Fall 2010 issue of Horizons

Public Sector/Colleges & Universities – continued

Any organization that expends more than $500,000 in federal awards during its fiscal year must have a single audit performed by an independent auditor. Upon completion of the single audit, the auditor will issue an audit report that contains an opinion as to whether the organization has complied with applicable federal requirements and whether the organization has the necessary internal controls in place to permit compliance with federal requirements. This audit report, along with the data collection form (which summarizes the single audit results), must be submitted electronically to the federal clearinghouse web-site within nine months after the organization’s fiscal year end. When performing a single audit, auditors decide which federal award programs to audit by following OMB’s risk-based selection process. First, the auditee must prepare a Schedule of Expenditures of Federal Awards (SEFA) that lists each federal award program, its Catalog of Federal Domestic Assistance (CFDA) number, and the amount expended. Auditors then divide the federal programs into Type A programs (i.e., larger programs), and Type B programs (i.e. smaller programs). For organizations with less than $100 million in federal expenditures, the Type A threshold is $300,000 or 3 percent of total federal expenditures, whichever is higher. According to the OMB’s selection requirements, all high risk Type A programs must be audited. A Type A program is deemed to be high risk automatically if it has not been audited in one of the two preceding years, or if findings were issued for that program in one of the two preceding years. Other factors, including auditor judgment, may also lead to a Type A program being deemed high risk. Additionally, high risk Type B programs may also be selected to be audited. Generally, this occurs when a Type A program is deemed to be low risk, in which case a high risk Type B program must be selected to be audited in its place. Finally, auditors must audit

enough programs to obtain the required coverage of the organization’s total federal expenditures. This required coverage level is 25 percent for organizations deemed to be low risk, and 50 percent for organizations deemed to be high risk. As will be demonstrated in a moment, each of these requirements will be impacted by the new guidance included in the 2010 compliance supplement related to ARRA-funded programs. ARRA Background The American Recovery and Reinvestment Act was signed into law by President Obama in February 2009. Under ARRA, approximately $787 billion in federal funding is being disbursed, with the objective of creating jobs and stimulating long- term growth for the American economy. Due to the large volume of federal funding being disbursed, many state and local governments, colleges and universities, and other non-profit organizations are receiving significantly more federal funding than in the past. Such funding may be distributed to an organization directly from the federal government or through an intermediary, and may be distributed as part of an existing award program (with an existing CFDA number) or as part of a new program with a new CFDA number. As a pre-condition for receiving ARRA funds, recipients and first-tier subrecipients must register with Central Contractor Registration (CCR), the federal government’s registrant database. Registration permits organizations to receive ARRA payments by electronic funds transfer. Furthermore, organizations receiving ARRA funds must file quarterly Section 1512 reports with the federal government, which include financial information as well as information on the number of jobs created by the ARRA-funded program.

Raise Your Expectations

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