies and procedures exist establishing:
- Communication of Federal award requirements to subrecipients.
- Responsibilities for monitoring subrecipients.
- Process and procedures for monitoring.
- Methodology for resolving findings of subrecipient noncompliance or weaknesses in internal control.
- Requirements
for and processing of subrecipient audits, including appropriate
adjustment of pass-through entity's accounts.
Information
and Communication
- Standard award documents used by the non-Federal entity contain:
- A listing of Federal requirements that the subrecipient must follow. Items can be specifically listed in the award document, attached as an exhibit to the document, or incorporated by reference to specific criteria.
- The description and program number for each program as stated in the Catalog of Federal Domestic Assistance (CFDA). If the program funds include pass-through funds from another recipient, the pass-through program information should also be identified.
- A statement signed by an official of the subrecipient, stating that the subrecipient was informed of, understands, and agrees to comply with the applicable compliance requirements.
- A recordkeeping system is in place to assure that documentation is retained for the time period required by the recipient.
- Procedures are in place to provide channels for subrecipients to communicate concerns to the pass-through entity.
Monitoring
- Establish a tracking system to assure timely submission of required reporting, such as: financial reports, performance reports, audit reports, on-site monitoring reviews of subrecipients, and timely resolution of audit findings.
- Supervisory reviews performed to determine the adequacy of subrecipient monitoring.
PART 7 - GUIDANCE FOR AUDITING PROGRAMS
NOT
INCLUDED IN THIS COMPLIANCE SUPPLEMENT
Purpose
- OMB Circular A-133 (§__.500(d)(3)) states that for those
Federal programs not covered in the compliance supplement, the auditor
should use the types of compliance requirements (see 14 types of
compliance requirements described in Part 3) contained in the compliance
supplement as guidance for identifying the types of compliance requirements
to test, and determine the requirements governing the Federal program
by reviewing the provisions of contract and grant agreements and
the laws and regulations referred in such contract and grant agreements.
The purpose
of this Part is to provide the auditor with guidance on how to identify
the applicable compliance requirements for programs not included
in this Supplement for single audits and for program-specific audits
when a program-specific audit guide is not available. This Supplement
only includes a few of the largest and/or riskiest Federal programs.
However, there are more than 600 assistance programs currently funded
by the Federal Government. Therefore, it is likely that the auditor
will encounter programs that the auditor is required to test as
major programs which are not included in this Compliance Supplement.
For this reason, the following guidance is provided for the auditor
to identify those compliance requirements that should be tested.
Organization
of this Supplement - First, a review of how this Supplement
is organized will be helpful, since the auditor must consider several
parts of the Supplement in identifying compliance requirements to
be tested. This Supplement is comprised of the following parts:
Part 1 - Background,
Purpose, and Applicability
Part 2 - Matrix of Compliance Requirements
Part 3 - Compliance Requirements
Part 4 - Agency Program Requirements
Part 5 - Clusters of Programs
Part 6 - Internal Control
Part 7 - Guidance for Auditing Programs Not Included in This Compliance
Supplement
In determining
the compliance requirements to test for programs not included in
this Supplement, the auditor shall to refer to Parts 3 and 5. Part
3 identifies and describes the 14 types of compliance requirements
where noncompliance may have a direct and material effect on a Federal
program and provides audit objectives and suggested audit procedures.
The 14 types of compliance requirements are:
A. Activities
Allowed or Unallowed
B. Allowable Costs/Cost Principles
C. Cash Management
D. Davis-Bacon Act
E. Eligibility
F. Equipment and Real Property Management
G. Matching, Level of Effort, Earmarking
H. Period of Availability of Federal Funds
I. Procurement and Suspension and Debarment
J. Program Income
K. Real Property Acquisition and Relocation Assistance
L. Reporting
M. Subrecipient Monitoring
N. Special Tests and Provisions
Part 5 enumerates
those programs that are considered to be clusters of programs as
defined by OMB Circular A-133 (§__.105). A cluster of programs
means Federal programs with different Catalog of Federal Domestic
Assistance (CFDA) numbers that are defined as a cluster of programs
because they are closely related programs and share compliance requirements.
Part 5 identifies research and development (R&D) and Student
Financial Aid (SFA) as clusters, as well as certain other clusters.
Also, Part 5 identifies other clusters of programs that are not
yet included in this Supplement.
For programs
not included in this Supplement, the auditor must determine the
applicable compliance requirements. While a Federal program may
have many compliance requirements, normally there are only a few
key compliance requirements that could have a direct and material
effect on the program. Since the single audit process is not intended
to cover every compliance requirement, this Supplement and the auditor's
focus should be on the 14 types of compliance requirements enumerated
in Part 3. The following are suggested procedures to assist the
auditor in making this determination.
Although the
focus of this Supplement is on compliance requirements that could
have a direct and material effect on a major program, auditors also
have responsibility under Generally Accepted Government Auditing
Standards (GAGAS) for other requirements when specific information
comes to the auditors' attention that provides evidence concerning
the existence of possible noncompliance that could have a material
indirect effect on a major program.
Steps
for Identifying Compliance Requirements
Determining
what compliance requirements to test involves several steps. The
auditor should address the following questions:
1. What are the program objectives, program procedures, and compliance requirements for a specific program?
2. Which of the compliance requirements could have a direct and material effect on the program?
3. Which of the compliance requirements are susceptible to testing by the auditor?
4. Into which of the 14 types of compliance requirements does each compliance requirement fall?
5. For Special
Tests and Provisions, what are the applicable audit objectives and
audit procedures?
1. What
are the program objectives, program procedures, and compliance requirements
for a specific program?
