The following news items should be of interest to auditors that perform HUD audits.
NEW HUD Notice on Uniform Guidance May Affect Current Single Audits
HUD's Office of Community Planning and Development (CPD) recently issued Notice CPD 16-04: Additional Transition and Implementation Guidance for Recipients of Community Planning and Development (CPD) Funds for 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (notice), which discusses, among other things, the timing of the effective date of the Uniform Guidance administrative requirements and cost principles to HUD recipients. This notice should be of interest to auditors performing single audits of HUD major programs since it addresses the compliance criteria that the auditor uses when testing compliance for an affected HUD program. Many of these single audits may already be in progress or are in the planning phase. The notice relates to the following HUD programs:
- Community Development Block Grant (CDBG) Program.
- CDBG Disaster Recovery Grants (CDBG-DR).
- HOME Investment Partnerships (HOME) Program.
- Housing Trust Fund (HTF) Program.
- Housing Opportunities for Persons With AIDS (HOPWA).
- Emergency Solutions Grants (ESG) Program.
- Continuum of Care (CoC) Program.
- CPD Programs awarded by Notice of Funding Availability (NOFA)
The notice discusses each of the above programs and explains when the Uniform Guidance became applicable to HUD recipients and other nuances of Uniform Guidance implementation including subawards, procurement, program income, and indirect costs. Auditors performing single audits that include HUD major programs should read the notice carefully to ensure that the appropriate criteria are being used to test compliance for each of the above programs.
In light of the confusion on the effective date, the notice states that HUD will not make findings of noncompliance if a grantee used CDBG, CDBG-DR, ESG, or HOME funds in accordance with comparable requirements under HUD regulation parts 84 or 85 (2013 edition) between December 26, 2014 and January 6, 2016. However, auditors should note that this aspect of the notice does not override the Uniform Guidance requirements for the auditor to report findings. That is, regardless of whether HUD pursues noncompliance found in this area, auditors should test compliance against the appropriate criteria and report findings if they find noncompliance.
The notice indicates that HUD grant recipients should contact their Field Office or HUD Headquarters representatives for more information. Recipients and auditors with questions about the notice may also contact the HUD representatives identified in Appendix III, "Federal Agency Single Audit and Program Contacts," of the OMB Compliance Supplement.
To provide an example of how the notice may affect single audit compliance testing, the following paragraphs discuss the aspects of the notice for the CDBG, CDBG-DR, ESG, and HOME programs.
CDBG, CDBG-DR, ESG, and HOME Programs. The HUD notice states that there has been confusion about the timing of Uniform Guidance applicability for the CDBG, CDBG-DR, ESG, and HOME programs because the grant agreements for these programs contain language requiring compliance with the program regulations "as now in effect and as may be amended from time to time" or similar language. As a result of this language, the notice states that HUD's intent was that existing grant agreements for the CDBG, CDBG-DR, ESG, and HOME programs would automatically become subject to the Uniform Guidance requirements as of the December 26, 2014, Uniform Guidance effective date. So, for example, if HUD had entered into a CDBG grant agreement with a nonfederal entity in early 2014 that included the "program regulations as amended" language, HUD's expectation was that the nonfederal entity would have complied with the Uniform Guidance administrative requirements and cost principles for funds expended from that award on or after December 26, 2014.
Finally, the notice covers what HUD recipients participating in the CDBG, CDBG-DR, ESG, and HOME programs must include in any subawards made and the relating timing. Situations in which a recipient must amend an existing subrecipient or comparable agreement are also discussed. Auditors of HUD recipients that make subawards should pay close attention to this section of the notice when performing subrecipient monitoring testing that relates to determining what subawards must contain.
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