The massive amounts of federal assistance made available under the Coronavirus Assistance Relief and Economic Stability (CARES) Act and the American Rescue Plan Act (ARPA) have ratcheted up federal government concerns about grant accountability. Congress reflected that when it significantly increased the budgets of the federal inspectors general whose jobs are to prevent and detect fraud, waste, and abuse in federal programs. But the first lines of defense that those federal auditors rely upon are the single audits that most federal grant recipients and subrecipients must arrange. The independent auditors who conduct those audits get their instructions from the Compliance Supplement, a hefty audit guide issued annually by the U.S. Office of Management and Budget. The Supplement identifies the grant requirements that must be tested and suggests ways for the auditors to determine compliance. So, those features clearly demonstrate to recipients and subrecipients, like RDOs, what to expect when single audits begin. This session will drill down on the sections of the Supplement that affect federal programs that most RDOs administer and will demonstrate how to be audit ready in this highly charged grant audit environment. -Bob Lloyd, Principal, Robert M. Lloyd Consulting Services, Greenville, SC -Moderator: Cindy Hultz, Executive Director, Mark Twain Regional Council of Governments, Perry, MO

1. Grant Audit Readiness in
a Pandemic Environment
Presented by Bob Lloyd
October 18, 2021
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Copyright (c) Robert M. Lloyd 2021

2. Federal Grant Audit Policy
• Two prongs
• The Inspector General Act (as amended)
--- Intent: prevent and detect “fraud, waste and
abuse”
--- Reliance on non-federal audit to the extent
“practicable”
• The Single Audit Act (as amended)
--- Intent: improve management of federal funds
--- OMB role to issue “policies, procedures, and
guidelines”
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3. Developments at the Federal Level
• Enactment of the CARES Act and the ARP Act
• Significant funding increases for the OIG’s
• Formation of the Pandemic Recovery
Accountability Committee (PRAC)
• Ongoing concerns about the quality of non-
federal audits
--- Federal single audit quality assessments
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4. What to Expect from the OIG
• Advance notification…normally
• Entrance conference
• Conduct of the field work
• Exit conference
• Draft audit report
• Views of auditee management
• “Management decision” by awarding agency
• Grounds for appeal
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5. Single Audit Fundamentals
• Annual audit requirement
• Trigger: Expenditure of $750,000 in federal
awards from all sources
• Audit objectives
--- Accuracy of financial statements and the
Schedule of Expenditures of Federal Awards (SEFA)
--- Proper design and operation of internal controls
--- Compliance with laws and regulations that could
have a “direct and material effect” on financial
claims
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Copyright (c) Robert M. Lloyd 2021

6. Auditee Single Audit Responsibilities
• Prepare financial statements and SEFA
• Establish and maintain effective internal controls that
provide reasonable assurance about compliance with laws,
regulations, and award terms and conditions
• Comply with laws, regulations, and award terms and
conditions
• Arrange for the single audit
• Prepare the summary schedule of prior audit findings
• Prepare and implement the corrective action plan, if
necessary
• Submit, in cooperation with the auditor, the audit reporting
package
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7. What to Expect from the Independent
Auditor
• Evaluation of the risk of non-compliance
• Factors considered:
--- Current and prior audit experience
----- Multiple internal control structures
----- Past audit findings
--- Oversight by federal agencies and pass-through entities
--- Inherent risk of the program
----- Complexity of the program
------- Nature of expenditures (e.g., personnel, procurement)
----- Phase of the program at the federal level
----- Phase of the program at the auditee
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8. Help for the Auditor
• OMB’s Compliance Supplement
• Supplement to what?
• Collaborative federal effort
• An annual opportunity for federal emphases
(Past examples: ARRA; Hurricanes; FFATA)
• Current version: COVID, COVID, COVID
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9. Scope of the Single Audit--Compliance
• For Assistance Listing (CFDA) programs covered
--- Required areas of compliance testing
--- Suggested audit procedures
• For Assistance Listing (CFDA) programs not
covered
--- Instructions about audit steps
• A “safe harbor” for auditors (2 CFR 200.514(d)(3))
--- For identifying compliance requirements—YES
--- For audit procedures—NO
• An “audit readiness checklist” for auditees!
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Copyright (c) Robert M. Lloyd 2021

