Audits are performed to ascertain the validity of an organization’s ability to operate effectively. There are four (4) common types of audits in grants management: The Office of Management and Budget (OMB) Circular A-133 Audit; Independent Audits and Financial Statements; the federal agency’s Office of Inspector General (OIG) Audit; and, the Government Accountability Office (GAO) Audit.
The Office of Management and Budget (OMB) Circular A-133 Audit is a single audit. The A-133 Compliance Supplement can help with compliance (here is the 2018 version). The OIG Performance Audits evaluate a grantees’ evidence against stated criteria such as requirements, measures or defined business practices to provide an objective analysis for management to use. They are not only programmatic audits, but they also include financial aspects that result in many questioned/disallowed costs. Financial audits assess whether the grantees reported financial condition is fairly reported.
A-133 Audits/Single Audit
Each year, the Federal Government provides over $400 billion in grants to State, local and tribal governments, colleges, universities and other non-profit organizations (non-Federal entities). The Single Audit Act of 1984 (with amendment in 1996) and OMB Circular A-133 ("Audits of State, Local Governments, and Non-Profit Organizations") provide audit requirements for ensuring that these funds are expended properly.
In the United States, the Single Audit, also known as the OMB A-133 audit, is a rigorous, organization-wide audit or examination of an entity that expends $500,000 in its fiscal year (increases to $750,000 in the Omni Circular 2 CFR Part 200 for new and amended awards made on or after December 26, 2014) or more of Federal assistance commonly known as Federal funds, Federal grants, or Federal awards received for its operations. The A-133 Audits of States, Local Government and Non-Profit Organizations A-133 came out of the Single Audit Act of 1984; it was a way to centralize and standardize audits across agencies.
If a non-Federal entity expends more than $500,000 (increases to $750,000 in the Omni Circular 2 CFR Part 200 for new and amended awards made on or after December 26, 2014) of Federal funds in a fiscal year, it is required to perform an A-133. Usually performed annually, the Single Audit’s objective is to provide assurance to the US federal government as to the management and use of such funds by recipients such as states, cities, universities, and non-profit organizations. The audit is typically performed by an independent certified public accountant (CPA) and encompasses both financial and compliance components.
A single audit is intended to provide a cost-effective audit for non-Federal entities in that one audit is conducted in lieu of multiple audits of individual programs.
Exempt vs. Non-Exempt
*Exempt refers to a non-federal entity that expends less than $500,000 of Federal funds in their fiscal year. Non-exempt refers to a non-federal entity that expends $500,000 or more of Federal funds in their fiscal year.
Local Governments are not subject to Statewide Single Audit but may need to have an A-133 if expenditures exceed $500,000 ($750,000 per 2 CFR Part 200). Grantees are responsible for ensuring that Subgrantees comply with A-133 audit requirements. The initial review of OMB Circular A-133 audit reports pertaining to Grantees is performed by the Federal Audit Clearinghouse and, for audits with findings pertaining to a particular federal agency’s grants, by the federal agency’ OIG. These reviews cover compliance with audit standards, completeness, timeliness and similar considerations.
The Single Audits must be submitted to the Federal Audit Clearinghouse (FAC) along with a data collection form, Form SF-SAC. In the new Omni Circular 2 CFR Part 200, one major change is the format for submitting the audits. All Single Audits must be submitted electronically to the Federal Audit Clearinghouse in text-based PDF format and unlocked so that Auditors can access it easily. Also, all audits must not include protected personally identifiable information (PPII) (2 CFR Part 200.82 & 200.512(A)(2)) when they are submitted. And, the Auditors are required to do the same. Regarding the PPII, the auditee must sign a statement to this effect before submitted the report to the Federal Audit Clearinghouse. The only exception applies to Indian Tribes that meet the definition in 200.54.
Another big change is that the pass-through agencies no longer have to retain the subrecipient’s audit reports in their offices. This is a huge relief if you are one of the pass-through entities because it is quite a paperwork burden to maintain all of those reports. Now, the pass-through can simply access their subrecipients’ audits online with the Federal Audit Clearinghouse.
