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Index GSA-CX-1.5: Single Audit and Major Program Determination Worksheet Entity:

Financial Statement Date:

Completed by:

Date:

Important Information About Changes to the Single Audit Process. In December 2013, OMB released final guidance on administrative requirements, cost principles, and audit requirements for federal awards. The final guidance, which is in 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 changes mandated by the Uniform Guidance, especially as they relate to award recipients, are extensive. Among other matters of specific applicability to auditors, changes in the Uniform Guidance include (1) increasing both the single audit threshold and the minimum threshold for Type A/B program determination to $750,000, (2) changing the criteria for determining high-risk Type A programs, (3) reducing the number of high-risk Type B programs that must be tested as major programs, (4) revising the Type B small program floor, (5) reducing the percentage of coverage requirement for both low-risk auditees and those who are not low risk, (6) revising the criteria for low-risk auditee status, (7) referring to the compliance supplement for identification of principal compliance requirements, and (8) increasing the threshold for reporting findings. Effective Dates. The Uniform Guidance has multiple effective dates: ¯ Federal agencies must implement policies and procedures through regulations to be effective December 26, 2014. ¯ Award recipients have to implement the new administrative requirements and the cost principles for all new federal awards made after December 26, 2014, and for funding increments to existing awards after that date. ¯ The audit requirements become effective for fiscal years beginning on or after December 26, 2014; early implementation by auditors is not permitted. Therefore, the first single audits performed under the new audit guidance will be those for entities with years ending December 31, 2015. Transition Considerations. Recipients with fiscal years ending after the effective date, for example, March 30, 2015, June 30, 2015, or September 30, 2015, will have to implement the new administrative requirements and cost principles for all new federal awards or funding increments to existing federal awards made after December 26, 2014. Thus, awards could be subject to two different sets of requirements—awards existing at December 26, 2014, that do not have incremental funding after that date would be subject to the previous administrative requirements and cost principles. New awards made after December 26, 2014, or existing awards that have incremental funding after that date would be subject to the Uniform Guidance. Although auditors would continue to follow the previous audit requirements for years ending before December 26, 2015, the audit could be affected by the need to test awards that are subject to different requirements. For years ending on or after December 26, 2015, all new administrative requirements, cost principles, and single audit requirements would be applicable. Because of the delayed effective date for audit requirements, the practice aids in this Guide have not been updated for the new audit requirements. Section 112 provides additional information about the Uniform Guidance. Important Information About the American Recovery and Reinvestment Act of 2009. The American Recovery and Reinvestment Act of 2009 (Recovery Act) continues to have significant implications for single audits. Important considerations related to the 2014 Compliance Supplement include the following: ¯ Appendix VII of the 2014 Compliance Supplement provides important information about the removal of Recovery Act programs from clusters. It notes that Appendix V describes selected Recovery Act programs that GSA-CX-1.5

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35

Index were deleted from Parts 4 and 5 of the 2014 Compliance Supplement based on their completion or limited amount of funds still subject to audit. However, if an entity has federal awards expended from these programs, they would be treated consistent with any other programs not included in the 2014 Compliance Supplement or not part of a cluster of programs. For example, (1) the program would not be considered as part of a cluster for periods covered by the 2014 Compliance Supplement, as the 2014 Compliance Supplement does not include the program in a cluster; and (2) if the program was part of a cluster which was audited as a major program in a prior year, the normal OMB Circular A-133 major program selection criteria and risk-based approach would apply and the program would be considered as audited in that prior year for purposes of major program determination, including consideration of any audit findings. See Appendix VII and the discussion about identifying major programs in section 404. ¯ Numerous Recovery Act programs that are subject to an audit under OMB Circular A-133 are not included in the OMB Circular A-133 Compliance Supplement. Appendix VII of the 2014 Compliance Supplement lists the CFDA number, program name, and federal grantor for those excluded programs. Appendix VII also identifies five Recovery Act programs that are not subject to an OMB Circular A-133 audit and are not required to be included in the Schedule of Expenditures of Federal Awards or in the determination of major programs. ¯ Recovery Act Section 1512 reporting requirements were deleted from the 2014 Compliance Supplement for all programs because the federal government’s Fiscal Year 2014 Omnibus Spending Bill repealed Section 1512 reporting as of February 1, 2014. ¯ Because Recovery Act expenditures are winding down, the guidance on the effect of those expenditures on the determination of major programs was removed from Appendix VII of the Compliance Supplement. Important Information about Proposed Compliance Supplement Revisions for 2015. Appendix VII of the 2014 Compliance Supplement discusses changes OMB plans to make to the 2015 Compliance Supplement. Certain changes would be based on past findings and the potential impact of noncompliance for each type of compliance requirement. See section 109 for further discussion of the proposed changes. Instructions 1. You need to be familiar with the concepts in this Guide before using this worksheet. The worksheet can be used for the following purposes. ¯ Part I—Preliminary step—information gathering on the accompanying Financial Awards Worksheet. ¯ Part II—Determining if a single or program-specific audit is required. ¯ Part III—Determining if the auditee is a low-risk auditee. ¯ Part IV—Determining major programs. ¯ Part V—Determining which programs tests of controls and compliance tests are to be performed for. To assist auditors in determining major programs, “low-risk auditee status,” and appropriate compliance requirements, objectives, and audit procedures, PPC offers a software product called PPC’s SMART Practice Aids—Single Audit (SMART Single Audit). SMART Single Audit also prepares the schedule of expenditures of federal awards. It can be obtained by calling (800) 431-9025. 2. Complete all parts if a Single Audit is being performed. If the client receives governmental financial awards but is not sure if a Single Audit is required, complete Parts I and II. 3. Section references [Sec.] throughout the form are to OMB Circular A-133 (Gov. Doc. No. 8 in PPC’s Government Documents Library) unless noted otherwise. GSA-CX-1.5 (Continued)

