The nonprofit and governmental regulatory environment is constantly changing, whether it’s tax regulations, accounting requirements, or grant compliance. This article highlights the recent and upcoming changes to the new data collection form, the federal Form 990, the new Uniform Grant Guidance, and the updated COSO.
New Data Collection Form
This January, the Office of Management and Budget (OMB) released the 2013 Data Collection Form, applicable for audit periods ending in 2013. Along with the new form, the Federal Audit Clearinghouse launched a new Internet Data Entry System (IDES) website for filing the data collection form.
The data collection form will look similar to the previous version; however, there are some significant changes. A new column to the Federal Awards page was added, identifying the number of findings for each federal award program. This column will correspond with the new Federal Awards Findings Page, which identifies the following:
- finding number referenced in the financial statements
- the type of compliance requirement the finding relates to (see our Federal Compliance Requirements Newsletter Series)
- whether the finding resulted in a modified opinion (other than clean opinion) or an “other matter”
- the severity of the finding: material weakness, significant deficiency, or other finding
- if questioned costs are associated with the finding
Federal loans and loan guarantees will also be reported on the Federal Awards page. If the federal program consists of part loan or loan guarantee, the loan/loan guarantee expenditures should be listed on one line and the non-loan/loan guarantee expenditures on a separate line.
The biggest change to the new website is each user will be required to create an account to review and certify (electronically sign) the data collection form. During the process of preparing the new data collection form, the auditee and auditor will receive an email from IDES directing new users to register a new account. A new account may also be set up by going to https://harvester.census.gov/facweb/Default.aspx and clicking “Submit an Audit.” On the next webpage, a new account can be created with an e-mail address. After registering for an account, you will receive an e-mail to complete registration by creating a password 12 characters long, consisting of uppercase and lowercase letters, numbers and a special character. Once you reach the Account Home page, you will see options to start a new submission, resume work on an uncompleted submission, revise a previously submitted form, and to view archived forms. For security purposes, the password will expire with 30 days of inactivity.
New Form 990
The IRS has released the 2013 Form 990 and instructions, along with all the related schedules. The good news for the 2013 Form 990 and 990 EZ is that no significant changes were made to the basic forms, schedules or questions. A majority of the 2013 changes relate to clarifications for certain requirements and responses. A summary of all changes to the Form 990 and related schedules can be obtained on the IRS website at the following link: http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/2013-Form-990-and-990-EZ:-Significant-Changes.
New Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
In December 2013, the U.S. Office of Management and Budget (OMB) issued Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Grant Guidance or Guidance). Because of the length and complexity of the new guidance, this update will focus an overview of the new guidance. Future KT newsletters will cover general provisions, changes to the OMB Cost Principles, and the new single audit requirements.
The Council of Financial Assistance Reform (COFAR) was established to streamline guidance for federal awards, easing administrative burden and strengthening oversight of the more than $500 billion expended annually in federal funds to reduce risks of waste, fraud, and abuse.
The Uniform Grant Guidance supersedes and streamlines requirements from eight different grant circulars into one set of guidance contained in Title 2 of the Code of Federal Regulations (CFR) as follows:
• Subpart A contains acronyms and definitions used throughout the Guidance.
• Subpart B discusses general provisions including the purpose of the Guidance, its applicability, and effective date.
• Subpart C covers administrative requirements directed primarily at federal agencies including pre-award activities and requirements for the contents of federal awards.
• Subpart D includes many of the administrative requirements including procurement, internal control, and subrecipient monitoring.
• Subpart E includes reforms to the Cost Principles previously found in Circulars A-21, A-87, and A-122
• Subpart F includes the reforms to single audit requirements which were previously found in Circulars A-133 and A-50.
The Uniform Grant Guidance defines non-federal entities as states, local governments, Indian tribes, institutions of higher education, or nonprofit organizations that carry out a federal award as a recipient or subrecipient. Non-federal entities will need to implement the new administrative requirements and Cost Principles for all new federal awards and for additional funding to existing awards made after December 26, 2014. This effective date may be challenging as some entities may have funding subject to the old cost principles and the new Cost Principles within the same fiscal year. OMB is expected to issue additional clarifying guidance relating to the effective date.
The audit requirements in Subpart F will be effective for fiscal years beginning on or after December 26, 2014. Therefore, auditees subject to a single audit with December 31, 2015, year ends will be required to undergo the first single audits conducted under the Uniform Grant Guidance. Early implementation of Subpart F is not permitted.
Internal control helps entities achieve important objectives and sustain and improve performance. In 1992, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued a report titled Internal Control—Integrated Framework (COSO report). The COSO report defines internal control, describes the components of effective internal control, provides criteria against which internal control can be evaluated, and presents guidance that organizations can follow when reporting publicly on internal controls over financial reporting.
The guidance issued by COSO was among the first internal control frameworks. The concept of internal control changed drastically after COSO issued its guidance. Not only did the new concepts affect how internal control was viewed by businesses, management, and CPAs in the United States, it also served as a basis for changes in the accounting profession’s standards relating to internal control. Basically, COSO is to internal control what GAAP is to financial statements. The COSO framework impacts financial statement audits because the COSO guidance was adopted into the auditing standards and is referenced in the new Uniform Grant Guidance noted above.
In the twenty years since the inception of the original COSO framework, business and operating evironments have changed dramatically, become increasingly complex, technologically driven, and global. At the same time, stakeholders are more engaged, seeking greater transparancy and accountability for internal control systems that support business decisions and governance of an entity.
In May 2013, COSO issued its updated Internal Control—Integrated Framework (the updated framework). This updated framework will replace COSO’s original framework on internal control that was originally issued in 1992. Because COSO considers the key concepts and principles in the original framework still fundamentally sound and widely accepted, entities may continue to use the original 1992 framework until December 15, 2014. After that time, COSO has indicated that it will consider the original framework superseded. However, the COSO Board encourages users to transition their applications and related documentation to the updated framework as soon as is feasible under their particular circumstances. Transition issues and an overview of the updated framework will be discussed in further detail in a future newsletter.
If you have any questions about the above updates please contact any of our non-profit specialists.