In early 2012, the Office of Management and Budget (“OMB”) issued preliminary proposed changes to Circular A133 and other grant reforms. After gathering more information and undergoing various deliberations, the OMB has now issued revised Proposed Guidance impacting various grant policies. These proposed changes are significant and will impact every entity receiving federal funding. This guidance is open for comments for a 90 day period. While we have provided a link to the full proposed changes (all 240+ pages!), the following are some of the key areas of change covered in this Proposed Guidance:
Single Audit Threshold for Audit Proposed to Increase to $750,000.
Entities that expend less than $750,000 in federal awards would not be required to undergo a single audit. This would represent an increase from the current $500,000 threshold for single audits which was established in 2003. The Proposed Guidance states that any entity that falls below the $750,000 threshold must make records available for review or audit by appropriate officials of the Federal agency, pass-through entity, and the Government Accountability Office.
Changes impacting Major Program Determination.
Several changes are being proposed which may impact major program determination, and thus, the type and amount of federal programs that auditors need to test when performing an audit on the federal funding you receive (an A133 or "single audit"). Included in these changes is the required percentage of federal programs to be tested in a single audit, which is proposed to be reduced from the current 50% (normal) and 25% (low-risk auditees) to 40% (normal) and 20% (low-risk auditees).
Criteria for Low-Risk Auditee Status.
The criteria for low-risk auditee status has been revised. Low-risk auditee status is important because it drives the amount of testing an auditor has to perform on your federal programs. For example, the definition would now more clearly include data collection form submission within required timeframes as a criteria and adds a criteria that the auditor did not report a substantial doubt about the auditee's ability to continue as a going concern.
Reduction in Types of Compliance Requirements to be Tested.
The Federal Register notice about this proposal indicates that OMB is also proposing that the number of types of compliance requirements to be tested in a single audit be reduced from the current 14 types of compliance requirements to 6 types of compliance requirements. Those requirements would now only include:
- Activities Allowed or Unallowed and Allowable Costs/Costs Principles (the Proposed Guidance does note that this requirement could include some testing of Period of Availability and Matching);
- Cash Management;
- Subrecipient Monitoring; and
- Special Tests & Provisions.
The proposal would permit the federal agencies to request that certain of the deleted types of compliance requirements be added to the Special Tests & Provisions requirement for programs where they could be considered essential to the oversight of the program. The Federal Register notice states that this change is not reflected in the draft proposal but would be implemented through the first OMB Compliance Supplement to be issued after the proposed change becomes final.
More detail will be required to be reported in auditor findings. However, the questioned cost threshold for reporting will be increased from $10,000 to $25,000.
Streamlining of Related Circulars and Guidance.
The proposal streamlines eight existing OMB Circulars into one document including Circular A-133 and the various Cost Principles. Additionally, the Proposed Guidance would consolidate the cost principles into a single document with limited variations by type of entity. OMB states that the Proposed Guidance will supersede the following OMB Circulars:
- A-21, Cost Principles for Educational Institutions
- A-87, Cost Principles for State, Local, and Indian Tribal Governments
- A-89, Federal Domestic Assistance Program Information
- A-102, Awards and Cooperative Agreements with State and Local Governments
- A-110, Uniform Administrative Requirements for Awards and Other Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations
- A-122, Cost Principles for Non-Profit Organizations
- A-133, Audits of States, Local Governments and Non-Profit Organizations
- It will also supersede those sections of A-50, Audit Follow-Up, related to Single Audits
There are also a number of changes being proposed and or considered related to indirect costs and time and effort reporting as well as proposed changes to existing Administrative Requirements.
For more information, you can read the full text of the Proposed Rule. Anyone wishing to comment on this proposal can do so directly to the OMB through May 2, 2013.