GAQC Alert No. 141 

Elimination of Late Single Audit Filing Extensions and Related Effect on Future Low-Risk Auditee Status

The purpose of this Governmental Audit Quality Center (GAQC) Alert is to make you aware of a recent U.S. Office of Management and Budget (OMB) memorandum to federal agencies titled, M-10-14, Updated Guidance on the American Recovery and Reinvestment Act (the OMB Memorandum).  This guidance could have implications on your single audits performed under OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations (Circular A-133).  Even though the title of the OMB Memorandum indicates that it provides guidance relating to the American Recovery and Reinvestment Act of 2009 (the Recovery Act), some of its provisions will affect single audits that that do not involve Recovery Act expenditures.  After reading this Alert you will: 
  • Understand the general contents of the OMB Memorandum and learn that federal agencies will no longer be granting extensions to auditees for late single audit filings with the Federal Audit Clearinghouse (FAC) for 2009 – 2011.
  • Know that the federal agencies will expect that late single audit submissions by an auditee in either one of the two prior years should keep an auditee from attaining low-risk auditee status in the current year.
  • Be aware of a continued emphasis with regard to the performance of quality control reviews (QCRs) of single audits and making the results of such reviews public on federal agency Web sites and
  • Get the latest status of the 2010 OMB Compliance Supplement.
  • Be informed about a recently scheduled GAQC member Web event titled, Key Recovery Act Considerations for Planning 2010 Single Audits, to be held on Wednesday, May 19, 2010, from 1:00pm – 3:00pm.

The OMB Memorandum

The main purpose of the OMB Memorandum, which was issued on March 22, 2010, is to provide additional information to the federal agencies on their oversight roles and responsibilities as it relates to Recovery Act funds expended by grantees.  For example, it provides guidance to the agencies on the following:

  • The steps federal agencies must take to review the quality of the data being entered into as part of the section 1512 recipient reporting requirements of the Recovery Act (see GAQC Alert #133 and GAQC Alert #118 for additional information on 1512 reporting).
  • Limitations on the program-specific recipient reporting guidance that federal agencies may issue.  It states that such guidance can only be issued by a federal agency if it is reviewed by OMB and it does not conflict (in whole or part) with OMB reporting guidance.  Additionally, any such guidance issued should be disseminated broadly.
  • Tracking the number of awards issued and the total dollars associated with such awards.
  • A requirement to compile a quarterly comprehensive list of all awards subject to section 1512 reporting (beginning with the quarter ended March 31, 2010) in order to establish a control total (i.e., the number of reports expected to be received by recipients for the quarter).
  • Guidance on the ability of state and local governments to recover administrative costs associated with the Recovery Act.

Single Audit Matters Addressed in the OMB Memorandum 

Question 7 of the OMB Memorandum is likely to be of most interest to auditors that perform single audits (we have bolded several key points in each of the subsections below).  You should take note of the following: 

No Extensions Provided for Single Audit Filings with the FAC.  Section 320 of Circular A-133 indicates that generally the data collection form (DCF) and related reporting package should be submitted to the FAC within the earlier of 30 days after receipt of the auditor’s reports, or nine months after the end of the audit period.  History has shown that generally more than 20-25% of the single audits filed with the FAC each year are filed later than nine months after the end of the audit period. Some of those late submissions have received approved extensions from a federal agency. The OMB Memorandum reminds federal agencies that the single audit is a key accountability mechanism for federal awards under the Recovery Act.  For that reason it advises that federal agencies should not grant any extension requests to grantees for fiscal years 2009 – 2011.  You may want to inform your auditees that have historically asked for and received submission extensions that they will likely no longer be able to receive extensions.  While this guidance appears in a memorandum relating to Recovery Act funds, OMB has informed us that the intent is that it would apply to all single audits.  Guidance clarifying this broader applicability will be added to the 2010 OMB Compliance Supplement.

