2018 Compliance Supplement and Single Audit Update. Diane E Edelstein, CPA

Transcription

1 2018 Compliance Supplement and Single Audit Update Diane E Edelstein, CPA July 19, 2018

2 What We Will Cover Key changes made in the 2018 OMB Compliance Supplement (Supplement); Using the 2017 and 2018 Supplements together Other Supplement reminders and notes Procurement Internal Control Performing and documenting compliance testing Other single audit developments, including future changes to the DCF; and Resources 2

3 Terminology & Abbreviations CFDA Catalog of Federal Domestic Assistance GASB Government Accounting Standards Board COFAR Council on Financial Assistance Reform HHS U.S. Department of Health and Human Services CPE Continuing Professional Education NDAA National Defense Authorization Act DCF Data Collection Form NFP Not for Profit Organization DOT U.S. Department of Transportation OMB Office of Management and Budget ED U.S. Department of Education R&D Research and Development Cluster FAC Federal Audit Clearinghouse SEFA Schedule of Expenditures of Federal FAQs Frequently Asked Questions SFA Awards Student Financial Assistance Cluster FAR Federal Acquisitions Regulation SLG State or Local Government GAO Government Accountability Office UG Uniform Guidance GAS- SA Guide AICPA Audit Guide, Governmental Auditing Standards and Single Audits 3

4 SINGLE AUDIT Uniform Guidance - UG Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards 4

5 5

6 Uniform Guidance for Federal Awards Contents Subpart A - Acronyms and Definitions 200.xx Subpart B - General Provisions 200.1xx Subpart C - Pre-Federal Award Requirements and Contents of Federal Award 200.2xx Subpart D Post-Federal Award Requirements 200.3xx Subpart E - Cost Principles 200.4xx Subpart F - Audit Requirements 200.5xx 6

7 Uniform Guidance for Federal Awards Contents Appendix I - Notice of Funding Opportunity Appendix II - Contract provisions for non-federal entity contracts under Federal awards Appendix III - Indirect (F&A) costs identification and assignment, and rate determination for Institutions of Higher Education (IHEs) Appendix IV - Indirect (F&A) costs identification and assignment, and rate determination for nonprofit organizations 7

8 Uniform Guidance for Federal Awards Contents Appendix V - State/local government and Indian tribewide central service cost allocation plans Appendix VI - Public assistance cost allocation plans Appendix VII - State and local government and Indian tribe indirect cost proposals Appendix VIII - Nonprofit organizations exempt from Cost Principles Appendix IX - Hospital Cost Principles Appendix X - Data Collection Form Appendix XI - Compliance Supplement 8

9 Key Changes Made in the 2018 Supplement 9

10 2018 Effective Date and Supplement Background Effective for audits of fiscal years beginning after June 30, 2017 Referred to as a skinny supplement as it only modifies sections that were considered to need significant changes Portions of 2017 Supplement that were not superseded continue to be effective for 2018 single audits Table of Content describes where the 2017 Supplement is superseded and how to use the 2017 and 2018 Supplements together 10

11 Accessing the 2018 Supplement Available on OMB web site as a single pdf ce-federal-financial-management/ GAQC 2018 Supplement Tool to assist auditors in using the 2018 and 2017 Supplements together and improve efficiency CAUTION! AUDITORS WILL NEED TO USE THE 2018 AND 2017 SUPPLEMENTS TOETHER TO PERFORM SINGLE AUDITS OF FISCAL YEARS BEGINNING AFTER JUNE 30,

12 GAQC 2018 Supplement Access Tool (aicpa.org/gaqc) 12

13 GAQC 2018 Supplement Access Tool (aicpa.org/gaqc) 13

14 2018 Supplement, Appendix V First thing to look at! Identifies all changes at a high level Important roadmap Identifies specific programmatic changes by CFDA number 14

15 2018 Supplement TOC Critical roadmap for using the 2017 and 2018 Supplements together Describes where the 2017 Supplement is superseded and/or continues to be relevant 15

