Recently, the Office of Management and Budget released its Memorandum M-10-14 (OMB Memorandum) updating guidance on the American Recovery and Reinvestment Act (“ARRA”).
In addition to providing guidance to Federal agencies and recipients regarding Section 1512 reporting and addressing certain administrative/technical considerations, some of the provisions of the Memorandum will also affect Single Audits that do not involve ARRA funding, including the suspension of Single Audit filing extensions for 2009-2011 and the impact that a late Single Audit filing will have on low-risk auditee status.
Of specific interest is the following:
- Federal agencies will no longer be granting extensions to auditees for late Single Audits filed with the Federal Audit Clearinghouse for 2009-2011.
- Federal agencies will expect that late Single Audit submissions filed by an auditee in either one of the past two prior years will preclude a low-risk auditee status
- Question 7 of the Memorandum addresses steps federal agencies should take regarding the oversight and accountability of ARRA funding.
- Question 7 indicates that, due to the importance of the Single Audit process and the reliance of Federal agencies on the audit results to monitor the accountability of ARRA programs, Federal agencies should not grant any extension requests to auditees for fiscal years 2009 through 2011. We have interpreted this to include all auditees – not only those who have received ARRA funding.
- Question 7 also indicates that, in order to meet the criteria for a low-risk auditee in the current year, the two prior years’ audits must have met the requirements of OMB Circular A-133, including report submission to the Federal Audit Clearinghouse by the due date. (OMB A-133, Section 320, requires that the Single Audit and related reporting package be submitted within the earlier of 30 days of receipt after the auditor’s report, or, nine months after the end of the audit period.) (Note: in our experience, the filing requirement of “within the earlier of 30 days of receipt of the auditor’s report” is oftentimes overlooked by auditees).
- Of particular interest here is that the loss of low-risk auditee status will directly affect the amount of audit attention auditees will receive. Specifically, auditors are required to test (as major) federal programs comprising at least 25% of an auditee’s federal expenditures for low-risk auditees; auditors of non low-risk auditees are required to test (as major) federal programs comprising at least 50% of an auditee’s federal expenditures.
- The Memorandum instructs Federal agencies to focus on audit findings. To this end, the Federal Audit Clearinghouse will begin to summarize audit findings by type of non-compliance for all ARRA programs beginning with Single Audits for fiscal years ended September 2009 and later. Federal agencies are expected to take action on such findings and expedite review/resolution within six months following the report submission. Federal agencies are also expected to consider performing more monitoring, inspections, or audits for grantees identified as having the highest risk.
- We believe that, as a result of the above, all auditees can expect a more rigorous Federal response to Single Audit findings than they may have experienced in the past.
If you have any questions about Office of Management and Budget M-10-14 , please contact your ParenteBeard advisor.