To streamline and improve the effectiveness of chapter 75 of title 31, United States Code (commonly referred to as the "Single Audit Act''). NOTE: July 5, 1996 - [S. 1579]
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, NOTE: Single Audit Act Amendments of 1996. 31 USC 7501.
(a) Short Title.--This Act may be cited as the "Single Audit Act
Amendments of 1996''.
(b) Purposes.--The purposes of this Act are
to--
(1) promote sound financial management, including effective internal
controls, with respect to Federal awards administered by non-Federal
entities;
(2) establish uniform requirements for audits of Federal awards
administered by non-Federal entities;
(3) promote the efficient and effective
use of audit resources;
(4) reduce burdens on State and local governments,
Indian tribes, and nonprofit organizations; and
(5) ensure that Federal
departments and agencies, to the maximum extent practicable, rely upon and use
audit work done pursuant to chapter 75 of title 31, United States Code (as
amended by this Act).
Chapter 75 of title 31, United States Code, is amended to read as follows:
Sec.
7501.
Definitions.
7502. Audit
requirements; exemptions.
7503. Relation to other
audit requirements.
7504. Federal agency
responsibilities and relations with non-Federal entities.
7505.
Regulations.
7506. Monitoring
responsibilities of the Comptroller General.
7507. Effective
date.
(a) As used in this chapter, the term--
(1) 'Comptroller General'
means the Comptroller General of the United States;
(2) 'Director'
means the Director of the Office of Management and Budget;
(3) 'Federal
agency' has the same meaning as the term 'agency' in section 551(1) of title
5;
(4) 'Federal awards' means Federal financial assistance and Federal
cost-reimbursement contracts that non-Federal entities receive directly from
Federal awarding agencies or indirectly from pass-through entities;
(5)
'Federal financial assistance' means assistance that non-Federal entities
receive or administer in the form of grants, loans, loan guarantees, property,
cooperative agreements, interest subsidies, insurance, food commodities, direct
appropriations, or other assistance, but does not include amounts received as
reimbursement for services rendered to individuals in accordance with guidance
issued by the Director;
(6) 'Federal program' means all Federal awards
to a non- Federal entity assigned a single number in the Catalog of Federal
Domestic Assistance or encompassed in a group of numbers or other category as
defined by the Director;
(7) 'generally accepted government auditing
standards' means the government auditing standards issued by the Comptroller
General;
(8) 'independent auditor' means--
(A) an external State or
local government auditor who meets the independence standards included in
generally accepted government auditing standards; or
(B) a public accountant
who meets such independence standards;
(9) 'Indian tribe' means any
Indian tribe, band, nation, or other organized group or community, including any
Alaskan Native village or regional or village corporation (as defined in, or
established under, the Alaskan Native Claims Settlement Act) that is recognized
by the United States as eligible for the special programs and services provided
by the United States to Indians because of their status as Indians;
(10)
'internal controls' means a process, effected by an entity's management
and other personnel, designed to provide reasonable assurance regarding the
achievement of objectives in the following categories:
(A) Effectiveness and
efficiency of operations.
(B) Reliability of financial reporting.
