for Advanced Technology Program (ATP)
5 - The Attestation Engagement
3. Federal Reporting
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 ATP 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 single companies from those used by joint venture participants because of differing requirements for each of these types of award recipients. A single company is defined by NIST as a small, medium, or large for-profit company. A single company can receive up to $2 million of ATP funds over a period not to exceed three (3) years.
ATP funds may only be used to pay for direct costs for single company recipients. Single company recipients are responsible for funding all of their overhead or indirect costs.
Small and medium size single companies are not required to provide a cost-share of direct costs, however, they may pay a portion of the direct costs in addition to paying for all the indirect costs allocated to the award. Large companies must cost-share at least 60 percent of the yearly total project costs (direct and indirect costs). A large company is defined as any business, including any parent company plus related subsidiaries, having annual revenues in excess of $2.721 billion. (Note that the revenue requirement for defining a large company will likely change annually as reflected in the ATP Proposal Kit). As with small and medium sized companies, ATP funds can only be used to pay for direct costs. However, large companies may use their overhead/indirect costs allocated to the project to meet their cost-share requirement.
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 are 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 company 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.
Engagement Letter: A letter of engagement between the ATP recipient 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 ATP recipient's business operation and trade secrets.
Criteria: The auditor should review the cooperative agreement which stipulates all required award 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 (As Applicable)
Cost Principles (As Applicable)
Report Package: The report package should include the following:
Submission of Reports: The report package should be submitted within 90 days of the end of the reporting period. The ATP recipient should submit with the report package the company'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 company'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 ATP recipient from the company's accounting records. The Schedule should report the latest approved budget, for the period being audited, as identified on Form NIST-1262, 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 recipient 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 ATP recipient 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 company receiving the ATP award, a general project description, basic award terms such as the length of the award, the amount of federal funding, and the recipient'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. Single company recipients may only use actual costs incurred during the award period as the basis for any claims.
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:
Direct Costs vs. Indirect Costs: Single company ATP recipients are reimbursed for allowable direct costs only. Indirect costs for single companies are unallowable for reimbursement with Federal funds and must be absorbed by the single companies. If indirect costs are not part of the cost-share computation, the indirect costs are not required to be audited. Note, beginning with proposals submitted on or after December 1997, large company recipients are required to cost-share at least 60 percent of the yearly total project costs (direct and indirect costs). Indirect costs incurred by a large company and allocable to the ATP award may be used to meet the company's cost-sharing requirement. If a large company recipient includes indirect cost as part of their cost-share, the indirect costs are required to be audited.
Small and medium size single companies' cost-sharing of any direct costs, and large single company cost-sharing of direct and indirect costs are defined based on the company's proposal and approved budget. The cost-sharing amount is made part of the award and must 1) meet the criteria stipulated in the administrative requirements of 15 CFR Part 14, 2) be allowable under the applicable federal cost principles, and 3) be subject to audit.
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, a large company claiming indirect costs 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 company to its cognizant federal agency within 90 days of receiving an 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:
11. Test, on a sample basis, that depreciation is not being claimed on assets or a portion of the assets purchased with federal funds.
Steps 12 through 14 are for companies providing indirect cost as a required cost-share.
12. Test the indirect cost pools allocable to the ATP award to ascertain that the pools include only allowable costs in accordance with applicable cost principles.
13. When DOC is the cognizant agency, test that the methodology used in allocating costs to ascertain if it produces an equitable distribution of costs.
14. If the company has a negotiated indirect cost rate, select a sample of claims for reimbursement and verify that the rates used are in accordance with the rate agreement, that rates were applied to the appropriate bases, and that amounts claimed were the product of applying the rate to the applicable base.
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 in the budget of 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 that large companies receiving an award as a single company must cost-share at least 60 percent of the yearly total project costs (direct and indirect 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. 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.
Subcontractors may not contribute towards the cost-share requirement. An ATP recipient cannot use funds received from other federal programs to meet the required cost-share of the ATP award. .
