Uniform Guidance: A Post-Implementation Recap

Those of you who either receive or audit federally fund awards have had the opportunity to become fully immersed in the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Issuance of the Uniform Guidance dusted off the rules and regulations from nearly two decades of trials, tribulations and experiences encountered by auditees and auditors. It also provides a refreshed look at what constitutes federally funded expenditures worthy of audit consideration within a more organized uniform framework of requirements. Regardless of the underlying nature of the federal award recipient, whether for a state or local government, hospital, higher education or nonprofit organizations, the uniform guidance applies across the board from which all participants are reading from the same script. With more than two years under our belt, now is a good time for a period of post-implementation introspection on how the “Super Circular” has lived up to its name.

Worthy of modern technology, the Uniform Guidance has been electronically codified with well-organized subparts starting with a list of acronyms and definitions, general provisions, pre-federal award requirements, post federal award requirements, cost principles, and audit requirements. Accordingly, the reader can easily navigate the Uniform Guidance and drill down to the applicable regulation with precision and efficiency.

One of the most refreshing aspects of the Uniform Guidance was the consolidation and elimination of eight separate OMB Circulars. No more trying to clarify the differences between circulars or evaluating the applicability of a myriad of circulars to individual recipient circumstances.

Per the pre-issuance blog on the OMB’s webpage, the objectives of the Uniform Guidance include the following:

• Change the focus from compliance to performance

• Eliminate conflicting and duplication of cost principles

• Provide consistent and transparent treatment of costs

• Improve and strengthen federal agency oversight

• Improve administration of federal awards from the application through the close-out process

• Provide better identification of risks associated with federal awards

• Target the audit for risk of fraud or waste

In 2013, it was estimated that approximately 5,000 nonfederal entities would be relieved of the single audit requirements due to raising the annual federal expenditure threshold to $750,000. With $600 billion dollars in federal grants awarded annually, it was time to focus on the dollars expended and provide some relief to the small recipients. An overarching objective of the OMB and federal agencies was consideration about how grant policies could be reformed to increase the efficiency and effectiveness of federal programs and eliminate unnecessary and duplicative requirements by focusing on areas that emphasize achieving better outcomes at a lower cost.  

The Uniform Guidance also provides relief to the recipients in that they can elect to charge a de minimis indirect cost rate of 10% of modified total direct costs if they choose not to apply indirect costs under either the simplified or direct allocation methods. This is especially useful for not-for-profits who may not have had a federally negotiated indirect cost rate.

In addition, there are several reporting changes affecting non-federal entities under the Uniform Guidance including:

• Subrecipient amount must now be shown on the face of the schedule of expenditures of federal awards (SEFA) including the pass-through entity’s identifier number.

• Auditees may list amounts expended separately by year for multiple federal award years.

• Loan amounts from the beginning of year plus any new additions must be shown on the face of the SEFA (for loans in which the federal government imposes continuing compliance requirements) and disclosure in the notes to the SEFA of the outstanding loan balances at the end of the year.

• Notes to the SEFA must include a disclosure as to whether the non-federal entity elected to use the 10% de minimis cost rate.

• Corrective action plan must include both financial statement and compliance findings and anticipated completion date.

Another change is that the issuance deadline for the data collection form (Form SF-SAC) has been extended under the Uniform Guidance to the next business day when the deadline falls on a weekend or holiday. Federal agencies can no longer grant a waiver of the deadline and the consequences to the auditee for not meeting the deadline is a material weakness in compliance.

Criteria for a low-risk auditee had changes which require the auditee to meet all of the following conditions for each of the preceding two audit periods:

• Single audits on an annual basis (i.e. no biennial audits)

• Unmodified auditor’s opinion on the financial statements or in relation to the SEFA

• No material weaknesses identified in the report under GAGAS (Yellow Book)

• Auditor did not report a substantial doubt as to the entities ability to continue as a going concern

• No audit findings of Type A federal programs for the preceding two audit periods for (a) material weaknesses or modified opinion in the report on internal control for major programs and (b) no known or likely questioned costs