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Index 4. Sec. 520(g) and Sec. 520(h) of the Circular state that when the major program determination is performed and documented in accordance with Sec. 520, the auditor’s judgment in applying the risk-based approach shall be presumed correct. Challenges by federal and pass-through entities shall only be for clearly improper use of the guidance. The authors believe proper use of this practice aid, including reasonable explanations, will satisfy this requirement. Part I—Preliminary Step—Information Gathering Complete (or have the client complete) Columns 1–8 on the accompanying Financial Awards Worksheet (Worksheet) by program. When completing (or reviewing) the form, be sure Recovery Act awards are reported separately in accordance with the most current OMB guidance. (This is necessary even if the Recovery Act funds were awarded for an existing program and a new CFDA number has not been assigned.) 1. If possible, group programs of the same federal agency or department consecutively; e.g., the Department of Education has a bilingual education program and a handicapped school program. Such grouping will make the information more convenient to use. 2. The CFDA No. in Column 2 is the identification number in the Catalog of Federal Domestic Assistance. (See the CFDA listings at the CFDA website at www.cfda.gov.) If the program is not listed in the CFDA, review the grant agreement or contact the grantor agency. If a CFDA No. is not available, see the instructions for the data collection form, discussed in section 1008. 3. The program name in Column 3 should include the prefix “ARRA-” for Recovery Act awards. 4. The grant ID number in Column 5 may be found in the client’s records, grant agreements or contracts, etc. 5. Columns 6 and 7 should include federal financial assistance and federal cost-reimbursement contracts. Column 6 is optional information; however, many auditors believe the first step in auditing expenditures is to determine the total award amount. They include federal awards made directly by federal awarding agencies or indirectly by recipients of federal awards or subrecipients, e.g., state or local grantor agencies. The direct recipient of federal awards is responsible for identifying the source of funds awarded to subrecipients. [Sec. 105] Federal financial assistance may be in the form of grants, loans, loan guarantees, property (including donated surplus property), cooperative agreements, interest subsidies, insurance, food commodities, direct appropriation, and other assistance received for the purpose of administering a federal program. It does not include direct federal cash assistance to individuals or procurement contracts (under grants or contracts used to buy goods or services from vendors). [Sec. 105] A discussion on determining the amount of federal awards expended is provided at section 205. 6. The Financial Awards Worksheet and the determination of major programs should be based on actual expenditures, and not budgeted or appropriated amounts. If interim, budgeted, or other amounts are used when initially preparing this form, recheck the form at year end and consider whether the answers are still appropriate. Also consider whether audit adjustments affect any of the conclusions reached. 7. If the audit is biennial, the worksheet would be for the two-year period. Part II—Determine the Need for a Single or Program-specific Audit 1. Insert the total federal awards expended for all federal programs (i.e., the grand total of Column 7 from the accompanying Financial Awards Worksheet). $ Practical Consideration: ¯ Management of an auditee that owns or operates a federally funded research and development center (FFRDC) may elect to treat the FFRDC as a separate entity for determining audit requirements. [Sec. 200(e)]

GSA-CX-1.5 (Continued)

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Index 2. Does the amount in Step 1 equal or exceed $500,000? [Sec. 200(b)] YES

Go to Step 3.

NO

An audit in accordance with OMB Circular A-133 is not required. It is not necessary to complete this worksheet.

3. Are all federal awards (those listed on the Worksheet) under one federal program or a single cluster of programs? [Sec. 200(c)] YES

Go to Step 4.

NO

A Single Audit is required. Go to Part III.

4. Do the federal program laws, regulations, contracts, or grant agreements require a financial statement audit? [Sec. 200(c)] YES

A Single Audit is required. Place a checkmark in Column 11 of the Worksheet and go to Part III. It is not necessary to complete Part IV of this worksheet. However, Part V should be performed.

NO

Go to Step 5.

Practical Considerations: ¯ Since there is only one program (one CFDA number), it is considered a major program. If the program has more than one amount (for example, a loan and an expended amount), each of the amounts should be checked. ¯ While not necessary for determining that the program is a major program for single audit purposes, completion of the following steps is necessary for completing the Data Collection Form: (These steps can be completed at this time or when the Data Collection Form is being completed.) ¯¯ Determine if the auditee is a low-risk auditee. This can be done by completing Part III. ¯¯ Determine the dollar threshold that would be used to distinguish Type A and Type B programs (if such a distinction were necessary) for determining major programs. This can be done by completing Part IV, “Federal Awards,” steps 1 and 3.

