The Single Audit Act (The Act) was first enacted by Congress in 1984 and was intended to establish uniform audit requirements for federal awards. The Act mandated that the Federal Office of Management and Budget (OMB), after consultation with the Comptroller General, prescribe policies, procedures and guidelines to implement the provisions of the Act.

In 1985, the OMB issued administrative Circular A-128, Audits of State and Local Governments to provide guidance to state and local governments in implementing the provisions of the Single Audit Act and set forth standards for obtaining consistency and uniformity among federal agencies which received or conducted state and local government audits. Combined, the Act and Circular A-128 mandated that grant recipients do the following:

• Engage an independent auditor to conduct an annual audit in conformance with Generally Accepted Auditing Standards (GAAS) if the entity received $25,000 or more in federal awards;
• Cover all of the government’s operations in its Single Audit;
• Determine that the financial statements of the government present fairly its financial position and the results of its financial operations in accordance with GAAP;
• Determine that the government unit complied with laws and regulations that may have a material effect upon the financial statements of each major federal program;
• Determine that the government unit has internal control systems in place to provide reasonable assurance that it is managing federal award programs in compliance with applicable laws and regulations; and
• Prepare a Schedule of Expenditures of Federal and Non-Federal Awards that identifies expenditures of federal monies for each federal program.

As noted above, the Act required an annual audit of non-federal entities receiving a certain level of federal financial assistance. A Single Audit (i.e., one audit of the entire entity) performed under the Act is intended to satisfy all federal agencies providing assistance to the entity.

Although non-profit organizations and universities were not included in the original act, on April 22, 1996, guidelines were established in OMB Circular A 133, Audits of Institutions of Higher Education and Other Non-Profit Institutions which prescribe policies or specific audit requirements for these groups of grant recipients.

Single Audit Act Amendments of 1996

On July 5, 1996, the Single Audit Act Amendments of 1996 were signed into law. OMB substantially revised Circular A-133 (June 24, 1997) to incorporate the provisions of the amended Act and the guidelines of A-128. Upon passage of A-133, Circular A-128 was rescinded.

Circular A-133 was further revised in June 2003 and June 2007.

Following is a summary of the Single Audit Act Amendments of 1996 and the revised Circular A-133:

• The scope of the Single Audit Act is extended to cover non-profit organizations and higher education institutions.
• The minimum threshold at which a Single Audit must be conducted is raised from $25,000 to $500,000 in federal award expenditures. Non-profit organizations receiving less than$500,000 in federal grants do not need to have their own audit but arrangements can be made for audits by their funding agency, the agency's inspector general, or the GAO.
• Audits generally must be conducted on an annual basis. Non profits that conduct program specific audits may choose biennial audits if they receive permission from the federal grantor agency or the pass-through entity from which funds are received, and biennial audits must cover both years.
• Recipients that pass through federal awards to subrecipients are required to ensure that a system is in place to assure subrecipient compliance with the provisions of the Act. Subrecipients do not include vendors.
• A federal program is defined as all federal awards to a non-federal entity assigned a single number in the Catalog of Federal Domestic Assistance or encompassed in a group of numbers or other category as defined by the Director of the OMB.
• All grant recipients are required to prepare a Schedule of Expenditures of Federal and Non-Federal Awards that identifies expenditures, including non-cash awards, of federal monies by federal program using the five-digit class code contained in the CFDA.
• Establishes a direct link between the state’s audited financial statements and the Single Audit reports by reducing the time for submitting Single Audit reports from 13 months to nine months after the close of the reporting period, March 31st. The auditor must determine that the Schedule of Expenditures of Federal and Non-Federal Awards is presented fairly in all material respects in relation to the state’s financial statements taken as a whole.
• Prescribes a two-step process, dollar threshold, and risk assessment to determine major programs subject to the annual Single Audit.

Single Audit Dollar Threshold

The auditor shall identify federal programs with federal award expenditures, which are the larger of $30,000,000 or 0.15 percent of total federal expenditures. Programs with federal expenditures above this threshold are labeled Type A and are generally considered major programs. Programs with expenditures below the threshold are labeled Type B.

Single Audit Risk Assessment

A risk-based approach shall also be used by the independent auditor to determine which programs will be subject to the Single Audit. The auditor will use professional judgment to classify Type A and Type B programs as low risk or high risk pursuant to the guidelines published in OMB Circular A-133. After assessing risk, the auditor will use the A-133 guidelines to determine the number of high-risk Type B programs to be included with Type A programs that are subject to audit.

NOTE: High-risk Type A programs must be included in the Single Audit; however, it is possible that low-risk Type A programs may be excluded as outlined in A-133.

The risk-based approach provides a direct link between internal control audit procedures and programs selected for substantive testing of major program compliance and includes consideration of:

• Current and prior audit experience;
• Oversight by federal agencies and pass-through entities; and
• Inherent risk of non-compliance for the federal program.

Federal single audit guidelines can be found in Federal Circular A133, Audits of States, Local Governments and Non-Profit Organizations and A133-Compliance Supplement (revised annually). They are available at http://www.whitehouse.gov/omb/circulars/.

Guide to Financial Operations

REV. 07/31/2015