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Program-Specific
Audit Guidelines
for Advanced Technology Program (ATP)
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Audit Requirements Chapter 2 - Reporting Requirements
Report Package Chapter 3 - The Schedule of Fund Sources and Project Costs
Chapter 4 - Auditor's Opinion on the Schedule of Fund Sources and Project Costs Overview |
Chapter 5 - The Attestation Engagement
Overview
2. Property Management 3. Procurement and Suspension and Debarment 4. Federal Reporting 5. Subcontractors/Subrecipients
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Audit Requirements: The Advanced Technology Program (ATP) is a cost-sharing program designed to assist United States industry and businesses pursue high risk, enabling technologies with significant commercial and economic potential. The statutory authority for ATP, 15 USC Sec. 278n, requires that NIST establish procedures regarding financial reporting and auditing to ensure that cooperative agreements are used for their specified purposes. Pursuant to the Inspector General Act of 1978, as amended, 5 USC App., all audits of financial assistance are to be performed in accordance with Government Auditing Standards issued by the Comptroller General of the United States. These audit requirements can be met by conducting an audit of the ATP financial statement, "Schedule of Fund Sources and Project Costs" and an examination-level attestation engagement of management's assertions regarding compliance with laws and regulations.
The ATP financial statement will be audited using generally accepted auditing standards which have been incorporated into the Government Auditing Standards. The examination-level compliance attestation engagement will be conducted in accordance with Government Auditing Standards and the standards contained in the Statement on Standards for Attestation Engagement (SSAE) No. 3, Compliance Attestation, as amended by SSAE No. 9, Statement of Standards for Attestation Engagement Nos. 1, 2, and 3, issued by the American Institute of Certified Public Accountants (AICPA). A compliance attestation engagement, conducted in accordance with SSAE No. 3, as amended, is a type of financial-related audit under Government Auditing Standards.
These guidelines are to be used by independent auditors to perform the required program-specific audits of ATP recipients except when those recipients are required to comply with the Single Audit Act of 1996 and Office of Management and Budget (OMB) Circular A-133, "Audits of States, Local Governments and Non-Profit Organizations." For recipients required to have annual audits in compliance with OMB Circular A-133, these guidelines can be used to identify the allowability of specific cost elements and other programmatic compliance requirements which may be tested.
These guidelines are not intended to be a complete manual of procedures, nor are they intended to supplant the auditor's judgment of the work required to meet the audit's objectives. These guidelines may not cover all circumstances encountered while performing the program-specific audit, similarly not all procedures will apply to every situation. Auditors must use their professional judgment in determining the work necessary to render the required opinions.
Different guidelines will be used by joint venture participants from those used by single companies because of differing requirements for each of these types of award recipients. The term joint venture refers to at least two separately owned for-profit companies, both of which are substantially involved in the R&D and both contributing toward the cost-sharing or matching requirement per the terms of the cooperative agreement. Joint ventures can receive funds for R&D activities for up to five years with no funding limitations other than the announced availability of funds. However, ATP funding must be for a minority share of the yearly total project costs.
The joint venture need not be a legally constituted entity. Each joint venture participant is considered to be a direct recipient of the ATP award. As a result, each joint venture participant is required to have an examination conducted in accordance with these guidelines.
All federal programs are assigned a number in the Catalog of Federal Domestic Assistance (CFDA). The CFDA number for the Advanced Technology Program is 11.612.
Objectives: The opinions on the program financial statement and management's assertions regarding compliance will be used as a tool by program managers and grant officials in meeting their responsibilities for ensuring that federal funds were spent for their intended purposes and in accordance with laws and regulations.
Frequency: ATP recipients shall have a program-specific audit performed in accordance with the following schedule:
The program-specific audit is to cover the period elapsed since the last program-specific audit of the joint venture participant or since the project began if the audit is the initial audit. The NIST Grants Officer may amend an award to extend the project period but provide no additional funding. This is known as a no-cost extension. In the case of a no-cost extension to the first year of an award, the audit should include project funds and project costs for the first year and the extension period. In the case of a no-cost extension to the third year of a 5-year award, the audit should include project funds and project costs for the two year project period including any approved extension period.
Engagement Letter: A letter of engagement between the joint venture participant and the auditor conducting the program-specific audit shall specifically include a provision that the auditor is required to provide the Secretary of Commerce, the Office of Inspector General, and the U.S. General Accounting Office or their representatives access to working papers or related documents. Access to working papers includes making necessary photocopies.
