President Clinton recently signed the Single Audit Act Amendments of 1996, which modify certain provisions of the Single Audit Act of 1984. This article will describe briefly the background of the new legislation and how it will affect audits of state and local governments.
Prior to 1984, state and local governments often had to face multiple and sometimes overlapping audits by federal grantor agencies. The Single Audit Act of 1984 streamlined federal audit requirements for state and local governments by replacing separate audits of individual grants with a "single" audit of federal awards specifically designed to meet the needs of all federal grantors. In 1985, the U.S. Office of Management and Budget (OMB) issued Circular A-128, Audits of State and Local Governments, which provided specific implementation guidance to auditors performing single audit engagements.
In 1990, the OMB used its regulatory authority (rather than legislation) to extend the single-audit concept to recipients of federal awards outside of state and local governments and issued OMB Circular A-133, Audits of Institutions of Higher Education and Other Nonprofit Institutions. Circular A-133 differed in some important respects from Circular A-128. Ideally, the OMB would have made these same modifications to Circular A-128 as well but was precluded from doing so because a number of the items at issue were legislatively mandated by the Single Audit Act of 1984 and therefore could be changed only through congressional action.
The federal government decided to remedy the disparity in single audit guidance by seeking legislative changes to the Single Audit Act of 1984. In a similar vein, the federal government undertook a revision of Circular A-133 designed to make it applicable to all recipients of federal awards, thereby eliminating the need for a separate circular for state and local governments. The first of these goals was achieved with the passage and signing of the Single Audit Act Amendments of 1996. The second was accomplished earlier this year when the OMB issued a revised version of Circular A-133.
The most important changes brought about by the amendments are summarized briefly below.
Uniform Coverage. The Single Audit Act of 1984 applied only to state and local governments. The requirement that other recipients of federal awards obtain single audits resulted from regulation rather than legislation. The amendments make single audits a legislative requirement for all outside (i.e., nonfederal), noncommercial recipients of federal awards (including not-for-profit hospitals).
Requirement for Single Audits. Previously, single audits were required for all entities receiving more than $100,000 in federal awards. The Single Audit Act Amendments of 1996 raise this single-audit "threshold" to $300,000. Moreover, the director of OMB is directed to review this threshold every two years and adjust the amount as needed (but not below $300,000).
Exemption from Audit Requirements. Previously, entities receiving less than $25,000 in federal awards were exempted from the requirement to be audited. Now this exemption applies to recipients of less than $300,000. Such entities still must maintain records of their federal awards and permit access to those records.
Program-specific Audits. In the past, governments receiving between $25,000 (i. …