It’s a year after implementation of the Uniform Guidance, which was effective for all federal awards provided after December 26, 2014, and we have now completed the initial cycle of single audits under the new guidance. The experience and knowledge gained will help as we prepare and plan for upcoming audits. Let’s recap the major changes under the Uniform Guidance, review areas where there were struggles and provide some tips for your 2017 single audits.
Recap of major changes:
|Effective Date||For Federal awards provided after December 26, 2014||Starting with years ended December 31, 2015 and
June 30, 2016
|Single Audit Threshold||A single audit is required for entities that received more than $750,000 in Federal Awards|
|Minimum Threshold for Type A & B Programs||For Federal Awards between $750,000 and $25 million||Type A - $750,000; Type B - 25% of Type A or $187,500|
|Between $25 million and $100 million||Total federal awards times .03|
|Threshold continues to change as the total federal awards $ increase||See uniform guidance for further details|
|Percentage of Coverage||40% for high-risk auditees and 20% for low-risk auditees|
|Questioned Costs Threshold||$25,000|
|Procurement Standards||Non-federal entity is permitted to delay implementation of the new standards for 2 full fiscal years|
Areas of struggle:
- Determining which guidance to follow, old or new
- Calculating thresholds for determining major programs
- Changes to the auditors’ reports
- Changes to the Schedule of Federal Awards (SEFA) and related disclosures
- Processing changes to the Data Collection Form
Which guidance to follow:
|Auditees||Old Awards – Old OMB cost principles and administrative requirements (e.g. OMB Circulars A-87, A-110, A-122, etc.)||New Awards – Subpart D and E of the Uniform Guidance||Certain sections of Subpart F|
|Auditors||For testing compliance – audit against the criteria that the auditee is required to follow||For performing the audit – Subpart F of the Uniform Guidance|
Auditors’ Reports - Make sure your auditors have updated the language in the auditors’ reports to eliminate reference to the OMB A-133 and replaced it with the new language.
SEFA and Related Disclosures – Have you updated the wording to incorporate the new standards? Was the disclosure regarding the 10% de minimus indirect cost rate added?
Data Collection Form (DCF) - There were also significant changes to the DCF. More information is now required, including pass-through entity information for funds received and for funds passed through to sub-recipients.
Tips for planning for 2017 single audits:
- If you delayed the adoption of the new procurement standards, then you should adopt the new standards as they are effective for years ending after December 26, 2016 (fiscal years beginning January 1, 2017 and July 1, 2017).
- Draft the SEFA early in the planning process. This will allow the auditor to make a determination of which major programs need to be tested and under which guidance, the new or old cost principles, earlier in the process.
- Make sure that the new Uniform Guidance thresholds are being applied properly in the determination of major programs as outlined in the table above. In some cases, we saw that the number of major programs dropped considerably.
- Make sure if you are considered a low-risk auditee, that the 20% overall coverage is being utilized. Again, this can substantially lower the number of major programs to be tested.
- Consider the effect of the Large Loan and Loan Guarantees on Type A and B thresholds. If there is a determination that certain loans should be excluded, then it could have a substantial impact on the major program determination.
- Be alert for clusters. You should find out if your programs are part of a cluster, which could be treated as one program under the major program determination.
- You may need to update the SEFA. Revisit the final SEFA and major program determination during the audit and at the conclusion of the audit to consider any changes made from the preliminary assessment.
- Gather the additional information needed to complete the DCF in the process of preparing the SEFA to make it easier when it comes time to prepare and submit the DCF.
Overall, the OMB’s goal was to streamline and consolidate the guidance into a single document to make it easier for auditees and auditors. We now have a year of experience and knowledge, having been through the first round of single audits under the Uniform Guidance. With proper planning and coordination with your auditors, this year’s single audits and data collection form submissions should be a lot smoother.
For more information, please contact Marie DeCicco at (267) 886-1761 or your Friedman LLP professional or engagement partner.