All non-Federal entities are required to comply with OMB Circular A-133: Government, education, and non-profit. The single audit includes both the entity’s financial statements and the Federal awards. The program-specific audit means an audit of one specific program. Commercial organizations are exempt. The reference to “Non-profit organization” includes non-profit institutions of higher education and hospitals. The audit report is due no later than nine months after the end of the entity’s fiscal year. An extension can be requested, but it must be made in writing. Late audit reports result in non-compliance.
You can check your A-133 status and the status of your Subgrantees on the OMB Circular A-133 Single Audit Database online.
Final changes to the A-133 Audit Compliance Supplement are not included in the 2 CFR Part 200 Guidance. Future changes will be based on available evidence of past audit findings, potential impact of non-compliances and public outreach. The Office of Management and Budget (OMB) released the FINAL 2014 A-133 Compliance Supplement. OMB has made the Compliance Supplement available in two commonly used formats, Microsoft Word and PDF (viewable with Adobe Acrobat Reader).
This 2014 Supplement is a preview of the implementation of changes. Changes became effective when the the 2015 Supplement was published.
If findings exist, audit resolution staff at the federal agency work with in collaboration with the Grantee to develop Corrective Action Plans (CAPs). The audit resolution involves steps determined to resolve any issues or weaknesses. The awarding agency is responsible for overseeing Corrective Action Plans (CAP) for their grantees and the grantees oversee compliance of their subgrantees. This includes the grantee’s review and analysis of the subgrantees’ audit report(s) and, if findings exist, the audited subgrantee should be contacted and a CAP should be requested. The awarding agency must monitor the grantees’ CAP and the grantee is responsible for following findings and remedying any issues determined during the audit.
The CAP should include the following: (1) Description of each finding; (2) Specific steps to be taken to implement the recommendation; (3) Timetable for performance of each corrective action; and, (4) Description of monitoring to be performed to ensure implementation of the CAP. The awarding agency should generate response to CAP request from grantee within 30 calendar days. This same timeframe is recommended for grantees to use with their subgrantees’ CAPs. Over time CAPs have identified and remedied issues for grantees and subgrantees.
Independent Audits and Financial Statements
When an A133 is not required (expensed less than $500,000 in Federal funds in a fiscal year-$750,000 in new 2 CFR Part 200), independent audits and financial statements can be used to assess organization’s financial management standing and capabilities. Reviews sometimes result in a management letter, which describes issues that may not be severe enough to be in an audit finding, but are worth acknowledging.
Federal Agency Office of the Inspector General Audits
Audits by the federal agency OIG evaluate strategic plans and objectives as compared with the actual project activities and a range of other topics. Reports are usually posted on the agency’s OIG Audit page. Sometimes, the OIG Audits only cover performance and other times it may cover both performance and financial activities. The OIG usually maintains a rotating schedule of states, localities, programs to audit and it is conducted by either OIG staff or contract support. The OIG Audits are usually all-encompassing and compares expenditures to program impact.
Government Accountability Office Audits
The GAO is an independent, nonpartisan agency that works for Congress to investigate how Federal government spends taxpayer dollars. The GAO’s mission is to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people. GAO provides Congress with timely information that is objective, fact-based, nonpartisan, non-ideological, fair, and balanced. GAO supports congressional oversight by auditing agency operations to determine whether federal funds are being spent efficiently and effectively; investigating allegations of illegal and improper activities; reporting on how well government programs and policies are meeting their objectives; performing policy analyses and outlining options for congressional consideration; and issuing legal decisions and opinions, such as bid protest rulings and reports on agency rules. The work of GAO is done at the request of congressional committees or subcommittees or is mandated by public laws or committee reports. GAO also undertakes research under the authority of the Comptroller General. GAO advises Congress and the heads of executive agencies about ways to make government more efficient, effective, ethical, equitable and responsive. The GAO work leads to laws and acts that improve government operations, saving the government and taxpayers billions of dollars.