The first step
is to gain an understanding of how the program works (e.g., the
program objectives and procedures) and determine what laws, regulations,
and provisions of contract or grant agreements (compliance requirements)
apply to the program. The auditor should consider the following
steps:
a. Discuss
the program with the non-Federal entity and, if necessary, the Federal
agency or, in the case of a subrecipient, the pass-through entity.
b. Review the
contract and grant agreements and referenced laws and regulations
applicable to the program, including any amendments or closeout
agreements. The documents or agreements may identify the name and
telephone number of a Federal contact person or, if a subaward,
the contact person for the pass-through entity whom the auditor
may wish to contact for additional information.
Note:
The auditor should be aware that a particular non-Federal entity
or Federal award may be subject to provisions that are unique to
that entity or award. For example, previous noncompliance by a non-Federal
entity may result in additional, requirements to which the non-Federal
entity must adhere in order to continue its participation in the
Federal program. Such provisions would generally not be based on
laws and regulations applicable to all awards under the Federal
program. Reasonable procedures to identify such compliance requirements
would be inquiry of non-Federal entity management and review of
the contract and grant agreements pertaining to the program. Any
such requirements identified which could have a direct and material
effect on a major program should be included in the audit.
c. Review the
Catalog of Federal Domestic Assistance (CFDA). The CFDA
provides summary information about each program and includes the
name and telephone number of a Federal contact person. A searchable
copy of the CFDA is available through the Internet on the GSA Home
Page (http://www.gsa.gov/fdac).
d. For audits
of Public and Indian Housing Authorities and certain Department
of Education Programs, the auditor should refer to the separate
supplements issued by these agencies as described in Part 1, Background,
Purpose, and Applicability.
e. If there
is a program-specific audit guide or other audit guidance issued
by the Federal agency's Office of Inspector General (OIG), the auditor
may wish to consider this guidance in identifying the program objectives,
program procedures, and compliance requirements. The availability
of program audit guides can be determined by consulting the President's
Council on Integrity & Efficiency (PCIE) publication, Revised
Program Audit Guide Listing (available from the Government
Printing Office) or by contacting the appropriate Regional OIG.
A copy of this document is available on the Internet at IGNET, PCIE
Single Audit Guidance (http://www.sbaonline.sba.gov/ignet/single/pcie.html).
f. Determine
whether the program was included in previously issued compliance
supplements (i.e., "Audits of States and Local Governments," issued
in 1990, and "Audits of Institutions of Higher Education and Other
Non-Profit Organizations," issued in 1991. ). If included, consider
whether the prior guidance is helpful and has continuing relevance.
2. Which
of the compliance requirements could have a direct and material
effect on the program?
Generally
Accepted Government Auditing Standards require that the auditor
plan the audit to provide reasonable assurance that the financial
statements are free of material misstatement resulting from violations
of laws and regulations that have a direct and material effect on
the determination of financial statement amounts. OMB Circular A-133
requires the auditor to perform procedures to determine whether
the non-Federal entity has complied with laws, regulations, and
the provisions of contract or grant agreements that could have a
direct and material effect on each major program. Therefore, the
auditor must determine which compliance requirements could have
a direct and material effect on each major program.
In assessing
materiality, the auditor should consider that materiality is based
on qualitative as well as quantitative aspects. Also, the auditor
should consider whether to set materiality at lower levels in audits
of Federal programs than private sector audits of financial statements
due to the visibility and sensitivity of such programs. Examples
of characteristics indicative of compliance requirements that could
have a direct and material effect on a major program include:
Noncompliance could likely result in questioned costs.
The requirement affects a large part of the Federal program (e.g., a material amount of program dollars).
Noncompliance
could cause the Federal agency, or pass-through entity in the case
of a subrecipient, to take action, such as seeking reimbursement
of all or a part of the award and suspending the recipient's or
subrecipient's participation in the program.
3. Which
of the compliance requirements are susceptible to testing by the
auditor?
The auditor
is only expected to test compliance for those requirements which
are susceptible to testing by the auditor (i.e., the requirements
can be evaluated against objective criteria, and the auditor can
reasonably be expected to have sufficient basis for recognizing
noncompliance). Further, the auditor would not be expected to test
for compliance with requirements that the Federal agency should
have the ability to verify in the normal course of administering
the program (e.g., if the requirement is that the non-Federal entity
must file a report by a certain date, the Federal agency should
know whether it received the report on time). Characteristics of
compliance requirements that auditors are typically expected to
test include those:
Which are practical to test.
With objective criteria available for the auditor to assess compliance.
Where an audit objective can be written that supports an opinion on compliance.
When testing adds value, for example:
- It is likely that the auditor could document the noncompliance in a manner that: (1) permits the Federal or pass-through entity to take action, or (2) gives the Federal or pass-through entity an early warning to initiate a monitoring visit or other contact with the non-Federal entity.
- The Federal
or pass-through entity does not otherwise have information that
verifies compliance.
4. Into
which of the 14 types of compliance requirements does each compliance
requirement fall?
Note:
In performing this step, the auditor may find it helpful to prepare
a matrix similar to the matrix included in Part 2 for programs included
in this Supplement.
The auditor
shall use the 14 types of compliance requirements listed for identifying
which requirements applicable to the program are subject to testing.
Not all compliance requirements apply to all programs. Conversely,
certain types almost always apply.
A. Activities
Allowed or Unallowed almost always applies to Federal programs.
The auditor should look at the program requirements and Federal
award documents for what constitutes allowable or unallowable activities.
B. Allowable
Costs/Cost Principles almost always applies since most
Federal programs have charges for goods or services. However, if
a program only involves benefits to eligible recipients, with no
administrative costs, purchases of goods or services (including
salaries and overhead), or allocated costs, then allowable costs
may not apply.
