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32 C.F.R. §§ 37.640–37.670

7 sections in range

§37.640. Must I include a provision for audits of for-profit participants?

32 C.F.R. § 37.640

If your TIA is an expenditure-based award, you must include in it an audit provision that addresses, for each for-profit participant:
(a)
Whether the for-profit participant must have periodic audits, in addition to any award-specific audits, as described in § 37.645. Note that the DCAA or the Office of the Inspector General, DoD (OIG, DoD), can provide advice on the types and scope of audits that may be needed in various circumstances.
(b)
Whether the DCAA or an independent public accountant (IPA) will perform required audits, as discussed in § 37.650.
(c)
How frequently any periodic audits are to be performed, addressed in § 37.655.
(d)
Other matters described in § 37.660, such as audit coverage, allowability of audit costs, auditing standards, and remedies for noncompliance.
Notes, amendments, and revision history

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 68 FR 47160, Aug. 7, 2003, unless otherwise noted.

§37.645. Must I require periodic audits, as well as award-specific audits, of for-profit participants?

32 C.F.R. § 37.645

You need to consider requirements for both periodic audits and award-specific audits (as defined in § 37.1325 and § 37.1235, respectively). The way that your expenditure-based TIA addresses the two types of audits will vary, depending upon the type of for-profit participant.
(a)
For for-profit participants that are audited by the DCAA or other Federal auditors, as described in §§ 37.650(b) and 37.655, you need not add specific requirements for periodic audits because the Federal audits should be sufficient to address whatever may be needed. Your inclusion in the TIA of the standard access-to-records provision for those for-profit participants, as discussed in § 37.915(a), gives the necessary access in the event that you or administrative agreements officers later need to request audits to address award-specific issues that arise.
(b)
For each other for-profit participant, you—
(1)
Should require that the participant have an independent auditor (i.e., the DCAA or an independent public accountant) conduct periodic audits of its systems if it expends $750,000 or more per year in TIAs and other Federal assistance awards. A prime reason for including this requirement is that the Federal Government, for an expenditure-based award, necessarily relies on amounts reported by the participant's systems when it sets payment amounts or adjusts performance outcomes. The periodic audit provides some assurance that the reported amounts are reliable.
(2)
Must ensure that the award provides an independent auditor the access needed for award-specific audits, to be performed at the request of the cognizant administrative agreements officer if issues arise that require audit support. However, consistent with the government-wide policies on single audits that apply to nonprofit participants (see § 37.665), you should rely on periodic audits to the maximum extent possible to resolve any award-specific issues.
Notes, amendments, and revision history

Amendments

[68 FR 47160, Aug. 7, 2003, as amended at 85 FR 51246, Aug. 19, 2020]

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 68 FR 47160, Aug. 7, 2003, unless otherwise noted.

Amendments

[68 FR 47160, Aug. 7, 2003, as amended at 85 FR 51246, Aug. 19, 2020]

§37.650. Who must I identify as the auditor for a for-profit participant?

32 C.F.R. § 37.650

The auditor that you will identify in the expenditure-based TIA to perform periodic and award-specific audits of a for-profit participant depends on the circumstances, as follows:
(a)
You may provide that an IPA will be the auditor for a for-profit participant that does not meet the criteria in paragraph (b) of this section, but only if the participant will not agree to give the DCAA access to the necessary books and records for audit purposes. Note that the allocable portion of the costs of the IPA's audit may be reimbursable under the TIA, as described in § 37.660(b). The IPA should be the one that the participant uses to perform other audits (e.g., of its financial statement), to minimize added burdens and costs. You must document in the award file the participant's unwillingness to give the DCAA access. The DCAA is to be the auditor if the participant grants the necessary access.
(b)
Except as provided in paragraph (c) of this section, you must identify the DCAA as the auditor for any for-profit participant that is subject to DCAA audits because it is currently performing under a Federal award that is subject to the:
(1)
Cost principles in 48 CFR part 31 of the Federal Acquisition Regulation (FAR) and 48 CFR part 231 of the Defense FAR Supplement; or
(2)
Cost Accounting Standards in 48 CFR chapter 99.
(c)
If there are programmatic or business reasons that justify the use of an auditor other than the DCAA for a for-profit participant that meets the criteria in paragraph (b) of this section, you may provide that an IPA will be the auditor for that participant if you obtain prior approval from the Office of the Inspector General, DoD. You must submit requests for prior approval to the Assistant Inspector General (Auditing), 4800 Mark Center Drive, Alexandria, VA 22350-1500. Your request must include the name and address of the business unit(s) for which IPAs will be used. It also must explain why you judge that the participant will not give the DCAA the necessary access to records for audit purposes (e.g., you may submit a statement to that effect from the participant). The OIG, DoD, will respond within five working days of receiving the request for prior approval, either by notifying you of the decision (approval or disapproval) or giving you a date by which they will notify you of the decision.
Notes, amendments, and revision history

Amendments

[68 FR 47160, Aug. 7, 2003, as amended at 85 FR 51246, Aug. 19, 2020]

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 68 FR 47160, Aug. 7, 2003, unless otherwise noted.

Amendments

[68 FR 47160, Aug. 7, 2003, as amended at 85 FR 51246, Aug. 19, 2020]

§37.655. Must I specify the frequency of IPAs' periodic audits of for-profit participants?

