New State Stabilization Guidance, Updated "Jobs Created and Retained" Guidance, and New Compliance Auditing SAS
Dear Center Members,
The purpose of this Governmental Audit Quality Center (GAQC) Alert is to provide GAQC members with information on several recently issued documents that could affect your single audits. After reading this GAQC Alert you will be aware of:
- New guidance that the U.S. Department of Education (ED) has issued for auditors on its State Fiscal Stabilization Fund (SFSF) program titled, Guidance for Grantees and Auditors - State Fiscal Stabilization Fund Program;
- New Office of Management and Budget (OMB) guidance for recipients of federal assistance awards received under the American Recovery and Reinvestment Act of 2009 (Recovery Act) on estimating jobs created and retained for purposes of reporting under Section 1512 of the Recovery Act; and
- A new AICPA auditing standard on compliance auditing.
SFSF Program Guidance
If you are auditing the ED SFSF program as part of a single audit, you should review and become familiar with new guidance issued by ED on December 24, 2009, titled, Guidance for Grantees and Auditors State Fiscal Stabilization Fund Program.
Background. One of the new federal programs authorized by the Recovery Act was ED's SFSF program. The SFSF program has two components: the Education Stabilization Fund (CFDA 84.394) and the Government Services Fund (CFDA 84.397). The purpose of the SFSF program is to help stabilize state and local budgets in order to minimize and avoid reductions in education and other essential services in exchange for a state's commitment to advance essential education reforms.
Previous SFSF Guidance Issued. In August 2009, the OMB issued an addendum to the March 2009 Compliance Supplement titled, Compliance Supplement Addendum #1 (Addendum #1) that provided guidance on the SFSF program for purposes of auditing it as part of a single audit (See GAQC Alert #118). Additionally, two other guidance documents primarily directed at grantees have been issued by ED as follows: Guidance on the State Fiscal Stabilization Fund Program, issued by ED in April 2009, and Guidance on the Maintenance-of-Effort Requirements in the State Fiscal Stabilization Fund Program, issued in May 2009.
Reason for New ED Guidance and What it Covers. Since the issuance of Addendum #1, there have been a number of questions submitted to ED by auditors on the SFSF program. Because of the broad nature of the SFSF program, the questions have generally related to testing allowable costs, the applicability of the cost principles to the SFSF program, and auditee requirements for recordkeeping, documentation, and reporting. The new ED guidance is intended to address these questions. In addition to providing a program overview, the document provides guidance in the following areas:
- With regard to the Education Stabilization Fund, restoration amounts, application requirements, information on how local educational agencies (LEAs) and institutions of higher education (IHEs) may use Education Stabilization funds, as well as certain prohibitions for such funds;
- With regard to the Government Services Fund, information on how States may use Government Services funds, as well as certain prohibitions for such funds;
- Pre-Award costs and related documentation requirements;
- Maintenance of effort requirements; and
- Recordkeeping, documentation, and reporting requirements for recipients of SFSF funds.
OMB Issues Updated "Jobs Created and Retained" Guidance
On December 18, 2009, OMB issued a memorandum titled, Updated Guidance on the American Recovery and Reinvestment Act – Data Quality, Non-Reporting Recipients, and Reporting of Job Estimates. This guidance should be of particular interest to your auditees that are recipients of federal assistance awards under the Recovery Act and required to report under Section 1512 of the Act.
Among the matters required to be reported by recipients under Section 1512 of the Recovery Act are estimates on the number of jobs created and retained. The new OMB guidance focuses on this particular aspect of the 1512 reporting and incorporates lessons learned from the reporting period that ended September 30, 2009 (the first reporting period under the Recovery Act). It replaces Section 5 "Reporting on Jobs Creation Estimates by Recipients" of the OMB June 2009 guidance document titled, Implementing Guidance for the Reports on Use of Funds Pursuant to the Recovery Act (see GAQC Alert #118) and reflects important simplifications to the manner in which job estimates are calculated and reported. Specifically, the memorandum states that:
- Recipients will now report job estimates on a quarterly, rather than cumulative, basis. As a result, recipients will no longer be required to sum various data on hours worked across multiple quarters of data when calculating job estimates.
- Recipients will no longer be required to make a subjective judgment on whether jobs were created or retained as a result of the Recovery Act. Instead, recipients will report on jobs funded with Recovery Act dollars.
- A simplified formula is provided to calculate job estimates and additional examples are included to assist in the understanding of how to apply the formula.
- Recipients should implement the updated methodology to the greatest extent possible for the January reporting period and that questions on the guidance should be directed to firstname.lastname@example.org.
GAQC members should also note that OMB has not yet issued an additional Addendum to the March 2009 Compliance Supplement to address the auditor's responsibilities relating to an auditee's compliance with Section 1512 reporting requirements. As noted in GAQC Alert #118, the previously issued Addendum #1 clarified that the reporting requirements imposed by Section 1512 of the Recovery Act were not applicable for audit periods with ending dates in June, July, and August of 2009, and therefore were not covered in that Addendum. Instead, Addendum #1 indicated that a separate Addendum would be issued to identify compliance requirements, audit objectives, and suggested audit procedures for reports required by Section 1512 for September 30, 2009 (the first reporting period for reports required by Section 1512), and later periods. The GAQC is monitoring activity in this area and will send a GAQC Alert as soon as there is something new to report.
New Standard on Compliance Auditing Issued
Statement on Auditing Standard (SAS) No. 117, Compliance Audits, has been issued by the AICPA Auditing Standards Board and will apply to your single audits and other similar compliance audits for fiscal periods ending on or after June 15, 2010, with earlier application permitted. The SAS supersedes SAS No. 74, Compliance Auditing Considerations in Audits of Governmental Entities and Recipients of Governmental Financial Assistance, and was primarily developed in response to the results of the federal study on the quality of single audits which showed that improvements were needed in many areas. Look for a GAQC Alert in early 2010 that will provide you with the details on this new standard. Click here for information on how to order the new SAS.
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Governmental Audit Quality Center
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