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Section 3: Single Audit Procedures

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Introduction

The single audit concept provides that recipients of federal funds use their own procedures to arrange for independent audits that are to be made on an organization-wide basis, rather than on a grant or project basis. If this organization-wide audit complies with the specific requirements of Office of Management and Budget (OMB) Circular A-133, then no additional audit requirements are normally imposed and all grantor agencies will rely on such audits.

The State and the Texas Department of Transportation (TxDOT) have subscribed to the spirit and principles of the single audit concept. Therefore, the audit work of others will be relied upon to the extent indicated by prudent judgment. Acceptance will be on the basis of written notice or other valid document, wherein, the validity of the audit work involved is reasonably assured.

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Background

The basic directive pertaining to the audit of state and local governments, institutions of higher education, and other non-profit organizations is OMB revised Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Circular A-133 implements the Single Audit Act amendments of 1996 and provides uniform single audit requirements for all non-federal grantees including state and local governments, colleges and universities, hospitals, and other non-profit organizations. This Circular, which was issued June 30, 1997, applies to audits of fiscal years beginning after June 30, 1996, and supersedes prior versions of Circular A-133, as well as rescinding Circular A-128, Audits of State and Local Governments.

Under OMB Circular A-133, TxDOT is considered a pass-through entity for federal funds and is charged with the following responsibilities:

  • informing each subgrantee of the Catalog of Federal Domestic Assistance (CFDA) number and title, amount of funding awarded, award number and award year,

  • advising subgrantees of the requirements imposed on them by federal laws, regulations, and provisions of contracts and grant agreements as well as any supplemental requirements imposed by the state,

  • monitoring the activities of subgrantees as necessary to ensure that federal awards are used for authorized purposes in compliance with laws, regulations and contract provisions and to ensure that performance goals are achieved,

  • ensuring that subgrantees expending $500,000 or more during the subgrantee’s fiscal year have met the audit requirements of OMB Circular A-133 for that fiscal year,

  • issuing management decisions on audit findings within six (6) months of the receipt of the subgrantee’s audit report and ensuring that the subgrantee takes appropriate and timely corrective action,

  • considering whether subgrantee audits necessitate adjustments to the State’s own records,

  • requiring each subgrantee to permit the state and other auditors to have access to records and financial statements as necessary for the state to comply with OMB Circular A-133, and

  • maintaining subgrantee report submissions (or other written notification when no reports are required to be submitted) on file for four years from the date of receipt.

The TxDOT Traffic Operations Division - Traffic Safety Section (TRF-TS) provides a substantial amount of federal and state funding to a large number and variety of governmental and non-governmental entities. Audits and on-going grant monitoring are two tools which the department uses to carry out its management oversight responsibilities. Part of the department’s audit-related responsibilities for subgrantees include obtaining, reviewing, and resolving subgrantee audit reports.

DUNS and OMB Circular A-133 Compliance Page

Potential Traffic Safety Program subgrantees must complete the DUNS and OMB Circular A-133 Compliance Page in eGrants when applying for grants with TRF-TS.

The Data Universal Numbering System (DUNS) is a unique nine-digit number recognized as the universal standard for identifying and tracking businesses worldwide. The Federal Spending Transparency Directive and the previous Federal Funding Accountability and Transparency Act (FFATA) requires grantees and subgrantees to have a DUNS number. Most agencies and organizations have DUNS numbers established. Agency personnel that submit proposals through eGrants should check with their agency’s accounting staff. To obtain a DUNS number, applicants should go to the Dun and Bradstreet Website at http://fedgov.dnb.com/webform.

Traffic Safety subgrantees are also required to comply with federal OMB Circular A-133 and/or the State of Texas Audit Circular requirements; therefore, all potential subgrantees must check one of the following on the eGrants DUNS and OMB Circular A-133 proposal compliance page:

  • “If threshhold expenditures of $500,000 or more are met during your agency’s fiscal year ####, please submit a Single Audit Report and Management Letter (if applicable) to TxDOT’s Audit Office, 125 E. 11th Street, Austin, TX 78701 or via e-mail to Virgie.Rodriguez@txdot.gov.