Protection of Confidential Information: Certain information obtained in this engagement is exempt from disclosure under the Freedom of Information Act (FOIA). Exempt from FOIA disclosure is information on the business operation of any member of the business or joint venture; and trade secrets possessed by any business or any member of the joint venture.
Criteria: The auditor should review the cooperative agreement which stipulates all required awards terms and conditions including the applicable administrative requirements and cost principles. In addition, the following documents should be available:
Department of Commerce Requirements
Administrative Requirements
Cost Principles (As Applicable)
Report Package: The report package should include the following:
Appendix A provides an illustrative example.
Submission of Reports: The report package should be submitted within 90 days of the end of the reporting period. The joint venture participants should submit with the report package the joint venture participant's most recent audited or reviewed financial statements. Two copies should be submitted to the Department of Commerce. One copy should be submitted to the NIST Grants Officer at the following address:
National Institute of Standards & Technology
Grants Office - Advanced Technology Program
Cooperative Agreement No. ______________
100 Bureau Drive, Stop 3580
Building 411, Room 143
Gaithersburg, Maryland 20899-3580
The other copy should be forwarded to the Office of Inspector General at the following address:
U.S. Department of Commerce
Office of Inspector General
ATTN: ATP Program-Specific Audit Report Coordinator
401 West Peachtree Street, NW, Suite 2742
Atlanta, Georgia 30308
In the accompanying transmittal letter, please provide the name and phone number of the joint venture participant's designated contact person in the event of questions about the submitted reports.
The Schedule of Fund Sources and Project Costs as presented in Appendix A will be prepared by the joint venture participant from their accounting records. The Schedule should report the latest approved budget, for the period being audited, as identified on Form NIST-1263, page 3, and the actual fund sources and project costs incurred for the reporting period. Project costs include costs allowable under the applicable cost principles subject to all limitations and exclusions set forth in the award including the award's special and general terms and conditions, and DOC's financial assistance standard terms and conditions. In addition, the joint venture participant should review the guidance included in ATP's Proposal Preparation Kit for the allowability or valuation of a specific cost element. If the aforementioned documents are silent on the accounting for a specific item of cost, then generally accepted accounting principles should be used.
The joint venture participant should prepare adequate disclosure notes to describe the basis of the schedule's presentation and any significant accounting policies used in preparing the schedule. In addition, the notes should include a general description of the joint venture including a list of other joint venture members, a general project description, basic award terms such as the length of the award, the amount of federal funding, and the joint venture participant's required cost-share. When appropriate, disclosure notes should also include related party transactions, subsequent events, and material questioned costs.
Overview: The Schedule of Fund Sources and Project Costs is the ATP financial statement. This program financial statement should be audited under generally accepted auditing standards incorporated into Government Auditing Standards. The opinion on the Schedule of Fund Sources and Project Costs should be prepared in accordance with the AICPA's Codification of Statement of Auditing Standards, Section 623, Paragraph 22, Special-Purpose Financial Presentations to Comply with Contractual Agreement or Regulatory Provisions.
The Schedule of Fund Sources and Project Costs is prepared in conformance with the terms of the award and consistent with the cost principles which govern the expenditures of funds.
This presentation of project income and expenditures is referred to as an other comprehensive basis of accounting. If material questioned costs are found while the auditor is forming an opinion of the ATP financial statement or during the attestation engagement, the Schedule of Fund Sources and Project Costs should remain unchanged and include the total project costs incurred, including the material questioned costs. The costs questioned should be disclosed in the accompanying notes to the ATP financial statement. With adequate note disclosure, the auditor can issue an unqualified opinion with an explanatory paragraph following the opinion, as appropriate.
Cost Principles: There are federal cost principles for each type of recipient receiving federal assistance. The cost principles applicable to the recipient are stated in the award document. Allowability of costs is determined as follows:
For-profit organizations - | Federal Acquisition Regulations (FAR) Part 31, "Contract Cost Principles and Procedures" |
Non-profit organizations - | OMB Circular A-122, "Cost Principles for Nonprofit Organizations" |
Educational organizations - | OMB Circular A-21, "Cost Principles for Educational Organizations" |
Hospitals - | 45 CFR Part 74, Appendix E, "Principles for Determining Costs Applicable to Research and Development Under Grants and Contracts with Hospitals" |
ATP was created as a cost reimbursement research and development vehicle. NIST built the cost reimbursement theory into the ATP regulation and cooperative agreements by requiring compliance with applicable federal administrative requirements and cost principles. Reimbursement claims to NIST using a basis other than cost (e.g. GSA schedule, commercial price, etc.) are not allowable under the terms of ATP cooperative agreements except for the transfers of goods, including computer software, and certain services which are valued according to the provisions of Section 295.25 of the ATP regulations.