C. Cash
Management almost always applies to Federal programs. An
exception would be a Federal award that operates on a cost reimbursement
basis only with no cash being advanced.
D. Davis-Bacon
Act only applies as required by the Act itself, the Department
of Labor's (DOL) governmentwide implementation of the Davis-Bacon
Act, or by Federal program legislation, for construction contracts
in excess of $2000 financed by Federal funds. The auditor should
review award documents to determine whether the Davis-Bacon Act
applies.
E. Eligibility
applies to most Federal programs which provide benefits to individuals,
groups of individuals, or make subawards. For programs with eligibility
requirements, the auditor should review the program laws, regulations,
and provisions of contract or grant agreements to determine the
specific eligibility requirements. Eligibility involves not only
individuals but also possibly groups of individuals, geographical
areas, or subrecipients. Additionally, the auditor should consider
whether continuing, as well as initial, eligibility requirements
apply. Furthermore, eligibility involves both who is eligible and
the amount of benefits provided to the eligible.
F. Equipment
and Real Property Management requirements applies to Federal
programs which purchase equipment or real property.
G. Matching,
Level of Effort, Earmarking is not universal, and, if applicable,
would be specific to the Federal program and often the non-Federal
entity. Therefore, the auditor will have to review the laws, regulations,
contract or grant agreements applicable to the program to determine
specific requirements for matching, level of effort, and/or earmarking.
H. Period
of Availability of Federal Funds almost always applies
to Federal programs. The contract or grant agreement applicable
to the program often indicates the period during which the funds
are available for obligation under the program. The auditor should
also look for program requirements regarding carry-over of unused
funds to future funding periods, and whether pre-award costs are
allowable, to what extent, and under what circumstances.
I. Procurement
and Suspension and Debarment applies any time the entity
procures goods or services. Suspension and debarment applies to
both procurements and subawards.
J. Program
Income applies to any program that generates program income
(primarily related to the disposition of the income). Program regulations
or the contract or grant agreements applicable to the program may
specify additional criteria.
K. Real
Property Acquisition and Relocation Assistance only applies
as required by the Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (URA) for payments to persons displaced
from their homes, businesses, or farms by federally-assisted programs.
While this requirement only applies to a few programs, when it does
apply, it is generally a significant aspect of the program. For
example, the U.S. Department of Transportation (DOT) funds many
programs to construct highways in which real property acquisition
and relocation assistance is a significant part of the program activities.
The U.S. Department of Housing and Urban Development has the most
transactions subject to the URA and the DOT has the most Federal
dollars affected.
L. Reporting
almost always applies to Federal programs. However, often the Federal
agency or pass-through entity, with OMB Paperwork Reduction Act
approval, has developed its own forms for financial reporting in
addition to or in lieu of the standard Federal financial reports.
The auditor should determine whether the standard reports are used,
and if not, what forms are used to report the same or similar information.
The auditor should be aware that reporting may include electronic
submissions for which there may be no physical document.
For performance
reporting and special reporting, if there is a program in this Supplement
funded by the same Federal agency that requires the same performance
or special reporting required by the program for which the auditor
is seeking to identify compliance requirements, and this Supplement
requires testing of those data, then the auditor should use such
guidance in identifying compliance requirements to test. Otherwise,
the auditor is only required to test financial reporting.
M. Subrecipient
Monitoring applies when Federal awards are passed through
to a subrecipient. If the entity is not a pass-through entity, this
requirement does not apply.
N. Special
Tests and Provisions includes those compliance requirements
that do not fit the description of the types of compliance requirements
discussed above. These will generally be the most difficult type
of compliance requirement to identify because, by definition, they
are unique to each program. In addition to reviewing the program's
contract and grant agreements and referenced laws and regulations,
the auditor should also make inquires of the non-Federal entity
to help identify and understand Special Tests and Provisions.
For each of
the types of compliance requirements listed above, except for Special
Tests and Provisions, the auditor shall consider the compliance
requirements and related audit objectives in Part 3. In making a
determination not to test a compliance requirement, the auditor
must conclude that the requirement either does not apply to the
particular non-Federal entity or that noncompliance with the requirement
could not have a material effect on a major program (e.g., the auditor
would not be expected to test Procurement if the non-Federal entity
charges only small amounts of purchases to a major program). The
suggested audit procedures in Part 3 are provided to assist auditors
in planning and performing tests of non-Federal entity compliance
with the requirements of Federal programs. Auditor judgment will
be necessary to determine whether the suggested audit procedures
are sufficient to achieve the stated audit objective and whether
additional or alternative audit procedures are needed.
Also, because
of the diversity of systems in place among non-Federal entities,
Part 3 does not include suggested audit procedures to test internal
control. The auditor must determine appropriate procedures to test
internal control on a case by case basis considering factors such
as the non-Federal entity's internal control, the compliance requirements,
the audit objectives for compliance, the auditor's assessment of
control risk, and the audit requirement to test internal control
as prescribed in OMB Circular A-133.
5. For
Special Tests and Provisions, what are the applicable audit objectives
and audit procedures?
For each of the types of compliance requirements discussed above, Part 3 includes generic audit objectives and suggested audit procedures, except for Special Tests and Provisions. As noted above, Special Tests and Provisions are sufficiently unique to every program that generic audit objectives and suggested audit procedures are not practicable. Therefore, the auditor will have to develop audit objectives and audit procedures for each identified Special Test and Provision using the guidance described in Part 3 under Special Tests and Provisions.
Appendix I
Federal
Programs Excluded from the A-102 Common Rule
Note: §___
references are to the "Uniform Administrative Requirements for Grants
and Cooperative Agreements to State and Local Governments" (A-102
Common Rule).
