Federal Programs and Uniform Guidance Compliance

November 3, 2016 — The Uniform Guidance Rules issued on December 26, 2014 made it even more critical for federal program administrators to maintain proper internal controls when implementing a federal program. Failure to do so could result in compliance issues and identified deficiencies if a single audit is ever required.

When considering what your organization can do to help track its federal programs and ensure the proper internal controls are in place, it’s helpful to know the common deficiencies organizations run into. Below is a list of some of the more common deficiencies found during single audits as well as general recommendations for what organizations can do to help prevent them.

Allowable Cost Deficiencies:

• Problem: Inadequate support or lack of support for time and effort reporting
  • Solution: Time and effort reporting should always be supported by ‘after-the-fact’ determination, documentation of time spent by employee, and by cost objective.
• Problem: Costs claimed are for ineligible or unallowable costs per the federal program or grant agreement
  • Solution: Prior to submitting a claim, all costs should be checked for allowability under the Uniform Guidance standards and to the grant agreement specifications. Additionally, any costs incurred or personnel charged to the grant should be traced back to the grant agreement letter to ensure the costs claimed are for allowable activities.

Reporting/Fiscal Management Deficiencies:

• Problem: Claims made by an auditee are in excess of eligible costs or don’t agree with supporting accounting records
  • Solution: Prior to submitting a claim, reconcile all claims filed with the general ledger. Also, keep track of grant budgets to actuals incurred to ensure claims are not made in excess of eligible costs.
• Problem: Costs claimed do not have supporting documentation (although they may agree with the accounting records)
  • Solution: Prior to submitting a claim, ensure supporting documentation is on file for all costs included in the claim.

Eligibility Deficiencies:

• Problem: The organization failed to perform eligibility checks of participants within its federal programs, or did not keep supporting records of these eligibility checks.
  • Solution: Ensure there are proper internal controls in place covering the eligibility determination process, and that these internal controls are being followed up with internal reviews.

Internal Control Deficiencies (General):

• Problem: Lack of segregation of duties over the accounting and reporting process
  • Solution: Organizations should ensure that there is no one person who has control over all phases of a transaction.
• Problem: Internal controls are developed but not working effectively
  • Solution: To help avoid this, organizations should ensure the individuals responsible for specific internal controls (such as reviews and authorizations) are well versed in what they should be looking for, and are knowledgeable in financial accounting and specific program requirements. Often times, it is beneficial to have multiple controls over specific compliance requirement areas.
• Problem: Lack of policies and procedures in place
  • Solution: Policies and procedures should be developed by organizations to cover internal controls and operations of specific compliance requirements (such as reporting procedures, eligibility checks, etc.) and these should be reviewed with all relevant personnel at all levels within the organization for comprehension. Organizations should consider performing internal reviews to ensure their own policies and procedures are being followed.

In addition to avoiding these common deficiencies, there are several things your organization can do to track federal programs and set the stage for any future single audits of these programs under the Uniform Guidance. Below is a list of tips you can use to assist your organization in the tracking of these programs, from an auditor’s perspective.

• Understand the new Uniform Guidance as it applies to federal awards. There are a variety of resources available out there to help navigate the ‘Uniform Guidance’ waters:
  • The AICPA’s Governmental Audit Quality Center (GAQC) recently archived a web event entitled "Preparing for a Single Audit: An Auditee Perspective.” This archived webinar assists organizations (auditees) with their role in the single audit process under the Uniform Guidance.
  • The AICPA also has a GAQC Auditee Resource Center, which can assist with general questions an organization may have about the single audit process or the Uniform Guidance requirements.
• Reach out to your Federal program administrators. They are there to help you understand the requirements of your federal awards and can be a great resource for your unique federal program requirements.
• For every federal compliance requirement your organization has (unique to each federal program), ask yourself “What internal controls does our organization have in place to ensure we are in compliance with each federal requirement?” Under the Uniform Guidance, there is an increased emphasis on an organization’s responsibility for effective internal controls. Consider the internal controls in your organization and ensure there are specific controls in place to ensure your organization is compliant with the federal compliance requirements. Part 6 of the 2016 Uniform Guidance Compliance Supplement provides an overview and the objectives of internal control. You can find this supplement at whitehouse.gov.
• Document, document, document! Without adequate documentation present, an auditor cannot conclude that proper internal controls were followed, which would result in a control deficiency.

Implementing these practices will help an organization comply with the Uniform Guidance.

If you have any questions about the Uniform Guidance or single audits, reach out to Melissa Johnson at melissa.johnson@redpathcpas.com or (651) 407-5896