(C)
Compliance with applicable laws and
regulations;
(11) 'local
government' means any unit of local government within a State, including a
county, borough, municipality, city, town, township, parish, local public
authority, special district, school district, intrastate district, council of
governments, any other instrumentality of local government and, in accordance
with guidelines issued by the Director, a group of local governments;
(12)
'major program' means a Federal program identified in accordance with
risk-based criteria prescribed by the Director under this chapter,
subject to the limitations described under subsection (b);
(13)
'non-Federal entity' means a State, local government, or nonprofit
organization;
(14) 'nonprofit organization' means any corporation,
trust, association, cooperative, or other organization that--
(A) is operated
primarily for scientific, educational, service, charitable, or similar purposes
in the public interest;
(B) is not organized primarily for profit; and
(C) uses net proceeds to maintain, improve, or expand the operations of the
organization;
(15) 'pass-through entity' means a non-Federal entity
that provides Federal awards to a subrecipient to carry out a Federal
program;
(16) 'program-specific audit' means an audit of one Federal
program;
(17) 'recipient' means a non-Federal entity that receives
awards directly from a Federal agency to carry out a Federal program;
(18)
'single audit' means an audit, as described under section 7502(d), of a
non-Federal entity that includes the entity's financial statements and Federal
awards;
(19) 'State' means any State of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam,
American Samoa, the Commonwealth of the Northern Mariana Islands, and the Trust
Territory of the Pacific Islands, any instrumentality thereof, any multi-State,
regional, or interstate entity which has governmental functions, and any Indian
tribe; and
(20) 'subrecipient' means a non-Federal entity that
receives Federal awards through another non-Federal entity to carry out a
Federal program, but does not include an individual who receives financial
assistance through such awards.
(b) In prescribing risk-based program selection
criteria for major programs, the Director shall not require more
programs to be identified as major for a particular non-Federal entity, except
as prescribed under subsection (c) or
as provided under subsection (d),
than would be identified if the major programs were defined as any program for
which total expenditures of Federal awards by the non-Federal entity during the
applicable year exceed--
(1) the larger of $30,000,000 or 0.15 percent of the
non- Federal entity's total Federal expenditures, in the case of a non-Federal
entity for which such total expenditures for all programs exceed
$10,000,000,000;
(2) the larger of $3,000,000, or 0.30 percent of the non-
Federal entity's total Federal expenditures, in the case of a non-Federal entity
for which such total expenditures for all programs exceed $100,000,000 but are
less than or equal to $10,000,000,000; or
(3) the larger of $300,000, or 3
percent of such total Federal expenditures for all programs, in the case of a
non- Federal entity for which such total expenditures for all programs equal or
exceed $300,000 but are less than or equal to $100,000,000.
(c) When the total expenditures of a non-Federal
entity's major programs are less than 50 percent of the non-Federal entity's
total expenditures of all Federal awards (or such lower percentage as specified
by the Director), the auditor shall select and test additional programs as major
programs as necessary to achieve audit coverage of at least 50 percent of
Federal expenditures by the non-Federal entity (or such lower percentage as
specified by the Director), in accordance with guidance issued by the
Director.
(d) Loan or loan guarantee programs, as
specified by the Director, shall not be subject to the application of subsection
(b).
(a)(1)(A) Each non-Federal entity that expends a total
amount of Federal awards equal to or in excess of $300,000 or such other amount
specified by the Director under subsection (a)(3)
in any fiscal year of such non-Federal entity shall have either a single audit
or a program- specific audit made for such fiscal year in accordance with the
requirements of this chapter.
(B) Each such non-Federal entity that expends
Federal awards under more than one Federal program shall undergo a single audit
in accordance with the requirements of subsections (b) through (i) of this
section and guidance issued by the Director under section 7505.
(C)
Each such non-Federal entity that expends awards under only one Federal program
and is not subject to laws, regulations, or Federal award agreements that
require a financial statement audit of the non- Federal entity, may elect to
have a program-specific audit conducted in accordance with applicable provisions
of this section and guidance issued by the Director under section 7505.
(2)(A)
Each non-Federal entity that expends a total amount of Federal awards of less
than $300,000 or such other amount specified by the Director under subsection (a)(3)
in any fiscal year of such entity, shall be exempt for such fiscal year from
compliance with--
(i) the audit requirements of this chapter; and
(ii) any
applicable requirements concerning financial audits contained in Federal
statutes and regulations governing programs under which such Federal awards are
provided to that non-Federal entity.
(B) The provisions of subparagraph (A)(ii) of this paragraph shall not exempt
a non-Federal entity from compliance with any provision of a Federal statute or
regulation that requires such non-Federal entity to maintain records concerning
Federal awards provided to such non-Federal entity or that permits a Federal
agency, pass-through entity, or the Comptroller General access to such
records.