Section 295.25 applies to transfers of goods, including computer software, and services provided by the transferor related to the maintenance of those goods, when those goods or services are transferred from one joint venture member to other separately-owned joint venture members. This special valuation rule allows the joint venture participant to claim the greater amount of the actual cost of the transferred goods and services as determined in accordance with applicable federal cost principles, or 75 percent of the best customer price of the transferred goods and services. However, in no event shall the aggregate of these allowable costs exceed 30 percent of the non-federal share of the total costs of the joint venture award.
Cost Limitations: The following costs are not allowable under the ATP program regardless of whether they are allowable under the FAR or OMB cost principles:
Refer to the ATP Proposal Preparation Kit for further details regarding the unallowable costs cited above.
The award terms and conditions stipulate prior approval requirements. In addition to the prior approval requirements specified in 15 CFR Part 14, the following are allowable ONLY IF prior approval is obtained from the NIST Grants Officer:
Indirect Costs: Costs claimed as indirect costs are subject to all the same limitations and prior approval requirements as direct costs. In order to be reimbursed for indirect costs, each joint venture participant must have an indirect cost rate or proposal approved by its federal cognizant agency. The indirect cost rate proposals provide a basis for allocating indirect costs to federal programs. They should be submitted by the joint venture participant to its cognizant federal agency within 90 days of receiving the ATP award.
Indirect costs must be calculated in accordance with an approved indirect cost proposal or a negotiated indirect cost rate. Indirect cost rates are normally negotiated based on the entities' fiscal year. Regardless of any approved indirect cost rate applicable to the award, the maximum dollar amount of allocable indirect costs will not exceed the line item for indirect costs contained in the approved budget.
Audit Objectives: Determine whether the ATP award funds (federal and committed non-federal award funds) were expended only for allowable activities in conformance with provisions of the applicable cost principles, limitations or exclusions set forth in the cooperative agreement award, applicable terms and conditions incorporated in the award, (i.e., Special Award Conditions, ATP General Terms and Conditions and DOC Financial Assistance Standard Terms and Conditions).
Suggested Audit Procedures: These procedures are provided to assist the auditors in planning and performing tests of the ATP award. Auditor judgment is necessary to determine whether the suggested audit procedures are sufficient to achieve the stated audit objective. The following are the suggested audit procedures for determining the allowability of costs in accordance with the cost principles:
Overview: The practitioner is required to obtain written assertions from management as part of the compliance attestation engagement performed in accordance with the AICPA's Statement on Standards for Attestation Engagement (SSAE) No. 3, Compliance Attestation, as amended by SSAE No. 9, Amendments to Statement on Standards for Attestation Engagements Nos. 1, 2, and 3. The written assertion may be provided to the practitioner in a representation letter or may be presented in a separate report that will accompany the practitioner's report. When a separate management report does not accompany the practitioner's report, the first paragraph of the report should also contain a list of management's assertions.
In addition to the five specific assertions that follow, management's written representations should include the general matters required by paragraph 67 of SSAE No. 3, as amended. Management's representations are an integral part of the engagement. Materiality relates to each specific management assertion.
Management Assertions, Compliance Requirements and Suggested Examination Procedures:
1. Matching or Cost-sharing
Management Assertion. The cost-share established by [joint venture participant's] annual budget in the ATP award has been met. The funds claimed as cost-share are not from a subcontractor or other federal sources and were not used as matching or cost-sharing funds on other federally supported activities. The funds claimed as cost-share meet the definition provided in 15 CFR Part 14 Section 23 and conform to the limitations in 15 CFR Part 295.2(l).
Compliance Requirement - The ATP statute and implementing regulations require joint ventures to cost-share more than 50 percent of the yearly total project costs. Section 295.2(l) of the ATP implementing regulations has defined the term "matching funds or cost-sharing" to mean that portion of project costs not borne by the federal government. Sources of revenue to satisfy the required cost-share include cash and in-kind contributions. In-kind contributions shall be valued in accordance with 15 CFR Part 14 Section 23 except for certain transfers between separately-owned joint venture participants as described in ATP rule 295.25. ATP restricts the total value of in-kind contributions that can be used to satisfy the cost share by requiring that such contributions not exceed 30 percent of the non-federal share of total project costs.
