Fall 2010 issue of Horizons

Section 1512 reports are due within 10 days of the end of each calendar quarter and are publicly available at www.recovery.gov in order to promote transparency regarding the use of ARRA funds. The federal government has indicated that it intends to use the single audit as one of its primary tools to monitor the expenditure of ARRA funds to ensure there is no fraud, waste, or abuse. Accordingly, organizations receiving ARRA funding should expect there to be increased interest in their single audit reports on the part of elected officials, awarding agencies, and the public. In order to understand how ARRA-funded projects and their associated requirements will affect the single audit process, organizations must first understand which types of federal funding are subject to the single audit. The single audit only addresses federal grants or awards received; it does not address vendor relationships with the federal government. In general terms, a vendor relationship exists when an organization performs a service to the federal government and is duly compensated, whereas a grant relationship exists when the organization receives federal funds in order to undertake an activity to benefit the public. In order to determine whether a given federal program constitutes a grant or a vendor relationship, organizations should review the contract governing the program or ask the grant contact or single audit coordinator at the federal agency. Additionally, OMB has indicated that Build America Bonds and COBRA tax credits are excluded from single audit requirements. Aside from these exceptions, all ARRA-funded programs are subject to single audit requirements. ARRA Projects Captured in the Single Audit

Furthermore, the compliance supplement mandates that all Type A federal programs containing any ARRA funding are automatically deemed to be high risk, even if these programs have been audited without findings in the past two years as discussed earlier. Effectively, this means that all Type A programs containing any ARRA funding will be audited as major every year. The compliance supplement also indicates that Type B programs containing ARRA funding should be considered to be of higher risk, making it more likely that these programs will be audited as major as well. The compliance supplement does provide two exceptions to this “automatically high risk” rule. First, the student financial aid program cluster is exempted from this requirement. Second, programs which contained ARRA funding in the prior year, were audited as major in the prior year, contain less than 20 percent ARRA funding, and otherwise qualify as low risk programs may be deemed to be low risk.

www.rubinbrown.com

54