Changes to Single Audits have happened due to the Office of Management and Budget (OMB) recent approval of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2CFR Chapter I, and Chapter II, Parts 200, 215, 220, 225 and 230), more commonly referred to as the Uniform Guidance. This guidance replaces the audit requirements under OMB A-133, OMB A-122 and several other sections of the guidance that has been used for years for Federal Grants. The Uniform Guidance is effective for grants awarded after December 26, 2014. Non-federal entities will need to implement the new administrative requirements and Cost Principles for all new federal awards made after December 26, 2014, and to additional funding to existing awards (referred to as funding increments) made after that date. Non-federal entities wishing to implement entity-wide system changes to comply with the guidance after December 26, 2014, will not be penalized for doing so. New single audit requirements apply for December 31, 2015 year ends and beyond. Key considerations for the new guidance:
- Single audit threshold amount has been increased to $750,000 from $500,000 for years ending December 31, 2015.
- Cost principles and new administrative requirements under the Uniform Guidance must be adopted for all new federal awards and incremental funding received after December 26, 2014.
- The Uniform Guidance can be found at
http://www.gpo.gov/fdsys/pkg/FR-2013-12-26/pdf/2013-30465.pdf A sample of important changes:
- Internal controls – Section 200.303
- The non-federal entity must: (a) for federal awards, the entity must establish and maintain effective internal control 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. These internal controls “should” be in compliance with guidance in “Standards for Internal Control in the Federal Government” (Green Book – http://www.gao.gov/assets/670/665712.pdf)
- OMB has stated that the “should” is meant to be a “best practice” and not a presumptively mandatory requirement.
- Procurement standards
- Other non-federal entities will follow the five procurement methods outlined in the Guidance including small purchase procedures which are subject to the Simplified Acquisition Threshold, micro-purchases, sealed bids, competitive proposals, and noncompetitive proposals.
- Generally, the new procurement standards adopt the majority of the language used from Circular A-102. Therefore, non-federal entities that are currently subject to Circular A-110 will likely be more significantly affected.
- Recipients with the greatest impact of new procurement guidance
- Higher Education Institutions
- Not-for-Profit Organizations
- A grace period for effective date – one full fiscal year
- Indirect costs rates
- Federal agencies will have to accept a non-federal entity’s negotiated indirect cost rate unless statute or regulation allows for an exception or agency head approves.
- Non-federal entities will have the option to extend the indirect cost rate for up to four years (one-time extension with some caveats)
- Non-federal entities that have never received a negotiated rate will be permitted to charge a de minimis rate of 10% of modified total direct costs. This rate may be used indefinitely.
- Sub-recipient monitoring and management
- Time and effort
- Covered in Allowable Costs/Cost Principles
The Council on Financial Assistance Reform (COFAR) is working with OMB on a rollout of related guidance. Frequently Asked Questions for New Uniform Guidance at 2CFR200 can be found at https://cfo.gov/wp-content/uploads/2014/08/2014-08-29-Frequently-Asked-Questions.pdf, and a copy is attached for your convenience. If you have any questions regarding these changes, please do not hesitate to contact us today.