ATP requires that there are at least two separately owned for-profit members in a joint venture which contribute toward the cost-sharing or matching requirement per the terms of the cooperative agreement. Subcontractors may not contribute towards the cost-share requirement. A joint venture participant cannot use funds received from other federal programs to meet the required cost-share of the ATP award.
Suggested Examination Procedures
2. Property Management
Management Assertion. Equipment acquired with the ATP funds has been accounted for in accordance with federal property management standards found in 15 CFR Part 14 Sections 30-37.
Compliance Requirement - Title to equipment acquired using federal financial assistance vests with the joint venture participant. The joint venture participant agrees to use the equipment for the authorized purpose of the project as long as it is needed and will not encumber the asset. There are no requirements pertaining to equipment with a cost of less than $5,000. NIST has disposition authority as described in 15 CFR Part 14 Section 34.
Equipment records shall be maintained, a physical inventory of equipment taken at least once every two years and reconciled to the equipment records, an appropriate control system should be used to safeguard equipment and equipment shall be adequately maintained.
While title to property and equipment vests with the joint venture participant, the company has no cost basis in the assets purchased with government funds. The participant's fixed asset system, therefore, must clearly identify that federal funds are the source of funding for the assets. The company is neither entitled to a depreciation deduction on their corporate tax return nor the R & D credit based on federal expenditures under this program.
Suggested Examination Procedures
3. Procurement and Suspension and Debarment
Management Assertion. Federal procurement standards described in 15 CFR Part 14 Sections 40-48 have been incorporated into the purchasing policies and adhered to for ATP award expenditures. Contracts and subawards have not been made to any organizations or its principals listed in the "List of Parties Excluded From Federal Procurement or Nonprocurement Programs," issued by General Service Administration.
Compliance Requirement - The purpose of federal procurement requirements is to provide to the maximum extent practical open and free competition. Joint venture participants will use their own written procurement procedures provided these procedures conform to federal law and regulations identified in 15 CFR Part 14 Sections 40-48.
The joint venture participants are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred or whose principals are suspended or debarred. Covered transactions include procurement contracts for goods or services equal to or in excess of $100,000 and all nonprocurement transactions (e.g., subawards to subcontractors/subrecipients). Requirements for suspension and debarment are contained in 15 CFR Part 26.
Suggested Examination Procedures
4. Federal Reporting
Management Assertion. The amounts in the quarterly financial status reports and the requests for advance or reimbursement agree with the underlying accounting records and summary records of each joint venture participant. The amounts in the SF-269s, SF-270s, and SF-272s submitted to NIST by the Joint Venture Administrator agree with the individual financial status reports and requests for advance or reimbursement submitted by each joint venture participant.
NOTE: Only Joint Venture Administrators are responsible for including the second sentence of the Federal Reporting Management Assertion above.
Compliance Requirement - Consolidated quarterly financial status reports (SF-269) and requests for advance or reimbursement (SF-270) are required to be sent to NIST by the Joint Venture Administrator. A report of federal cash transactions (SF-272) is required if federal funds are provided under a cash advance. The SF-272 is due 15 working days following the end of each calendar quarter for awards under $1 million dollars; or 15 working days following the end of each month for awards over $1 million dollars; or unless otherwise specified in a special award condition.
The financial status report and claims for advance or reimbursement prepared by each joint venture participant and submitted to the Joint Venture Administrator contain information that can be reconciled to the joint venture participant's accounting records from which the Schedule of Fund Sources and Project Costs is prepared. The financial information prepared by each joint venture participant and submitted to the Joint Venture Administrator may be on an SF-269 and SF-270 but the use of these standard forms is not required. Since the Joint Venture Administrator is also a participant in the joint venture, the Administrator should prepare a financial status report for their own records reporting only its own expenditures and advances or reimbursements.
The Joint Venture Administrator is responsible for conducting a review of the financial status reports for each joint venture participant to ensure that the financial information is consistent with each participant's approved budget. Any discrepancies must be resolved by the Joint Venture Administrator, prior to submitting financial reports or requesting payments from NIST. The Joint Venture Administrator must ensure that the overall joint venture award cost-share requirements are met throughout the award.
Suggested Examination Procedures - The following procedures a. through d. apply to each joint venture participant's financial status report and request for advance or reimbursement. Procedures e. through g. are additional procedures which should be used in the examination of the Joint Venture Administrator.
5. Subcontractors/Subrecipients
Management Assertion. The agreements entered into with subcontractors/subrecipients, as defined below, require that the subcontractors/subrecipients adhere to federal laws and regulations as specified by the ATP award and sanctions are specified for the subcontractor's/subrecipient's noncompliance.
