Audits of Federal Funds (Single Audits)
Entities that receive federal funds including states, local governments, and not-for-profit organizations (NPOs), are subject to audit requirements commonly referred to as “single audits” under the Single Audit Act of 1984, as amended in 1996. The Single Audit Act was enacted to standardize the requirements for auditing federal programs. The Act provides that grantees are subject to one audit of all of their federal programs versus separate audits of each federal program, hence the term “single audit.” The AICPA believes that single audits should be performed in a high-quality manner, using appropriate professional standards, and provides guidance to its members through its Governmental Audit Quality Center and through other means such as technical publications, guidance, educational courses, and conferences.
In November 2011, Representative James Lankford, an Oklahoma Republican, introduced the "Grant Reform and New Transparency Act" or GRANT Act, H.R. 3433. While the primary purpose of the bill is to improve transparency in the grant application, award and reporting processes, it also calls for the Office of Management and Budget (OMB) to submit a plan for improving the single audit process. Such a plan would have to include, among other things, a simplified single audit alternative for non-federal entities with expenditures for smaller federal awards. The legislation defines a "smaller Federal award" as $1 million or less.
Because the Single Audit Act currently bases its audit requirement on total federal awards expended of $500,000 or more, the AICPA is concerned that the bill’s language is inconsistent because it implies that an audit would only be required when there is one federal award greater than $1 million. As a result, the AICPA has advocated that the bill be clarified that the simplified audit alternative be explored for recipients expending greater than $1 million in total federal awards.
The bill was favorably reported to the full House by the Oversight and Government Reform Committee in May 2012. The bill saw no further action in 2012.
Earlier Legislative Proposals and Executive Branch Actions
The federal funds provided to governments and NPOs subject to single audits have been significantly increased (by approximately $800 billion) due to the passage of the American Recovery and Reinvestment Act of 2009 (Recovery Act), which was intended to stimulate the economy and create jobs.
Representative Edolphus Towns, a New York Democrat, introduced H.R. 2182 to require 0.5 percent of Recovery Act funds be allocated to conduct oversight to prevent waste, fraud and abuse. The bill passed the House in May 2009. There was no action on the bill in the Senate, and it died with end of the 111th Congress. It also has not been reintroduced in this Congress which began its term in January 2011.
Additionally, President Obama issued Executive Order 13520 on Nov. 23, 2009, creating a working group of federal, state and local officials to recommend improvements that could be made to single audits, including determining whether such audits are effective in identifying improper payments and whether single audit requirements should be streamlined or eliminated where their value is minimal. In March 2010, the Office of Management and Budget (OMB) issued government-wide guidance to the federal agencies (found at http://www.whitehouse.gov/sites/default/files/omb/assets/memoranda_2010/m10-13.pdf) on the implementation of the Executive Order. Under OMB’s guidance, which affects OMB Circular A-123, Management’s Responsibility for Internal Control, federal agencies with programs susceptible to significant improper payments are required to submit a quarterly report on any identified high-dollar overpayments to the agency’s Inspector General and the Council of Inspectors General on Integrity and Efficiency, and also make the report available to the public. Additionally, OMB continues to study the inter-relationship of single audits and the required federal agency reporting of improper payments and whether any changes are needed to single audit legislation or regulation as a result of its study.
Copy of Legislation
Copies of bills and all Congressional actions are available on the Library of Congress’s THOMAS website by bill number after first selecting "Try the Advanced Search" and then the correct Congress.
October 25, 2007 AICPA Testimony before the Senate Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security (linked here and at Senate hearing of same day below).
Links to Congressional Hearings
November 19, 2009 House Oversight and Government Reform Committee hearing, Tracking the Money: How Recovery Act Recipients Account for Their Use of Stimulus Dollars
September 10, 2009 Senate Homeland Security and Governmental Affairs Hearing, Follow the Money: An Update on Stimulus Spending
July 8, 2009 House Oversight and Government Reform Hearing, Tracking the Money: Preventing Waste, Fraud and Abuse of Recovery Act Funding
October 25, 2007 Senate Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security Hearing, Single Audits: Are They Helping to Safeguard Federal Funds
Links to Other Documents
November 20, 2009 Executive Order, Reducing Improper Payment and Eliminating Waste in Federal Programs
March 13, 2009 Government Accountability Office Report, Single Audit: Opportunities Exist to Improve the Single Audit Process and Oversight
June 2007 President's Council on Integrity and Efficiency and Executive Council on Integrity and Efficiency, Report on National Single Audit Sampling Project (report of results of Federal Single Audit Quality Study)
Diana Huntress Deem
Director, Congressional and Political Affairs
Director, Governmental Auditing and Accounting