May CGHSFOA Accounting Conference Cheyenne Mountain Resort Colorado Springs May 15, Neal Christensen, CPA, CGMA Neal

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1 May CGHSFOA Accounting Conference Cheyenne Mountain Resort Colorado Springs May 15, 2013 Neal Christensen, CPA, CGMA Neal Learning Objectives, you will be able to; 1. Identify a federal award and grantee versus providing goods and services and being a vendor 2. Know the criteria for a correct SEFA presentation 1

2 Learning Objectives, you will be able to; 3. Complete a Schedule of Expenditures of Federal Awards (SEFA) 4. Assist your Financial Statement/ Single Audit auditor in deciding which federal awards are going to be audited Definitions at OMB A-133 section.105 Cluster of programs Federal award Federal financial assistance Federal program Major program Non-Federal entity Pass-through entity 2

3 The Single Audit Act 1984 (federal law) resulted in the drafting of the implementation document, Office of Management & Budget (OMB) Circular A Audit requirements A Single Audit is required only if your county receives in total $500,000 or more in federal assistance. 3

4 .205 Basis for determining Federal awards expended the disbursement of funds passed through to subrecipients ( CDHS settlement with the counties ).205 Basis for determining Federal awards expended Medicaid payments to a subrecipient for providing patient care services to Medicaid eligible individuals are not considered Federal awards unless a State requires the funds to be treated as Federal awards because reimbursement is on a costreimbursement basis. 4

5 .210 Subrecipient and vendor determinations An auditee may be; a recipient, a subrecipient, and a vendor. Characteristics indicative of a Federal award received by a subrecipient: 1. Determines who is eligible to receive what Federal financial assistance; 2. Has its performance measured against whether the objectives of the Federal program are met; 3. Has responsibility for programmatic decision making; 5

6 Characteristics indicative of a Federal award received by a subrecipient: 4. Has responsibility for adherence to applicable Federal program compliance requirements; and 5. Uses the Federal funds to carry out a program of the organization as compared to providing goods or services for a program of the passthrough entity. Characteristics indicative of a payment for goods and services received by a vendor: 1. Provides the goods and services within normal business operations, 2. Provides similar goods or services to many different purchasers, 3. Operates in a competitive environment, 6

7 Characteristics indicative of a payment for goods and services received by a vendor: 4. Provides goods or services that are ancillary to the operation of the federal program, and 5. Is not subject to compliance requirements of the federal program. Subrecipient or Vendor? The decision ultimately comes down to a judgment call 7

8 The county s compliance responsibility for vendors is to ensure that the procurement, receipt, and payment for goods and services comply with laws, regulations, and the provisions of contracts or grant agreements. For-profit subrecipient The contract with the for-profit subrecipient should describe applicable compliance requirements and the forprofit subrecipient's compliance responsibility. 8

9 Subpart C Auditees (county s) responsibilities 1. Identify federal programs received 2. Maintain internal control 3. Comply with laws, regulations, and the provisions of contracts and grant agreements Subpart C Auditees (county s) responsibilities 4. Prepare financial statements, including the Schedule of Expenditures of Federal Awards(SEFA) 5. Ensure that the audits required are properly performed and submitted when due 6. Follow up and take corrective action on audit findings 9

10 .305 Auditor selection Factors to be considered in evaluating each proposal for audit services include the; responsiveness to the request for proposal, relevant experience, availability of staff with professional qualifications & technical abilities, results of external quality control reviews, & price..310 Financial statements (b) Schedule of expenditures of Federal awards List programs List passthrough agencies Total expended for each program Note regarding significant accounting policies List subrecipient agencies Include non-cash assistance 10

11 It is being proposed that the 14 compliance requirements be reduced to six; 1. Activities allowed or unallowed 2. Allowable costs/cost principles 3. Cash management 4. Davis-Bacon Act 5. Eligibility 6. Equipment and real property management 7. Matching, level of effort, earmarking 8. Period of availability of Federal funds 9. Procurement and suspension and debarment 10. Program income 11. Real property acquisition and relocation assistance 12. Reporting 13. Subrecipient monitoring 14. Special tests and provisions CDHS is a Pass-through entity and their requirements are found at; Subpart D - Federal Agencies and Pass- Through Entities (d) Pass-through entity responsibilities. 11

12 How does an auditor determine which Federal grants to audit? By using a risk-based approach at.520 Major program determination and using 1) current and prior audit experience, 2)oversight by Federal agencies and pass-through entities, and 3) the inherent risk of the Federal program. Is the county a high or low-risk county? If the county is a low risk county then in the aggregate only 25% of all Federal assistance needs to be audited If the county is a high risk county then in the aggregate 50% of all Federal assistance needs to be audited 12

13 .530 Criteria for a low-risk county In each of the previous two yearly audits; 1.Unqualified financial statement opinion and unqualified opinion of the SEFA 2. Type A programs have no material weaknesses in internal control.530 Criteria for a low-risk county In each of the previous two yearly audits; 3. Type A programs have no non-compliance that materially effects compliance with laws, regulations, contracts, or grant agreements 4. Type A programs have no known or likely questioned costs above five percent of total federal assistance 13

14 .520 Major program determination Type A programs shall be $300,000 or three percent (.03) of total Federal awards expended in the case of an county for which total Federal awards expended equal or exceed $300,000 but are less than or equal to $100 million or $3 million or three-tenths of one percent (.003) of total Federal awards expended in the case of an county for which total Federal awards expended exceed $100 million but are less than or equal to $10 billion. or $30 million or 15 hundredths of one percent (.0015) of total Federal awards expended in the case of an county for which total Federal awards expended exceed $10 billion. Federal programs not labeled Type A shall be labeled Type B. Inclusion of large loan and loan guarantees (loans) should not result in the exclusion of other programs as Type A programs. 14

15 Step 2. Identify Type A programs which are low-risk considering all the criteria under step 2 at.520 Major program determination, (c). Step 3. Indentify Type B programs which are high-risk considering all the criteria under step 3 at.520 Major program determination, (d)..520 Major program determination (i) Deviation from use of risk criteria. For first-year audits, the auditor may elect to determine major programs as all Type A programs plus any Type B programs as necessary to meet the percentage of coverage rule. 15