Background
Certain grant
programs (block grant programs enacted under the Omnibus Budget
Reconciliation Act of 1981, one special program, open-ended entitlement
programs, and other specified programs) are exempt from the provisions
of the A-102 Common Rule. These programs are listed below. State
administrative requirements for financial management and control
apply to the block grant programs (including their subrecipients)
and Federal agency regulations apply to the programs which are not
block grants.
Block grant
programs and the one special program are also exempt from the provisions
of OMB cost principles circulars. State cost principles requirements
apply to these programs (including their subrecipients). The open-ended
entitlement programs and other specified programs are subject to
the provisions of the OMB cost principles circulars.
The administrative
requirements for the open-ended entitlement programs contained in
Federal agency regulations may not be identical those in the A-102
Common Rule. Rather than identify for testing each instance where
the requirements differ, this Compliance Supplement only addresses
differences that warrant special attention. These differences are
in the areas of real property and equipment, procurement, and financial
reporting. With respect to all other administrative requirements,
the auditor should be guided by the provisions of the A-102 Common
Rule (see Part 3) or Circular A-110 and agency program requirements
(see Part 4).
USDA's program
rules for the Food Stamp Program are in 7 CFR 271-285. HHS's program
rules for Medicaid, AFDC, Child Support Enforcement, and Foster
Care and Adoption Assistance programs are in 42 CFR 430-498, 45
CFR 201-257, 45 CFR 301-307, and 45 CFR 1355-1357, respectively.
45 CFR 95, "General Administration - Grant Programs (Public Assistance
and Medical Assistance)," applies to all of these HHS programs.
Differences
pertaining to real property and equipment
USDA's program
rules for real property and equipment (property) acquired under
the Food Stamp program are in 7 CFR 277.13, Property. These rules
provide for reimbursing the Federal Government for its share of
the fair market value of property with an original cost of $1000
or more when the property is no longer needed.
Differences
pertaining to procurement
USDA's program
rules for procurement associated with the Food Stamp program are
in 7 CFR 277.14, Procurement standards. These rules require pre-award
review and approval for all noncompetitive procurements over $10,000,
all one bid only procurements over $10,000, and all procurements
over $10,000 which specify a brand name. The rules also limit small
purchase procedures to purchases under $10,000.
Subpart F of
45 CFR 95, ADP equipment and services, applies to all of these programs.
Subpart F requires prior Federal written approval for the acquisition
of ADP equipment and services of $5 million or more when the Federal
Government funds at regular matching rates and prior written approval
for all ADP acquisitions when the Federal Government funds at enhanced
matching rates. In addition, the rules require prior Federal written
approval for sole source contracts between $1 million and $5 million
when the Federal Government funds at regular matching rates and
for certain requests for proposals (RFPs), contracts, and amendments.
Differences
pertaining to financial reporting
USDA's financial
reporting requirements associated with the Food Stamp program are
provided in Part 4 of this Supplement.
HHS's financial
reporting requirements associated with Medicaid are provided in
Part 4 of this Supplement. HHS's reporting requirements for AFDC,
Child Support Enforcement, and Foster Care and Adoption Assistance
have been approved under the Paperwork Reduction Act of 1980, as
amended. The auditor should consult with the auditee to obtain the
most current requirements. The reporting requirements for these
programs will be included in Part 4, upon completion of the agency
program requirements.
Programs
Excluded from the Requirements of the A-102 Common Rule
Since many
of the programs excluded from the A-102 Common Rule were reauthorized
or amended, the following list provides the current CFDA number
and name as listed in the 1996 CFDA. A notation is included with
the program name to indicate when only part of the awards under
a CFDA number are excluded from the A-102 Common Rule or to provide
other clarifications.
§___.4(a)(2)
Block grant programs authorized by:
The Omnibus
Budget Reconciliation Act of 1981 (§___.4(a)(2))
93.569 Community Services Block Grant
93.991 Preventive Health and Health Services Block Grant
93.958 and Block Grants for Community Mental Health Services
93.959 Block Grants for Prevention and Treatment of Substance Abuse
(both of these were formerly part of the ADAMHA block grant)
93.994 Maternal and Child Health Services Block Grant to the States
93.667 Social Services Block Grant
93.568 Low-Income Home Energy Assistance
14.228 Community Development Block Grants/State's Program (State-administered
small cities program)
84.298 Innovative Education Program Strategies (Title VI) (formerly
Chapter 2 of ECIA)
17.250 and Job Training Partnership Act (Title I and II)
17.246 Employment and Training Assistance--Dislocated Workers (Title
III)
(For both of
these programs (17.250 and 17.246), Section 164(a)(3) of the Job
Training Reform Amendments of 1992, and the implementing regulations
at 20 CFR section 627.420, prescribe minimum requirements for procurements
made with Job Training Partnership Act (JTPA) Titles I, II, and
III funds. These requirements largely parallel, and in some cases
exceed, the procurement provisions of the A-102 Common Rule. Also,
CFR section 627.435(b) provides that the determination of whether
a JTPA Title I, II, or III cost is direct or indirect shall be made
in accordance with the OMB cost principles circulars identified
in 29 CFR Part 97, the Department of Labor's adoption of the A-102
Common Rule at 29 CFR section 97.22(b).)
Special program
84.010 Title
I Grants to Local Educational Agencies (formerly Chapter 1 of ECIA)
Open-ended entitlement programs
§___.4(a)(3)
Entitlement grants to carry out the following programs of the Social
Security Act:
93.560 Family
Support Payments to States--Assistance Payments (AFDC Maintenance
Assistance)
93.563 Child Support Enforcement (Title IV-D)
93.658 and Foster Care--Title IV-E
93.659 Adoption Assistance (Title IV-E)
93.778 Medical Assistance Program (Medicaid; Title XIX) (not including
the State Medicaid Fraud Control program)
See Note 1
below for applicable Federal agency regulations.