16 2018 Supplement, Part 1 Replaces Part 1 of the 2017 Supplement Updated discussion of the effective date Explanation of how auditors need to use the 2017 and 2018 Supplements jointly USE GAQC 2018 SUPPLEMENT TOOL TO HELP YOU LOCATE SECTIONS OF 2017 AND 2018 SUPPLEMENTS NEEDED FOR YOUR 2018 SINGLE AUDITS 16

17 2018 Supplemental Safe Harbor Status The auditor cannot consider the Supplement to be a safe harbor for identifying the audit procedures to apply Auditor judgment is necessary to determine whether the suggested audit procedures are sufficient The auditor can consider the Supplement a safe harbor for identification of compliance requirements to be tested for the programs included herein if the auditor: performs reasonable procedures to ensure that the requirements in the Supplement are current and to determine whether there are any additional provisions of federal awards that should be covered, and Update or augment the requirements contained in the Supplement, as appropriate. 17

18 2018 Supplement Part 2 NOT included in 2018 Supplement For new or revised programs, use the individual matrices included in Parts 4 and 5 of the 2018 Supplement For programs not included in the 2018 Supplement, use the Part 2 matrix in the 2017 Supplement 18

19 2018 Supplement Part I, Procurement and Suspension and Debarment this is the only Part 3 section included in 2018 Supplement Simplified acquisition and micro-purchase threshold changes due to the NDAAs of 2017 and 2018 (see next slides) Refers auditor to Appendix VII-A for guidance on reporting audit test results in this area. Use 2017 Supplement for remaining Part 3 sections 19

20 Effective Date Reminder! Grace period option delayed applicability of UG sections to for three full fiscal years after December 26, 2014 December 31st year ends go live 1/1/2018 June 30th year ends - go live 7/1/2018 September 30th year ends - go live 10/1/2018 Must document decision in internal procurement policy update for grace period extension 20

21 Procurement 2017 Effects Effect of 2017 NDAA & Who, What, and When Enacted on December 23, 2016, and raised the micro-purchase threshold to $10,000 for procurements under grants and cooperative agreements Official guidance has not been issued to clarify the applicability date ONLY applies to institutions of higher education, or related or affiliated nonprofit entities, nonprofit research organizations or independent research institutes Once the applicability date is determined, non-federal entities must document this decision in their internal procurement policies. When implemented by eligible auditees, it would apply to procurements purchased under ALL federal grants. 21

22 Procurement 2018 Effects Effect of 2018 NDAA & Who, What, and When Enacted December 12, 2017, and increased the simplified acquisition threshold to $250,000 and the micro-purchase threshold to $10,000 Effectively redefines the level for these thresholds in the Uniform Guidance once effective Applies to all non-federal entities (except states) and for all federal grants THESE CHANGES ARE NOT EFFECTIVE UNTIL THEY ARE FORMALLY CODIFIED IN THE FAR! - (June 30, 2018 M Memorandum) Early implementation not permissible The non-federal entity must document the decision in its internal procurement policies. 22

23 2018 Supplement, Appendix VII A NDAA Addendum 2017 NDAA - Auditors not expected to write findings for covered entities that implemented increased micro-purchase thresholds after December 23, 2016, as long as entity documented decision Covered entities include institutions of higher education, or related or affiliated nonprofit entities, nonprofit research organizations or independent research institutes 2018 NDAA - Since will not be effective until codified in the FAR, audit findings are expected for other entities that adopted the increased micro-purchase and simplified acquisition thresholds before the codification date. When in doubt, reach out to the cognizant or oversight agency for audit for guidance! 23

24 2018 Supplement, Part 4 Programs with Changes CFDA# Program Name Agency - DOT Highway Planning and Construction Cluster Highway Planning and Construction Recreational Trails Program Federal Lands Access Program Appalachian Development Highway System High-Speed Rail Corridors and Intercity Passenger Rail Service Capital Assistance Grants Federal Transit Cluster Federal Transit Capital Investment Grants Federal Transit Formula Grants State of Good Repair Grants Program Bus and Bus Facilities Formula Program Agency - ED Title I Grants to Local Educational Agencies Migrant Education State Grant Program Charter Schools English Language Acquisition State Grants Supporting Effective Instruction State Grants Student Support and Academic Enrichment Program... 24