5. Are the awards in Step 3 R&D awards? [Sec. 200(c)] YES

Go to Step 6.

NO

Go to Step 8.

6. Are the R&D awards in Step 3 received from one federal agency or one federal agency and one pass-through entity? [Sec. 200(c)] YES

Go to Step 7.

NO

A program-specific audit is not permitted. Place a checkmark in Column 11 of the Worksheet and go to Part III. It is not necessary to complete Part IV of this worksheet. However, Part V should be performed.

7. Has the federal agency or the pass-through entity approved in advance a program-specific audit? [Sec. 200(c)] YES

Go to Step 8.

NO

Since a program-specific audit is not permitted without prior approval, a Single Audit is required. Place a checkmark in Column 11 of the Worksheet and go to Part III. It is not necessary to complete Part IV of this worksheet. However, Part V should be performed. GSA-CX-1.5 (Continued)

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Index 8. Has the auditee elected to have a program-specific audit? [Sec. 200(c)] YES

The auditee has elected to have a program-specific audit. Place a checkmark in Column 11 of the Worksheet and go to Part III. It is not necessary to complete Part IV of this worksheet. However, Part V should be performed.

NO

Since the auditee has not elected to have a program-specific audit, a Single Audit is required. Place a checkmark in Column 11 of the Worksheet and go to Part III. It is not necessary to complete Part IV of this worksheet. However, Part V should be performed.

Practical Consideration: ¯ Even though it meets the criteria in the preceding steps for having a program-specific audit, the auditee may elect a program-specific audit or a Single Audit. Chapter 9 of this Guide provides guidance for program-specific audits.

COMMENTS:

Part III—Determining If the Auditee Is a Low-risk Auditee To be eligible for a reduced threshold for testing of major programs (see Part IV, “Federal Awards,” Step 15), an entity must qualify as a “low-risk auditee.” In some instances, whether an auditee qualifies as a low risk auditee does not affect the determination of major programs because the results of Steps 1–11 under “Federal Awards” in Part IV identify sufficient major programs to meet the higher 50% (versus 25% for low-risk auditees) percentage of coverage rule. However, OMB representatives have indicated that for purposes of preparing the summary of auditor’s results and answering the question in the Data Collection Form at Part III, Item 3, regarding whether the auditee qualified as a low-risk auditee, such a determination needs to be made in all instances, including in a program-specific audit. Yes 1. An entity is considered a low-risk auditee if it meets ALL of the following criteria for each of the previous two years (or, in the case of biennial audits, the previous two audit periods). Once a question is answered “No” (and a waiver is not available), no additional questions need be answered. The answer to Step 2 is “No.” [Secs. 530 and 320(a); 2014 Compliance Supplement, Appendix VII] a. Single audits were performed in accordance with the provisions of OMB Circular A-133. (An entity that has biennial audits does not qualify as a low-risk entity, unless agreed to in advance by the cognizant or oversight agency for audit.) [Sec. 530(a)] COMMENTS: b. The auditor’s opinions on the financial statements and the schedule of expenditures of federal awards were unmodified, or if either or both were modified, the cognizant or oversight agency for audit has judged that the opinion modification does not affect management of federal awards and has provided a waiver. [Sec. 530(b)] COMMENTS:

GSA-CX-1.5 (Continued)

No

N/A

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39

Index Yes

No

N/A

c. The auditor’s Yellow Book report on internal control did not identify any deficiencies in internal control over financial reporting as material weaknesses or if material weaknesses were identified, the cognizant or oversight agency for audit has judged that the material weaknesses do not affect the management of federal awards and has provided a waiver. [Sec. 530(c)] COMMENTS: d. None of the federal programs had audit findings from any of the following in either of the preceding two years (or, in the case of biennial audits, the preceding two audit periods) in which they were classified as Type A programs: [Sec. 530(d)] (If there were no Type A programs in either year, these questions are N/A and do not need to be answered for Type B programs.) (1) Material weaknesses in internal controls over compliance. (2) Noncompliance with the provisions of laws, regulations, contracts, or grant agreements that have a material effect on the Type A programs. (3) Known or likely questioned costs that exceed 5% of the total federal awards expended for a Type A program during the year of the findings. COMMENTS: e. The reporting package and data collection form for each of the two previous years were submitted to the Federal Audit Clearinghouse by the due date. [Sec. 320(a); 2014 Compliance Supplement, Appendix VII] COMMENTS: Practical Considerations: ¯ OMB Memorandum M-10-14, “Updated Guidance on the American Recovery and Reinvestment Act,” dated March 22, 2010, states, “In order for an entity to be considered a low-risk auditee in the current year, the prior two years audits must have met the requirements of OMB Circular A-133, .320).” including report submission to the FAC by the due date (OMB Circular A-133 § Appendix VII to the 2014 Compliance Supplement clarifies that this consideration began with audits covered by the 2010 Compliance Supplement. Audit procedures for determining whether previous submissions were made on a timely basis are provided at GSA-AP-1, Step 6, and GSA-AP-2, Step 19. ¯ Sec. 320(a) of OMB Circular A-133 requires the reporting package and data collection form to be submitted to the Federal Audit Clearinghouse the earlier of 30 days after the reports are received from the auditors or nine months after the end of the audit period, unless a longer period of time was agreed to in advance by the cognizant or oversight agency for audit. The Federal Audit Clearinghouse considers the submission requirement complete when it has received the electronic submission of both the data collection form and the reporting package. According to footnote 6 to Paragraph 8.27 of the GAS/A-133 AICPA Audit Guide, federal agencies are generally no longer granting extensions. However, the OMB granted an extension until March 31, 2014, for all fiscal year 2013 audit packages due on or before March 31, 2014. The extension was automatic and no approval was required. ¯ As this Guide went to press, the Federal Audit Clearinghouse was not yet able to accept submissions for fiscal periods ending in 2014. Auditors should monitor the Clearinghouse website for a change in submission status and for additional information from OMB about an expected extension to due dates for 2014 submissions.