(3) Every 2 years, the Director shall review
the amount for requiring audits prescribed under paragraph (1)(A) and may adjust
such dollar amount consistent with the purposes of this chapter, provided the
Director does not make such adjustments below $300,000.
(b)(1) Except as provided in paragraphs (2) and (3), audits
conducted pursuant to this chapter shall be conducted annually.
(2) A
State or local government that is required by constitution or statute, in effect
on January 1, 1987, to undergo its audits less frequently than annually, is
permitted to undergo its audits pursuant to this chapter biennially.
Audits conducted biennially under the provisions of this paragraph shall cover
both years within the biennial period.
(3) Any nonprofit organization that
had biennial audits for all biennial periods ending between July 1, 1992, and
January 1, 1995, is permitted to undergo its audits pursuant to this chapter
biennially. Audits conducted biennially under the provisions of this paragraph
shall cover both years within the biennial period.
(c) Each
audit conducted pursuant to subsection (a) shall be
conducted by an independent auditor in accordance with generally accepted
government auditing standards, except that, for the
purposes of this chapter, performance audits shall not be required except as
authorized by the Director.
(d) Each single audit conducted pursuant to subsection (a) for any
fiscal year shall--
(1) cover the operations of the entire non-Federal
entity; or
(2) at the option of such non-Federal entity such audit shall
include a series of audits that cover departments, agencies, and other
organizational units which expended or otherwise administered Federal awards
during such fiscal year provided that each such audit shall encompass the
financial statements and schedule of expenditures of Federal awards for each
such department, agency, and organizational unit, which shall be considered to
be a non-Federal entity.
(e) The auditor shall--
(1) determine whether the
financial statements are presented fairly in all material respects in conformity
with generally accepted accounting principles;
(2) determine whether
the schedule of expenditures of Federal awards is presented fairly in all
material respects in relation to the financial statements taken as a
whole;
(3) with respect to internal controls pertaining
to the compliance requirements for each major program--
(A) obtain an
understanding of such internal controls;
(B) assess control risk; and
(C)
perform tests of controls unless the controls are deemed to be ineffective; and
(4) determine whether the non-Federal entity has complied with the provisions of
laws, regulations, and contracts or grants pertaining to Federal awards that
have a direct and material effect on each major program.
(f)(1) Each Federal agency which provides Federal awards to a recipient
shall--
(A) provide such recipient the program names (and any identifying
numbers) from which such awards are derived, and the Federal requirements which
govern the use of such awards and the requirements of this chapter; and
(B)
review the audit of a recipient as necessary to determine whether prompt and
appropriate corrective action has been taken with respect to audit findings, as
defined by the Director, pertaining to Federal awards provided to the recipient
by the Federal agency.
(2) Each pass-through entity shall--
(A)
provide such subrecipient the program names (and any identifying numbers) from
which such assistance is derived, and the Federal requirements which govern the
use of such awards and the requirements of this chapter;
(B) monitor the subrecipient's use of Federal awards through
site visits, limited scope audits, or other means;
(C) review the audit of a
subrecipient as necessary to determine whether prompt and appropriate corrective
action has been taken with respect to audit findings, as defined by the
Director, pertaining to Federal awards provided to the subrecipient by the
pass-through entity; and
(D) require each of its subrecipients of Federal
awards to permit, as a condition of receiving Federal awards, the independent
auditor of the pass-through entity to have such
access to the subrecipient's records and financial statements as may be necessary for the pass-through entity to comply with this chapter.
(g)(1) Reports. The auditor shall report on the results of any audit conducted pursuant to this section, in accordance with guidance issued by the Director.
(2) When reporting on any single audit, the auditor shall include a summary
of the auditor's results regarding the non-Federal entity's financial
statements, internal controls, and compliance with laws and regulations.