25 2018 Supplement, Part 4 Programs with Changes (continued) CFDA# Program Name Agency - HHS Health Center Program Cluster Consolidated Health Centers (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) Grants for New and Expanded Services Under the Health CCDF Cluster Child Care and Development Block Grant Child Care Mandatory and Matching Funds of the Child Care and Development Fund Head Start Tribal Maternal, Infant, and Early Childhood Home Visiting Program Cluster Affordable Care Act (ACA) Tribal Maternal, Infant, and Early Childhood Home Visiting Program Tribal Maternal, Infant, and Early Childhood Home Visiting Agency - Social Security Administration Disability Insurance/SSI Cluster Social Security--Disability Insurance (DI) Supplemental Security Income (SSI) 25

26 Programs to be Added and Deleted from Part 4 26

27 2018 Supplement Part Supplement updated the following sections: SFA Cluster regulatory updates Other Clusters - new cluster added, Tribal Maternal, Infant, and Early Childhood Home Visiting Program Cluster, comprised of CFDA#s and Need to use 2017 Supplement Part 5 for Introduction and R&D sections 27

28 Other SFA Cluster Developments ED issued an updated FSA memorandum stating that institutions participating in Title IV programs that submit a single audit that does not include the SFA cluster as a major program will no longer be required to notify their respective School Participation Division of the low-risk assessments. The previous procedure in place had required an approval from School Participation Division if SFA cluster would not be audited as major Supplement does not include the new audit objectives and steps around securing student information that ED had been contemplating adding. 28

29 2018 Supplement, Appendix VII-A- Hurricane and NDAA Addendum Need to use 2018 Appendix VII-A in conjunction with 2017 Appendix VII Already discussed NDAA addendum Guidance related to hurricanes Harvey, Irma, and Maria Intended to assist auditees, auditors, pass-through entities, and federal awarding agencies with ensuring appropriate administrative relief for audit related issues resulting from the impact of hurricanes See also related OMB memorandum to federal agencies dated October 26,

30 2018 Supplement Unchanged Sections Part 6, Internal Control Part 7, Guidance for Auditing Programs Not Included in This Compliance Supplement Appendices I through IV Appendix VI Appendix VII Appendix VIII Appendix IX You will use 2017 Supplement for these sections! Use the GAQC 2018 Supplement Tool (see previous slides) to ensure you are using the correct year and section! 30

31 Using the 2017 and 2018 Supplements Together 31

32 How to use the Parts of the Supplement Correctly Matrix of Compliance Requirements 3.1 and 3.2: Compliance Requirements Agency Program Requirements Clusters of Programs Internal Control Guidance for Auditing Programs not Included in the Supplement 32

33 Illustration #1 Using 2017 and 2018 Supplements Together Auditor needs to audit the DOT Highway Planning and Construction Cluster as a major program: CFDA CFDA CFDA CFDA Step 1: Look at the TOC to see if the cluster was updated in In this case, it was! 33

34 New Requirement Matrix for the Dot Cluster Because the cluster was updated, go to Part 4 of 2018 Supplement to find the new matrix. (Excerpt below) 34

35 What about Part 3? Use the new 3.2.I, Procurement, Suspension, and Debarment from the 2018 Supplement For all other sections of 3.1 and 3.2, use 2017 Supplement 35

36 What about Part 4? Use the new Part 4 section for this DOT cluster in the 2018 Supplement Important Note! The 2018 Part 4 Section for this cluster refers the auditor to the Part 4 DOT cross-cutting section for testing various compliance requirements The DOT cross-cutting section was not superseded by the 2018 Supplement Thus, the auditor also needs to use 2017 DOT cross-cutting section 36

37 Illustration #2 Using 2017 and 2018 Supplements Together Auditor needs to audit the HHS Health Center Program Cluster as a major program: CFDA CFDA Step 1: Look at the TOC to see if the cluster was updated in In this case, it was! 37

38 Where is the Requirement Matrix for the HHS Cluster? Because the cluster was updated, go to Part 4 of 2018 Supplement to find the matrix. (See excerpt below) 38

39 What about Parts 3 & 4? Part 3 Use the new 3.2.I, Procurement, Suspension and Debarment from the 2018 Supplement For all other sections of 3.1 and 3.2, use 2017 Supplement Part 4 Use the new Part 4 section for this HHS cluster in the 2018 Supplement 39

