|Publication Date: June 2003
Page Numbers: 38401-38402
Revision of OMB Circular No. A-133.
Posted on 07-15-2003
[Federal Register: June 27, 2003 (Volume 68, Number 124)]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
OFFICE OF MANAGEMENT AND BUDGET
Audits of States, Local Governments, and Non-Profit Organizations
AGENCY: Office of Management and Budget.
ACTION: Revision of OMB Circular No. A-133.
SUMMARY: The Office of Management and Budget (OMB) is issuing final
revisions to Circular A-133, ``Audits of States, Local Governments, and
Non-Profit Organizations.'' The purpose of these revisions is to (1)
increase the threshold for audit from $300,000 to $500,000, (2)
increase the threshold for cognizant agency for audit from $25 million
to $50 million, and (3) make related technical changes to facilitate
the determination of cognizant agency for audit and provide for Federal
agency reassignment of oversight agency for audit.
DATES: The final revisions are effective for fiscal years ending after
December 31, 2003, and early implementation will not be permitted with
the exception of the amendment to the definition of oversight agency
for audit in Circular A-133, section --.105. The amendment to the
definition of oversight agency for audit is effective July 28, 2003.
FOR FURTHER INFORMATION CONTACT: Recipients should contact their
cognizant agency for audit or oversight agency for audit or Federal
awarding agency, as may be appropriate in the circumstances.
Subrecipients should contact their pass-through entity. Federal
agencies should contact Terrill W. Ramsey, Office of Federal Financial
Management, Office of Management and Budget, 202-395-3993.
SUPPLEMENTARY INFORMATION: On August 12, 2002, OMB proposed revisions
(67 FR 52545) to OMB Circular A-133, ``Audits of States, Local
Governments, and Non-Profit Organizations.'' The Office of Management
and Budget (OMB) is issuing final revisions to Circular A-133, ``Audits
of States, Local Governments, and Non-Profit Organizations.'' The
revisions will (1) increase the threshold for audit from $300,000 to
$500,000, (2) increase the threshold for cognizant agency for audit
from $25 million to $50 million, and (3) make related technical changes
to facilitate the determination of cognizant agency for audit and
provide for Federal agency reassignment of oversight agency for audit.
The Single Audit Act Amendments of 1996, 31 U.S.C. 7502(a)(3),
provide for the Director of OMB to review the single audit threshold on
a biennial basis and increase it as appropriate. The audit threshold
established in 1997 required all non-Federal entities (States, local
governments, and non-profit organizations) that expend $300,000 or more
in a year in Federal awards to have an audit conducted in accordance
with Circular A-133. The revision increases the audit threshold from
$300,000 to $500,000. This increase relieves almost 6,000 entities from
the audit requirements of Circular A-133 while only exempting from
audit less than one half of one percent of Federal awards expended (in
dollars) by entities currently conducting Circular A-133 audits.
The revision increases the threshold for cognizant agency for audit
from $25 million to $50 million. This change will reduce the number of
non-Federal entities with a cognizant agency for audit assignment from
1,000 to 500. This revision will allow Federal agencies to provide more
focused attention where there is the greatest risk in terms of Federal
awards expended, but still provide each non-Federal entity with an
assigned oversight agency for audit from which to request technical
advice. The revision also changes the base years for determining
cognizant agency for audit assignments. (Currently, the cognizant
agency for audit determination is based on the amount of Federal
funding in the year immediately preceding each five-year audit
cognizant period. This revision changes the base year to the second
year preceding the five-year audit cognizant period to allow sufficient
time to make cognizant agency for audit determinations before the start
of the audit cognizance period.) Finally, the revision changes the
definition of oversight agency for audit to permit Federal agencies to
Response to Comments
OMB received 43 comment letters: Eight from Federal agencies, seven
from State governments, four from universities, five from non-profit
organizations, 14 from certified public accountants, and five from
individuals. Nearly all comments focused on raising the audit
threshold: 28 were in favor and 10 opposed. Of the 10 that were opposed
to raising the audit threshold, two were from Federal agencies; two
were from one State; one from a university; and five from individuals.