GSA-CX-1.5 (Continued)

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Index Yes

No

N/A

¯ Although the reporting package and data collection form would be technically late if not filed within 30 days after the reports are received from the auditors, the OMB appears to focus on only the nine-month filing requirement for determining whether the auditee can be considered low risk. Based on the authors’ discussion with AICPA staff, the date for the 30-day filing requirement is not tracked by the Federal Audit Clearinghouse and, thus, would be difficult to test. The authors recommend that, except for data collection forms affected by the 2013 or 2014 automatic extension, when faced with a situation where an auditee has met the nine-month filing requirement but not the 30-day filing requirement (if earlier), the auditor consult with the cognizant agency about whether the auditee could be considered low-risk.

2. Does the auditee qualify as a low-risk auditee? (Indicate “Yes” or “No.”) Part IV—Determining Major Programs Completion of Part IV is not necessary if all federal awards are expended under one federal program or a single cluster of programs. (The program or cluster should have a check mark in Column 11 of the Worksheet.) Definitions. 1. Federal program means: [Sec. 105] a. All federal awards to a non-federal entity assigned a single number in the CFDA. b. When no CFDA number is assigned, all federal awards from the same agency made for the same purpose would be combined and considered one program. c. Notwithstanding a. and b., a cluster of programs. 2. Cluster of Programs—A grouping of closely related programs that share common compliance requirements. The types of clusters are research and development, student financial assistance, and other clusters as may be defined in Part 5 of the Compliance Supplement or as designated by a state for federal awards the state provides to its subrecipients. Note: All programs in a cluster are evaluated together under the risk-based approach to determining major programs included in Section 520 of OMB Circular A-133. Thus, if selected as a major program, all individual programs that the entity has within the cluster are tested as a major program. The expenditures of the individual programs are totaled by cluster (Column 7 in the Worksheet) when determining Type A and Type B programs. A cluster may be either a Type A or Type B program. (See Part IV, “Federal Awards,” Step 3.) Practical Considerations: ¯ Appendix VII of the 2014 Compliance Supplement provides important information about the removal of certain Recovery Act programs from clusters. It notes that Appendix V describes selected Recovery Act programs that were deleted from Parts 4 and 5 of the 2014 Compliance Supplement based on their completion or limited amount of funds still subject to audit. However, if an entity has federal awards expended from these programs they would be treated consistent with any other programs not included in the 2014 Compliance Supplement or not part of a cluster of programs. For example: (1) the program would not be considered as part of a cluster for periods covered by the 2014 Compliance Supplement, as the 2014 Compliance Supplement does not include the program in a cluster; and (2) if the program was part of a cluster which was audited as a major program in a prior year, the normal OMB Circular A-133 major program selection criteria and risk-based approach would apply and the program would be considered as audited in that prior year for purposes of major program determination, including consideration of any audit findings. See Appendix VII and the discussion about identifying major programs in section 404. ¯ Appendix VII of the 2014 Compliance Supplement provides important information about the treatment of National Science Foundation (NSF) awards. Effective for proposals due on or after January 14, 2013, all awards issued by the NSF meet the definition of “Research and Development” (R&D) at OMB Circular A-133, Section 105. As such, auditees should identify NSF awards as part of the R&D cluster on the SEFA and the auditor should use the R&D cluster in Part 5 when testing any of those awards. There will be a transition period (probably 4 years) when SEFAs will include both awards funded previous to this change in approach and awards made subsequent to it. Previously funded awards may be identified on the SEFA at the auditee’s discretion, but awards resulting from proposals due on or after January 14, 2013 must be included in the SEFA as part of the R&D cluster.

