What you need to know • The US Office of Management and Budget has proposed streamlining its grant guidance and issuing a single document. • The proposal also would allow new grantees to use a minimum flat indirect cost rate for a few years and provide new opportunities for certain grantees to simplify the reporting needed to support salary charges. It also may lead to more robust subrecipient monitoring. • Other proposed changes include streamlining the Circular A-133 compliance audit to focus on areas of waste, fraud and abuse, raising the audit threshold to $750,000 and increasing the Type A/B program threshold to $500,000. • Comments are due by 2 June 2013. Overview The US Office of Management and Budget (OMB) is seeking comment on broad revisions to its guidance for federal awards. The proposal, Proposed OMB Uniform Guidance: Cost Principles, Audit and Administrative Requirements for Federal Awards, would streamline and consolidate eight existing OMB documents and regulations into one document. The proposed guidance would supersede the following OMB Circulars: • A-133, Audits of States, Local Governments and Non-Profit Organizations • A-21, Cost Principles for Educational Institutions • A-87, Cost Principles for State, Local, and Indian Tribal Governments • A-102, Awards and Cooperative Agreements with State and Local Governments No. 2013-08 22 April 2013 Technical Line OMB — proposed guidance In this issue: Overview ........................................... 1 Key changes for grant recipients ....... 2 Cost principles ................................ 2 Administrative requirements........... 5 Audit requirements......................... 6 Reporting on the Schedule of Expenditures of Federal Awards... 8 Indirect effects on grant recipients .... 8 Circular A-133 audit threshold would increase to $750,000 ....... 8 Changes to the major program determination process ................ 8 Percentage of coverage changes... 10 Criteria for low-risk auditee ........... 10 No more deviation from use of risk criteria to select major programs ........................ 10 Reduction in types of compliance requirements to be tested ......... 11 Audit findings ............................... 12 Appendix A: The proposed guidance.. 13 Appendix B: Summary of proposed A-133 audit changes and effects on recipients ................................ 14 Changes proposed to federal grant policies
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Ernst & Young Technical Line OMB Grant Guildelines 04 22 2013
The US Office of Management and Budget has proposed streamlining its grant guidance and making other changes aimed at increasing the effectiveness and efficiency of federal programs.
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What you need to know • The US Office of Management and Budget has proposed streamlining its grant
guidance and issuing a single document.
• The proposal also would allow new grantees to use a minimum flat indirect
cost rate for a few years and provide new opportunities for certain grantees
to simplify the reporting needed to support salary charges. It also may lead to
more robust subrecipient monitoring.
• Other proposed changes include streamlining the Circular A-133 compliance
audit to focus on areas of waste, fraud and abuse, raising the audit threshold
to $750,000 and increasing the Type A/B program threshold to $500,000.
• Comments are due by 2 June 2013.
Overview The US Office of Management and Budget (OMB) is seeking comment on broad
revisions to its guidance for federal awards.
The proposal, Proposed OMB Uniform Guidance: Cost Principles, Audit and
Administrative Requirements for Federal Awards, would streamline and consolidate
eight existing OMB documents and regulations into one document. The proposed
guidance would supersede the following OMB Circulars:
• A-133, Audits of States, Local Governments and Non-Profit Organizations
• A-21, Cost Principles for Educational Institutions
• A-87, Cost Principles for State, Local, and Indian Tribal Governments
• A-102, Awards and Cooperative Agreements with State and Local Governments
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13 22 April 2013 Technical Line Changes proposed to federal grant policies
Appendix A: The proposed guidance The proposed guidance can be found on OMB’s website at www.whitehouse.gov/omb/grants_docs#proposed.
Other documents available on the website that could be helpful include:
• Federal Register notice
• Crosswalk from existing to proposed guidance
• Crosswalk from proposed guidance to predominant source in existing guidance
• Administrative Requirements Text Comparison
• Cost Principles Text Comparison
• Audit Requirements Text Comparison
• Definitions Text Comparison
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14 22 April 2013 Technical Line Changes proposed to federal grant policies
Appendix B: Summary of proposed A-133 audit changes and effects on recipients
Entities with federal expenditures < $750,000 Entities with less than $3 million in federal
expenditures (1)
Entities with
$3 million - $50 million in federal expenditures
Entities with more than $50 million in federal
expenditures A-133 Revision Topic Expenditures
material to entity Expenditures not material to entity
Threshold for A-133 audit
Eliminates A-133 audit, but audit effort for federal grant revenue recognition and to assess the risk related to unallowable costs will continue to be needed for entities that continue to have their financial statements audited. Likely savings will relate to elimination of A-133 reporting and data collection form, and possibly from focusing audit efforts directly on the impact of material misstatement on the financial statements taken as a whole rather than on a particular program.
