Introduction: Materiality by Compliance Requirement Matrix Planning Federal Materiality by Compliance Requirement See Footnotes 1-6 below the matrix table for further explanation, in particular, review note 6 which discusses tailoring the matrix assessments. (1) (2) (6) (6) (3) (4) (5) (5) (6) Compliance Requirement Applicable per Compl. Suppl. Direct & material to program / entity Monetary or nonmonetary If monetary, population subject to require. Inherent risk (IR) assess. Final control risk (CR) assess. Detection risk of noncompl. Overall audit risk of noncompl. Federal materiality by compl. requirement (Yes or No) (Yes or No) (M/N) (Dollars) (High/Low) (High/Low) (High/Low) (High/Low) typically 5% of population subject to requirement A Activities Allowed or Unallowed Yes M 5% B Allowable Costs/Cost Principles Yes M 5% C Cash Management Yes N 5% D RESERVED E Eligibility Yes M/N 5% F Equipment & Real Property Mgmt Yes M 5% G Matching, Level of Effort, Earmark Yes M 5% H Period of Availability (Performance) Yes M 5% I Procurement & Sus. & Debarment Yes N 5% J Program Income Yes M 5% K RESERVED L Reporting Yes N 5% M Subrecipient Monitoring No – See Note In Section N Special Tests & Provisions – Wage Rate Requirements Yes N 5% N Special Tests & Provisions – Maximum Per-Unit Subsidy and Underwriting Requirements Yes N 5% N Special Tests & Provisions – Drawdowns of HOME Funds Yes N 5% N Special Tests & Provisions – Housing Quality Standards Yes N 5%
The requirements for the development and submission of indirect (facilities and administration (F&A)) cost rate proposals and cost allocation plans (CAPs) are contained in as follows: Appendix III to Part 200—Indirect (F&A) Identification and Assignment and Rate Determination for Institutions of Higher Education (IHEs) Appendix IV to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations Appendix V to Part Government-Wide Central Service Cost Allocation Plans Appendix VI to Part 200—Public Assistance Cost Allocation Plans Appendix VII to Part 200—States and Local Government and Indian Tribe Indirect Cost Proposals Except for the requirements identified under “Basic Guidelines,” which are applicable to all types of non-Federal entities, this compliance requirement is divided into sections based on the type of entity. The differences that exist are necessary because of the nature of the non-Federal entity organizational structures, programs administered, and breadth of services offered by some non-Federal entities and not others. (Source: 2017 OMB Compliance Supplement 3.2) Agency Codification Adjustments/Exceptions: HUD, DOT, and EPA have not made any adjustments or exceptions that directly impact references within this compliance requirement. Basic Guidelines Except where otherwise authorized by statute, cost must meet the following general criteria in order to be allowable under Federal awards; 1. Be necessary and reasonable for the performance of the Federal and be allocable thereto under the principles in. 2. Conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. 3. Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. 4. Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. 5. Be determined in accordance with generally accepted accounting principles (GAAP), except, for and local governments and Indian tribes only, as otherwise provided for in 2 CFR part 200. 6. Not be included as a cost or used to meet cost-sharing or matching requirements of any other federally financed program in either the current or a prior period. 7. Be adequately documented. Selected Items of Cost
Suggested Compliance Procedures – De Minimis Indirect Cost Rate Note: The following subsections identify requirements specific to each type of entity. Suggested Audit Procedures – Compliance (Substantive Tests) (Reference / link to documentation where testing was performed testing): The following suggested audit procedures apply to any non-Federal entity using a de minimis indirect cost rate, whether as a recipient or a subrecipient. None of the procedures related to indirect costs in the sections organized by type of non-Federal entity apply when a de minimis rate is used. Consider the results of the testing of internal control in assessing the risk of noncompliance. Use this as the basis for determining the nature, timing, and extent (e.g., number of transactions to be selected) of substantive tests of compliance. 1. Determine that the non-Federal entity has not previously claimed indirect costs on the basis of a negotiated rate. Auditors are required to test only for the three fiscal years immediately prior to the current audit period. 2. Test a sample of transactions for conformance with . a Select a sample of claims for reimbursement of indirect costs and verify that the de minimis rate was used consistently, the rate was applied to the appropriate base, and the amounts claimed were the product of applying the rate to a modified total direct costs base. b Verify that the costs included in the base are consistent with the costs that were included in the base year, i.e., verify that current year modified total direct costs do not include costs items that were treated as indirect costs in the base year. 3. For a non-Federal entity conducting a single function, is predominately funded by Federal awards, determine whether use of the de minimis indirect cost rate resulted in the non-Federal entity double-charging or inconsistently charging costs as both direct and indirect.