2011 National Extension and Research Administrative Officers’ Conference

Session #33, May 24, 20111:30 p.m. – 2:45 p.m.Anchorage ,Alaska

Federal Audits and IPIA Reviews:

Edward Nwaba, CPABranch Chief, Policy and Oversight Division

Office of Grants and Financial Management, NIFA-USDA

Oversight Activities

• Audits (Three types):– OMB Circular A-133 (Single Audits)– OIG / GAO Program Specific Audits– NIFA Administrative / Financial Reviews

• OMB Circular A-133 (Single Audits)– Requires Non Federal entities that expend $500,000 or

more in a year in Federal awards, to have an audit – single audit or program specific audit

– Established consistent and uniform standards for audits of Federal recipients ( i.e. States, local governments, and non-profit organizations)

• OIG / GAO Program Specific Audits– Ascertain agency progress in implementing program

guidelines– Determine recipient’s compliance with program

requirements

Oversight Activities contd.

Administrative / Financial Reviews• All other reviews other than Audits:

– Investigations – hotline complaints• Mismanagement• Misuse of funds• Other complaints – not happy with program

– System Reviews – A-123 Internal Controls, etc– Program Specific audits

• Program activities tie to plan of work• Terms and Conditions of awards are met• Other statutory requirements are met

Administrative / Financial Reviews contd.• Agency identifies programs or recipients for review:

based on-– To meet Statutory Requirements – e.g. Improper

Payments Information Act (IPIA), Hatch Act, McIntire-Stennis Act

– New programs or recipients – program specific– Per recommendation from program– Whistleblower / Hotline complaints

• Reviews may include review of financial, compliance, internal controls, and accounting systems

• Reviews can be on-site, or desk reviews

Recent OIG Audit

• Review of 1994 Tribal Land Grant Institutions – OIG Audit No. 13011-3-AT– Audit Objectives

• Evaluate NIFA controls over grants to the 1994 Land Grant Institutions

• Verify that the 1994 LGI’s were using grants as intended per grant agreements

– Site visits• Two LGI’s visited

Sample Findings – OIG Audit No. 13011-3-AT

Tribal colleges submitting few required reports including:• OMB Circular A-133 Single Audit Reports• Plans of Work for Endowment Interest Funds - received

25 out of 99 reports• Annual Program Performance reports for Equity and

Research Grants • Financial Status Reports (SF-269 / SF425)• LGI’s claimed ineligible expenses:

– Improperly charged salaries and wages – employees not working on project charged

– Equipment costs without adequate support– Wrong project funded– Drawdowns performed after award had expired

Recent NIFA Non-profit Audit• Review of Non-profit Grantee

– Audit Objectives• Evaluate whether grantee used grant funds as

intended per grant agreement• Determine whether use of Federal funds complied

with Federal admin. requirements, cost principles and implementing regulations

• Examined program income, program expenditures expenditures, Personnel actions, use of facilities, and procurement actions.

Sample Findings – NIFA Non-profit Audit

• Program income improperly classified as unrestricted income

• Inconsistent treatment of accounting fees and maintenance charges

• Costs charged to federal grants after the award expiration date

• Travel advance improperly charged to NIFA award

Sample Findings – NIFA Non-profit Audit contd.• IT costs improperly charged to federal grants – using

inappropriate allocation method• Renovation costs improperly charged to federal grants as

indirect costs• Severance Pay for unallowable activity charged to

federal grants• Audit, insurance, legal and other services improperly

procured

Sample Findings from Other NIFA Reviews, OIG / GAO and A-133 Audits

• Draw downs in excess of recorded expenditures• NIFA awards treated as one pool of funds. Cost overruns on

one award absorbed by another unrelated award• Commingling of grant funds• Matching requirements were not met, or recipients claimed

unallowable costs as part of their matching contribution• Grants not closed out timely• Expenditures reported on SF-269/425 Financial Reports did

not reconcile to accounting records – SF-269/425 expenditures not supported by accounting records

• Equipment inventory not completed in more than two years• SF-269/425 Financial Reports not filed or filed late

Sample Findings from Other NIFA Reviews, OIG/ GAO and A-133 Audits contd.

• Cash Transaction Report SF-272 did not reconcile to the General Ledger

• Inconsistent treatment of costs (i.e., certain indirect costs were charged direct to NIFA awards, but allocated as indirect costs on other awards)

• Time and effort reporting noncompliance• Sub-recipient monitoring noncompliance• Unexpended Carryover funds not properly documented and

accounted for• Lack of separation of duties and incompatible functions• Excess pension costs charged to awards• Improperly charged salaries and wages to wrong account• Unallowable building renovation costs charged to grant

awards

Improper Payments Information Act (IPIA) site reviews

• IPIA Act of 2002 – Enacted under Public Law (P.L. 107-300)

• Requires Federal awarding agencies to do (Three things)– Identify programs with high risk of making improper

payments– Calculate / Estimate the annual amount of improper

payments– If estimate exceeds threshold 2.5% of program

outlays and $10m Report estimate to congress w/corrective action plan

What are Improper Payments? (Two types)

• Any payment that should not have been made, or that was made in an incorrect amount (including overpayments and underpayments) and payments to ineligible recipients

• Any payment for an ineligible service, any duplicate payment, any payment for services not received, any payment that does not account for credit for applicable discounts

Site Visit Selection• Six institutions each year

– 4 (1862s)– 1 (1890)– 1 (1994)

Testing Criteria / Transactions• Allowable Activities – Smith Lever as example

– Expenditures are allowable per plan of work / grant agreement

– Smith Lever Act and 1444 funds• Not used for unallowable building purchase or

repair activities• Purchase or rental of land• College course teaching activities

Testing Criteria / Transactions – contd.

• Allowable Costs – – Expenditures are for allowable direct costs – indirect

costs and tuition remission are unallowable– Payments are to proper payee / correct amount– Retirements costs – 5% caps and 100% match

observed

Testing Criteria / Transactions –contd.• Matching

– 100% match observed – section 3 (b) and 3(c)– No matching requirement – section 3 (d)– In-kind contributions not allowed as match for

formula grants

Testing Criteria / Transactions – contd.

• Period of availability of Federal funds– Expenditures are for correct period– Carry forward requirements are met

• 1862 section 3(b) and 3(c) – 100% for 5 years• 1890 section 1444 – 20% for one year

Testing Criteria / Transactions – contd.• Reporting

– Required reports filed timely– OMB A-133 audit reports– SF-269 financial status report

• April 1 for 1862s• December 1 for 1890s

Testing Criteria / Transactions – contd.

• Special Tests and Provisions– Plan of work – program specific requirements– Interviewed project staff– Compare salary charges to time and effort report– T & E reporting procedures / frequency

Sample Findings from (IPIA) Site Reviews• Grant funds improperly spent for unallowable grant

activities• Grant funds improperly spent for unallowable college

course teaching activities• Grant funds improperly used to fund college

scholarships & tuition remission expenditures• Expenses reported in incorrect amount - Available

discounts not taken• Improper Payroll charges for employees not working on

the grants charged – State funded employees improperly paid using grant funds

Sample Findings from (IPIA) Site Reviews

• Expenses recorded in the wrong period• Improper application of established capitalization rules• Missing support for expenditures• Incorrectly recorded journal entries• Extension funds improperly used to fund retiree benefits

Thank You