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OMB Circular A-133 Audits of States, Local Governments and Non-Profit Organizations Presented by Ann Holmes and Toni Lawson PowerPoint PPT Presentation

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OMB Circular A-133 Audits of States, Local Governments and Non-Profit Organizations Presented by Ann Holmes and Toni Lawson. Presenters. Ann Holmes Chief Financial Officer, CASL [email protected] 301‑226‑8804 Toni Lawson Associate Director, ORAA [email protected]

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OMB Circular A-133 Audits of States, Local Governments and Non-Profit Organizations Presented by Ann Holmes and Toni Lawson

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OMB Circular A-133Audits of States, Local Governments and Non-Profit OrganizationsPresented by Ann Holmes and Toni Lawson


  • Ann Holmes

    Chief Financial Officer, CASL

    [email protected]


  • Toni Lawson

    Associate Director, ORAA

    [email protected]


History of Single Audit

  • Each agency used to be responsible for its own audits

  • Audits were not coordinated

  • Inflated costs to Federal Government

  • Undue burden on Universities

Single Audit Report

  • Financial statements

  • Schedule of expenditures of Federal awards

  • Auditors opinions on fair presentation of financial statements

  • Schedule of expenditures of Federal awards

Single Audit Report

  • Auditors’ report on internal control & opinion on compliance

  • Auditors’ schedule of findings and questioned costs

  • Auditees’ corrective action plans; and

  • A summary schedule of prior audit findings

A-133 Emphasis

  • Sets standards for audit consistency and uniformity

  • Identifies compliance requirements

  • Establishes criteria for testing internal controls

  • Tests for reasonable assurance that financial statements are accurate

Risk Based Approach

  • Identify major programs based on expenditures in fiscal year

  • Review previous audit findings

  • Review new programs or those with regulatory changes

  • Review personnel or system changes at institution

Risk Assessment

  • Focus is on high risk transactions

  • Cost sharing

  • Direct vs. F & A costs (F.6.b.)

  • Shared use items

    • Big order of lab supplies - is the expense allocated on a reasonable basis?

  • Related party transactions

Circular Organization

  • General

    • Gives the purpose of the circular and definitions of frequently used terms

  • Audits

    • Specific information on audit requirements

Circular Organization

  • Responsibilities defined for:

    • Auditees (the university)

    • Federal Agencies

    • Pass-Through Entities

    • Auditors

OMB Circular A-133

  • Appendix

    • A.- Data Collection Form

    • B.- Compliance Supplement

A-133 Subpart A Purpose

Sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of [Universities] expending Federal funds.

A-133 Subpart ADefinitions

CFDA Number

The number assigned to a Federal program in the Catalog of Federal Domestic Assistance (CFDA).


59.037 SBDC

47.076 Education/Human Resources (NSF)

A-133 Subpart ADefinitions

Internal Control

Process designed to provide reasonable assurance of achieving the following:

  • Effective & efficient operations

  • Reliable financial reporting

  • Compliance with laws & regulations

A-133 Subpart ADefinitions

Pass-through Entity

A non-Federal entity that provides a Federal award to a subrecipient to carry out a Federal program.

A-133 Subpart ADefinitions

SubrecipientA non-Federal entity that expends Federal funds received from a pass-through entity to carry out a Federal program.

A-133 Subpart B Audits


  • Who is required to be audited

  • Determining subrecipient vs vendor

  • Frequency of audits

Subcontract or Vendor?

  • Subcontractor

    • Performance measured against whether the objectives of the federal program are met

    • Has responsibility for programmatic decision making

    • Has responsibility for adherence to applicable federal program compliance requirements

Subcontract or Vendor?

  • Vendor

    • Provides the goods and services within normal business operations

    • Provides similar goods or services to many different purchasers

    • Operates in a competitive environment

    • Provides goods or services that are ancillary to the project

    • Not subject to compliance requirements

A-133 Subpart C Auditees

Auditee responsibilities:

  • Identify all Federal awards received (funds are listed in the A-133 report)

  • Maintain control over Federal program

  • Comply with laws & regulations

  • Prepare financial statements

  • Ensure audits are done & submitted when due

  • Follow up and take corrective action

A-133 Subpart D Pass-through Entities


  • Identify Federal awards to subrecipient (CFDA#)

  • Advise subrecipient of Federal requirements

  • Monitor subrecipient for compliance

A-133 Subpart E Auditors


  • Financial statements

  • Internal control

  • Compliance with regulations

  • Follow-up on prior audit findings

Pass-through Entity Responsibilities

  • Award Identification

    • Inform the sub-recipient of the federal award information (e.g. award name, CFDA)

