Threshold Requirements of Circular A-133

By Epps, Ruth W.; Staples, Catherine L. | The CPA Journal, September 1993 | Go to article overview

Threshold Requirements of Circular A-133

Epps, Ruth W., Staples, Catherine L., The CPA Journal

The issuance of OMB Circular A-133, Audits of Institutions of Higher Education and Other Nonprofit Organizations, requires thousands of not-for-pro organizations in the U.S. receiving Federal funding to undergo audits. OMB Circular A-133 applies to a wide range of organizations including private universities and some very small nonprofit organizations. Since OMB Circular A-133 was designed with the idea that one set of regulations should meet all needs, organizations receiving relatively small Federal awards are subject to the same compliance auditing requirements as major recipients. When small not-for-profit organizations consider applying for a Federal award, they should compare the costs of compliance with all the Federal laws and regulations with the benefits of Federal funding. OMB Circular A-133 requirements became effective in March, 1990, with the sunset review to take place in 1393. An aspect that should receive careful review in sunset is the threshold for making the shift from non-major to major programs. Our opinion is that the threshold should be increased to $300,000

To provide support for the above position, we begin by providing a brief chronological history of Federal audit requirements and then compare the requirements of OMB Circular A-133 to OMB Circular A-128, Audits of State and Federal Governments. Next, the college and university environment, and its relationship to the development of OMB Circular A-133 is explored. Finally, the topic of self-governance for not-for-profit organizations is discussed.


An overview of the Federal audit requirements history will give background for our position.

1965--OMB Circular A-73 defined audit requirements and called for coordinated audits of grants at the Federal level. This circular was unsuccessful due to 1) the lack of uniformity in legal requirements at various departments; 2) the lack of necessary audit procedures; and 3) the lack of uniformity of reporting methods.

1971--0MB Circular A-102 set audit requirements for grants to state and local governments (Attachment G). This circular made OMB responsible for setting standards. The concept of organizationwide audits was suggested, but no guidance was given to show how the audits were to be performed.

1972--First version of GAO Government Audit Standards was issued. This addressed professional qualifications as well as work performed and provided guidelines for evaluation of audit work.

1979--The Joint Financial Management Improvement Program issued its report recommending ways to overcome current governmental auditing problems. The recommendations were 1) establish uniform audit guidelines) 2) create central oversight agencies; and 3) allow audit costs to be reimbursed. These changes resulted in Attachment P to OMB Circular A-102, and now required organization-wide audits.

1979 through 1984--Attachment P (organization-wide) audits are performed. However, delays in naming "cognizant agencies" and identifying key compliance issues created auditing and reporting problems. Additionally, no guidance was given on the responsibility for subrecipients and the resolution of deficient audit findings was poor.

From this climate, a movement grew for legislation that would establish procedures and frameworks for governmental audits, allow for partial reimbursement for audit costs, assign responsibility for subrecipient reporting, and establish authority for dealing with the adequacy of audit work.

1984--The Single Audit Act was signed into law. The Act established uniform audit requirements for state and local governments and Indian tribes that receive Federal financial assistance. This Act established 1) uniform audit requirements for audits of Federal funds received by state and local governments, 2) "cognizant agencies" appointed by OMB, and 3) thresholds used to determine if single audits were required.

1985--OMB Circular A-126F Audits of State And Federal Governments, superseded audit requirements of A-102. …

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