Final guidance was issued by the U.S. Office of Management and Budget on Dec. 26, 2013, which streamlines the federal government’s requirements from eight existing OMB circulars into one document, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. The objectives of the guidance are to ease administrative burden and strengthen oversight of federal funds to reduce risks of waste, fraud and abuse.
The consolidated guidance eliminates duplicative and conflicting provisions, includes provisions that focus on performance over compliance, and encourages efficient use of information technology. Also, policies related to direct and indirect costs were updated to provide more consistent and transparent treatment, and language was strengthened in certain items of cost. The guidance includes a section of standard definitions of terms used throughout the final guidance and throughout many approved federal information collections used to manage federal awards.
The final guidance includes numerous additions, revisions and clarifications. Recipients of federal awards should review the final guidance to ensure compliance with federal award requirements. Selected notable items are included below:
- Requires non-federal entities to take reasonable measures to safeguard protected personally identifiable information as well as any information that the federal awarding agency or pass-through entity designates as sensitive. (Definitions of Personally Identifiable Information (PII) and Protected Personally Identifiable Information (PPII) are included in the guidance.)
- Requires federal agencies and pass-through entities to review the risk associated with a potential recipient prior to making an award.
- Requires disclosures of conflicts of interest and relevant criminal violations
- Expressly prohibits profit from federal awards (unless expressly authorized by the terms and conditions of the award).
- Requires certifications of senior non-federal entity officials (that includes awareness of potential penalties under the False Claims Act).
- Encourages non-federal entities to have family-friendly policies, including a provision that temporary dependent care costs that result directly from travel to conferences and meet specified standards, are allowable costs.
Several provisions in the final guidance target audit requirements. These revisions are intended to strengthen oversight and focus audits where there is the greatest risk of fraud, abuse and waste in federal awards. The revisions include the following:
- Raises the Single Audit threshold from $500,000 of federal awards per year to $750,000 in federal awards per year. (The change in threshold will reduce the number of Single Audits by approximately 5,000 while maintaining 99.7 percent of current coverage of federal award dollars.)
- Increases the minimum threshold to determine whether a program is a Type A or Type B program from $300,000 to $750,000. (Type A programs are more likely to be selected to be audited as a major program during a Single Audit.)
- Specifies that a Type A program will automatically be selected to be audited as a major program in instances where the program was audited in the prior year and there were the following types of findings related to the program:
- Modified opinion on compliance
- Material weakness in internal controls over compliance
- Questioned costs greater than five percent
- Significant deficiencies in internal controls over compliance and other compliance findings will no longer require automatic selection of a Type A program as a major program in the subsequent year’s Single Audit.
- Reduces overall coverage requirements during a Single Audit from 25 percent to 20 percent of federal awards for low-risk auditees and from 50 percent to 40 percent of federal awards for all other auditees.
- Refines the criteria for auditees to be considered a low-risk auditee.
- Makes single audit reports available to the public online.
- Requires the auditee to certify that there is no protected personally identifiable information in the Single Audit report upon submission to the Federal Audit Clearinghouse.
- No longer requires subrecipients to provide copies of their Single Audit reports to pass-through entities, since this information will be available online.
The proposed guidance discussed streamlining the types of compliance requirements found in the Compliance Supplement from the existing 14 to six. Since the Compliance Supplement is published as part of a separate process, such changes were not included in the final guidance. Instead, this issue is expected to be addressed in future updates to the Compliance Supplement.
The guidance is effective immediately for federal agencies. For non-federal agencies, the guidance is effective as implementation policies are provided by the applicable federal agency and no later than Dec. 26, 2014. Guidance related to audit requirements is effective for years beginning after Dec. 26, 2014.
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Amanda McGinity is a member of the firm's Audit and Assurance Services Department and Not-for-Profit and Governmental Services Groups. She provides a variety of services, including financial statement audits, reviews and consulting projects involving compliance and internal control issues.