In December 2013, OMB released final guidance on administrative requirements, cost principles, and audit requirements for federal awards. The final guidance, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), supersedes and streamlines eight existing OMB Circulars into one document that includes OMB Circulars A-21, A-87, A-89, A-102, A-110, A-122, A-133, and the guidance in OMB Circular A-50 on Single Audit Act follow-up. The Uniform Guidance can be accessed at https://federalregister.gov/a/2013-30465.
The Uniform Guidance, which is located in Title 2 of the Code of Federal Regulations, consolidates previous guidance into a streamlined format that aims to improve both its clarity and accessibility, lessen administrative burdens for federal award recipients, and reduce the risk of waste, fraud, and abuse.
While the Uniform Guidance does not broaden the scope of applicability of existing government-wide requirements, parts of it may apply to for-profit entities and foreign entities.
Major Policy Improvements
Major policy improvements in the Uniform Guidance include-
• Eliminating duplicative and conflicting guidance.
• Enhancing accountability for federal funds.
• Encouraging efficient use of IT.
• More consistent and transparent treatment of costs.
• Strengthening language to limit costs.
• Strengthening oversight through pre-award requirements.
• Targeting audit requirements on risk of waste, fraud, and abuse.
Single Audit Changes
Among other matters of specific applicability to auditors, changes in the Uniform Guidance include-
• Raising both the threshold that triggers a Single Audit and the threshold for Type A/B program determination to $750,000.
• Changing the high-risk program criteria for Type A programs.
• Reducing the number of high-risk Type B programs that must be tested as major programs.
• Revising the Type B small program floor.
• Reducing the percentage of coverage requirement to 40% for normal auditees and 20% for low-risk auditees.
• Revising the criteria for low-risk auditee status.
• Referring to Appendix XI to Part 200, Compliance Supplement, for identification of compliance requirements. (This was formerly known as the OMB Circular A-133 Compliance Supplement.)
• Increasing the threshold for reporting findings to $25,000 in questioned costs and requiring more detailed information to be reported.
We Recommend . . .
. . . that both auditors and award recipients-
• Pay close attention to the definitions, especially contract and supplies. (Subpart A)
• Review guidance on applicability of the requirements to different types of awards (e.g., grants, loans). (Subpart B, Section 200.101)
• Pay close attention to recipient administrative requirements, especially the new procurement requirements and the new requirements for pass-through entities. (Subpart B)
• Determine whether the recipient’s existing written policies are adequate. Having a written policy is referred to numerous times in the Uniform Guidance, including in: • Financial management (Subpart D, Section 200.302)
• Payment (Subpart D, Section 200.305)
• Procurement (Subpart D, Sections 200.318-.320)
• Compensation (Subpart E, Sections 200.430-.431)
• Relocation costs (Subpart E, Section 200.464)
• Travel costs (Subpart E, Section 200.474)
• Carefully read the audit requirements. (Subpart F)
• Check the crosswalk, “Audit Requirements Comparison Chart.”
The Uniform Guidance has several different effective dates (early implementation is not allowed)-
• Federal agencies have six months to submit implementing regulations to the OMB. Nonfederal entities are required to comply with the Uniform Guidance once the new regulations are in effect. OMB officials have stated that they expect to have all of the implementing regulations in effect by December 2014.
• Audit requirements would apply to fiscal years beginning after the federal agencies publish their implementing regulations. Thus, the audit requirements will be effective for single audits of years beginning on or after January 1, 2015 (i.e., December 31, 2015 year-end Single Audits).
• Other requirements will affect federal awards and funding drawdowns made on or after January 1, 2015.
Additional clarifying information is expected on the implementing regulations and effective dates.
Expect More Changes
You’ll have to stay alert for changes to the compliance requirements. OMB’s original proposal included reducing the number of types of compliance requirements from 14 to 6, with several of the compliance requirements being combined. The discussion of major policy reforms in the Uniform Guidance notes that because the compliance supplement is published as part of a separate process, no final changes were made at the time the Uniform Guidance was finalized. However, the Council of Financial Assistance Reform (COFAR) has recommended that any future changes made to the compliance supplement be based on available evidence on past findings and the potential impact of noncompliance for each type of compliance requirement. The COFAR further recommended that additional public outreach be conducted prior to making any structural changes to the format of the compliance supplement in order to mitigate an inadvertent increase in administrative burden.