The U.S. Office of Management and Budget (OMB) has issued an addendum titled “Compliance Supplement Addendum #1”1 to the OMB document called “OMB Circular A-133 Compliance Supplement March 2009.”2 Organizations need to be aware of the information in the addendum and use it in conjunction with other parts and appendixes of the supplement to determine the appropriate compliance requirements for each program that spends awards related to the American Recovery and Reinvestment Act of 2009 (ARRA).3 Organizations also need to be familiar with the OMB’s new supplemental reporting guidance for using ARRA funds.
The Addendum
The addendum is effective for audits of fiscal years beginning after June 30, 2008 (that is, for June 30, 2009, single audits and year-end audits thereafter), where the organization has expended ARRA funds. The changes in Part 5, “Clusters of Programs,” described below, are particularly important for the audit.
All information in the addendum that is new or in addition to the text in the “OMB Circular A-133 Compliance Supplement March 2009” is identified by being in bold type.
Updated Matrix of Compliance Requirements
The addendum includes an updated Part 2, “Matrix of Compliance Requirements,” which shows new ARRA programs, new clusters, and pre-existing programs that now are associated with ARRA under pre-existing Catalog of Federal Domestic Assistance (CFDA) numbers. The applicable compliance requirements are identified.
Additional Guidance for Certain Types of Compliance Requirements
The addendum includes additional guidance to Part 3, “Compliance Requirements,” covering allowed or unallowed activities, the
Davis-Bacon Act, procurement, suspension and debarment, reporting, monitoring of subrecipients, and special tests and provisions.
New Program Sections
Part 4 of the addendum updates the supplement with the addition of new ARRA programs or revised program sections. Among the U.S. agencies that issued new program sections are the Department of Education, the Department of Homeland Security, the Department of Housing and Urban Development, the Department of Labor, and the Environmental Protection Agency.
Revised Clusters for the Effect of ARRA Programs
The guidance in Part 5 of the addendum includes critical information about how ARRA programs are to be clustered during the audit. These changes will have an effect on the process for determining which programs will be audited as major programs.
Further, guidance is provided on ARRA funds for the Federal Pell Grant Program (FPG) and the Federal Work-Study Program (FWS) in that ARRA disbursements relating to these programs were made without separate identification of ARRA portions to institutions. Therefore, since it is not possible for organizations to separately identify ARRA expenditures for these programs, the addendum states that all expenditures for FPG and FWS programs should be reported as part of the Student Financial Assistance cluster under CFDA numbers 84.063 and 84.033, respectively.
Additional General Guidance for Internal Control
Of special interest to auditors, Part 6, “Internal Control,” has been revised to emphasize several points relating to internal control test work related to each major program with ARRA funding. This section emphasizes the need for strong internal controls over these programs. Ensuring that ARRA-funded programs comply with federal laws, regulations, and program compliance requirements is the responsibility of the organization and will be a significant focus for auditors.
New Reporting Guidance
In June 2009, the OMB issued a document titled “Implementing Guidance for the Reports on Use of Funds Pursuant to the American Recovery and Reinvestment Act of 2009.” 4 The new guidance supplements the reporting guidance described in Section 1512 of ARRA for recipients of grants, loans, and other forms of assistance. It goes into great detail about the reporting for both prime recipients (defined as nonfederal entities that receive ARRA funding as federal awards in the form of grants, loans, or cooperative agreements directly from the federal government) and subrecipients (defined as nonfederal entities that are awarded ARRA funding from the prime recipient through a legal instrument to support the performance of the substantive project or program for which the prime recipient received ARRA funding).
Several key points that organizations should be aware of:
- The first required reporting is due 10 days after Sept. 30, 2009 (Oct. 10, 2009), and will not be covered as part of June 30, 2009, single audits. However, the reporting requirements outlined in Section 1512 of ARRA are applicable from the date of the enactment of ARRA. Therefore, the first required reporting will include not only activity for the quarter that ends Sept. 30, 2009, but also any activity that occurred for the quarter that ended June 30, 2009. In other words, the first reporting submission will be cumulative for both quarters.
- ARRA may contain additional recipient reporting responsibilities (beyond those in Section 1512) that are specific to certain federal programs. Recipients will have to comply with any reporting as outlined in the award agreement, which might result in the submission of similar data to the federal awarding agency.
- Prime recipients (as defined above) of all federal programs identified in Supplement 1 to the implementing guidance titled 'List of Programs Subject to Recipient Reporting'5 are required to report.
- A number of required reporting elements are described in Section 2 of the document (specifically in question 2.3). For prime recipients, they include, among other things, information about received and expended ARRA awards, project descriptions, job creation information, and the top five recipient officers’ names and compensation. Section 5 of the document includes information on preparing job creation estimates. Prime recipients also have to report three additional data elements associated with any vendors receiving funds for any payments greater than $25,000. Exceptions are provided for subrecipient payments of less than $25,000.
- Reports will be submitted through a new Web site: www.FederalReporting.gov. Submitted reports will be made public through www.Recovery.gov and on individual federal agency Web sites.
John C. Weber, CPA, is a partner with Crowe Horwath LLP in the Oak Brook, Ill., office. He can be reached at 630.706.2099 or
john.weber@crowehorwath.com.
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