Opposition centered on concerns over specific programs and the
perceived lack of accountability over Federal funds that would fall
below the new threshold. On the other hand, several commenters
suggested raising the threshold to $1 million to further alleviate the
burden on non-Federal entities expending smaller amounts of Federal
funds. OMB believes that, because the revisions only exempt an
additional one-half of one percent of Federal dollars expended from
audit while providing administrative relief to approximately 6,000
entities, the risk to Federal funds does not outweigh the benefits to
grant recipients. OMB, however, appreciates the comments about reduced
accountability and concerns expressed by several commenters that
raising the audit threshold could provide more opportunities for fraud.
It is important to note that Circular A-133 audit is only one of
many monitoring tools available to oversee the administration of and
strengthen accountability over Federal grants. Grantee monitoring
should occur throughout the year rather than relying solely on a once-
a-year audit. Monitoring activities may take various forms; however, a
first monitoring tool should be identifying to the grantee the Federal
award information (e.g., Catalog of Federal Domestic Assistance (CFDA)
title and number, award name, name of Federal agency) and applicable
compliance requirements. Other monitoring tools include reviewing
grantee financial and performance reports, performing site visits to
review financial and programmatic records and observe operations, and
arranging for agreed-upon procedures engagements for certain aspects of
grantee activities, such as described in Sec. --.230(b)(2) of Circular
A-133. Factors such as the size of awards, the complexity of the
compliance requirements, and risk of grantee non-compliance as assessed
by the grantor may influence the nature and extent of monitoring
procedures. Federal laws or regulations may impose monitoring
requirements specific to a Federal program. The 2003 OMB Circular A-133
Compliance Supplement clarifies the guidance to auditors related to
It should also be noted that the Federal Government has the
authority to audit and/or investigate any entity suspected of using
Federal funds improperly, regardless of the amount of funds involved.
Allegations of fraud should be directed to the Federal awarding
agency's Office of Inspector General fraud hotline phone numbers which
are available on the Internet at http://www.ignet.gov.
Nine comments addressed the increase from $25 million to $50
million of the threshold for cognizant agency for audit. Seven
commenters (two Federal and five non-Federal) supported the increase
and two Federal agencies opposed. One concern was that the reduction in
the number of cognizant agency for audit assignments would reduce
Federal agency monitoring of audit quality. OMB is actively working
with Federal agencies to strengthen quality control reviews of audits
by selecting a statistical sample of single audits to measure audit
quality across Federal programs. This work is expected to improve our
ability to measure and improve audit quality.
Four comments concerned the technical changes. One Federal agency
(which opposed all of the proposed revisions to Circular A-133)
expressed concern about accountability over Federal funds. As noted
above, OMB believes that the revisions to Circular A-133 provide an
appropriate balance between administrative relief and the risk to
Availability of Revised Circular
OMB has prepared an updated version of Circular A-133, as amended
herein. It is available electronically on the OMB Home Page at http://www.omb.gov
and then select ``Grants Management'' followed by
Dated: June 23, 2003.
Augustine T. Smythe,
1. OMB hereby amends Circular A-133 by replacing $300,000 with
$500,000 in the following sections: Sec. ----.200(a); Sec. --
--.200(b); Sec. ----.200(d); Sec. ----.230(b)(2); and Sec. --
2. OMB hereby amends Circular A-133 by replacing $25 million with
$50 million in section Sec. ----.400(a), first sentence.
3. OMB hereby amends Circular A-133 by replacing section Sec. --
--.400(a), third, fourth, and fifth (parenthetical) sentences with the
following: Sec. ----.400 Responsibilities.
(a) * * * The determination of the predominant amount of direct
funding shall be based upon direct Federal awards expended in the
recipient's fiscal years ending in 2004, 2009, 2014, and every fifth
year thereafter. For example, audit cognizance for periods ending in
2006 through 2010 will be determined based on Federal awards expended
in 2004. (However, for 2001 through 2005, the cognizant agency for
audit is determined based on the predominant amount of direct Federal
awards expended in the recipient's fiscal year ending in 2000).
* * * * *
4. OMB hereby amends Circular A-133, section Sec. ----.105, by
adding at the end of the definition of oversight agency for audit: ``A
Federal agency with oversight for an auditee may reassign oversight to
another Federal agency which provides substantial funding and agrees to
be the oversight agency for audit. Within 30 days after any
reassignment, both the old and the new oversight agency for audit shall
notify the auditee, and, if known, the auditor of the reassignment.''
[FR Doc. 03-16355 Filed 6-26-03; 8:45 am]