40 Illustration #3 Using 2017 and 2018 Supplements Together Auditor needs to audit CFDA , Adult Education Basic Grants to States, as a major program Step 1: Look at the TOC to see if the cluster was updated in In this case, it was NOT! 40

41 What About Parts 2 & 3? Part 2 Use the 2017 Supplement matrix section for CFDA Part 3 Use the new 3.2.I, Procurement, Suspension and Debarment from the 2018 Supplement For all other sections of 3.1 and 3.2, use 2017 Supplement 41

42 What About Part 4? Use the 2017 Supplement section for CFDA since it was not included in the 2018 Supplement. IMPORTANT NOTE! The 2017 Part 4 section for this program refers the auditor to the Part 4 ED cross-cutting section for testing various compliance requirements The ED cross-cutting section was superseded by the 2018 Supplement Thus, the auditor also needs to use 2018 ED cross-cutting section 42

43 Other Supplement Reminders and Notes 43

44 A Reminder About When Section 3.1 and 3.2 are Applicable Some nonfederal entities will still have expenditures from older federal awards subject to pre-ug requirements Part 3.1 is generally to be used for federal awards made prior to December 26, 2014 Part 3.2 is to be used for federal awards and incremental funding made on or after December 26,

45 Responsibility When a Program is not in the Supplement? Use Part 7 to assist you in identifying compliance requirements and to develop your audit approach/program What are the program objectives, program procedures, and compliance requirements for a specific program? Which of the compliance requirements could have a direct and material effect on the program? Which of the compliance requirements are susceptible to testing by the auditor? Into which of the 12 types of compliance requirements does each compliance requirement fall? For Special Tests and Provisions, what are the applicable audit objectives and audit procedures? 45

46 Use Correct Supplement if Auditing a Prior Period! If auditing a prior period subject to the 2017 Supplement, access it on the GAQC home page (by section) 46

47 2019 Supplement? OMB has stated that: The target issuance date is January 2019 If this occurs, it is unknown what the effective date will be In concert with the recent President s Management Agenda, some programs may be reviewed for potential overhaul (see later slides for information on the management agenda) 47

48 PROCUREMENT 48

49 Procurement States must use the same policies and procedures they use for procurements from their non-federal funds ( ) Non-federal entities other than states follow

50 Procurement Extension Client must implement the procurement standards 3 full fiscal years after the effective date of the UG (i.e., 3 full fiscal years after December 26, 2014) A 12/31 year-end client has to implement procurement standards for its fiscal year beginning 1/1/18 (i.e., its 12/31/18 fiscal year-end) A 6/30 year-end client has to implement the UG procurement standards for its fiscal year beginning 7/1/18 (i.e., its 6/30/19 fiscal year-end) Source: 2 CFR (a) and COFAR FAQ

51 UG Procurement Requirements: What Does This Apply To? FAQ Goods and services charged to: Non-Federal program Indirect cost pool Federal award 51

52 The UG Procurement Musts UG general procurement standards Full and open competition UG procurement methods Cost or price analysis Contracting with small and minority businesses, women s business enterprises and labor surplus area firms Contract provisions 52

53 General Procurement Standards Documented procurement procedures Written standards of conduct covering conflicts of interest Procedures to avoid unnecessary or duplicative items Must award contracts to responsible contractors Must maintain procurement records 53

54 Procurement Records (i) Detail history of the procurement Rationale for method of procurement Selection of contract type Contractor selection or rejection Basis for contract price 54

55 Procurement Micro Purchases $3,500 Aggregate - $2,000 if it is for Construction and subject to Davis-Bacon Act There does not need to be quotations Equitable distribution among qualified vendors Small Purchases Simple and informal procurement methods Not more than the simplified acquisition threshold - currently $150,000 Price and rate quotations must be obtained from adequate number of qualified sources Sealed Bids Above simplified threshold greater than $150,000 Preferred for construction projects Must be publicly advertised 55