Eliminates A-133 audit, but audit effort for federal grant revenue recognition and to assess the risk related to unallowable costs may still be needed as amounts become more material. Savings from elimination of A-133 reporting and data collection form.
No direct effect, but may affect subrecipient monitoring process as noted below.
Threshold for A-133 audit (continued)
Elimination of A-133 audit for subrecipients below the proposed $750,000 threshold, and other proposed changes may affect monitoring of grantees. The scope of the A-133 audit for larger subrecipients could change depending on whether the programs are audited as major programs at the subrecipient level. A robust subrecipient monitoring process for smaller grantees will continue to be required.
Elimination of A-133 audit for subrecipients below the proposed $750,000 threshold, and other proposed changes may affect monitoring of grantees that will continue to be required. The scope of the A-133 audit for larger subrecipients could change depending on whether the programs are audited as major programs at the subrecipient level. A robust subrecipient monitoring process for smaller grantees will continue to be required.
Threshold for Type A/B programs to $500,000
No direct effect, may affect subrecipient monitoring. May reduce total number of Type A programs, which can reduce audit effort.
Little effect but may reduce total number of Type A programs.
Likely little effect for the largest entities.
Effect of loans and loan guarantees on Type A/B threshold for grantees with Student Financial Assistance (SFA) loan programs where loan-related amounts are less than 50% of the SFA cluster
No direct effect, may affect subrecipient monitoring. No increase to Type A/B threshold with likely no effect on audit effort.
Would increase Type A/B threshold and decrease audit effort for grantees such as community colleges where annual SFA cluster amounts reported are currently greater than four times the largest non-loan program.
Would not change Type A/B threshold and not affect audit effort for grantees where annual SFA cluster amounts reported are currently not greater than four times the largest non-loan program.
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15 22 April 2013 Technical Line Changes proposed to federal grant policies
Entities with federal expenditures < $750,000 Entities with less than $3 million in federal
expenditures (1)
Entities with
$3 million - $50 million in federal expenditures
Entities with more than $50 million in federal
expenditures A-133 Revision Topic Expenditures
material to entity Expenditures not material to entity
Change in criteria of a finding that requires high-risk designation in a Type A program in the following year
No direct effect, may affect subrecipient monitoring. Would likely result in fewer high-risk Type A programs and reduce audit effort at the margin but would allow for more informed judgments on programs that merit audit effort. Entities with dominant federal programs that have to be audited each year to achieve coverage would see little impact.
Likely would decrease high-risk Type A programs and reduce audit effort at the margin but allow for more informed judgments on programs that merit audit effort.
Reduction in coverage percentages
No direct effect, may affect subrecipient monitoring. Audit effort could decline for some entities. Those with dominant federal programs would likely see no change.
Audit effort would likely decline.
Change in selection of high-risk Type B programs
No direct effect, may affect subrecipient monitoring. Audit effort would decrease for entities where auditor is required to perform Type B program risk assessments.
Stop Type B program risk assessment process upon meeting 1/4 threshold
No direct effect, may affect subrecipient monitoring. Audit effort would decrease for entities where auditor is required to perform Type B program risk assessments.
No program risk assessments/testing on small Type B programs < 25% of Type A/B program threshold
No direct effect, may affect subrecipient monitoring. Audit effort would decrease for entities where auditor is required to perform Type B program risk assessments.
Criteria for low-risk auditee, a key determinant in % of coverage testing floor
No direct effect, may affect subrecipient monitoring. Audit effort would increase in specific situations.
Change in compliance testing criteria from 14 to 7
No direct effect, may affect subrecipient monitoring. Effect on audit effort would likely be minimal for most programs, but effort required to document non-applicable compliance requirements would be eliminated.
(1) Effect would be similar for larger entities whose schedule of expenditures of federal awards contains or is dominated by a single or a few major programs.