This presentation was delivered at NADO's 2018 Annual Training Conference, held in Charlotte, NC on October 13-16. For more information, visit: https://www.nado.org/events/2018-annual-training-conference/

1. Coping with Federal Grant
Oversight
NADO Annual Training Conference
October 15, 2018
Presented by Bob Lloyd
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2. Here’s Looking at You, Kid!
• Monitoring
--- Federal agencies—prime recipients
--- Pass-through entities—subrecipients
--- Pass-through entities—contractors
• Auditing
--- Federal audits
--- Non-federal audits
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3. Scope of Reviews
• Financial
• Compliance
• Economy and efficiency
• Program results
• Records retention and access (2 CFR
200.333)— All “records pertinent to a Federal
award”
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4. Federal Monitoring
• Permissive (2 CFR 200.328(e))— Federal agency “may
make site visits as warranted by program needs.”
• Absence of specific standards
• Impact of Government Performance and Results Act
(GPRA)
• Federal site visit checklist examples
--- FTA
--- HUD
--- DOJ
• Desk reviews
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5. Pass-through Entity Monitoring
• What to expect (2 CFR 200.331 d-f)
• Pass-through entity must monitor activities of
subrecipients as necessary to ensure compliance
and performance
--- Review of financial and performance reports
--- Correction of identified deficiencies
--- Issuance of management decisions on relevant
audit findings
--- Verify single audit compliance through use of the
Federal Audit Clearinghouse
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6. Pass-through Entity Monitoring
• Optional steps
--- Provide training and technical assistance
--- Perform on-site reviews
--- Arrange agreed-upon procedures audits of
entities that are not required to arrange for a
single audit
• Contract administration (2 CFR 200.318(b))
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7. Auditing
• Auditing Standards
--- Generally Accepted Government Auditing
Standards (GAGAS) aka “the Yellow Book.”
--- Generally Accepted Auditing Standards (GAAS)
--- Attestation Standards
• Key Elements
--- Independence
--- Qualifications
--- Due Professional Care
--- Quality Control
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8. Federal Audit Policy Affecting Grants
• Federal Audits
--- Authority
----- Budget and Accounting Act of 1921
----- Inspector General Act of 1978
--- Offices of Inspectors General
----- Required reliance on non-federal audits
--- Independent auditors under contract to OIG’s
--- Government Accountability Office
• Non-federal Audits
--- Single Audit Act of 1984
--- Subpart F, 2 CFR 200 (supersedes OMB Circular A-133)
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9. Federal Audits
• Setting audit priorities
--- Vulnerability
--- Requirement of statute or regulation
--- Management request or emphasis
--- Newness, changed conditions
--- Dollar magnitude
--- Prior audit experience
--- Extent of federal participation
--- Availability of audit resources
--- Availability of other audit reports
• www.ignet.gov
--- Annual audit plans
--- Semi-annual reports to Congress
--- Audit report archives
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10. State Audits
• Independent State Auditors
• CPA’s under contract to State Auditors
• General reliance on GAAS and GAGAS
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11. Single Audits
• Scope
--- Accuracy of financial statements and
Schedule of Expenditures of Federal Awards
(SEFA)
--- Evaluation of internal controls over financial
reporting, assets, and compliance
--- Compliance with laws, regulations, and award
terms that could have a direct and material
effect on federal claims
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12. Single Audits
• Auditor’s determination of major programs
--- Dollar size (2 CFR 200.518)
--- Audit risk (2 CFR 200.519)
• Audit testing
--- Importance of the OMB Compliance Supplement
--- The “Cliff’s Notes of Grant Administration”
--- 12 required compliance areas
--- Suggestions for testing methods
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13. Cost Allowability
• Federal audits--2 CFR 200.503(d)
--- “Full cost” borne by federal agency
• Non-federal audits—2 CFR 200.425
--- No “back door” single audits
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14. Resolution Activities
• Communication during field work
• Meaningful discussion at exit conference
• Written response to draft report
• Full text of response in final report
• Self-directed corrective action plan
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15. Results of Oversight
• Monitoring reports
--- Findings
--- Concerns
• Audit reports
--- Opinions
--- Reports
--- Standards for findings
• Management letters
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16. Types of Findings
• Fraud
• Illegal acts
• Noncompliance
• Internal control
--- Material weakness
--- Significant deficiency
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17. Questioned Costs
• Unallowable (2 CFR 200.403, 2 CFR 200.420-
475)
• Unreasonable (2 CFR 200.404)
• Unapproved (when required) (2 CFR 200.407)
• Unsupported (2 CFR 200.403)
--- Audit standards of evidence
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18. Attributes of Findings
• Federal program and award identification
• Criteria
• Condition found
• Cause
• Asserted effect
• Questioned costs, if any
• Perspective
• Repeat finding
• Recommendation
• Views of management
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19. Follow-up and Resolution
• Management decisions (PL 100-504, 2 CFR
200.521)
• Corrective action plans (2 CFR 200.511(c))
• Summary schedule of prior audit findings (2
CFR 200.511(b))
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20. Your Response
• Are they correct?
• If yes, concur or partially concur
• Don’t wait for a management decision
• “Lead the parade” to fix the problem
• Formulate your own corrective action plan
• Focus on the cause
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21. Your Response
• Are they wrong?
• Substandard conduct of review
--- Departure from standards
• Sample size
--- Isolated incident vs. systemic problem
• “Deconstructing” findings
• Faulty interpretation
--- Multiple valid interpretations
--- Silence
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22. Your Response—On Non-compliance
• Good faith effort/Reasonable belief
• Procedural vs. substantive
• Mitigating facts and circumstances
• Little or no harm to awarding agency
• No past adverse impact on program or
beneficiaries
• Potential future adverse impact on program or
beneficiaries
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23. Your Response—On Internal Control
• Changes to policies and procedures
• Reinforcement of existing policies and
procedures
• Training
• Sanctions
• Remedies related to “lower tier” organizations
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24. Questions
• Now
• Later
--- Bob Lloyd
--- consultlloyd@aol.com
--- Telephone: (864) 235-8680
--- Fax: (864) 235-1465
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