56 Procurement Competitive Proposals Above simplified threshold currently $150,000 More than one source for proposal Usually used for fixed fee or cost reimbursement A written method of evaluation and selection Award must go to most advantageous proposal Sole Source Must meet at least one of the criteria: o Single source availability o Public emergency o Written request has been made and approved by federal or PTE o Competition is determined to be inadequate 56

57 UG Procurement: Contract Cost and Price Cost or price analysis must be performed with every procurement action in excess of the SAT o Independent estimates required before receiving bids or proposals o Methods and degree of analysis to be defined by entity s written procurement procedures Negotiation of profit o Negotiation of profit required when there is no price competition or where cost analysis is performed o Factors to consider when negotiating a fair and reasonable profit Estimated costs used in analysis must be allowable in accordance with Subpart E of the UG 57

58 UG Procurement: Contract Provisions Non-federal entity s contracts must contain the applicable provisions described in Appendix II The following are some of the contract requirements identified in Appendix II: Contracts for more than the SAT must address administrative, contractual or legal remedies in instances where the contractor violates terms All contracts in excess of $10,000 must address termination for cause and for convenience Federally assisted construction contracts must include equal opportunity clauses 58

59 TESTING INTERNAL CONTROL (vs COMPLIANCE) 59

60 Single Audit Internal Control Requirements Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards at 2 CFR 200 (UG or Uniform Guidance) Establishes additional auditee and auditor requirements for internal control over compliance for single audits 60

61 Differences Between Internal Control Work for Financial Statements vs. Single Audit Financial statement audit internal control relating to assertions such as occurrence/existence, accuracy, and completeness What activities does an auditee perform to ensure the financial statements are reported accurately? Single audit internal control relating to compliance requirements What activities does an auditee perform to ensure the compliance requirements are met? 61

62 Differences Between Internal Control Work for Financial Statements vs. Single Audit Testwork requirements differ For example, low assessed level of control risk of noncompliance requirement in a single audit This equates to a requirement to plan for a high level of assurance obtained from internal control 62

63 Uniform Guidance Definitions( ) Internal Control A process implemented by a non-federal entity, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: Effectiveness and efficiency of operations Reliability of reporting for internal and external use Compliance with applicable laws and regulations 63

64 Uniform Guidance Definitions ( ) Internal Control over Compliance Requirements for Federal Awards A process implemented by a non-federal entity designed to provide reasonable assurance regarding the achievement of the following objectives for federal awards: Transactions are properly recorded and accounted for Transactions are executed in compliance with federal statues, regulations and terms of the award Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition 64

65 Uniform Guidance Internal Control Responsibility Auditees ( ) The non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Internal controls should be in compliance with guidance in: Standards for Internal Control in the Federal Government [Green Book] issued by the Comptroller General of the United States, and the Internal Control Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Use of should in Uniform Guidance indicates a best practice and is not a presumptively mandatory requirement 65

66 Uniform Guidance Internal Control Responsibility Auditors ( (c)) Auditors must: Perform procedures to obtain an understanding of internal control over federal programs sufficient to plan the audit to support a low assessed level of control risk of noncompliance for major programs. Plan testing of internal control over the relevant compliance requirements for each major program Perform testing of internal control as planned Report on internal control over compliance 66

67 67 Deficiency Definitions A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis

68 68 What about Part 6 of the OMB Compliance Supplement? Part 6, Internal Control, of the 2017 OMB Compliance Supplement consists of a Summary of Green Book and COSO Components and Principles of Internal Control

69 69 Components of Internal Control Control Environment Risk Assessment Control Activities Information and Communication Monitoring

70 Enhanced Oversight: Control Testing Peer Review Study of 87 Single Audits Description Insufficient evidence in file that the firm tested controls around each major program s direct and material compliance requirements # of engagements 25 Failed to document understanding of controls for each major program s direct and material compliance requirements No evidence that the firm tested controls over compliance at all

71 Control Testing: Examples of Problems Found Thought it was OK to combine internal control assessments for all major programs Could orally explain their understanding of internal control but did not document it Used a generic questionnaire that was not tailored to the client Thought a walkthrough of internal controls over financial reporting was sufficient Relied on controls at the grantor to eliminate the need for control testing Relied heavily on audit programs without understanding the steps they were signing off on 71

