Source: https://clintonwhitehouse2.archives.gov/OMB/circulars/a133_compliance/98/PT7.html
Timestamp: 2019-03-25 05:19:20
Document Index: 707766053

Matched Legal Cases: ['art 3', 'art 5', 'art 5', 'art 5', 'art 3', 'art 1']

Purpose - OMB Circular A-133 (§__.500(d)(3)) states that for those Federal programs not covered in the compliance supplement, the auditor should use the types of compliance requirements (see 14 types of compliance requirements described in Part 3) contained in the compliance supplement (this Supplement) as guidance for identifying the types of compliance requirements to test, and determine the requirements governing the Federal program by reviewing the provisions of contract and grant agreements and the laws and regulations referred in such contract and grant agreements.
Part 5 enumerates those programs that are considered to be clusters of programs as defined by OMB Circular A-133 (§__.105). A cluster of programs means Federal programs with different Catalog of Federal Domestic Assistance (CFDA) numbers that are defined as a cluster of programs because they are closely related programs and share compliance requirements. Part 5 identifies research and development (R&D) and Student Financial Aid (SFA) as clusters, as well as certain other clusters. Also, Part 5 identifies other clusters of programs that are not yet included in this Supplement.
For programs not included in this Supplement, the auditor must determine the applicable compliance requirements. While a Federal program may have many compliance requirements, normally there are only a few key compliance requirements that could have a direct and material effect on the program. Since the single audit process is not intended to cover every compliance requirement, this Supplement and the auditor's focus should be on the 14 types of compliance requirements enumerated in Part 3. The following are suggested procedures to assist the auditor in making this determination.
1. What are the program objectives, program procedures, and compliance requirements for a specific program?
2. Which of the compliance requirements could have a direct and material effect on the program?
3. Which of the compliance requirements are susceptible to testing by the auditor?
4. Into which of the 14 types of compliance requirements does each compliance requirement fall?
5. For Special Tests and Provisions, what are the applicable audit objectives and audit procedures?
a. Discuss the program with the non-Federal entity and, if necessary, the Federal agency or, in the case of a subrecipient, the pass-through entity.
b. Review the contract and grant agreements and referenced laws and regulations applicable to the program, including any amendments or closeout agreements. The documents or agreements may identify the name and telephone number of a Federal contact person or, if a subaward, the contact person for the pass-through entity whom the auditor may wish to contact for additional information.
c. Review the Catalog of Federal Domestic Assistance (CFDA). The CFDA provides summary information about each program and includes the name and telephone number of a Federal contact person. A searchable copy of the CFDA is available through the Internet on the GSA Home Page (http://www.gsa.gov/fdac).
d. For audits of Public and Indian Housing Authorities, the auditor should refer to the separate supplement issued by HUD, as described in Part 1, Background, Purpose, and Applicability.
e. If there is a program-specific audit guide or other audit guidance issued by the Federal agency's Office of Inspector General (OIG), the auditor may wish to consider this guidance in identifying the program objectives, program procedures, and compliance requirements. The availability of program audit guides can be determined by consulting the President's Council on Integrity & Efficiency (PCIE) publication, Revised Program Audit Guide Listing (available from the Government Printing Office) or by contacting the appropriate Regional OIG.
f. Consider other audit guidance, including previously issued guidance, pertaining to the program that has continuing relevance.
Noncompliance could cause the Federal agency, or pass-through entity in the case of a subrecipient, to take action, such as seeking reimbursement of all or a part of the award and suspending the recipient's or subrecipient's participation in the program.
- It is likely that the auditor could document the noncompliance in a manner that: (1) permits the Federal or pass-through entity to take action, or (2) gives the Federal or pass-through entity an early warning to initiate a monitoring visit or other contact with the non-Federal entity.
- The Federal or pass-through entity does not otherwise have information that verifies compliance.
A. Activities Allowed or Unallowed almost always applies to Federal programs. The auditor should look at the program requirements and Federal award documents for what constitutes allowable or unallowable activities.
B. Allowable Costs/Cost Principles almost always applies since most Federal programs have charges for goods or services. However, if a program only involves benefits to eligible recipients, with no administrative costs, purchases of goods or services (including salaries and overhead), or allocated costs, then allowable costs may not apply.
C. Cash Management almost always applies to Federal programs. An exception would be a Federal award that operates on a cost reimbursement basis only with no cash being advanced.
D. Davis-Bacon Act only applies as required by the Act itself, the Department of Labor's (DOL) governmentwide implementation of the Davis-Bacon Act, or by Federal program legislation, for construction contracts in excess of $2000 financed by Federal funds. The auditor should review award documents to determine whether the Davis-Bacon Act applies.
E. Eligibility applies to most Federal programs which provide benefits to individuals, groups of individuals, or make subawards. For programs with eligibility requirements, the auditor should review the program laws, regulations, and provisions of contract or grant agreements to determine the specific eligibility requirements. Eligibility involves not only individuals but also possibly groups of individuals, geographical areas, or subrecipients. Additionally, the auditor should consider whether continuing, as well as initial, eligibility requirements apply. Furthermore, eligibility involves both who is eligible and the amount of benefits provided to the eligible.
F. Equipment and Real Property Management requirements applies to Federal programs which purchase equipment or real property.
G. Matching, Level of Effort, Earmarking is not universal, and, if applicable, would be specific to the Federal program and often the non-Federal entity. Therefore, the auditor will have to review the laws, regulations, contract or grant agreements applicable to the program to determine specific requirements for matching, level of effort, and/or earmarking.
H. Period of Availability of Federal Funds almost always applies to Federal programs. The contract or grant agreement applicable to the program often indicates the period during which the funds are available for obligation under the program. The auditor should also look for program requirements regarding carry-over of unused funds to future funding periods, and whether pre-award costs are allowable, to what extent, and under what circumstances.
I. Procurement and Suspension and Debarment applies any time the entity procures goods or services. Suspension and debarment applies to both procurements and subawards.
J. Program Income applies to any program that generates program income (primarily related to the disposition of the income). Program regulations or the contract or grant agreements applicable to the program may specify additional criteria.
K. Real Property Acquisition and Relocation Assistance only applies as required by the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) for payments to persons displaced from their homes, businesses, or farms by federally-assisted programs. While this requirement only applies to a few programs, when it does apply, it is generally a significant aspect of the program. For example, the U.S. Department of Transportation (DOT) funds many programs to construct highways in which real property acquisition and relocation assistance is a significant part of the program activities. The U.S. Department of Housing and Urban Development has the most transactions subject to the URA and the DOT has the most Federal dollars affected.
L. Reporting almost always applies to Federal programs. However, often the Federal agency, with OMB Paperwork Reduction Act approval, or the pass-through entity has developed its own forms for financial reporting in addition to or in lieu of the standard Federal financial reports. The auditor should determine whether the standard reports are used, and if not, what forms are used to report the same or similar information. The auditor should be aware that reporting may include electronic submissions for which there may be no physical document.
M. Subrecipient Monitoring applies when Federal awards are passed through to a subrecipient. If the entity is not a pass-through entity, this requirement does not apply.
N. Special Tests and Provisions includes those compliance requirements that do not fit the description of the types of compliance requirements discussed above. These will generally be the most difficult type of compliance requirement to identify because, by definition, they are unique to each program. In addition to reviewing the program's contract and grant agreements and referenced laws and regulations, the auditor should also make inquires of the non-Federal entity to help identify and understand Special Tests and Provisions.