New Jersey - SINGLE AUDIT POLICY FOR RECIPIENTS OF FEDERAL GRANTS & STATE AID

Department of the Treasury SINGLE AUDIT POLICY FOR RECIPIENTS OF FEDERAL GRANTS,  STATE GRANTS AND STATE AID

NO.: 04-04-OMB ORIGINATING AGENCY: OFFICE OF MANAGEMENT AND BUDGET EFFECTIVE DATE: 1-1-04 EXPIRATION DATE: INDEFINITE SUPERSEDES: 98-07-OMB SUBJECT: SINGLE AUDIT POLICY FOR RECIPIENTS OF FEDERAL GRANTS, STATE GRANTS AND STATE AID ATTENTION: AGENCY FISCAL AND GRANT OFFICERS FOR INFORMATION CONTACT: ROBERT A. LAZZARA PHONE: (609) 984-1536 The Single Audit Act of 1984 (Act) was revised by the Single Audit Act Amendments of 1996 (Amendments) to incorporate non-profit organizations. Pursuant to the Amendments to the Act, the federal Office of Management and Budget (OMB) rescinded Circular A-128, Audits of State and Local Governments. OMB also revised Circular A-133 and renamed it Audits of States, Local Governments, and Non-Profit Organizations. OMB Circular A-133 was revised (Federal Register June 27, 2003) to raise the audit threshold for all recipients, including state and local governments to $500,000. The provisions of OMB Circular A-133 Revised are effective for fiscal years ending after December 31, 2003. PURPOSE The purpose of this circular is to revise State policy regarding audits of grant recipients. DEFINITIONS Recipient Recipient is defined as any local government (including school board), non-profit organization or for-profit organization that receives from a State agency any federal grant, State grant or State aid funds tocarry out or administer a program. If any organization receives federal grant, State grant or State aid funds to provide the State with goods or services (procurement) and does not carry out or administer a program, they are considered vendors. This Circular does not cover vendors. State departments should use the same procedures to monitor these vendors as they use to monitor other procurements. In addition, the procurement, receipt and payment for goods and services should comply with applicable federal and State laws and regulations. Grant Grant is defined as an award of financial assistance by a State agency in the form of money or property in lieu of money. The term includes "cost-type contracts" in which the contractor is paid on the basis of the costs it incurs, with or without a fee; and "fixed price contracts" in which a specific amount is paid per unit (e.g., per diem) regardless of the actual costs incurred. The term does not include purchases made in accordance with statutes and regulations regarding procurement, stipends, tuition aid, loans to students and other similar expenditures. State Aid State aid is one of the major subdivisions of the State budget. This category shall mean: Monies paid by the State to a local government or to a non-governmental agency for: Assistance distributed to local governments according to a formula; Assistance provided to aid local governments to carry out activities that are the responsibility of the local unit; Grants-in-aid to non-governmental agencies for functions carried out on behalf of a local unit of government; Payments specifically designated by law as State aid.  Expenses incurred by a State department or agency on behalf of a local unit of government. Such expenditures may include:  Monies budgeted by the State to make payments on behalf of local government; Administrative costs of State aid programs; Costs of State personnel engaged in services normally provided and paid for by a local government. To determine if State aid funds should be included in the population of funds to be tested for compliance with laws and regulations, the auditor should determine if the State account number is included in the State Grant Compliance Supplement (see Section IV). If the account number is not included in the Supplement, the auditor should contact the funding department's Single Audit Contact to determine if the account has any compliance requirements. State Cognizant Department A State Cognizant Department is a State department that has the responsibility to ensure the timely receipt of quality audit reports from grant recipients. Additional responsibilities include performance of desk reviews of single audit reports, ensuring that audit exceptions are resolved, confirmation of independent audit organization external Quality Control Reviews (QCR), and communication of the results of desk reviews and QCRs to OMB - Accounting Operations via the Grantee Single Audit Monitoring System (GSA). Department Single Audit Contact A Department Single Audit Contact is an individual assigned by a State department to act as a liaison with OMB - Accounting Operations and other State departments concerning federal and State audit requirements. A Listing of Department Single Audit Contacts is included in the State Grant Compliance Supplement. POLICY The following State policy regarding audits of recipients is effective for