72 Control Testing: Examples of Problems Found in Performance Powerticked generic audit programs, signing off on procedures where there was no indication work was performed Thought no testing of controls was OK when 100% of disbursements were tested Did not test controls over compliance because asserted that federal awards follow the same internal control system as non-federal awards Did not test controls thinking such tests are required every three years Did not test controls because they assessed control risk at high 72

73 73 Considering Internal Control Over Compliance in a Single Audit Which applicable compliance requirements are direct and material? Subjective o Auditor judgment o Experience o Accepted risk o Industry expectation Use information gained from steps taken to obtain an understanding of each major program Qualitative and quantitative factors

74 Auditor Consideration of Internal Control Over Compliance in a Single Audit Obtain understanding Determine nature, timing and extent of further audit procedures Risk assessment (Design & Implemented) 74

75 Design and Implementation Versus Effectiveness Test of design and implementation Walkthrough auditor understanding Conclusion: Control has been properly designed and implemented Test of operating effectiveness Test key control attributes Conclusion: Control is effective Remember If control is not effective, a finding must be reported! 75

76 76 Internal Control Over Compliance - Operating Effectiveness Tests of operating effectiveness different than determining that control has been implemented Evidence of who, when, what Procedures include: Inquiries Inspection of documents indicating performance Observation of application of specific controls Reperformance of controls by auditor Generally involves combination of procedures Inquiry alone is not sufficient

77 How to Access Internal Control Frameworks COSO framework Update to COSO released in May 2013 Available for purchase Access information Government Accountability Office (GAO) Green Book Update to the Green Book released in September 2014 Available for free Access Green Book 77

78 78 Other Tips Testing compliance gives indirect evidence on controls, but cannot serve as the basis for assessing controls as operating effectively

79 Business Process Business Process The activity performed by the process owner Includes a series of steps to initiate recognize and disclose business transactions in a particular period. A process activity is where an error can occur 79

80 Internal Control Internal Control Activities that mitigate processing risk (either directly or indirectly) in a entity s business process to an acceptable level. An activity that is performed to prevent of detect an error 80

81 Performing and Documenting Compliance Testing 81

82 Compliance Testing Documentation Avoiding the N/A Problem N/A is not enough to support why you did not audit a type of compliance requirement If your teams believe a requirement that is identified as being applicable to a program in the Part 2 matrix of the Compliance Supplement is not direct and material to a client, documentation should always be provided Documentation is key if overriding a Y in the Part 2 matrix! 82

83 Example N/A Documentation Example 1. Detail testing of the subrecipient monitoring compliance requirement is not performed for CFDA XX.XXX even though the requirement is noted as applicable in the Part 2 matrix. This is because XYZ entity s expenditure of program funds has not included passing funds down to subrecipients. Example 2. While the Part 2 Matrix identifies procurement as being applicable to CFDA No. XX.XXX, Client ABC made only one small purchase during the year that is immaterial overall to the program expenditures. Therefore, the procurement type of compliance requirement for CFDA No, XX.XXX is not direct and material to Client ABC. Example 3. Detail testing of the eligibility type of compliance requirement not performed. While the requirement is noted as applicable in the Part 2 matrix, the Compliance Supplement section for CFDA No. XX.XXX notes that testing eligibility is the responsibility of the pass-through entity's subrecipients. Thus, it is to be tested by the auditors of Client ABC s subrecipients. 83

84 Panel Discussion on Compliance Testing Recent question received by GAQC When performing compliance testing on allowable costs, can one sample of transactions be selected that includes transactions across all major programs, or are separate samples required for each major program required? 84

85 Compliance Testing Best Practices 85

86 Audit Documentation Do the Work Document the work Obtain sufficient appropriate audit evidence 86

87 Other Single Audit Developments 87

88 AICPA Audit Guide, Government Auditing Standards and Single Audits Key resource for auditors; you should be using this Guide! 2018 update available now in ebook and paperback Key changes made: Updates to areas needing additional emphasis or explanation to help clarify the Uniform Guidance audit requirements Updates for July 2017 federal UG FAQs Slight changes to certain auditor reports for consistency 88