  • “If expenditures are less than $500,000 during your agency’s fiscal year ####, please submit a statement to TxDOT’s Audit Office as follows: “We did not meet the $500,000 expenditure threshhold and therefore we are not required to have a single audit performed for FY ####.”

TRF-TS creates a database of subgrantees that are required to submit a single audit report and subgrantees that are not required to submit a single audit report, but must submit a statement that they do not meet the expenditure threshhold and therefore, are not required to submit a single audit report. This database is completed annually by TRF-TS from information captured in the DUNS and OMB Circular A-133 compliance page of eGrants after the grant award process has been completed for the year . The database is then forwarded to the TxDOT Audit Office (AUD) so that AUD can determine which agencies have submitted their single audit report or a statement that a single audit report is not required, within nine months after the end of their fiscal year.

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Responsibilities

TxDOT, through the TxDOT Audit Office (AUD), is responsible for:

  • determining whether the subgrantee spent federal pass-through funds in accordance with applicable laws or regulations
  • obtaining copies of single audit reports from subgrantees in accordance with the guidelines established under OMB Circular A-133, or
  • obtaining copies of statements from subgrantees that they are not required to have an audit conducted as the $500,000 expenditure threshhold for the year was not met.
  • updating and submitting to TRF-TS bi-annually (January and June) the database (list) of the subgrantees that have either submitted their single audit report, or submitted a statement that a single audit report is not required, within nine months after the end of their fiscal year
  • insuring that single audit reports:
    • meet the minimum “Reporting Standards for Financial Audits” as outlined in Chapter 5 of the 2007 revision of the Government Auditing Standards issued by the Comptroller General of the United States
    • meet the requirements of the “Statement on Auditing Standards No. 63” issued by the American Institute of Certified Public Accountants for “Compliance Auditing Applicable to Governmental Entities and Other Recipients of Governmental Financial Assistance.”

Reviewing Single Audit Reports

If the subgrantee’s financial reports have been approved by their federal cognizant agency or state single audit coordinating agency, AUD receives a copy of the approval letter.

AUD completes a desk review within 30 calendar days of receiving the report and assists in resolving any issues noted in the desk review by forwarding them to the appropriate TxDOT program area for resolution.

The single audit report is examined closely to identify the projects, agreement or grants representing funds administered by TxDOT. A report is then prepared and submitted to the appropriate division program director listing all projects identified in the “Schedule of Federal Financial Assistance” as having received audit coverage.

If the audit report includes disallowances or unfavorable findings to be resolved, extracts or copies are forwarded to the subgrantee for collection of the money due or other resolution as appropriate. Information copies are provided to TRF-TS program managers and to the district Traffic Safety Specialists when appropriate.

TxDOT TRF-TS is responsible for:

  • following up with subgrantees that have not submitted the required single audit reports, the statements that they are not required to submit a single audit report, or that have audit findings to be resolved.
  • impose sanctions, when necessary, on subgrantees that prevent TRF-TS from obtaining, reviewing, and resolving audit reports in a timely manner by not submitting these documents by their due dates and/or when requested by TRF-TS.

Sanction Policy

The primary goal of TxDOT is to fulfill its responsibilities to obtain, review, and resolve audit reports in a timely manner and to monitor for contract compliance. Audit reports should be received in the department by their due date, reviewed within 90 days of receipt of a complete report and resolved within six (6) months of receipt. To accomplish this, the Department (TxDOT TRF-TS) will rely, in cases where it is necessary, on the imposition of sanctions to ensure that audit reports are received, that materials needed for audit report review and resolution are submitted and that contract provisions are adhered to.

Sanction Procedures

  1. Whenever an audit report is not received in the department by its due date, or whenever additional material is needed from an audited entity in order to proceed with audit review and resolution activities, TRF staff will write to the entity requesting that the report, or other material, be submitted within 30 days. If the requested information is submitted, the matter will be considered closed.

  2. If the information has not been submitted by the end of the 30-day period, TRF-TS staff will write a second notification letter to the audited entity indicating that this is a second notice and request again that the material be submitted within 30 days, or that the entity provide a written explanation of why the material cannot be provided within the second 30-day time frame. If the requested material cannot be provided within the second 30-day period, the explanation of the delay should also specify a date by which the material will be provided.