GSA-CX-1.5 (Continued)

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Index Federal Awards. 1. Calculate the basis for determining Type A programs. [Sec. 520] a. Insert the total federal awards expended (the total from Column 7 on the accompanying Financial Awards Worksheet)

$

b. Subtract large loan and loan guarantee programs (and clusters that include large loan and loan guarantee programs) included in a. [Sec. 520(b)(3)] c. Net amount

$

Practical Considerations: ¯ To determine which federal programs are to be audited as major programs, the auditor should first identify federal programs as being either Type A or Type B. Federal awards expended for purposes of determining Type A and Type B programs are the amount of cash and noncash awards, after all adjustments are made, in the final current-year schedule of expenditures of federal awards. (If the prior-year schedule or preliminary current-year estimates are used to plan the audit, the auditor would recalculate the threshold for Type A programs based on the final amounts to ensure that awards are properly classified as Type A or B.) ¯ OMB Circular A-133 states at Sec. 520(b)(3) that the “inclusion of large loan and loan guarantees (loans) should not result in the exclusion of other programs as Type A programs. When a Federal program providing loans significantly affects the number or size of Type A programs, the auditor shall consider this Federal program as a Type A program and exclude its values in determining other Type A programs.” Prior to the issuance of the 2010 Compliance Supplement, the OMB did not provide guidance on what might be considered a “large” loan or loan guarantee program. Appendix VII of the 2014 Compliance Supplement clarifies the issue by providing a “safe harbor” for treatment of large loan and loan guarantee programs that auditors may consider using when determining Type A programs. The safe harbor establishes a presumption that only changes in the number or size of Type A programs caused by excluding individual loan and loan guarantee programs that are greater than four times the largest non-loan program are significant. Thus, unless a program with loans or loan guarantees exceeds four times the largest non-loan program, (1) the program with the loans or loan guarantees is not considered large and (2) auditors do not have to subtract the program with the loans or loan guarantees (in Step 1. b.) when determining the Type A program threshold (Step 3). Thus, if a loan or loan guarantee program is part of a cluster, the entire cluster should be subtracted from total awards expended at Step 1.b. and be considered a Type A program. Appendix VII provides examples of the safe harbor computation. Auditor judgment is needed in applying a safe harbor and it is important to have a good understanding of the client’s particular facts and circumstances. The authors recommend that if the auditor chooses not to subtract a program that exceeds the safe harbor computation, he or she clearly document why including the program does not result in excluding other programs as Type A programs. ¯ If the audit is biennial, the determination of Type A and Type B programs should be based upon the federal awards expended during the two-year period. [Sec. 520(b)(4)]

2. For each loan and loan guarantee program at Step 1.b., place an “A” in Column 9 of the Worksheet. For loan or loan guarantee programs at Step 1.b. that are part of a cluster, place an “A” in Column 9 of the Worksheet for all programs in the cluster. Practical Considerations: ¯ OMB Circular A-133 at Section 520(b)(3) states that all loan and loan guarantees excluded from the base (subtracted at Step 1.b.) should be considered Type A programs. The discussion in Appendix VII of the 2014 Compliance Supplement regarding the safe harbor for treatment of large loan and loan guarantee programs reminds auditors that a cluster is treated as one program. Thus, if a loan or loan guarantee program is part of a cluster, the entire cluster is subtracted from total awards expended at Step 1.b. and considered to be a Type A program. Appendix VII provides examples of the safe harbor computation. ¯ If a program (one CFDA number or cluster) has more than one amount listed on the Worksheet (for example, a loan and an expended amount), place an “A” in Column 9 for each amount.

GSA-CX-1.5 (Continued)

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Index 3. Complete (and check) either step a., b., c., or d. depending on the amount at Step 1.c. [Sec. 520(b)] a. If the amount at Step 1.c. is $300,000 or less, there are no Type A programs among the programs included in the Step 1.c. amount; i.e., all are Type B programs. Place a “B” in Column 9 of the Worksheet for all such programs. b. If the amount at Step 1.c. is greater than $300,000 but is $10 million or less, Type A programs are the programs included in the Step 1.c. amount with total program expended funds (Column 7 of the Worksheet) that exceed $300,000. The remaining programs (included in the Step 1.c. amount) are Type B. For each of these programs, place an “A” or “B,” as appropriate, in Column 9 of the Worksheet. c. If the amount at Step 1.c. is greater than $10 million but is $100 million or less, Type A programs are those included in the Step 1.c. amount with total program expended funds (Column 7 of the Worksheet) equal to or greater than 3% ( .03) of the amount at Step 1.c. ($ times .03 equals $ ). The remaining programs (included in the Step 1.c. amount) are Type B. For each of these programs, place an “A” or “B,” as appropriate, in Column 9 of the Worksheet. d. If the amount at Step 1.c. is greater than $100 million, see Section 520(b)(1) of OMB Circular A-133 and make the determination accordingly. For each program, place an “A” or “B” as appropriate, in Column 9 of the Worksheet. Practical Considerations: ¯ As defined in Part IV, “Definitions,” Step 2, clusters of programs are closely related programs that share common compliance requirements. While each individual program has its own CFDA number, the expenditures of these programs are totaled by cluster (Column 7 in the Worksheet) when determining Type A and Type B programs. ¯ The single audit threshold for fiscal years ending after December 31, 2003, was increased from $300,000 to $500,000. However, the minimum Type A program threshold continues to be $300,000.