Effect of Late Single Audit Filings on Low-Risk Auditee Status.  As the GAQC has informed members over the last several years, some federal agencies have informally interpreted that a late single audit filing in either one of the prior two audit years would preclude a grantee from being considered a low-risk auditee in the current year.  The OMB Memorandum is the first time this position has been formally communicated.  It states that in order for a grantee to meet the criteria for low-risk auditee status in the current year under Section 530 of Circular A-133, that the prior two audits must have met the requirements of Circular A-133, including submissions to the FAC by the due date described in Section 320 of Circular A-133 (see previous paragraph). OMB's intent is that this guidance apply broadly to all single audits and not only those with Recovery Act funds.  We know that there are many June 30, 2009, single audits currently wrapping up in order to meet next week's March 31, 2010, filing deadline.  If you are involved in one of these audits, you may want to inform your auditees about this new guidance and stress the impact that a late filing of the June 30, 2009, single audit will have on their June 30, 2010, single audit (i.e., they will not qualify for low-risk auditee status).  You should also expect that this new OMB guidance will apply to your single audits with years ending after June 30, 2009, until such time that we hear otherwise from OMB.  Also, remember that the date used to determine whether there has been a late filing is not when the audit is completed or issued, but rather when the data collection form and reporting package have been successfully received by the FAC. 

Quality Control Reviews. Consistent with prior OMB communications relating to the Recovery Act, the OMB Memorandum advises federal agencies that they should perform QCRs to ensure that single audits are properly performed and that findings that should have been reported by the auditor as required by Circular A-133 actually have been reported.  The results of these QCRs are to be reported on federal agency Web sites and  It is not yet clear how much information about the QCRs performed will be made public.  Initial indications are that each federal agency will determine the level of detail provided on QCRs performed.  Some agencies have indicated to us that they may only provide statistical information (e.g., number of audits reviewed, percentage of errors, types of errors, etc.) versus providing engagement-specific information.  However, there could be others that decide to take a different approach. The GAQC will be discussing this area with the agencies going forward and recommending that a common approach be used by all. This focus on QCRs by federal agencies should be an emphasis point that you cover with your single audit teams as you begin planning your 2010 audits.  You should also ensure that a thorough review of your single audit engagements is performed prior to completion and issuance.  Remember that the AICPA peer review checklists are a tool you can use to assist in reviewing your single engagements.  Click here to access the peer review tools. 

Findings Follow-Up.  The OMB Memorandum also instructs federal agencies to focus on audit findings.  The FAC will begin running reports for single audits with fiscal years ended September 30, 2009, and later, that summarize audit findings by type of noncompliance for all Recovery Act programs.  Agencies are to review these reports and take action on them by expediting review and resolution (within 6 months after FAC submissions complete), focusing efforts on high risk programs and auditees, and making sure appropriate corrective actions are taken.  Agencies are instructed to consider performing additional monitoring, inspections, or audits for grantees where single audits have identified the greatest risk.  You may want to consider informing your auditees that they can expect a more rigorous federal response to single audit findings than they may have encountered in the past. Finally, the section of question 7 that discusses agency responsibilities for findings states that many non-federal entities submit their single audits by March 30, 2010.  We followed up with OMB to ensure that they were not implying that June 30th single audits were due by March 30th (and not March 31st as is normal practice).  OMB informed us that the March 30th date provided is a typographical error and that there is no change to the due date for June 30th single audits.

Status of 2010 OMB Compliance Supplement

The GAQC provided comments to the OMB on the vet draft of the 2010 Compliance Supplement (see GAQC Alert #137).  Thanks to our members that submitted comments for inclusion in what we sent to OMB.  OMB is currently working through all comments received and is also working on developing updated Recovery Act guidance to be included in the 2010 Supplement.  For example, we have been working with OMB as they develop guidance on the impact of Recovery Act funds on major program determination for 2010 single audits.  Additionally, discussions have been held regarding how much work the auditor will be asked to do relating to recipient reporting under section 1512 of the Recovery Act.  These discussions are ongoing.  At this time, we still expect the 2010 Supplement to be issued in the April/May timeframe.  We will alert you as soon as we have more information.

GAQC Web Event on the Recovery Act Scheduled for May 19, 2010

Mark your calendars for an upcoming GAQC member Web event titled, Key Recovery Act Considerations for Planning 2010 Single Audits, to be held on Wednesday, May 19, 2010, from 1:00pm – 3:00pm. Registration instructions will follow at a later date.  We have confirmed Mandy Nelson, a partner at KPMG LLP and former chair of the GAQC Executive Committee, to lead the event.  We have not had an update call on the Recovery Act since last fall and much has happened since then.  By May, we will have final (or near final) Compliance Supplement guidance and be in a position to provide you with the latest information needed to plan your audits.  Don’t miss this important event if your auditees are expending Recovery Act funds.

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