§___.4(a)(7)
A grant for an experimental, pilot, or demonstration project that
is also supported by a grant listed in paragraph (a)(3) of this
section.
See Note 1
below for applicable Federal agency regulations.
§___.4(a)(6)
Entitlement grants for State Administrative expenses under The Food
Stamp Act of 1977
10.561 State
Administrative Matching Grants for Food Stamp Program
See Note 2
below for applicable Federal agency regulations.
§___.4(a)(4)
Entitlement grants under the following programs of The National
School Lunch Act:
10.555 (i)
National School Lunch Program (General Assistance)
10.550 (ii) Food Distribution (Distributions for entitlement programs
only, that is the Commodities for Child Nutrition Programs)
10.555 (iii) National School Lunch Program (Special Meal Assistance)
10.559 (iv) Summer Food Service Program for Children
10.558 (v) Child and Adult Care Food Program
See Note 2
below for applicable Federal agency regulations.
§___.4(a)(5) Entitlement grants under the following programs of The Child Nutrition Act of 1966:
10.556 (i)
Special Milk Program for Children
10.553 (ii) School Breakfast Program
See Note 2
below for applicable Federal agency regulations.
Other specified programs
§___.4(a)(8)
Grant funds awarded under subsection 412(e) of the Immigration and
Nationality Act (8 U.S.C. 1522(e)) and subsection 501(a) of the
Refugee Education Assistance Act of 1980 (42 U.S.C. 1535) (Pub.
L. 96-422, 94 Stat. 1809), for cash assistance, medical assistance,
and supplemental security income benefits to refugees and entrants
and the administrative costs of providing the assistance and benefits.
93.566 Refugee
and Entrant Assistance--State Administered Programs
See Note 1
below for applicable Federal agency regulations.
§___.4(a)(9)
Grants to local education agencies under 20 U.S.C. 236 through 241-1(a),
and 242 through 244 (portions of the Impact Aid program), except
for 20 U.S.C. 238(d)(2)(c) and 240(f) (Entitlement Increase for
Handicapped Children).
84.041 Impact
Aid (excluding payments for children with disabilities and payments
for construction)
§___.4(a)(10)
Payments under the Veterans Administration's State Home Per Diem
Program.
64.014 Veterans
State Domiciliary Care
64.015 Veterans State Nursing Home Care
64.016 Veterans State Hospital Care
Note
1: Even though the programs listed under paragraphs §___.4(a)(3),
§___.4(a)(7), and §___.4(a)(8) are exempt from the A-102
Common Rule, they are currently covered by HHS's interim final implementation
of OMB Circular A-110 which HHS has titled as "Requirements for
Awards and Subawards to Institutions of Higher Education, Hospitals,
Other Non-Profit Organizations, and Commercial Organizations; and
Certain Grants and Agreements with States, Local Governments and
Indian Tribal Governments" (45 CFR part 74) which has requirements
less restrictive (for institutions of higher education)
but similar to the A-102 Common Rule and "General Administration-Grant
Programs (Public Assistance and Medical Assistance)" (45 CFR part
95).
Note
2: Even though the entitlement programs listed under paragraphs
§___.4(a)(4), §___.4(a)(5), §___.4(a)(6) above are
exempt from the A-102 Common Rule, they are covered by USDA's 7
CFR part 3015 which has requirements more restrictive
but similar to the A-102 Common Rule.
Appendix II
Federal Agency Codification of Certain Government-wide Requirements
| Agency (departments then agencies1 |
A-102
Common Rule (State & local governments |
OMB
Circular A-110 (universities & non-profit organizations)2 |
Nonprocurement Suspension & Debarment3 |
|---|---|---|---|
| Agriculture | 7 CFR 3016 | 7 CFR 3019 | 7 CFR 3017 |
| Commerce | 15 CFR 24 | 15 CFR 26 | |
| Defense | 32 CFR 33 | 32 CFR 25 | |
| Education | 34 CFR 80 | 34 CFR 74 | 34 CFR 85 |
| Energy | 10 CFR 600 | 10 CFR 600 | 10 CFR 1036 |
| Health & Human Services | 45 CFR 92 | 45 CFR 74 | 45 CFR 76 |
| Housing & Urban Development | 24 CFR 85 | 24 CFR 84 | 24 CFR 24 |
| Interior | 43 CFR 12 | 43 CFR 12 | 43 CFR 12 |
| Justice | 28 CFR 66 | 28 CFR 70 | 28 CFR 67 |
| Labor | 29 CFR 97 | 29 CFR 95 | 29 CFR 98 |
| State | 22 CFR 135 | 22 CFR 145 | 22 CFR 137 |
| Transportation | 49 CFR 18 | 49 CFR 19 | 49 CFR 29 |
| Treasury | 31 CFR 19 | ||
| Veterans Affairs | 38 CFR 43 | 38 CFR 44 | |
| ADF | 22 CFR 1508 | ||
| AID | 22 CFR 226 | 22 CFR 208 | |
| CNCS | 45 CFR 2541 | 45 CFR 2543 | 45 CFR 2542 |
| EPA | 40 CFR 31 | 40 CFR 30 | 40 CFR 32 |
| EX-IM | |||
| FEMA | 44 CFR 13 | 44 CFR 17 | |
| FMCS | 29 CFR 1470 | 29 CFR 1471 | |
| GSA | 41 CFR 105-71 | 41 CFR 105-72 | 41 CFR 105-68 |
| IMS | 45 CFR 1183 | 45 CFR 1185 | |
| IAF | 22 CFR 1006 | ||
| NASA | 14 CFR 1273 | 14 CFR 1265 | |
| NARA | 36 CFR 1207 | 36 CFR 1210 | 36 CFR 1209 |
| NEA | 45 CFR 1157 | 45 CFR 1154 | |
| NEH | 45 CFR 1174 | 45 CFR 1169 | |
| NSF | 45 CFR 602 | 45 CFR 620 | |
| ONDCP | 21 CFR 1403 | 21 CFR 1404 | |
| OPM | 5 CFR 970 | ||
| OPIC | |||
| Peace Corps | 22 CFR 310 | ||
| SBA | 13 CFR 143 | 13 CFR 145 | |
| TVA | |||
| USIA | 22 CFR 518 | 22 CFR 513 |
- Abbreviations
used for the following independent agencies: African Development
Foundation (ADF), Agency for International Development (AID),
Corporation for National & Community Service (CNCS), Environmental
