The Office of Management and Budget (OMB) has issued for comment new guidance for Cost Principles, Audit and Administrative Requirements for Federal Awards and Audits of States, Local Governments, and Non-Profit Organizations. This is part of the OMB’s federal grants improvement initiative that was started last year. Below I have highlighted some of the more significant provisions being proposed.

The first most significant proposal is to increase the Single Audit threshold to entities that have federal spending of $750,000 or more. This would represent an increase from the current $500,000 threshold for Single Audits that was established in 2003. Organizations that fall below the $750,000 threshold would still have to make their records available for review or audit by the Federal agency, a pass-through entity or the Government Accountability Office (GAO). In addition, the threshold for major program determination may be revised to $500,000 which is up from the current $300,000.

There are also proposed changes to the determination of high-risk vs. low-risk type A and B programs as well as changes in the percentage of coverage required in a Single Audit. The percentage of coverage required in a single audit is proposed to be reduced from the current 50% (normal) and 25% (low-risk auditees) to 40% (normal) and 20% (low-risk auditees).

One of the more significant changes relative to the amount of audit work required in a Single Audit are the changes to the types of compliance requirements required to be tested. Currently 14 types of compliance requirements are required to be tested by the auditor. The proposal reduces these to 6 types of compliance requirements. Those requirements include: (1) Activities Allowed or Unallowed and Allowable Costs/Principles; (2) Cash Management; (3) Eligibility; (4) Reporting; (5) Subrecipient Monitoring; and (6) Special Tests & Provision. However, the federal agencies providing the funding will be allowed to request that some of the deleted types of compliance requirements may be requested where they could be considered essential to the oversight of the program.

The proposal does not just point toward reductions in work effort. For example, when there are findings, more detail will be required to be reported. The questioned cost threshold, however, will be increased from $10,000 to $25,000.

All of the related circulars and guidance published by OMB (A-21, A-87, A-110, etc.) will be streamlined into one document including Circular A-133. This will produce a more streamlined set of guidelines for both the auditor and the federally funded agencies. Although the audit thresholds are increasing, this is basically keeping pace with inflation and it would be inappropriate to conclude (or hope) that the Single Audit is going to be any less stringent in the years to come.

If you have questions or would like more information about your A-133 please contact any member of the NFP Services Team.

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