    The second notification letter shall inform the audited entity that TRF-TS is considering the imposition of a fiscal sanction unless the requested information (or an acceptable explanation for not submitting it) is received.

  3. If the audit report, or other materials requested, has not been received by the end of the second 30-day period, and the audited entity has not provided an acceptable explanation of why the material could not be submitted within the time frame, TRF-TS staff will write to the audited entity and indicate either that the requested material has not been received, or that no acceptable explanation for not submitting it has been provided. The letter shall inform the audited organization that TxDOT is now in the process of considering the imposition of a fiscal sanction because of the entity’s failure to comply with previous requests.
  4. When it becomes necessary to inform an entity that TRF-TS is considering the imposition of a fiscal sanction, TRF-TS staff will research the status of the grant award and the Department’s payments to determine the possible sanctions available to the Department. Possible sanctions include:

    • disallowing the administrative and/or overhead costs until the requested material has been supplied
    • withholding 10% of the subgrantee’s reported allowable expenses (if the subgrantee’s expenditure reports do not clearly identify an administrative expense amount) until the requested material has been received
    • suspending the grant until the requested material has been supplied
    • terminating the grant.

    Generally, audit reports are due substantially after the close of a period for which funding has been provided and requests for additional information needed to proceed with audit review and/or resolution will occur later. In most cases where TRF-TS is considering the imposition of a fiscal sanction, it will have to be imposed in a current period for a failure to submit an audit report or other material related to funding provided in a prior period.

    In those cases in which an entity has not provided an audit report or other information necessary for the review and resolution of audits for a period that is now closed and TRF-TS is not providing any funding for the entity for the current period, TRF-TS will not provide any new funding to the entity for any program, from any source, until the requested material has been provided.

  5. Once TRF-TS staff has identified an appropriate sanction, they shall prepare a brief report for review and approval by the TxDOT TRF Division Director.

    The report shall explain the circumstances leading to the tentative decision to impose a sanction (i.e. what the entity failed to provide, what actions TRF-TS took to obtain the information prior to considering the imposition of a sanction) and explaining the reasons for the particular sanction being recommended. TRF-TS staff should also prepare a proposed sanction letter to the entity. The letter should describe the circumstances leading up to the decision to impose the sanction, what sanction is being imposed, when the sandtion will begin, and what the entity needs to do to have the sanction lifted.

  6. Once a sanction has been determined and a proposed sanction letter prepared, the letter is sent to the audited entity indicating the imposition of a fiscal sanction which will remain in place until the audit or other requested material, or a satisfactory explanation of why it cannot be submitted, is received by TRF-TS.
  7. If the imposition of the initial sanction does not result in the subgrantee providing the audit report or other requested materials, the sanction shall remain in place for a period of up to three (3) months from the effective date of the initial sanction. TRF-TS shall inform, each month, the sanctioned entity in writing that the sanction is being continued because of the organization’s failure to submit the audit report or other requested materials.
  8. Prior to the expiration of the three month period following the imposition of an initial sanction, TRF-TS shall inform the audited entity, in writing, that TRF-TS will impose further sanctions if the audit report, or other requested material has not been provided within three months after the effective date of the initial sanction.

    When a sanctioned entity has submitted the information requested by TRF-TS, and TRF-TS has found it to be acceptable, the sanction will be lifted and any funds withheld during the sanction period will be returned to the subgrantee by the most convenient method as determined by TRF-TS.

    However, if compliance with the audit requirements has been too late and TRF-TS no longer has the withheld funds available to return, the funds previously withheld will not be returned when the sanction is lifted. If, at any time during the period in which a subgrantee is under sanction, TRF-TS’s normal grant renewal process is underway, TRF-TS will not enter into a grant for the next contract perioud unless the entity first provides the audit reort or other requested material for the period for which the sanction is being imposed.

    If the audited entity has not submitted an audit report or other requested material necessary for the audit review and/or resolution process by the expiration of the three-month period following the effective date of the initial sanction, TRF-TS will consider terminating all funding to the organization for failure to comply with the audit requirements of the grant.

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