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Uniform Grant Guidance Part III

2015 Traci HansonIt is hard to believe that December is here.  With the new Uniform Grant Guidance (the Guidance) becoming effective on December 26, 2014, we wanted to remind Organizations of impacts of the Guidance and certain actions that Organizations will need to take to ensure compliance with the new Guidance.  Any organization expending federal money (even if it is just $1) is subject to the Guidance.  We will also review the final section of the new Guidance relating to the audit requirements.

The new Guidance consists of three main categories:

Section A: Subparts A-D: Reforms to Administrative Requirements

Section B:  Subpart E:  Reforms to Cost Principles

Section C:  Subpart F:  Reforms to Audit Requirements

Section A, subparts A-D and Section B, subpart E were reviewed in previous newsletters.  Please see those articles for additional information on the respective sections of the Guidance.  As a reminder, for organizations receiving any federal grants, the Guidance is requiring written policies for grant compliance.  We would suggest that organizations develop general written grant compliance policies for each of the 14 compliance requirements (see previous newsletters articles) and more detailed written grant compliance policies for specific grant requirements, as needed.

The Cost Principles portion of the Guidance includes general requirements for costs charged to federal grant programs to be reasonable and properly documented.  A new de minimis indirect cost rate of 10 percent of modified total direct costs is included in the Guidance.  Documentation for personal services (salaries and wages) charged to a federal grant program was modified to be less prescriptive under the Guidance, but the documentation must still be based on records that accurately reflect the work performed.  Numerous individual costs are also included in the Cost Principles section of the Guidance.  Organizations will want to review these details to ensure compliance.

The Reforms to Audit Requirements in Section C, subpart F are not effective until years beginning on or after December 26, 2014, or December 31, 2015 year-ends.  This section of the Guidance replaces OMB Circular A-133.  One of the changes with the Audit Requirements is that the compliance audit threshold changed from $500,000 to $750,000.  The increase in the compliance audit threshold eliminates a compliance audit requirement for approximately 5,000 organizations, but still covers 99.7 percent of federal grant funds currently audited.

During a compliance audit, the auditor will select certain federal grant programs to test in detail based on a prescribed risk assessment.  Under the Guidance, several changes were made to the risk assessment process, which may result in fewer federal grant programs being audited in detail.  With fewer organizations and federal grant programs being audited, monitoring of subrecipients may need to be expanded.

Auditors are required to report findings related to a lack of adequate internal controls over federal grants and noncompliance with federal grant requirements.  Overall, finding requirements have not substantially changed under the Guidance with continued emphasis on identification of prior findings, including updates and details as to why a finding is not corrected.  The threshold for reporting known or likely questioned costs increased from $10,000 to $25,000 under the Guidance.  Questioned costs are costs questioned by an auditor because of an audit finding resulting from violating a federal requirement, inadequate supporting documentation for costs, or unreasonable costs charged to a federal grant program.

As a part of the compliance audit process, the audited financial statements and results of the compliance audit, including findings, is summarized on a data collection form.  The data collection form has historically been available to the public.  Under the Guidance, the data collection form and the entire reporting package, consisting of the financial statements, auditor’s reports, audit findings, and summary schedule of prior audit findings, will be available to the public on the Federal Audit Clearinghouse website.

This is a summary of the changes to the Audit Requirements within the Guidance.  The full Guidance is available at the following link:Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Two Frequently Asked Questions documents were issued to assist with implementation of the Guidance, which can be found athttps://cfo.gov/cofar/.  Please contact Traci Hanson, Shelley Goodrich, or Sandra Weaver with specific questions related to the Guidance.

Traci Hanson

Traci Hanson

CPA, Partner at Ketel Thorstenson, LLP
In June 2001, Traci joined the audit team at Ketel Thorstenson, LLP. With an astute and analytical skill-set, she specializes in audits for non-profit organizations, commercial businesses, rural electric cooperatives, federal grants, and governmental entities.
Traci Hanson

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