4. Based on Steps 2 or 3, is there at least one Type A program? YES

Go to Step 5.

NO

Place a check mark in Column 10 of the Worksheet for all programs and go to Step 11.

5. Does the auditor have the option to waive use of the risk criteria for determining major programs? [Sec. 520(i)] YES

Go to Step 6.

NO

Go to Step 7.

COMMENTS:

Practical Consideration: ¯ An auditor has the option to waive use of the risk criteria for the first year the entity is audited pursuant to OMB Circular A-133 or for the first year after a change in auditors except the election may not be made more than once every three years. [Sec. 520(i)]

GSA-CX-1.5 (Continued)

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Index 6. Does the auditor elect to waive use of the risk criteria? [Sec. 520(i)] YES

Place a check mark in Column 10 of the Worksheet for all Type B programs, a check mark in Column 11 for all Type A programs, and go to Step 11.

NO

Go to Step 7.

COMMENTS:

Practical Consideration: ¯ OMB Circular A-133 provides for use of the waiver when the conditions are met, but the auditor has the option of electing or not electing the waiver. [Sec. 520(i)]

7. Has a federal agency notified the auditee (or the auditor) that one or more of the Type A programs may not be considered a low-risk program? [Sec. 520(c)(2)] YES

Place a check mark in Column 11 on the accompanying Financial Awards Worksheet indicating that the programs for which such a notification has been received must be audited as a major program. Go to Step 8.

NO

Go to Step 8.

COMMENTS:

Practical Considerations: ¯ OMB may approve a federal awarding agency’s request that a Type A program at certain recipients not be considered low-risk. The federal agency shall notify the recipient and, if known, the auditor at least 180 days prior to the end of the fiscal year to be audited of OMB’s approval. [Sec. 520(c)(2)] ¯ Appendix VII of the 2014 Compliance Supplement provides important information about the removal of certain Recovery Act programs from clusters. It notes that Appendix V describes selected Recovery Act programs that were deleted from Parts 4 and 5 of the 2014 Compliance Supplement based on their completion or limited amount of funds still subject to audit. However, if an entity has federal awards expended from these programs they would be treated consistent with any other programs not included in the 2014 Compliance Supplement or not part of a cluster of programs. For example: (1) the program would not be considered as part of a cluster for periods covered by the 2014 Compliance Supplement, as the 2014 Compliance Supplement does not include the program in a cluster; and (2) if the program was part of a cluster which was audited as a major program in a prior year, the normal OMB Circular A-133 major program selection criteria and risk-based approach would apply and the program would be considered as audited in that prior year for purposes of major program determination, including consideration of any audit findings. See Appendix VII and the discussion about identifying major programs in section 404. ¯ Previous editions of the Compliance Supplement indicated that Recovery Act awards generally could not be considered low-risk, even if they otherwise met the low-risk criteria under Sec. 520(c) of OMB Circular A-133. However, this guidance was removed from the 2014 Compliance Supplement, which is effective for fiscal years beginning after June 30, 2013.

8. Are any of the remaining Type A programs (those not checked at Step 7) low-risk programs? [Sec. 520(c)(1)] The authors recommend that GSA-CX-1.6 be used as a practice aid in determining whether a program or programs can be considered low-risk. YES

For Type A programs considered low-risk, place a check mark in Column 10 of the accompanying Financial Awards Worksheet. For Type A programs not considered low-risk, place a check mark in Column 11. Go to Step 9.

NO

For each of the remaining Type A programs, place a check mark in Column 11. Go to Step 9.

COMMENTS:

GSA-CX-1.5 (Continued)

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Index 9. Review Type B programs for high-risk programs: a. If no Type A programs were determined to be low-risk programs at Step 8, check here mark in Column 10 of the Worksheet for all Type B programs, and go to Step 11.

, place a check

Practical Consideration: ¯ Based on Sec. 520(e)(2), it is not necessary to test (as a major program) more Type B programs than the number of Type A programs not tested because they are determined to be low-risk.

b. The auditor is required to perform risk assessments for all or selected Type B programs that exceed an amount stipulated (small program floor) in OMB Circular A-133. Based on Sec. 520(d)(2), the Type B programs that are subject to being selected for testing are those that exceed the cut-off amount computed as follows. Complete (and check) either step (1), (2), (3), or (4) depending on the amount from Step 1.a. (1) If the amount at Step 1.a.($ ) is $33,333,333 or less, all Type B programs with awards expended that exceed $100,000. (2) If the amount at Step 1.a.($ ) is more than $33,333,333 but is $100 million or less, all Type B programs with awards expended greater than .3% (.003) of the amount at Step 1.a. ($ times .003 equals $ ). (3) If the amount at Step 1.a. ($ ) is more than $100 million but is $1 billion or less, all Type B programs with awards expended that exceed $300,000. (4) If the amount at Step 1.a. ($ ) is more than $1 billion, all Type B programs with awards expended equal to or greater than .03% (.0003) of the amount at Step 1.a. ($ times .0003 equals ($ ). c. Are there any Type B programs that exceed the cut-off amount (small program floor) computed at Step 9.b.? YES

Place a check mark in Column 10 of the accompanying Financial Awards Worksheet for all Type B programs that do not exceed the cut-off amount and go to Step 9.d.