Suggested Examination Procedures
b. Ascertain that the cost-share provided did not come from a subcontractor to the project or from other federal sources.
c. Inquire of management whether the costs charged to the ATP project have been used to meet cost-sharing or matching requirements of other federally supported activities.
d. If in-kind contributions are part of the cost-share, trace these contributions to the company's accounting and summary records to determine that the value of the in-kind contribution is in accordance with 15 CFR Part 14 Section 23 and does not exceed the limitations imposed by 15 CFR Part 295.2(l).
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 recipient. The recipient 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 recipient, the recipient has no cost basis in the assets purchased with government funds. The recipient'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
b. Ascertain that a physical inventory is conducted at least once every two years.
c. Inquire as to the disposal of ATP funded equipment during the award period. Ascertain whether disposition instructions were requested from NIST and, if so, were they followed. If disposition instructions were not requested, did the disposition of property meet the requirements of 15 CFR Part 14, Section 34.
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. Recipients 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.
Recipients 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
b. Test a representative sample of procurement transactions. Evaluate whether the contract files maintain sufficient detail to document the significant history of the procurement, including the rationale for method of procurement, selection of contract type, contractor selection or rejection, and the basis of contract price.
c. Inquire about the rationale for any procurement with limited competition and ascertain if the limitation was justified.
d. Review correspondence to determine that documentation for procurement transactions exceeding $100,000 was submitted to the NIST Grants Officer for approval if any of the following conditions exist: 1) the award was made by noncompetitive negotiation, 2) only a single bid or offer was received, 3) the award was made to other than the apparent low bidder, or 4) a brand name product was specified.
e. Test a sample of procurement contracts and subawards and ascertain if they were awarded to suspended or debarred parties included on GSA's List of Parties Excluded from Federal Procurement or Nonprocurement Programs.
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.
Compliance Requirement - Quarterly financial status report (SF 269) and requests for advance or reimbursement (SF 270) are required. The financial status report and claims for advance reimbursement contain information that can be reconciled to the accounting records from which the Schedule of Fund Sources and Project Costs was prepared. A report of federal cash transactions (SF 272) is required if federal funds are provided under a cash advance.
Suggested Examination Procedures
b. Obtain an understanding of the recipient's procedures for preparing and reviewing the financial status reports and the request for advance or reimbursement.
c. Select a sample of financial status reports and requests for advance or reimbursement to determine that the reports are prepared according to DOC instructions. For the sample, trace significant data to supporting documentation (e.g., summary worksheets, ledgers, etc.) and determine all material differences between financial reports and the company's accounting records.
d. Review the company's system for monitoring payment requests from subcontractors/subrecipients. Test controls which limit payments to reimbursement of actual costs. .
e. Review significant adjustments made to the general ledger accounts or other accounting records affecting the ATP award and evaluate for propriety. Ascertain whether amended federal reports were submitted for these adjustments.
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 ATP recipient 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 recipient and assists the recipient in meeting the project's goals. This definition does not include the procurement of goods and services.
The ATP recipient should include in each agreement with its subcontractors/subrecipient 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
b . Ascertain whether the ATP recipient received the subcontractor's/subrecipient's audit reports and the ATP recipient required the subcontractor/subrecipient to take timely corrective actions on deficiencies identified in the audits.
c. When audit reports are not required from subcontractors/subrecipients, review the ATP recipient's monitoring procedures to ascertain if the subcontractor/ subrecipient used federal funds for authorized purposes and what action was taken in response to findings.
d. Test the agreements to determine that there are sanctions in place for noncompliance with laws and regulations as specified by the ATP award and if noncompliance was found that the sanctions were enforced.
For the Period of xx/xx/xx - xx/xx/xx
Actual Receipts &
|ATP Award Funds|
|Total Fund Sources|
|Direct Project Costs|
|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
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.
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.
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:
created: September 1999
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