fiscal years ending after December 31, 2003: All State agencies that disburse federal grant, State grant or State aid funds to recipients that expend $500,000 or more in federal financial assistance or State financial assistance within their fiscal year must require these recipients to have annual single audits or program-specific audits performed in accordance with the Act, Amendments, OMB Circular No. A-133 Revised and State policy. It should be noted that the federal government will not pay for a single audit for any recipient that expends less than $500,000 of federal funds. All State agencies that disburse federal grant, State grant or State aid funds to recipients that expend less than $500,000 in federal or State financial assistance within their fiscal year, but expend $100,000 or more in State and/or federal financial assistance within their fiscal year, must require these recipients to have either a financial statement audit performed in accordance with Government Auditing Standards (Yellow Book) or a program-specific audit performed in accordance with the Act, Amendments, OMB Circular No. A-133 Revised and State policy. Program-specific audits in accordance with OMB Circular No. A-133 Revised can be elected when a recipient expends federal or State awards under only one federal or State program and the federal or State program's laws, regulations, or grant agreements do not require a financial statement audit of the grantee. If a State funding department determines that a financial statement audit in accordance with Government Auditing Standards will not provide adequate monitoring for their department's funds, each department has the responsibility to perform other monitoring procedures. Such procedures include on-site visits, reviews of documentation supporting requests for reimbursement, and limited scope audits as outlined in OMB Circular No. A-133 Revised. State Cognizant Departments should consider various risk factors in developing recipient monitoring procedures, such as the relative size and complexity of federal and State awards administered by recipients, prior experience with each recipient, and the cost-effectiveness of various monitoring procedures. Although OMB Circular No. A-133 Revised allows certain biennial audits; State policy continues to require all audits to be performed on an annual basis. In addition to federally required reports and opinions, recipient single audits must contain similar reports and opinions for State grant or State aid funds. Recipient single audit reports must include a supplementary schedule of the entity's State grant and State aid financial assistance programs. This schedule entitled Schedule of Expenditures of State Financial Assistancemust show for each State program: State Grantor Department Program Title State Account Number Program Amount (Amount of Funds Received) Program Grant (Contract) Period Fiscal Year Disbursements Total Disbursements Auditors should use the same risk based approach to audit and monitor State financial assistance, as used for federal programs. This approach is described in OMB Circular No. A-133 Revised. Unless a funding department's policy requires an earlier submission, audit reports are due nine months after the end of the audit period. Funding departments must include audit report due dates in standard grant agreements. Each department must maximize the recovery of federal audit costs (as direct or indirect) in accordance with federal OMB Circulars, to fund federal monitoring positions. Any State department that mandates audit requirements, above and beyond the minimum federal and State requirements, is responsible for funding the additional audit work performed. Additional audit requirements must be communicated to the recipient's State Cognizant Department Single Audit Contact and the recipient at least 180 days prior to the recipient's fiscal year end. State Cognizant Departments must update the Grantee Single Audit Monitoring System on a timely basis. In instances of reported recipient noncompliance with material terms and conditions of grant agreements or State and federal laws and regulations, State agencies must ensure that appropriate corrective action is initiated within six months after receipt of the audit report. STATE GRANT COMPLIANCE SUPPLEMENT To assist auditors in testing recipient compliance with State grant and State aid financial assistance programs, and applicable laws and regulations, OMB - Accounting Operations developed a document entitled, State Grant Compliance Supplement. The Supplement is included on the Internet at: http://www.state.nj.us/treasury/omb/publications/grant/index.shtml or http://www.state.nj.us/treasury/omb/ (see Highlights). Department Single Audit Contacts listed in the Supplement have the responsibility to address inquiries concerning compliance requirements for any accounts not included in the Supplement. Charlene M. Holzbaur Director