NO

Place a check mark in Column 10 of the accompanying Financial Awards Worksheet for all Type B programs and go to Step 11.

d. From the programs that exceed the cut-off amount (small program floor) in the preceding step, determine the number of programs that have to be assessed and determine if the programs selected are high-risk. The authors recommend that the assessment(s) be made and documented by completing an GSA-CX-1.7, for each program for which an assessment is required. (1) If the auditor elects to follow Option 2 [Sec. 520(e)(2)], perform high-risk assessments for selected programs until the number of programs that have to be tested as major have been identified. Because specific guidance on assessing Type B programs with expenditures of Recovery Act awards was removed from the 2014 Compliance Supplement, there is no longer a requirement as to which Type B program(s) have to be assessed. Once the required number of high-risk Type B programs has been identified, it is not necessary to assess others. (2) If the auditor elects to follow Option 1 [Sec. 520(e)(2)], Sec. 520(d)(1) indicates that risk assessments are to performed for all of the programs identified at Step 9.b. GSA-CX-1.5 (Continued)

GSA 6/14

45

Index Practical Considerations: ¯ The auditor is not required to justify the option selected. Also, the selection of an option is made annually, and no justification is required for a change in the selected option. ¯ The number of Type B programs identified at Step 9 that have to be audited as major programs may be identified under either of the following two options [Sec. 520(e)]: ¯¯ Option 1: At least one half of the Type B programs identified as high-risk must be audited as major programs, except that the number selected to be audited as a major program in this step need not exceed the number of low-risk Type A programs identified at Step 8. [For example, if there are four high-risk Type B programs and one low-risk Type A program, only one of the four high-risk Type B programs must be selected for audit as a major program. If there are five high-risk Type B programs and no low-risk Type A program, none of the five high-risk Type B programs must be selected for audit as a major program.] ¯¯ Option 2: One high-risk Type B program for each Type A program identified as low-risk at Step 8. ¯ OMB encourages using an approach that provides an opportunity for different high-risk Type B program to be audited as major over a period of time. [Sec. 520(e)(2)(ii)]

10. Based on the assessment(s), are any of the Type B programs considered high-risk? [Sec. 520(d)] YES

For Type B programs considered high risk, select those to be audited as major programs and place a check mark in Column 11 on the accompanying Financial Awards Worksheet. For all Type B programs not to be audited as major programs, place a check mark in Column 10. Go to Step 11.

NO

For all remaining Type B programs, place a check mark in Column 10 on the accompanying Financial Awards Worksheet. Go to Step 11.

After Step 10, all programs should have a check mark in Column 10 or 11 (not both) of the accompanying Financial Awards Worksheet. 11. Has a federal agency requested the auditee to have a particular program audited as a major program that has not already been selected as a major program, confirmed that it wants the program to be audited as a major program, and agreed to pay the full incremental costs to have the program audited as a major program? [Sec. 215(c)] YES

Place a check mark in Column 11 of the accompanying Financial Awards Worksheet (instead of Column 10) for any programs that meet this criteria. Go to Step 12.

NO

Go to Step 12.

Practical Consideration: ¯ A federal agency may request to have a particular program audited as a major program in lieu of the agency conducting or arranging for additional audits (e.g., financial audits, performance audits, evaluations, inspections, or reviews). Such requests have to be made at least 180 days prior to the end of the fiscal year to be audited. The auditee, after consultation with its auditor, should promptly inform the agency whether the program would otherwise be audited as a major program using the risk-based audit approach described in Sec. 520 and, if not, the estimated incremental costs of auditing it as a major program. The federal agency is required to promptly confirm to the auditee whether it wants the program audited as a major program and agrees to pay the full incremental costs. In such circumstances, the program should be audited as a major program. [A pass-through entity may apply the provisions of Sec. 215(c) for a subrecipient.]

GSA-CX-1.5 (Continued)

46

GSA 6/14

Index 12. Calculate the basis for the 50% coverage rule: a. Insert the amount of total federal program awards expended; i.e., the grand total of Column 7 of the Financial Awards Worksheet.

$

b. 50% of a.

$

c. Total the amount of federal program awards expended for all programs with a check mark in Column 11.

$

13. Do the programs with a check mark in Column 11 equal or exceed 50% of the total federal programs awards expended (that is, does line 12.c. exceed line 12.b.)? [Sec. 520(f)] YES

Go to Part V. Also see the discussion at paragraph 404.36.

NO

Go to Step 14.

COMMENTS:

14. Does Part III, Step 2, indicate that the auditee qualifies as a low-risk auditee? (This Question should be answered only if the answer to Question 13 is “No.”) YES

Go to Step 15.

NO

Go to Step 18.

COMMENTS:

15. Calculate the basis for the 25% coverage rule: a. Insert the amount from Step 12.a.

$

b. Enter 25% of a.