10. The 2021 Supplement
• Main volume issued on August 13
• How it’s organized and why that’s important
--- Part 2--Matrix of Compliance Requirements
--- Part 3—Compliance Requirements
--- Part 4—Agency Program Requirements
--- Part 5—Clusters of Programs
• Includes designation of eight “higher risk”
programs
• Two expected Addenda to include major COVID
related programs
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Copyright (c) Robert M. Lloyd 2021

11. Opening the Door with the Matrix
• The “Cliff’s Notes” of federal grant administration
• 12 areas of administrative compliance (actually more)
• Federal agencies pick 6 for audit coverage
• Relying on Assistance Listing (CFDA) Numbers drawn
from the auditees SEFA
--- Federal awarding agencies and pass-through entities
are required to provide the Assistance Listing Numbers in
award agreements
--- Some existing federal programs received enhanced
funding under COVID-19 related legislation
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Copyright (c) Robert M. Lloyd 2021

12. Components of Part 3 Entries
• Compliance requirements that must be tested
(with statutory and regulatory citations)
• Audit objectives—auditor’s role in
determining whether actions have been taken
• Suggested audit procedures
--- What steps should the auditor take?
--- What documentation is likely to be
examined?
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13. General Compliance Requirements
Identified
• Activities Allowed or Unallowed
--- “Eligible activities”
• Allowable Costs/Cost Principles
--- General tests
--- “Selected” items
--- Indirect cost recovery
• Cash Management
--- Timely drawdown and disbursement
--- Size of drawdowns
--- Interest earnings and recovery
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14. Compliance Requirements (Continued)
• Eligibility (Recipients, Subrecipients, Program
Beneficiaries)
• Equipment Management
--- Property records
--- Timely effective inventory
• Real Property Management
• Matching/Cost Sharing
• Level of Effort (Maintenance of Effort)
• Earmarking
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15. Compliance Requirements (Continued)
• Performance Period
--- Pre-award costs
• Procurement
--- Non-competitive transactions
--- Minimum records
--- Cost or price analysis
• Suspension and Debarment
--- Check SAM.gov (Excluded Parties List System)
• Program Income
--- Received
--- Expended on allowable cost
--- FIFO
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16. Compliance Requirements (Continued)
• Reporting
--- Financial
--- Performance
• Subrecipient Monitoring
--- CCR and DUNS numbers
--- Mandatory steps (2 CFR 200.332(d))
--- Subrecipient audit verification (2 CFR 200.332(f)
• Special Tests and Provisions
--- Federal agency priority matters
• Auditor’s judgment about other areas where noncompliance could be
material to the federal program
--- Federal agency risk alerts
--- OMB designation of higher risk programs
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Copyright (c) Robert M. Lloyd 2021

17. Connecting to Parts 4 and 5
• Part 4
--- “Agency” Program Requirements
--- 239 Separate Assistance Listings
Part 5
--- Clusters of Programs
--- Multiple Assistance Listings that are subject
to the same compliance requirements
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18. Cautions about Applicability of
Compliance Requirements
• KEY: Communications from federal awarding
agencies or pass-through entities in the award
agreements
• Agency “guidance”
• Steep learning curves
--- Revisions to 2 CFR 200 (8/13/20)
--- OMB Administrative Flexibility Memorandum
(3/19/21)
--- OMB FAQ’s on 2 CFR (5/4/21)
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Copyright (c) Robert M. Lloyd 2021

19. A Few Other “Audit Alerts”
• Beware of “back door requirements”
• Interpreting the requirements--Who to call (Appendix III—
Agency liaison and program contacts)
• Advice on testing procedures—Who is the auditor going to
call (Appendix III—Inspector General Office contacts)
• Study the “atmosphere”
--- Federal inspectors general website (www.ignet.gov)
--- Pandemic Recovery Accountability Committee website
(www.prac.gov)
--- Federal Audit Clearinghouse website
(harvester.census.gov/facweb)
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Copyright (c) Robert M. Lloyd 2021

20. Questions
• Now
• Later
--- Bob Lloyd
--- Telephone: (864) 235-8680
--- E-mail: consultlloyd@aol.com
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Copyright (c) Robert M. Lloyd 2021