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New York State Accounting System User Procedures Manual

Volume Name
CONTROLS AND SPECIAL PROCEDURES
Volume
XI
Date
8/13/08
Section Name
Accounting for Federal Grants - Single Audit Act Compliance
Section
5.0200

Single Audit Act Accounting and Reporting Requirements
New York State is subject to specific accounting and administrative requirements for the federal funds it receives and disburses. Many of these requirements are mandated by the Federal Program Information Act of 1977, as amended in 1983; Federal Single Audit Act of 1984, as amended in 1996 (Single Audit); and the Federal Cash Management Improvement Act (CMIA) of 1990 which is presented in Section 5.0300 of this Manual. With few exceptions, the State’s Central Accounting System (CAS) is the primary source of information relating to the status of federal grant funds. In recent years, the CAS has been modified to accommodate the myriad of cash reporting and auditing requirements mandated by the Federal government. These CAS information databases include federal grant award numbers, CFDA numbers and appropriated expenditures or disbursements for federal programs. In addition, the State and federal grant accounting records are routinely exchanged to update each other’s records on the status of federal awards. Therefore, the federal award and CFDA numbers contained in the State’s accounting system are essential to assure that information provided to the Federal government is complete and accurate in all material respects. Following is a general description for how and why this information is used.

Federal Program Information Act of 1977, as amended in 1983
This Act provided for the efficient and regular distribution of information of federal domestic assistance programs and directs the General Services Administration (GSA) and the Director of the Office of Management and Budget (OMB) to collect and distribute current information on federal domestic assistance programs. In 1984, the OMB issued Circular A-89: Federal Domestic Assistance Program Information to provide instructions to the federal awarding agencies and grant recipients for uniform, systematic and periodic collection of information for all federally financed domestic assistance programs. Circular A-89 established a process for federal awarding agencies to provide annual information to GSA and OMB on all domestic assistance programs and activities that are federally funded. Using this information as a source, the GSA issues an annual Catalog of Federal Domestic Assistance (CFDA), and periodic updates as the need arises, which contains a comprehensive list of all domestic assistance programs. Each program is assigned a five-digit program number (referred to as the CFDA number) categorized by the federal administering agency. These CFDA numbers are used extensively by the federal and New York State government in all grant award notices, budget certificates and state accounting records to account for and report the status of State-administered, federally funded programs. The CFDA numbers represent, in most instances, the primary source for retrieving information from State accounting records to prepare financial statements required under the Single Audit Act and to review compliance with the cash management of Federal funds. The importance of obtaining and maintaining CFDA numbers in the State’s segregation records cannot be overemphasized and are more fully described in Section 5.0300 of this Manual.

Single Audit Act of 1984
The Single Audit Act (The Act) was first enacted by Congress in 1984 and was intended to establish uniform audit requirements for federal awards. The Act mandated that the Federal Office of Management and Budget (OMB), after consultation with the Comptroller General, prescribe policies, procedures and guidelines to implement the provisions of the Act. In 1985, the OMB issued administrative Circular A-128, Audits of State and Local Governments to provide guidance to state and local governments in implementing the provisions of the Single Audit Act and set forth standards for obtaining consistency and uniformity among federal agencies which received or conducted state and local government audits. Combined, the Act and Circular A-128 mandate that grant recipients do the following:

  • engage an independent auditor to conduct an annual audit in conformance with Generally Accepted Auditing Standards (GAAS) if the entity received $25,000 or more in federal awards;

  • cover all of the government’s operations in its Single Audit;

  • determine that the financial statements of the government present fairly its financial position and the results of its financial operations in accordance with GAAP;

  • determine that the government unit complied with laws and regulations that may have a material effect upon the financial statements or each major federal program;

  • determine that the government unit has internal control systems in place to provide reasonable assurance that it is managing federal award programs in compliance with applicable laws and regulations; and

  • prepare a Schedule of Expenditures of Federal and Non-Federal Awards that identifies expenditures of federal monies for each federal program.

As noted above, the Act required an annual audit of non-federal entities receiving a certain level of federal financial assistance. A single audit (i.e., one audit of the entire entity) performed under the Act is intended to satisfy all federal agencies providing assistance to the entity. Although nonprofit organizations and universities were not included in the original act, on April 22, 1996 guidelines were established in OMB Circular A‑133, Audits of Institutions of Higher Education and Other Non‑Profit Institutions which prescribe policies or specific audit requirements for these groups of grant recipients.

Single Audit Act Amendments of 1996
On July 5, 1996, the Single Audit Act Amendments of 1996 were signed into law. OMB substantially revised Circular A-133 (June 24, 1997) to incorporate the provisions of the amended Act and the guidelines of A-128, which were rescinded.

Circular A-133 was further revised in June 2003.

Following is a summary of the Single Audit Act Amendments of 1996 and the revised Circular A-133:

  • The scope of the Single Audit Act is extended to cover not-for-profit organizations and higher education institutions.

  • The minimum threshold at which a Single Audit must be conducted is $500,000 in federal award expenditures. Not-for-profit organizations receiving less than $500,000 in federal grants do not need to have their own audit but arrangements can be made for audits by their funding agency, the agency's inspector general or the GAO.

  • Audits generally must be conducted on an annual basis. Not-for‑profits that conduct program‑specific audits may choose biennial audits if they receive permission from the federal grantor agency or the pass‑through entity from which funds are received and biennial audits must cover both years.

  • Recipients that pass through federal awards to subrecipients are required to ensure that a system is in place to assure subrecipient compliance with the provisions of the Act. (Subrecipients do not include vendors.)