$

c. Insert the amount from Step 12.c.

$

16. Do the programs with a check mark in Column 11 of the Financial Awards Worksheet equal or exceed 25% of the total federal program awards expended (that is, does Step 15.c. exceed Step 15.b.)? YES

Go to Part V.

NO

Go to Step 17.

COMMENTS: 17. Select programs with a check mark in Column 10 of the Financial Awards Worksheet and place a check mark in Column 11 until the programs with a check mark in Column 11 total at least the amount at Step 15.b. Go to Part V. [Sec. 520(f)] Practical Consideration: ¯ In selecting additional programs to meet the 25% requirement, some auditors may choose from the programs, if any, identified as high-risk at Step 9 that have not previously been selected for testing. Other auditors may choose to rotate the programs selected

GSA-CX-1.5 (Continued)

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47

Index from year to year as suggested (but not required) by OMB. Because of the requirement that a Type A program cannot be considered low-risk if it has not been audited as a major program at least once in the two most recent audit periods, it may, in some instances, be desirable to select low-risk Type A programs, especially if they were not audited as major programs in the prior audit period and they are expected to be Type A programs next year. Other factors that the auditor may want to consider when selecting additional major programs include: ¯¯ The auditor’s knowledge of the programs. ¯¯ Whether the programs are included in the OMB Circular A-133 Compliance Supplement. ¯¯ The size of the programs (since larger programs will provide more coverage under the percentage of coverage rule, but may not be as efficient to audit). ¯¯ Any auditee requests that particular programs be selected as major programs.

18. Select programs with a check mark in Column 10 of the Financial Awards Worksheet and place a check mark in Column 11 until the programs with a check mark in Column 11 total at least the amount at Step 12.b. Go to Part V. [Sec. 520(f)] Practical Consideration: ¯ In selecting additional programs to meet the 50% requirement, some auditors may choose from the programs, if any, identified as high-risk at Step 9 that have not previously been selected for testing. Other auditors may choose to rotate the programs selected from year to year as suggested (but not required) by OMB. Because of the requirement that a Type A program cannot be considered low-risk if it has not been audited as a major program at least once in the two most recent audit periods, it may, in some instances, be desirable to select low-risk Type A programs, especially if they were not audited as major programs in the prior audit period and they are expected to be Type A programs next year. Other factors that the auditor may want to consider when selecting additional major programs include: ¯¯ The auditor’s knowledge of the programs. ¯¯ Whether the programs are included in the OMB Circular A-133 Compliance Supplement. ¯¯ The size of the programs (since larger programs will provide more coverage under the percentage of coverage rule, but may not be as efficient to audit). ¯¯ Any auditee requests that particular programs be selected as major programs.

Part V—Tests of Controls and Compliance Tests Tests of controls (except as discussed in section 603, when internal control over some or all of the compliance requirements for a major program has not been implemented or is likely to be ineffective) and compliance tests must be performed for all programs with a check mark in Column 11 (major programs) of the Financial Awards Worksheet.

GSA-CX-1.5 (Continued)

GSA-CX-1.5 (Continued)

CFDA or Other No.a

Name of Agency or Departmenta

3 Name of Programa

Total Financial Awards, All Programs

2

1 Name of Grant

4 Grant I.D. No.

5 Total Awards Expended

............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. .............

........... ........... ........... ........... ........... ........... ........... ........... ........... ........... ........... ........... ........... ........... ........... ........... ........... ........... ........... ...........

7

Award Amount

6

9 Type Program (A or B)

8 Last Year Audited as a Major Programb

Single Audit and Major Program Determination Worksheet Financial Awards Worksheet 10 Nonmajor Program

Major Program

11

48 GSA 6/14

b

a

Indicate the last year the program was audited as a major program. See GSA-CX-1.6, Step 1.

Note: As this Guide went to press, the Federal Audit Clearinghouse was not yet able to accept submissions for fiscal periods ending in 2014. Auditors should monitor the Clearinghouse website for a change in submission status and for additional information from OMB about an expected extension to due dates for 2014 submissions.

IMPORTANT NOTE ABOUT THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009: The American Recovery and Reinvestment Act of 2009 (Recovery Act) requires federal award recipients to separately report expenditures of Recovery Act funds on the schedule of expenditures of federal awards and the data collection form. The separate reporting requirement relates not only to new programs but also to existing programs that have expenditures of Recovery Act awards. Part 176 of CFR Title 2 [2 CFR part 176.210(b)] states that the separate reporting should be accomplished by including the prefix “ARRA-” in identifying the name of the federal program on the SEFA and as the first characters in Item 9d of Part III on the SF-SAC. However, the 2013–2015 data collection form accomplishes this by providing a box in column 6g of Part III to insert “Y” for Yes or “N” for No to indicate whether the program was funded with Recovery Act awards. If a CFDA program involves the expenditures of both Recovery and non-Recovery Act funding, each must be listed on a separate line. The 2013–2015 data collection form must be used for audits of periods ending in 2013, 2014, or 2015.

Notes:

GSA 6/14 49

GSA-CX-1.5 (Continued)