What are you required to do? According to OMB Circular A-133 (which governs the administration of federal awards), organizations are required to:
“Maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs.”
       To ensure that you have the proper controls in place, it is a good idea to perform an assessment of each of the compliance requirements that affect your federal grants. Here are a few questions you can ask yourself and others involved with the administration of the grant:
     “How do we know that case managers who are carrying out the program are fully informed of the provisions of the grant?”
     “What process do we have that would prevent an unallowable cost from being charged to the grant?
     “How do we know that participants in the program are eligible to receive services? Does anyone verify eligibility after the initial assessment?”
     “How do we make certain that we have paid for allowable costs before we request reimbursement from the grantor?”
     “How do we communicate changes involving the grant to those personnel who need to know?”
     “Do we routinely check the “Excluded Parties Listing System” to ensure that we are not doing business with any vendors that have been suspended or debarred?”
     “What process do we have in place to make sure that all reports were filed accurately and timely?”

     After doing this assessment, you may find that your internal controls need to be strengthened. If you need assistance with this, please give us a call.

Has your company received a portion of the American Recovery and Reinvestment Act of 2009 funds or do you anticipate applying to receive such funds?  If so the following are a few key points that should be discussed/considered:Consider appointing a Recovery Act “Czar” who is responsible for becoming familiar with the numerous requirements associated with the Recovery Act funds and communicate them to others in the organization.  They will also be a resource for others in the organization and be indicative of a strong “tone at the tope” for the importance of compliance with Recovery Act awards.

• Additional controls and systems may be required to ensure that Recovery Act funds are separately identified and tracked in the accounting system.  This segregation will have to carry through to the Schedule of Expenditures of Federal Awards and the Data Collection Form.
• Additional controls and systems may be required to meet the stringent reporting requirements to the federal agencies. 
• Internal control over compliance is extremely important to ensure funds are spent appropriately.  Consider the following:
  • Are control procedures over federal expenditures appropriate, working properly and designed to prevent unallowable expenditures?
  • Are additional controls and systems required to ensure that Recovery Act funds are separately identified and tracked?
  • Are new controls needed to meet the stringent reporting requirements to the federal government?
  • If Recovery Act funds are passed down to subrecipients are controls in place to ensure appropriate monitoring and reporting requirements?
• The Federal Audit Clearinghouse is required to provide public access, via the internet, to all single audit reports filed with the FAC for fiscal years ending 9/30/09 and later.  This will include the Schedule of Findings and Questioned Costs, if applicable.
• With the addition of Recovery Act funds, there will likely be more high-risk programs and additional compliance requirements that auditors will need to test.

For more information, see the Government Audit Quality Center Alert No.’s 106, 111 and 112 and the OMB Circular A-133 Compliance Supplement Appendix 7.

Is your organization ready for the strict rules of oversight, transparency and accountability? Can your internal control structure prevent and detect fraud? In an effective internal control system, the following five components work to support the achievement of the organization’s mission, strategies and objectives:

1. Control environment – describes the “consciousness” of the individuals within the organization. This element is the foundation for the remaining components and is exhibited by discipline and structure.

2. Risk assessment – describes how management identifies, analyzes and manages the risks relating to preparing financial statements in accordance with GAAP.

3. Control activities – defines the organization’s policies and procedures in accomplishing its objectives.

4. Information and communication – mechanism for transmitting pertinent information timely, so that individuals can fulfill their responsibilities.

5. Monitoring – determines the quality and effectiveness of the system.

Will your internal control structure provide the boundaries necessary to ensure that the federal funds are expended appropriately? If you are uncertain, consider having your system evaluated before you accept and expend the federal funds.  

For more information about the American Recovery and Reinvestment Act of 2009, see www.recovery.gov.