89 FAC Developments Nothing new for 2018 audits However, remember reporting packages, including your reports and findings are posted publicly! Proposed new DCF for use in 2019, 2020, and 2021 audits is out for comment Access proposed draft DCF and instructions Access Federal Register Notice 89

90 Auditors Main Proposed Changes to DCF for 2019, 2020, and 2021 Audit finding information would be expanded to include the actual text of the audit finding. Would be required to indicate whether a communication such as management letter was issued. Auditees Would be required to include the text of the corrective action plans. Would also be required to include the text of the notes to the SEFA 90

91 FAC Best Practice Tops Review your DCF submissions (the actual forms) in the FAC for deficiencies Remediate deficiencies through reissuance of the data collection form and/or reports on a timely basis before identification in federal quality control reviews, desk reviews and peer reviews Also consider reviewing a postissuance sampling of your single audit reporting packages posted to the FAC (now generally available publicly) for any quality problems Find Audit Information Federal agencies and others now have the opportunity to do the same 91

92 Be on the Lookout for the Following: Lack of identification of clusters Improper application of definition of a federal program (programs with same CFDA #) Missed major program based on type A program 2-year look back Missed major program based on type A program with a prescribed prior year finding Inadequate percentage of coverage and improper determination of low-risk auditee status Type A program threshold calculation errors 92

93 Update on Federal FAQs on the UG Previously issued by COFAR; now that COFAR disbanded, FAQs are posted to CFO.gov Web site Compliance Supplement states that FAQs are meant to provide additional context, background, and clarification of the policies described in the Uniform Guidance and should be considered in the single audit work plan and reviews Latest update made in July 2017 Access the latest version of the FAQs 93

94 GAO Government Auditing Standards (Yellow Book) Expected release date by June 30, 2018 Effective date? What Likely to Expect New format to differentiate requirements from application guidance Independence revisions Current Yellow Book CPE requirement will be retained Removal of requirements to report abuse and waste 94

95 President s Management Agenda Management Agenda released on OMB Web site in March 2018 Includes a cross-agency priority goal on grants along with a related strategy document which includes: Component 1 on the standardization of grant reporting data and digitized data collection. Component 2 on to the development of digital tools to manage federal risk. Component 3 on the identification of practices and data tools to enable agencies to incorporate performance into their grant award operations GAQC will be monitoring 95

96 Future Revisions to the Uniform Guidance? Address need for periodic increases to the micropurchase and simplified acquisition thresholds? President s Management Agenda grants goal? Presidential Executive Order on Buy American Hire American (BAHA)? Never Contract with the Enemy? Address allowable costs issues due to implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions? Digital Accountability and Transparency Act (DATA Act) align standard definitions with UG? 96

97 Governmentwide Audit Quality Project FAQ states: a governmentwide audit quality project must be performed once every 6 years beginning in 2018 Does the 2018 date signify the year that the first study must be performed? No. The project will examine single audit engagements that are submitted to the FAC no earlier than 2018 and will occur in 2019 or 2020 as determined by OMB. FOCUS POINT! Ensure that single audits are subject to strong quality control and that teams are aware that high quality is imperative! 97

98 GAQC and Other AICPA Resources 98

99 Where to Find More? Access the following single audit-related GAQC archived web events Single Audits: New Insights on Factors Driving Quality Uniform Guidance Year 3: A Deeper Dive into Challenging Audit Areas Uniform Guidance: Challenging Compliance Areas Internal Control: COSO, the Green Book, and More Note: There are numerous other archived Web events on UG and other topics at link above! 99

100 Other GAQC Resources Illustrative Auditors Reports Single Audit, Yellow Book, SLG, HUD SEFA Practice Aids (for both auditors and auditees) Quality Control Tools Tips for Getting Through a Quality Control Review Peer Review Checklists Practice Aid - Establishing and Maintaining a System of Quality Control 100

101 Closing Thoughts 101

102 Audit Documentation Not documented not done Oral explanation can not substitute for written documentation If you think it INK IT

103 Communication I you don t think it needs said Say it twice

104 Winding down with questions 104

105 Questions? Contact Me! Diane E Edelstein, CPA Partner, Maher Duessel dedelstein@md-cpas.com Pittsburgh Harrisburg Butler State College Erie Lancaster