Protection Agency (EPA), Export-Import Bank of the United States
(EX-IM), Federal Emergency Management Agency (FEMA), Federal Mediation
& Conciliation Service (FMCS), General Services Administration
(GSA), Institute of Museum Services (IMS), Inter-American Foundation
(IAF), National Aeronautics & Space Administration (NASA), National
Archives & Records Administration (NARA), National Endowment for
the Arts (NEA), National Endowment for the Humanities (NEH), National
Science Foundation (NSF), Office of National Drug Control Policity
(ONDCP), Office of Personnel Management (OPM), Overseas Private
Investment Corporation (OPIC), Small Business Administration (SBA),
Tennessee Valley Authority (TVA), & United States Information
Agency (USIA).
- Additional
agencies are expected to codify OMB Circular A-110 (58 FR 62992);
in the meantime, the Circular's requirements apply to them and
their awards.
- Executive Order 12549 provided that agencies, including those which have yet codified the common rule, are covered by OMB's governmentwide guidelines which are identical to the common rule (see OMB's memorandum to the agencies at 60 FR 33036 and OMB's notice at 53 FR 34474).
A copy of
this table is also located on OMB's Home Page (/WH/EOP/OMB/html/miscdoc/ag-codif.html).
Appendix III
Federal Agency Contacts for A-133 Audits
This appendix lists Federal agency contacts for A-133 information. A separate table is provided for each Federal agency. The left side of the table lists the addresses, phone numbers, and, where available, e-mail and web page addresses, for each contact. The right side lists the geographical area each Federal contact is responsible for overseeing.
| United States Department of Agriculture | |
|---|---|
| Regional
Inspector General U.S. Department of Agriculture 4700 River Road, Suite 5D06 (Mail Unit 151) Riverdale, MD 20737-1237 Phone: Voice (301) 734-8763 FAX (301) 734-7610 |
For audits in Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia, Puerto Rico, and the Virgin Islands |
| Regional
Inspector General U.S. Department of Agriculture 401 W. Peachtree St. NW Atlanta, GA 30365-3520 Phone: Voice (404) 730-3210 FAX (404) 730-3221 |
For audits in Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, and Tennessee |
| Regional
Inspector General U.S. Department of Agriculture 111 N. Canal St., Suite 1130 Chicago, IL 60606 Phone: Voice (312) 353-1352 FAX (312) 353-3017 |
For audits in Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin |
| Regional
Inspector General U.S. Department of Agriculture 101 South Main, Room 324 Temple, TX 76501 Phone: Voice (817) 298-1430 FAX (817) 298-1373 |
For audits in Arkansas, Louisiana, New Mexico, Oklahoma, and Texas |
| Regional
Inspector General U.S. Department of Agriculture P.O. Box 293 Kansas City, MO 64141 Phone: Voice (816) 926-7667 FAX (816) 926-3861 |
For audits in Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, South Dakota, Utah, and Wyoming |
| Regional
Inspector General U.S. Department of Agriculture 600 Harrison Street, Suite 225 San Francisco, CA 94107 Phone: Voice (415) 744-2851 FAX (415) 744-2871 |
For audits in Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Washington, Trust Territories of the Pacific, and Territory of Guam |
| National
Single Auditor Coordinator U.S. Department of Agriculture Office of Inspector General Jamie L. Whitten Building - Room 450E 1400 Independence Ave. SW Washington, DC 20250 Phone: Voice (202) 720-3163 FAX (202) 690-4110 |
NATIONAL OFFICE CONTACT |
| Department of Commerce | |
| Office
of Inspector General U.S. Department of Commerce Atlanta Regional Office of Audits Suite 2342 401 W. Peachtree St. NW Atlanta, GA 30308 Phone: Voice (404) 730-2780 FAX (404) 730-2788 |
All audits |
| Department of Defense | |
| Office
of the Assistant Inspector General for Audit Policy and Oversight Office of Inspector General U.S. Department of Defense 400 Army Navy Drive, Room 700 Arlington, VA 22202-2884 Phone: Voice (703) 604-8705 FAX (703) 604-9808 |
All audits |
| Department of Education | |
| Non-Federal
Audit Team Office of Inspector General U.S. Department of Education 3535 Market St., Room 16280 Philadelphia, PA 19104 Phone: Voice (215) 596-0262 FAX (215) 596-0124 |
For audits in Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia, Puerto Rico, and the Virgin Islands |
| Non-Federal
Audit Team Office of Inspector General U.S. Department of Education 1200 Main Tower, Room 2130 Dallas, TX 75202 Phone: Voice (214) 767-3826 FAX (214) 767-2024 |
For audits in Alabama, Arizona, Arkansas, California, Florida, Georgia, Hawaii, Kentucky, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Guam |
| Non-Federal
Audit Team Office of Inspector General U.S. Department of Education 10220 N. Executive Hills Blvd., 2nd Floor Kansas City, MO 64153 Phone: Voice (816) 880-4024 FAX (816) 891-0815 |
For audits in Alaska, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, North Dakota, Ohio, Oregon, South Dakota, Utah, Washington, Wisconsin, and Wyoming |
| Non-Federal
Audit Team Office of Inspector General U.S. Department of Education 600 Independence Ave. SW, Room 4200 Washington, DC 20202-1510 Phone: Voice (202) 205-8200 FAX (202) 205-8238 Web Page: http://home.gvi.net/~edoig |
NATIONAL OFFICE CONTACT |
| Department of Energy | |
| U.S.