  • During- the-Award-Monitoring

    • Monitor the sub’s use of funds through regular contact

  • Sub-recipient Audits

    • Ensure that entities of met the A-133 audit requirements

Pass-through Entities(UM) Responsibilities

  • Measures for subrecipient compliance:

    • Sponsored Projects Subcontract Procedure Manual

    • Subrecipient’s A-133 Audit Certification

    • Subrecipient’s A-133 Audit Report

Pass-through Entities(UM) Responsibilities

  • Subaward

    • used when a portion of a sponsored project is performed by another entity

    • states work to be performed, conditions to be imposed on subrecipient, flow-down of Federal regulations and laws, terms and conditions of prime award

    • constitutes a part of UM’s proposal to sponsor

Pass-through Entities(UM) Responsibilities

  • Contents of subrecipient’s proposal:

    • Work statement

    • Budget

    • Schedule/Deliverables

    • Endorsement

Pass-through Entities(UM) Responsibilities

  • PI/PD’s role:

    • Review and document subrecipient’s qualifications

    • Ensure subrecipient’s costs are reasonable

    • Initiate request to issue subaward and subsequent modifications to ORAA

    • Review and approve subrecipient’s invoices

Pass-through Entities(UM) Responsibilities

  • PI/PD’s role, continued:

    • Monitor subrecipient’s performance to ensure satisfactory conformance with subrecipient’s statement of work

    • Receive and review subrecipient’s technical reports

    • Facilitate close-out, i.e. final technical reports and final invoices

Pass-through Entities(UM) Responsibilities

  • ORAA’s role:

    • Draft subaward

    • Assign subaward a unique identification number (Q or Zxxxxx)

    • Issue/negotiate subaward with subrecipient

Pass-through Entities(UM) Responsibilities

  • ORAA’s role, continued:

    • Forward fully-executed subaward to PI/PD or business officer

    • Manage and process subaward modifications

    • Facilitate close-out of subawards

    • Encumber funds authorized to subrecipient in FRS

Pass-Through Entities(UM) Responsibilities

  • OCGA’s role:

    • Receive and incorporate subrecipient’s financial reports with reporting requirements of prime award

Internal Controls

  • Sense of conducting operations ethically

  • Positive responsiveness to questioned costs

  • Staff knowledge of compliance requirements

  • Training programs

Compliance Requirements

  • Ensure that funds were used only for activities that further the objectives outlined in the award document

  • 14 areas of review (A-N):

    • Emphasis on largest expenses

      • Employee compensation

      • F&A costs

      • Equipment

Compliance & Internal Controls

A. Activities Allowed or Unallowed

  • Identify the types of activities allowed or prohibited

  • Test for proper classification & accumulation

  • Review Sub-awards to ensure activities are allowable

Compliance & Internal Controls

B. Allowable Costs/Cost Principles

  • OMB A-21

    • Reasonable, Necessary, Allowable

    • Facilities & Administrative vs Direct

    • Disclosure Statement

    • Comparisons of budgets to actual costs

Compliance & Internal Controls

C. Cash Management

  • Cost reimbursable*

  • Cash Advances*

  • Letter of credit*

    *Funds requested are for actual expenses

Compliance & Internal Controls

D. Davis-Bacon Act

  • All laborers and mechanics employed to work on construction projects financed by the Federal government must be paid prevailing wage rates.

Compliance & Internal Controls

E. Eligibility

  • Who can participate in a Federal program and the amounts for which they qualify

  • Subrecipients are reviewed for eligibility

Compliance & Internal Controls

F. Equipment and Real Property Management

  • Proper records & adequate safe guards

  • Disposition of equipment

  • Agency compensated if sold

  • Property tags in place

Compliance & Internal Controls

G. Matching, Level of Effort

  • Comply with A-110 (section 23)

  • Test to determine if commitment met

  • Verify source of funds is allowable

  • Review effort requirements were met

  • Commitment from management to meet matching requirements

Compliance & Internal Controls

H. Period of Availability of Federal Funds

  • Only cost resulting from obligations incurred during the funding period may be charged to the award

  • Test transactions charged after the award expired

  • Mechanisms for identifying awards about to expire

Compliance & Internal Controls

I. Procurement, Suspension & Debarment

  • Purchases are made in compliance with A-110

  • Contracts are not made with entities or individuals that have been suspended or disbarred