  • A federal program is defined as ...all Federal Awards to a non-Federal entity assigned a single number in the Catalog of Federal Domestic Assistance or encompassed in a group of numbers or other category as defined by the Director (of OMB).

  • All grant recipients are required to prepare a Schedule of Expenditures of Federal and Non-Federal Awards that identifies expenditures, including non-cash awards, of federal monies by federal program using the five-digit class code contained in the CFDA.

  • Establishes a direct link between the State’s audited financial statements and the Single Audit reports by reducing the time for submitting Single Audit reports from 13 months to nine months after the close of the reporting period (i.e., March 31st). The auditor must determine that the Schedule of Expenditures of Federal and Non-Federal Awards is presented fairly in all material respects in relation to the State’s financial statements taken as a whole.

  • Prescribes a two-step process, dollar threshold and risk assessment, to determine major programs subject to the annual Single Audit.

Dollar Threshold - The auditor shall identify federal programs with federal award expenditures, which are the larger of $30,000,000 or 0.15 percent of total federal expenditures. Programs with federal expenditures above this threshold are labeled Type A and are generally considered major programs and subject to Single Audit.** Programs with expenditures below the threshold are labeled Type B.

Risk Assessment - A risk-based approach shall also be used by the independent auditor to determine which programs will be subject to the Single Audit. The auditor will use professional judgment to classify Type A and Type B programs as low-risk or high risk pursuant to the guidelines published in OMB Circular A-133. After assessing risk, the auditor will use the A-133 guidelines to determine the number of high-risk Type B programs to be included with Type A programs that are subject to audit.

NOTE: High-risk Type A programs must be included in the Single Audit; however, it is possible that low risk Type A programs may be excluded as outlined in A-133.
The risk-based approach provides a direct link between internal control audit procedures and programs selected for substantive testing of major program compliance and includes consideration of (a) current and prior audit experience, (b) oversight by federal agencies and pass-through entities and (c) inherent risk of non-compliance for the federal program.

  • The amendments are effective for fiscal years ending on or after June 30, 1996.

Additional Information
State agencies should be familiar with the following references for single audit compliance issues.

Federal single audit guidelines can be found in Federal Circular A133, Audits of States, Local Governments and Non-Profit Organizations and A133-Compliance Supplement (revised annually). They are available at http://www.whitehouse.gov/omb/circulars/

DUNS (Data Universal Numbering System). Effective October 1, 2003, federal grant applicants must include a DUNS number on paper and electronic applications to the Federal Government. Without a DUNS number applications will likely be rejected. It is extremely important that Agencies use the correct DUNS number on grant applications as it is expected that the DUNS number will be assigned to all grant activity throughout the life of the grant, including the payment request, reporting and Single Audit. State agency guidelines can be found in the Budget Policy and Reporting Manual I-100 (2003), located at http://www.budget.state.ny.us/guide/bprm/i/i100.html.

Minimum Accounting Requirements

  • Pursuant to OSC and DOB requirements, ALL first-time budget certificates to segregate federal funds appropriations must be accompanied by the Federal Grant Award Notice received from the federal awarding agency to support the segregation of funds.

  • All federal funds budget certificates must contain the following:

    1. Federal Grant Award Number (DFAFS number) or authorization code (usually 12 digits)

    2. Five-digit CFDA number (refer to Section 5.0300 of this Manual)

Failure to provide a valid grant award number and CFDA number will result in a delay or rejection of the Budget Certificate since the Office of the State Comptroller (OSC) cannot update a segregation record without this information. Moreover, since federal financing systems and reports are based on grant award numbers, it is MANDATORY that this information be provided on Budget Certificates in order for OSC to completely and accurately report grant activity or request federal funds needed to finance State payments from appropriated federal funds.

  • Within 30 days of receipt, State agencies are required to notify the Division of the Budget and OSC’s Bureau of Accounting Operations of any changes to the funding of Federal programs. Such changes include, but are not limited to, increases or decreases in Federal funding obligations, disallowances or any change in a program’s scope or objective. Each written notification is to be accompanied by reference to the grant award number and notice from the Federal awarding agency.

  • Annually, during the January - March quarter, OSC’s Bureau of Accounting Operations will confirm with State agencies the accuracy of the CFDA numbers assigned to segregation records within the (CAS). Agencies are required to report any discrepancies or changes to OSC within 30 days of the confirmation request.

  • Monthly appropriation/segregation-based CAS reports will contain information relating to the status of State appropriations. These reports will also include the grant award number and CFDA number assigned to each federal fund segregation record. On receipt, agencies must review these reports for completeness and accuracy and report errors or omissions to OSC’s Bureau of Accounting Operations immediately upon discovery.

  • Unless other arrangements are made between the cognizant State agency and the Federal government, OSC will provide federal agencies with monthly or quarterly reports of state spending from federal award authorizations.

  • The Federal government often provides OSC with grant award authorization balances which will be matched to the State appropriated balances for each grant award, as identified by Federal grant award (DFAFS) number. State agencies will be notified of any instance(s) where State appropriated balances exceed the federal grant award authorization balance. State agencies are responsible for providing information to OSC to support the level of appropriation or reducing segregations to the award authorization level will be necessary. Filing these changes with OSC immediately is crucial due to the potential negative impact these authorization adjustments have on funding disbursements with daily federal drawdowns.

  • The cognizant State agency is defined as the agency that applied for and received federal aid. It is this agency that has direct operational responsibility for managing federal awards and ensuring full compliance with federal rules and regulations governing federal grant funds. Suballocations or transfers of appropriations to other State agencies will never relieve the cognizant agency of its responsibility for ensuring compliance, especially as it relates to award authorization balances.