Department of Energy Office of Inspector General ATTN: Single Audit Coordinator 1000 Independence Ave. SW IG-33, Rm 5A-193 Washington, DC 20585 Phone: Voice (202) 586-1951 FAX (202) 586-0099 E-Mail: single.audit@hq.doe.gov Web Page: http://www.hr.doe.gov/ig/ |
All audits |
| Department of Health and Human Services | |
| National
Audit Managers - Non-Federal Audits HHS OIG National External Audit Resources Lucas Place 323 West 8th Street, Room 514 Kansas City, MO 64105 Phone: Voice (816) 374-6714 (800) 732-0679 FAX (816) 374-6727 Web Page: http://www.os.dhhs.gov |
All audits |
| Department of Housing and Urban Development | |
| U.S.
Department of HUD Office of Inspector General Financial Audits Division,br>Single Audit Coordinator 451 7th Street, SW Washington, DC 20410 Phone: Voice (202) 708-0383 FAX (202) 708-1783 Web Page: http://www.hud/gov/oig/oigindex.html |
All audits |
| Department of the Interior | |
| U.S.
Department of Interior Office of Inspector General 1849 C Street, NW, NS 5341 Washington, DC 20240 Phone: Voice (202) 208-5384 FAX (202) 208-2803 |
All audits |
| Department of Justice | U.S.
Department of Justice Washington Regional Audit Office 1425 New York Ave, NW Suite 6001 Washington, DC 20005 (Mailing Address: P.O. Box 34190 Washington, DC 20043-4190) Phone: Voice (202) 616-4688 FAX (202) 616-4581 |
District of Columbia, Maryland, Virginia, and West Virginia |
| U.S.
Department of Justice Philadephia Regional Audit Office 701 Market Street, Suite 201 Philadelphia, PA 19106 Phone: Voice (215) 580-2111 FAX (215) 597-1348 |
For audits in Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont |
| U.S.
Department of Justice Atlanta Regional Audit Office 101 Marietta Street Suite 2322 Atlanta, GA 30323-2401 Phone: Voice (404) 331-5928 FAX (404) 331-5046 |
For audits in Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, Puerto Rico, and the Virgin Islands |
| U.S.
Department of Justice Chicago Regional Audit Office CitiCorp Center, 500 West Madison, Suite 3510 Chicago, IL 60661 Phone: Voice (312) 353-1203 FAX (312) 886-0513 |
For audits in Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, Ohio, and Wisconsin |
| U.S.
Department of Justice Dallas Regional Audit Office 207 South Houston Street Box 4 (Room 334) Dallas, TX 75202 Phone: Voice (214) 655-5000 FAX (214) 655-5025 |
For audits in Arkansas, Colorado, Louisiana, Montana, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Utah, and Wyoming |
| U.S.
Department of Justice San Francisco Regional Audit Office 1200 Bayhill Drive, Suite 201 San Bruno, CA 94066 Phone: Voice (415) 876-9220 FAX (415) 876-0902 |
For audits in Alaska, American Samoa, Arizona, California, Guam, Hawaii, Idaho, Nevada, Oregon, Washington, Trust Territories of the Pacific Islands, and the Commonwealth of Northern Mariana Islands |
| U.S.
Department of Justice Assistant Inspector General for Audit 1425 New York Avenue, NW Suite 5001 Washington, DC 20005 (Mailing Address: P.O. Box 34190 Washington, DC 20043-4190) Phone: Voice (202) 616-4633 FAX (202) 616-1697 |
NATIONAL OFFICE CONTACT |
| Department of Labor | |
| National
Single Audit Coordinator Division of Audit Operations U.S. Department of Labor 200 Constitution Ave. NW, Room S-5022 Washington, DC 20210 Phone: Voice (202) 219-8385 FAX (202) 219-4453 |
NATIONAL OFFICE CONTACT |
| Department of State | |
| U.S.
Department of State Office of Inspector General OIG/AUD/CG 1700 North Moore Street Arlington, VA 22209 Phone: Voice (703) 284-2600 FAX (703) 284-2622 |
All audits |
| Department of Transportation | |
| U.S.
