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From The AICPA Audit Committee Toolkit.
Copyright © 2005 by the American Institute of Certified Public Accountants,
Inc., New York, New York.
| Purpose of This Tool. Office of Management and Budget (OMB) Circular A-133 was issued pursuant to the Single Audit Act of 1984 and subsequent amendments. It establishes the standards in order to obtain consistency and uniformity among federal agencies for the audit of states, local governments, and not-for-profit organizations expending federal awards.
This tool is intended to aid not-for-profit organizations in complying the requirements and expectations of the Single Audit Act, as well as to assist with compliance of the provisions of the Act.
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The Single Audit Act requires that nonfederal entities that expend $500,000
or more a year in federal awards have a single or program-specific audit in
accordance with the provisions of the Act's audit requirements. The determination
of when an award is expended should be based on when the award activity occurs.
Expenditures include cash transactions, loans, loan guarantees, federally restricted
endowment funds, and various other types of noncash assistance, such as interest
subsidies. A program-specific audit may be elected only when an auditee expends
federal awards under one federal program (excluding research and development,
which is considered as one major program) and the federal program's laws, regulations,
or grant agreements do not require the auditee to have a financial statement
audit.
Requirements and Responsibilities
Recipients of federal awards are required to:
- Maintain a system of internal control over all federal programs in order
to demonstrate compliance with pertinent laws and regulations.
- Identify all grant programs by Catalog of Federal Domestic Assistance
(CFDA) number and title, awarding agency, year of award, and any pass-through
entities if applicable.
- Ensure that audits mandated under OMB Circular A-133 are performed and
filed with appropriate federal entities as required.
- Follow up on any audit findings, questioned costs, or compliance issues.
This involves specific responses and, when necessary, taking corrective action
that will resolve current and/or previous findings.
- Sign the official data collection and single audit submission form that
is prepared in conjunction with the independent auditor. The recipient organization
is legally responsible for the accuracy and timely submission of these forms
even if the auditor prepares the forms.
Auditors of recipients of federal awards are required to:
- Plan and conduct the audit in accordance with GAAS (generally accepted
auditing standards) and GAGAS (generally accepted government auditing standards).
- Determine if the organization-wide and federal awards financial statements
are presented fairly in accordance with GAAS and GAGAS.
- Determine if Schedule of Expenditures of Federal Awards is presented fairly
in relation to the organization’s financial statements as a whole.
- Perform tests that demonstrate an understanding of the recipient’s
internal controls in order to support a “low assessed risk” for
major programs.
- Determine that the recipient has complied with laws, regulations, and
grant agreements through review and testing procedures.
- Follow up on the status of previous audit findings.
Awarding agencies have the following responsibilities in the audit process:
- Ensure that audits are completed and filed on time.
- Provide technical assistance to auditors and recipients who may have audit
questions.
- Issue a management decision on financial and compliance audit findings
within six months after an audit report has been submitted.
- Ensure that recipients follow up on audit findings and develop and implement
a corrective action plan if necessary.
Reporting
The auditor’s report may be in the form of either combined or separate
reports. The auditor’s report will state that the audit was conducted
in accordance with OMB Circular A-133 and include the following:
- An opinion (or disclaimer of opinion) about whether the financial statements
and schedules of expenditures are fairly presented in accordance with GAAP.
- Report on the status of internal controls relative to the financial statements
and major programs.
- Compliance report that describes the degree to which the recipient has
complied with laws, regulations, and the terms and conditions of the federal
assistance awards.
- Schedule of findings and questioned costs.
- List of major programs using the required risk-based methodology.
- Determination concerning federal programs as to whether the recipient
of the federal award is a “high risk” or “low risk.”
Conclusion
The specific requirements and responsibilities of federal agencies and
nonfederal recipients are detailed in OMB Circular A-133 (see the Circular
available
at www.whitehouse.gov/omb/circulars/a133/a133.html). Federal agencies are
required to apply the provisions of Circular A-133 to all nonfederal entities
that receive and expend federal awards either directly from federal awarding
agencies or as sub-recipients who receive federal awards from a pass-through
entity.
From The
AICPA Audit Committee Toolkit. Copyright ©
2005 by the American Institute of Certified Public Accountants, Inc., New
York, New York.
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