Compliance Requirement - The joint venture participant is ultimately responsible to NIST for funds passed to a subcontractor/subrecipient. For the purpose of these guidelines, a subcontractor/subrecipient is defined as an organization which receives a portion of the financial assistance from the ATP joint venture participant and assists the joint venture participant in meeting the project's goals. This definition does not include the procurement of goods and services. The joint venture participant should include in each agreement with its subcontractors/ subrecipients the requirement for adherence to the federal laws and regulations as required by NIST's Advanced Technology Program. Subcontractors/subrecipients are required to have an audit performed in accordance with the ATP Program-Specific Audit Guidelines if the subcontractor/subrecipient has received more than $300,000 under an ATP award. Suggested Examination Procedures
For the Period of xx/xx/xx - xx/xx/xx
Approved
Budget
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Actual
Receipts &
Project Costs |
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Fund Sources | ||
---|---|---|
ATP Award Funds | ||
Recipient's Contribution | ||
Program Income | ||
Other | ||
Total Fund Sources | ||
Direct Project Costs | ||
Direct Costs | ||
Project Salaries | ||
Technical | ||
Administrative | ||
Fringe Benefits | ||
Technical | ||
Administrative | ||
Travel | ||
Equipment | ||
Materials/Supplies | ||
Subcontracts | ||
Other | ||
Total Direct Costs | ||
Total Indirect Costs(1). | ||
Total Project Costs |
1. Include indirect costs if indirect costs are claimed as part of a required cost-share.
Independent Auditor's Report
[Addressee]
We have audited the accompanying Schedule of Fund Sources and Project Costs of [ single company ] as of [date of this report]. This Schedule of Fund Sources and Project Costs is the responsibility of [ single company's] management. Our responsibility is to express an opinion on the Schedule of Fund Sources and Project Costs based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Schedule of Fund Sources and Project Costs are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Schedule of Fund Sources and Project Costs. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Schedule of Fund Sources and Project Costs. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Schedule of Fund Sources and Project Costs was prepared for the purpose of complying with the award requirements of the ATP cooperative agreement number 70NANB#H#### entered into by [single company] and the U.S. Department of Commerce as described in Note X. This Schedule was prepared in conformance with the award requirements which is a comprehensive basis of accounting other than generally accepted accounting principles.
In our opinion, the Schedule of Fund Sources and Project Costs referred to above presents fairly, in all material respects,(2) the source of funds and project costs of [single company ] for the period [year end (date)/period from (date) to (date)] in conformity with the basis of accounting described in Note X.
This report is intended solely for the information and use of the audit committee, management and the U.S. Department of Commerce and should not be used for any other purpose.
[Signature]
[Date]
[Addressee]
We have examined management's assertions, that [single company] complied with the following specified requirements, relative to the Company's Schedule of Fund Sources & Project Costs for the NIST ATP Cooperative Agreement No. 70NANB#H#### for the period from [date] to [date] (list compliance requirements as shown below or attach management assertions in accompanying management report).
Management is responsible for [single company's] compliance with those requirements. Our responsibility is to express an opinion on management's assertions about [single company's] compliance based on our examination.
Our examination was conducted in accordance with Government Auditing Standards, issued by the Comptroller General of the United States; attestation standards established by the American Institute of Certified Public Accountants; and the NIST Program-Specific Audit Guidelines for Advanced Technology Program (ATP) Cooperative Agreements with Single Companies, issued by the U.S. Department of Commerce, Office of Inspector General, dated May 1999 and, accordingly, included examining, on a test basis, evidence about [single company's] compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination on [single company's] compliance with specified requirements.
In our opinion, management's assertions that [single company ] complied with the aforementioned requirements relative to the [single company's] ATP Award Cooperative Agreement No. 70NANB#H#### during the [year ended (date)/period from(date) to (date)] are fairly stated, in all material respects.(3)
This report is intended solely for the information of the audit committee, management, and the U.S. Department of Commerce and is not intended to be and should not be used by anyone other than these specified parties.
[Signature]
[Date]
____________________
1. Include
indirect costs if indirect costs are claimed as part of a required cost-share.
2. The auditor should modify the standard report and issue a qualified, adverse or disclaimer of opinion, as appropriate, in the following circumstances:
3. The practitioner should modify the standard report if any of the following conditions exist:
Date
created: September 1999
Last updated:
April 11, 2005
ATP
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