  • University has existing codes of conduct

Compliance & Internal Controls

J. Program Income

Gross income received that is directly generated by the federally funded project during the grant period

  • Verify income is added to the budget

  • Verify income was properly accounted for

Compliance & Internal Controls

K. Real Property Acquisition & Relocation Assistance

  • Equitable treatment if property is acquired

Compliance & Internal Controls

L. Reporting

  • Financial -Recipients should use standard financial reporting forms

  • Performance -at least annually must submit actual accomplishments compared to goals

  • Special Reporting -as required by the agency

Compliance & Internal Controls

M. Subrecipient Monitoring

  • Ensure Compliance with Federal requirement

  • Reasonable assurances that subrecipients obtain required audits

Subrecipient Monitoring

  • Subrecipient monitoring is a requirement in both OMB Circular A-110 and OMB Circular A-133

  • Get your PIs involved in reviewing progress reports and invoices

Subrecipient Reports

  • Flow-down requirements make subs responsible for reporting

  • Final reports must incl. prime and subs

  • Subaward reports must be submitted prior to due date for reports to sponsor

  • PI (prime) approves reports (technical and program)

  • Subs should be closed before prime

Keys to Good Subrecipient Monitoring

  • Write a good subaward document that includes a clear SOW.

  • ORAA uses the Federal Audit Clearinghouse to assess whether your subrecipient would be considered high risk

  • Think of yourself as a sponsor—make sure invoices certified by the subrecipient’s authorized official

Approving the Subaward Invoice

  • Have the PI sign the invoice (or provide an email) authorizing the payment.

  • Sample statement for PI authorization:

    • In signing below I approve payment of this invoice and attest that the charges appear reasonable, and progress to date on this project is satisfactory and in keeping with the statement of work.

Compliance & Internal Controls

N. Special Tests & Provisions

  • Student Financial Assistance

  • Federal Work Study

  • Loans

Types of Audits

  • Pre-award ($1mil or greater)

  • Financial Statement

  • OMB A-133

  • Program

  • Disclosure Statement

  • F&A Cost Proposal

  • Procurement System Review

  • Property System Review

Surviving an Audit

  • Question: When do you begin preparing for an audit?

  • Answer: The day you submit the proposal!

Documents Required for Audit

  • Copy of Agreement

  • Proof of Salary Approval

  • Copies of ALL invoices paid on the account

    • Include P.O. if required for purchase

  • Cost Sharing Documentation

    • Cost Sharing worksheet/account

    • Don’t forget to include F&A on salaries/fringe benefits

Documents Required for Audit

  • Effort Reports

    • Must match payroll charges – caution when preparing transfers

  • Sub-Awards

    • Copy of award

    • Copy of report or deliverable from sub.

    • Copy of approved final invoice

Documents Required for Audit

  • Reconciliation Documentation

    • Proof that the charges were reviewed

    • Are charges valid

    • Are encumbrances correct

    • Have recipients been paid

Key to Successful Audit

  • Organized Files

  • Documentation for expenses

  • Appropriate Approvals

  • Audit Trails

  • Knowledge of policies and regulations

Transfer of Expenses

  • “Transfer(s) must be supported by documentation that contains a full explanation of how the error occurred...”

  • “An explanation that merely states ‘to correct error’ or ‘to transfer to correct project’ is not sufficient.”

  • “It should be noted that frequent errors in the recording of costs may indicate the need to review the accounting system and/or internal controls.” (DHHS Grants Manual)


  • Document! Document! Document!When transfers are required — “Defend the Debit”

    • Auditors want to know why the award was charged for the expense

Auditor Management

  • Don’t assume the auditor has basic knowledge of regulations

  • Understand all auditors questions

  • If you are not sure - check it out

  • Don’t ramble or provide additional information

  • Keep track of questions and responses

  • Accompany the auditors when they speak to PI

Recent UM Audit Findings

  • Cost price analysis for reasonability of costs on “subcontract” only

  • Lack of documentation on Subawards

  • Expense Transfers missing complete explanations of why/how the error occurred

  • Charging Administrative salaries to awards not in the sponsor approved budget

  • Equipment on loan from federal government not in inventory system

Possible Consequences for Noncompliance

  • Corrective Actions

  • Additional Special Award Terms and Conditions

  • Loss of Expanded Authorities

  • Cost Disallowance and Repayment

  • Termination of Award

  • Civil and/or Criminal Violations and Imposed Penalties

Words to the Wise

“If you don’t like being audited by an auditor, you will really dislike being audited by an angry auditor.”NCURA



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