32 C.F.R. § 37.655

If your expenditure-based TIA provides for periodic audits of a for-profit participant by an IPA, you must specify the frequency for those audits. You should consider having an audit performed during the first year of the award, when the participant has its IPA do its next financial statement audit, unless the participant already had a systems audit due to other Federal awards within the past two years. The frequency thereafter may vary depending upon the dollars the participant is expending annually under the award, but it is not unreasonable to require an updated audit every two to three years to reverify that the participant's systems are reliable (the audit then would cover the two or three-year period between audits). The DCAA is a source of advice on audit frequencies if your TIA provides for audits by IPAs.
Notes, amendments, and revision history

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 68 FR 47160, Aug. 7, 2003, unless otherwise noted.

§37.660. What else must I specify concerning audits of for-profit participants by IPAs?

32 C.F.R. § 37.660

If your expenditure-based TIA provides for audits of a for-profit participant by an IPA, you also must specify:
(a)
What periodic audits are to cover. It is important that you specify audit coverage that is only as broad as needed to provide reasonable assurance of the participant's compliance with award terms that have a direct and material effect on the research project. Appendix C to this part provides guidance to for-profit participants and their IPAs that you may use for this purpose. The DCAA and the OIG, DoD, also can provide advice to help you set appropriate limits on audit objectives and scope.
(b)
Who will pay for periodic and award-specific audits. The allocable portion of the costs of any audits by IPAs may be reimbursable under the TIA. The costs may be direct charges or allocated indirect costs, consistent with the participant's accounting system and practices.
(c)
The auditing standards that the IPA will use. Unless you receive prior approval from the OIG, DoD, to do otherwise, you must provide that the IPA will perform the audits in accordance with the Generally Accepted Government Auditing Standards. 2
(d)
The available remedies for noncompliance. The agreement must provide that the participant may not charge costs to the award for any audit that the agreements officer, with the advice of the OIG, DoD, determines was not performed in accordance with the Generally Accepted Government Auditing Standards or other terms of the agreement. It also must provide that the Government has the right to require the participant to have the IPA take corrective action and, if corrective action is not taken, that the agreements officer has recourse to any of the remedies for noncompliance identified in 32 CFR 34.52(a).
(e)
The remedy if it later is found that the participant, at the time it entered into the TIA, was performing on a procurement contract or other Federal award subject to the Cost Accounting Standards at 48 CFR part 30 and the cost principles at 48 CFR part 31. Unless the OIG, DoD, approves an exception (see § 37.650(c)), the TIA's terms must provide that the DCAA will perform the audits for the agreement if it later is found that the participant, at the time the TIA was awarded, was performing under awards described in § 37.650(b) that gave the DCAA audit access to the participant's books and records.
(f)
Where the IPA is to send audit reports. The agreement must provide that the IPA is to submit audit reports to the administrative agreements officer and the OIG, DoD. It also must require that the IPA report instances of fraud directly to the OIG, DoD.
(g)
The retention period for the IPA's working papers. You must specify that the IPA is to retain working papers for a period of at least three years after the final payment, unless the working papers relate to an audit whose findings are not fully resolved within that period or to an unresolved claim or dispute (in which case, the IPA must keep the working papers until the matter is resolved and final action taken).
(h)
Who will have access to the IPA's working papers. The agreement must provide for Government access to working papers.
Notes, amendments, and revision history

Amendments

[68 FR 47160, Aug. 7, 2003, as amended at 85 FR 51246, Aug. 19, 2020]

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 68 FR 47160, Aug. 7, 2003, unless otherwise noted.

Amendments

[68 FR 47160, Aug. 7, 2003, as amended at 85 FR 51246, Aug. 19, 2020]

§37.665. Must I require nonprofit participants to have periodic audits?

32 C.F.R. § 37.665

Yes, expenditure-based TIAs are assistance instruments subject to the Single Audit Act (31 U.S.C. 7501-7507), so nonprofit participants are subject to their usual requirements under that Act, as implemented by subpart F of 2 CFR part 200. Specifically, the requirements are the same as those in subpart E of 2 CFR part 1128 for grants and cooperative agreements to institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes. Note that those requirements also apply to Federally Funded Research and Development Centers (FFRDCs) and other Government-owned, Contractor-Operated (GOCO) facilities administered by nonprofit organizations, because nonprofit FFRDCs and GOCOs are subject to the Single Audit Act.
Notes, amendments, and revision history

Amendments

[85 FR 51246, Aug. 19, 2020]

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 68 FR 47160, Aug. 7, 2003, unless otherwise noted.

Amendments

[85 FR 51246, Aug. 19, 2020]

§37.670. Must I require participants to flow down audit requirements to subrecipients?

32 C.F.R. § 37.670

(a)
Yes, in accordance with § 37.610, your expenditure-based TIA must require participants to flow down the same audit requirements to a subrecipient that would apply if the subrecipient were a participant.
(b)
For example, a for-profit participant that is audited by the DCAA—
(1)
Would flow down to a university subrecipient the Single Audit Act requirements that apply to a university participant.
(2)
Could enter into a subaward allowing a for-profit participant, under the circumstances described in § 37.650(a), to use an IPA to do its audits.
(c)
This policy applies to subawards for substantive performance of portions of the research project supported by the TIA, and not to participants' purchases of goods or services needed to carry out the research.
Notes, amendments, and revision history

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 68 FR 47160, Aug. 7, 2003, unless otherwise noted.