(h)
The non-Federal entity shall transmit the reporting package, which shall include
the non-Federal entity's financial statements, schedule of expenditures of
Federal awards, corrective action plan defined under subsection (i),
and auditor's reports developed pursuant to this section, to a Federal
clearinghouse designated by the Director, and make it available for public
inspection within the earlier of--
(1) 30 days after receipt of the auditor's
report; or
(2)(A) for a transition period of at least 2 years after the
effective date of the Single Audit Act Amendments of 1996, as established by the
Director, 13 months after the end of the period audited; or
(B) for fiscal
years beginning after the period specified in subparagraph (A), 9 months after
the end of the period audited, or within a longer timeframe authorized by the
Federal agency, determined under criteria issued under section 7504, when the
9-month timeframe would place an undue burden on the non-Federal entity.
(i) If an audit conducted pursuant to this section
discloses any audit findings, as defined by the Director, including material
noncompliance with individual compliance requirements for a major program by, or
reportable conditions in the internal controls of, the non-Federal entity with
respect to the matters described in subsection (e), the non-Federal entity shall
submit to Federal officials designated by the Director, a plan for corrective
action to eliminate such audit findings or reportable conditions or a
statement describing the reasons that corrective action is not necessary. Such
plan shall be consistent with the audit resolution standard promulgated by the
Comptroller General (as part of the standards for internal controls in the
Federal Government) pursuant to section 3512(c).
(j) The
Director may authorize pilot projects to test alternative methods of
achieving the purposes of this chapter. Such pilot projects may begin only after
consultation with the Chair and Ranking Minority Member of the Committee on
Governmental Affairs of the Senate and the Chair and Ranking Minority Member of
the Committee on Government Reform and Oversight of the House of
Representatives.
(a) An audit conducted in accordance with this chapter shall be in lieu of any financial audit of Federal awards which a non-Federal entity is required to undergo under any other Federal law or regulation. To the extent that such audit provides a Federal agency with the information it requires to carry out its responsibilities under Federal law or regulation, a Federal agency shall rely upon and use that information.
(b) Notwithstanding subsection (a), a Federal agency may conduct or arrange
for additional audits which are necessary to carry out its responsibilities
under Federal law or regulation. The provisions of this chapter do not authorize
any non-Federal entity (or subrecipient thereof) to constrain, in any manner,
such agency from carrying out or arranging for such additional audits, except
that the Federal agency shall plan such audits to not be duplicative of other
audits of Federal awards.
(c) The provisions of this chapter do not limit the
authority of Federal agencies to conduct, or arrange for the conduct of, audits
and evaluations of Federal awards, nor limit the authority of any Federal agency
Inspector General or other Federal official.
(d) Subsection (a) shall apply
to a non-Federal entity which undergoes an audit in accordance with this chapter
even though it is not required by section 7502(a) to have
such an audit.
(e) A Federal agency that provides Federal awards and conducts
or arranges for audits of non-Federal entities receiving such awards that are in
addition to the audits of non-Federal entities conducted pursuant to this
chapter shall, consistent with other applicable law, arrange for funding the
full cost of such additional audits. Any such additional audits shall be
coordinated with the Federal agency determined under criteria issued under section 7504 to
preclude duplication of the audits conducted pursuant to this chapter or other
additional audits.
(f) Upon request by a Federal agency or the Comptroller
General, any independent auditor conducting an audit pursuant to this chapter
shall make the auditor's working papers available to the Federal agency
or the Comptroller General as part of a quality review, to resolve audit
findings, or to carry out oversight responsibilities consistent with the
purposes of this chapter. Such access to auditor's working papers shall include
the right to obtain copies.
(a) Each Federal agency shall, in accordance with guidance issued by the
Director under section 7505, with regard to Federal awards provided by the
agency--
(1) monitor non-Federal entity use of Federal awards,
and
(2) assess the quality of audits conducted under this chapter for
audits of entities for which the agency is the single Federal agency determined
under subsection (b).
