09.28.11

FFATA:  What will your auditors request related to the reporting requirements under FFATA?

by Amy Fenninger, Divya Khanijo and Maili Montgomery

 

In support of the ever increasing pursuit of transparency and accountability, the Federal Funding Accountability and Transparency Act (FFATA) was introduced in 2010, creating additional reporting responsibilities related to subaward expenditures for prime awardees of federal awards. While organizations have been required to report under FFATA for nearly a year now, the 2011 audit cycle will likely be the first audit during which your auditor will scrutinize your compliance with this reporting requirement. Here’s a brief summary of FFATA requirements and a look at what your auditor will be looking for and what you can do to prepare for the audit.

In summary, FFATA requires direct recipients to report certain award information about first-tier subawards in excess of $25,000. FFATA applies to grant and contracts alike, though the effective date differs based on the type of award (October 1, 2010 for grants, March 1, 2011 for contracts). FFATA reports are due by the end of the month following the month in which the subaward obligation is made. Certain direct recipients must also report both its own executive compensation and the subawardee’s if federal awards account for 80% of more of the entity’s total revenues and revenues exceed $25,000,000.

You should expect your auditor to ask some variation of the following questions. Remember that your auditor will not only want you to demonstrate the entity’s compliance with FFATA but also the soundness of the entity’s internal control over compliance with FFATA.

Did the auditee adopt or implement procedures in order to comply with FFATA upon effective date?

• FFATA requires the recipient to register in the Central Contractor Registration (CCR) (which is not a new requirement for those recipients of American Recovery and Reinvestment Act (ARRA) awards) and the FFATA Subaward Reporting System (FSRS), the reporting submission tool for FFATA reports.

Did the auditee appropriately identify its federal awards, if any, that are subject to FFATA?

• Applicable to new awards after October 1, 2010. Existing awards do not apply.
• Not applicable to ARRA awards (as those awards are subject to separate reporting).

Did the auditee appropriately identify its subawards? How does the auditee identify which subrecipients, if any, are subject to FFATA?

• Subawards include both subrecipients (as defined by OMB Circular A-133) and subcontractors who furnish supplies or services for performance of the prime contract.
• Excludes supplier agreements with vendors for indirect-type costs.
• For those new Federal grants as of October 1, 2010, if the initial award is equal to or greater than $25,000, reporting of sub-award and executive compensation data is required.
• If the initial award is less than $25,000 but subsequent grant modifications result in a total award equal to or greater than $25,000, the award will be subject to the reporting requirements, as of the date the award exceeds $25,000.
• If the initial award equals or exceeds $25,000 but funding is subsequently de-obligated such that the total award amount falls below $25,000, the award continues to be subject to these reporting requirements.

Did the auditee file the appropriate reports in a timely manner in accordance with FFATA?

• Your auditor will request a listing of all new awards and first-tier subawards for the fiscal year end.  Included in this list should be all awards and first-tier subawards from direct non-ARRA funded awards or funded with both ARRA and non-ARRA funding.  This listing should include the following information about the awards and first-tier subawards: prime award number, initial award amount, the date of the award, any modification to the initial award, the amount of each of the modifications of the award, the date of each modification and the date the report was due and the date that it was submitted. This level of detail may be necessary for the auditor to determine when the subaward became subject to FFATA.
• A sample of subawards will be selected (from the list above) by your auditor for testing of the FFATA reporting requirement.  For the selected subawards, you will need to provide the following:
  • Subaward date (and any modifications thereof)
  • Amount of subaward (and any modifications thereof)
  • Subaward obligation/action date
  • Date of FFATA report submission and support that it was submitted timely (i.e. copy of reports).
  • Documents that support the financial information in the reports.
  • Documents that demonstrate that all of the required elements (as detailed above) were included in the reports.

Did the auditee design and implement effective internal controls over compliance?

• Who reviews the awards that were identified as subject to FFATA to ensure all applicable awards were identified? What are the key controls in this process?
• Who reviews the subrecipients that were identified as subject to FFATA to ensure all applicable subrecipients were identified? What are the key controls in this process?
• How does the entity monitor that FFATA reports, when applicable, are submitted timely for all subrecipients?
• Who reviews the reports before submission to ensure that all key elements (as described above) are included in the reports submitted under FFATA reporting?

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