This is part 2 of 3 in the Single Audit and the Uniform Guidance Blog Series. Make sure to check out the final installment, What to Expect When You’re Anticipating an Auditor.
The bar has been raised for grant recipients receiving federal awards. With the advent of the new Uniform Guidance, non-federal entities are expected to meet performance measurements, assess risk, and effectively manage their grants to a whole new set of regulations.
For grant recipients wanting additional federal funds, having an audit with no findings, i.e. a “clean” audit, will be critical to passing the new risk and integrity assessments with potential funders. Grant recipients should take full advantage of this window of cooperative audit resolution with federal agencies to resolve old issues and position their organizations for the future. Below are three key changes in regards to Single Audit for grant managers and other grant professionals.
Change #1: Risk Assessments Increasingly Rely on Audit Results
For non-finance folks, the concept of internal controls is one they may have heard or read about in college or seen on a presentation from the accounting department, but the relevance to programs has been limited at best. One of the big changes with the new federal grant regulations was the movement of internal controls from the audit guidance into the administrative requirements.
Now, programs are expected to be partners in the application of internal controls throughout the grant lifecycle. How will this happen? This is an area where finance professionals need to lead the charge. The concepts and practical applications for programs staff, human resources, and IT should be reviewed and communicated.
Contrary to what you might think, internal controls are not about writing a bunch of policy or procedure documents and sticking them on a shelf somewhere. Instead, internal controls are a living process that exists to ensure that what you say you’ll do happens as expected, and, when it doesn’t, this deviation is detected and corrected.
Change #2: Cooperative Audit Resolution is the Calm before the Storm
Does the idea of cooperation between grant recipients, auditors, and funding agencies seem like it’s too good to be true? Are you more familiar with the adversarial roles of the past?
In Sub-section 200.25 Cooperative Audit Resolution is described as the use of techniques that promote quick resolution of audit findings and corrective actions by “improving communication, fostering collaboration, promoting trust, and developing an understanding between the federal agency and the non-federal entity.”
Wondering how this “Kumbaya” moment is going to be accomplished? Here is the view of the Uniform Guidance:
Cooperative audit resolution will be achieved through:
- Strong commitment to program integrity by leadership on all sides
- Working cooperatively with non-federal entities, federal agencies, and the auditors
- Agreeing to focus on current conditions and a commitment to use corrective action plans to improve the future state
- Appropriate relief of past mistakes when issues are addressed promptly and fixed
But there is a big stick with this carrot: the federal government wants to send a crystal-clear message that they are being nice to get past the old “junk,” then it will be no more Mr. Nice Guy. Future failures to correct audit findings and deficiencies will not be tolerated and will result in a whole host of sanctions against your non-federal entity.
Change #3: More Focused Attention on Areas of High Risk
If you take the time to read through the new Uniform Guidance, a couple of things become obvious. First of all, the federal government wants to shift the accountability for grant funds back to the people spending the money. In other words, they are tired of getting hauled before Senate hearings to explain the inappropriate (or worse) behavior of some bad apples who received federal grants.
Secondly, the focus on the federal side is “How do we deal with limited resources and focus our attention where the biggest risks for waste, fraud, and abuse occur?” In other words, where is the biggest bang for the buck? It actually makes sense from a lot of perspectives and nonprofits and other non-federal entities with limited resources can learn from this approach.
What if your primary focus is making sure you have a clear accountability for compliance at your organization as opposed to a “Let’s Make a Deal” culture where issues are addressed only after they have blown up into bigger problems?
Involvement of the whole organization in internal control systems is one way to identify and correct areas of higher risk. Another way to reduce risk is to invest in systems and training that help people do their jobs successfully and reduce the risk of noncompliance at the organization. Small steps consistently applied will get you to your destination and make sure funding streams needed to help your communities will continue to flow.