You can’t afford to bury your head in the sand when it comes to your compliance guidelines. Auditors will be testing and evaluating your internal controls as part of the Uniform Guidance audit. To avoid findings, be sure you are consistently evaluating and reviewing your internal control structure.
You Can’t Bury Your Head In The Sand
Recently, the U.S. Office of Management and Budget (OMB) released the final 2019 OMB Compliance Supplement. These updates include several significant changes that could impact your entity and your annual Uniform Guidance audit, and will be effective for all audits of fiscal years beginning after June 30, 2018.
The Six-Requirement Mandate
As part of President Trump’s Management Agenda, the OMB will now require federal agencies to limit the number of compliance requirements that are subject to audit to six per program or cluster. Previously, there were 12 compliance requirements that were subject to testing (based on a determination on the requirement being direct and material to the program). It’s very important for you to remember that your entity is still responsible for maintaining its compliance with all other requirements for each federal grant even if they are identified as being not subject to audit.
To this point several federal agencies have moved certain compliance requirements into the Special Tests & Provisions section to ensure they are still subject to testing while still meeting the six-requirement mandate. Please also remember all direct and material compliance requirements will still be subject to testing as part of the Government Auditing Standards requirements for testing compliance even if they are not identified as subject to audit in the OMB Compliance Supplement.
Part 6 – Internal Controls
This part of the final 2019 OMB Compliance Supplement has been updated to include appendices with illustrative controls for both entity-wide controls for each internal control component (i.e., control environment, risk assessment, information and communication, and monitoring) and specific controls that apply to individual types of compliance requirements. These illustrations have been updated to be more consistent with today’s environment.
I would recommend reviewing this part of the supplement to consider whether your entity has established an effective internal control structure at the entity-wide level and then specific compliance requirement level to prevent and detect material non-compliance. Auditors will be testing and evaluating your internal controls as part of the Uniform Guidance audit. To avoid findings, be sure you are consistently evaluating and reviewing your internal control structure. This part of the OMB Compliance Supplement is a great tool to assist you in that evaluation.
Lastly, remember that the significant procurement changes will be subject to audit in your current audits. Check out the following previous articles to ensure you are meeting all of these requirements:
Are you sure if you’re meeting these compliance standards? To avoid any issues moving forward, contact me directly at 330.722.8222 or email Rea & Associates and ask to speak to any member of our government services team.
By Chad Gorfido, CPA, principal (Cleveland office)
Check out these other resources for more insight into your compliance requirements.
Uniform Guidance Procurement Standards Compliance
School Districts … Teachers … And Crowdfunding?!
Six Policies & Procedures All Government Entities Should Implement, Update