Department of Transportation Office of Inspector General Atlanta Federal Center Suite 17T60 Atlanta, GA 30303 Phone: Voice (404) 562-3770 FAX (404) 562-3854 |
All audits |
| Department of the Treasury | |
| Department
of the Treasury Office of Inspector General Director of Field Audit Operations 740 15th Street NW, Suite 600 Washington, DC 20008 Phone: Voice (202) 927-5400 FAX (202) 927-5379 |
All audits |
| Department of Veterans Affairs | |
| Director Contract Review and Evaluation Division (53C) Department of Veterans Affairs 810 Vermont Ave. NW Washington, DC 20420 Phone: Voice (202) 523-1751 FAX (202) 523-0365 |
All audits |
| Agency for International Development | |
| USAID Attn: M/OP/PS/CAM Contract Audit Management Branch Room 1425, SA-14 Washington, DC 20523-1416 Phone: Voice (703) 875-1110 FAX (703) 875-1027 E-Mail: SingleAudit@USAID.gov Web Page: http://www.info.usaid.gov |
For audits of all U.S. based not-for-profit organizations |
| Appalachian Regional Commission | |
| Appalachian
Regional Commission Office of Inspector General 1666 Connecticut Ave. NW, Suite 215 Washington, DC 20235 Phone: Voice (202) 884-7675 FAX (202) 884-7691 E-Mail: hsparks@arc.gov |
All audits |
| Corporation for National and Community Service | |
| Office
of the Inspector General Corporation for National and Community Service - Suite 8100 1201 New York Avenue, NW Washington, DC 20525 Phone: Voice (202) 606-5000 ext. 390 FAX (202) 565-2795 E-Mail: wanderso@cns.gov |
All audits |
| Environmental Protection Agency | |
| National
Single Audit Coordinator Office of Inspector General Mid-Atlantic Audit Division U.S. Environmental Protection Agency (3A100) 841 Chestnut Street, 13th Floor Philadelphia, PA 19107 Phone: Voice (215) 566-5800 FAX (215) 566-2351 E-Mail: single.audit@epamail.epa.gov Web Page: http://www.epa.gov/oigearth |
All Audits |
| Federal Emergency Management Agency | |
| District
Audit Manager Office of Inspector General Federal Emergency Management Agency Room 373 3003 Chambles-Tucker Road Atlanta, GA 30341 Phone: Voice (770) 220-5242 FAX (770) 220-5259 |
All audits in Alabama, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Wisconsin, Puerto Rica, and the Virgin Islands |
| District
Audit Manager Office of Inspector General Federal Emergency Management Agency Building 105 Presidio of San Francisco San Francisco, CA 94129 Phone: Voice (415) 923-7010 FAX (415) 923-7017 |
All audits in Alaska, Arizona, Arkansas, California, Colorado, Hawaii, Idaho, Iowa, Kansas, Louisiana, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, Wyoming, and Guam. |
| Office
of Inspector General Federal Emergency Management Agency 500 C Street SW - Suite 825 Washington, DC 20472 Phone: Voice (202) 646-3911 FAX (202) 646-3901 |
NATIONAL OFFICE CONTACT |
| General Services Administration | |
| Regional
Inspector General for Auditing General Services Administration Washington Field Audit Office (JA-W) 7 & D Street SW, Room 1064 Washington, DC 20407 Phone: Voice (202) 708-5340 FAX (202) 708-7494 |
All audits |
| National Aeronautics & Space Administration | |
| NASA
Office of Inspector General NASA Headquarters, Code W Washington, DC 20546-0001 Phone: Voice (202) 358-1232 FAX (202) 353-3022 E-Mail: codew-aiga-staff-dir@lists.hq.nasa.gov Web page: http://www.hq.nasa.gov/office/oig/hq |
All audits |
| National Archives and Records Administration | |
| Office
of Inspector General National Archives at College Park 8601 Adelphi Road - Room 1300 College Park, MD 20740-6001 Phone: Voice (301) 713-7000 FAX (301) 713-7320 |
All audits |
| National Endowment for the Arts | |
| Office
of Inspector General National Endowment for the Arts 1100 Pennsylvania Ave. NW, Room 528 Washington, DC 20506 Phone: Voice (202) 682-5402 FAX (202) 682-5649 |
All audits |
| National Endowment for the Humanities | |
| Office
of Inspector General National Endowment for the Humanities 1100 Pennsylvania Ave. NW, Room 419 Washington, DC 20506 Phone: Voice (202) 606-8350 FAX (202) 606-8329 E-Mail: oig@neh.fed.us |
All audits |
| National Science Foundation | |
| Office
of Inspector General National Science Foundation Assistant Inspector General for Audit 4201 Wilson Boulevard, Suite 1135 Arlington, VA 22230 Phone: Voice (703) 306-2100 FAX (703) 306-0649 E-Mail: single_audit@nsf.gov |
All audits |
| Nuclear Regulatory Commission | |
| U.S.
Nuclear Regulatory Commission Mail Stop T5D28 Office of Inspector General Washington, DC 20555 Phone: Voice (301) 415-5930 FAX (301) 415-5091 E-Mail: apx@nrc.gov |
All audits |
| Small Business Administration | |
| Deputy
Assistant Inspector General for Auditing Operational Support Services Small Business Administration Office of Inspector General 409 Third Street SW, Suite 5600 Washington, DC 20416 Phone: Voice (202) 205-7431 FAX (202) 205-7874 |
All audits |
| Social Security Administration | |
| Audit
Manager Office of Inspector General Social Security Administration Bolling Federal Bldg., Rm 415 601 E. 12th Street Kansas City, MO 64106 Phone: Voice (816) 426-3204 ext. 262 FAX (816) 426-2618 E-Mail: FREDRIC.UEHLING@SSA.GOV |
All audits |
| Tennessee Valley Authority | |
| Assistant
Inspector General, Audit Operations Tennessee Valley Authority Office of Inspector General 400 West Summit Hill Drive Knoxville, TN 37902-1499 Phone: Voice (423) 632-3437 FAX (423) 632-4130 |
All audits |
| U.S. Information Agency | |
| U.S.
Information Agency Office of Inspector General OIG/AUD/CG 1700 North Moore Street Arlington, VA 22209 Phone: Voice (703) 284-2600 FAX (703) 284-2622 |
All audits |