(b) Each non-Federal entity shall have a single Federal agency, determined in
accordance with criteria established by the Director, to provide the non-Federal
entity with technical assistance and assist with implementation of this
chapter.
(c) The Director shall designate a Federal
clearinghouse to-
(1) receive copies of all reporting packages developed
in accordance with this chapter
(2) identify recipients that expend $300,000
or more in Federal awards or such other amount specified by the Director under
section
7502(a)(3) during the recipient's fiscal year but did not undergo an audit
in accordance with this chapter; an
(3) perform analyses to assist the
Director in carrying out responsibilities under this chapter.
(a) The Director, after consultation with the Comptroller General, and
appropriate officials from Federal, State, and local governments and nonprofit
organizations shall prescribe guidance to implement this chapter. Each Federal
agency shall promulgate such amendments to its regulations as may be necessary
to conform such regulations to the requirements of this chapter and of such
guidance.
(b)(1) The guidance prescribed pursuant to
subsection (a) shall include criteria for determining the appropriate charges to
Federal awards for the cost of audits. Such criteria shall prohibit a
non- Federal entity from charging to any Federal awards--
(A) the cost of any
audit which is--
(i) not conducted in accordance with this chapter;
or
(ii) conducted in accordance with this chapter when expenditures of
Federal awards are less than amounts cited in section 7502(a)(1)(A)
or specified by the Director under section
7502(a)(3), except that the Director may allow the cost of limited scope
audits to monitor subrecipients in accordance with section
7502(f)(2)(B); and
(B) more than a reasonably proportionate share of the
cost of any such audit that is conducted in accordance with this chapter.
(2) The criteria prescribed pursuant to paragraph (1) shall not, in the
absence of documentation demonstrating a higher actual cost, permit the
percentage of the cost of audits performed pursuant to this chapter charged to
Federal awards, to exceed the ratio of total Federal awards expended by
such non-Federal entity during the applicable fiscal year or years, to such
non-Federal entity's total expenditures during such fiscal year or
years.
(c) Such guidance shall include such provisions as may be necessary to
ensure that small business concerns and business concerns owned and controlled
by socially and economically disadvantaged individuals will have the opportunity
to participate in the performance of contracts awarded to fulfill the audit
requirements of this chapter.
(a) The Comptroller General shall review provisions requiring financial
audits of non-Federal entities that receive Federal awards that are
contained in bills and resolutions reported by the committees of the Senate and
the House of Representatives.
(b) If the Comptroller General determines that
a bill or resolution contains provisions that are inconsistent with the
requirements of this chapter, the Comptroller General shall, at the earliest
practicable date, notify in writing--
(1) the committee that reported
such bill or resolution; and
(2)(A) the Committee on Governmental Affairs of
the Senate (in the case of a bill or resolution reported by a committee of the
Senate); or
(B) the Committee on Government Reform and Oversight of the House
of Representatives (in the case of a bill or resolution reported by a committee
of the House of Representatives).
This chapter shall apply to any non-Federal entity with respect to any of its fiscal years which begin after June 30, 1996.''.
Subject to section 7507 of title 31, United States Code (as amended by section 2 of this Act) the provisions of chapter 75 of such title (before amendment by section 2 of this Act) shall continue to apply to any State or local government with respect to any of its fiscal years beginning before July 1, 1996.
Approved July 5, 1996.
HOUSE REPORTS: No. 104-607 accompanying H.R. 3184 (Comm. on Government Reform
and Oversight).
SENATE REPORTS: No. 104-266 (Comm. on Governmental Affairs).
CONGRESSIONAL RECORD, Vol. 142 (1996):
June 14, considered and passed
Senate.
June 18, considered and passed House.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 32 (1996):
July 5,
Presidential statement.
Return to
Single Audit Library home page