Single audit changes: the recently revised version of OMB Circular A-133 increased the single audit threshold to $500,000 from $300,000 and the cognizant agency threshold to $50 million from $25 million.(The Accounting Angle)(Audits of States, Local Governments, and Non-Profit Organizations )

On June 27, the U.S. Office of Management and Budget published in the Federal Register a revised version of its Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations (68 FR 38401). This circular governs the scope and conduct of single audits. The following questions are designed to highlight the key changes incorporated into this latest version of OMB Circular A-133.

What is meant by the term "single audit threshold?" Since the passage of the Single Audit Act of 1984, state and local governments that benefit from federal awards generally are required to obtain a "single audit" specifically tailored to meet the needs of federal grantors. As a practical matter, governments benefiting from smaller federal awards have been exempted from this requirement. Thus, the award amount at which a single audit becomes mandatory has come to be known as the single audit threshold.

What has the single audit threshold been in the past? When the Single Audit Act of 1984 first took effect, the threshold for mandatory single audits was $100,000 of federal financial assistance. With the passage of the Single Audit Act Amendments of 1996, the threshold for mandatory single audits was raised to exempt governments expending less than $300,000 in federal awards. That same legislation also mandated that the director of OMB review the reasonableness of the threshold every two years and authorized the director, based on these biennial reviews, to reset the threshold at amounts higher than $300,000.

What will the single audit threshold be in the wake of the recent revisions of OMB Circular A-133? The latest version of OMB Circular A-133 resets the single audit threshold at $500,000. That is, governments expending less than $500,000 in federal awards will not be required henceforth to obtain a single audit.

From a macro perspective, what is the anticipated effect of this change in the single audit threshold on audit coverage? The change in threshold will have scant effect on the total dollar amount of federal awards covered by single audits. It will, however, relieve approximately 6,000 local governments and nonprofit organizations that currently must obtain single audits from having to continue to do so.

When does the new single audit threshold take effect? The new threshold for single audits will first take effect for audits of fiscal years ending after December 31, 2003. Note that governments are expressly prohibited from implementing the new threshold prior to that date.

Does the new $500,000 threshold also apply to the determination of Type A programs? In addition to setting a statutory minimum single audit threshold of $300,000, The Single Audit Act Amendments of 1996 also set a threshold of $300,000 (or 3 percent of federal awards) for determining whether a given federal award program should be classified as a "Type A" program, the first step in determining whether it is subject to the special audit coverage requirements applicable to major programs. While the Single Audit Act Amendments of 1996 mandated that the director of OMB review the basic threshold for single audits every two years and authorized needed adjustments based on that review, the legislation contained no similar provisions regarding the statutory threshold applicable to the determination of Type A programs. Accordingly, the $300,000 (or 3 percent) threshold used far the determination of Type A programs remains unaffected by the increase of the basic single audit threshold to $500,000.