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OMB Overhauls Single Audit Requirements


The following article was included in CohnReznick's The Not-for-Profit Advisor - Winter 2014 issue.

On December 26, 2013, the Office of Management & Budget (OMB) finalized federal grant reform guidance proposed earlier in the year. The guidance is designed to improve and streamline the grant oversight process by establishing uniform administrative requirements, cost principles, and audit requirements. It also consolidates eight existing OMB circulars – including Circular A-133 (Single Audit) – into a single document.

Following are highlights of the Single Audit changes, which apply to audits of fiscal years beginning on or after December 26, 2014. These changes are meant to focus audits on areas that present the greatest risk of waste, fraud, and abuse.

Increased threshold. The guidance increases the requirement for an organization to have a Single Audit performed from a threshold of $500,000 to $750,000 when federal awards are expended. According to the OMB, this change will provide audit relief to approximately 5,000 organizations while maintaining audit coverage of 99% of currently covered federal funds.

Major program determination. The guidance modified the sliding scale threshold that separates Type A (major programs) from Type B programs, including raising the lowest threshold from $300,000 to $750,000 for organizations that spend between $750,000 and $25,000,000 in federal awards.

The guidance amends the types of findings that will trigger a high-risk classification, which requires a Type A program to be audited as a major program. Type A programs will be considered high-risk if, in the most recent audit period, the program:

  • Failed to receive an unmodified opinion;
  • Had a material weakness in internal control; or
  • Had known or likely questioned costs exceeding 5% of total program expenditures.

Keep in mind, however, that Type A programs must be audited as major programs at least once every three years, regardless of whether they are high-risk.

Finally, the guidance reduces the number of high-risk Type B programs that must be tested as major programs from 50% to 25% of the total number of low-risk Type A programs.

Audit coverage. The guidance reduces the percentage of coverage required in a Single Audit to 40% of federal expenditures for entities that do not qualify as low-risk auditees (20% for low-risk auditees). The current requirements are 50% and 25%, respectively. The guidance also revises the criteria for low-risk auditee status, making it more difficult for some organizations to qualify.

Audit findings. The guidance requires auditors to report their findings in greater detail, but it increases the threshold for reporting questioned costs from $10,000 to $25,000.

Compliance requirements. The proposed guidance contemplated a reduction in the compliance requirements from 14 to 6, but this change was ultimately not incorporated in the final guidance. OMB may reduce the number of compliance requirements subject to audit in the future as part of its annual compliance supplement update.

What Does CohnReznick Think?
This new guidance impacts federal award recipients whether or not they are subject to the new single audit thresholds. The new guidance also includes changes and clarifications to administrative requirements and cost principles. For this reason we feel that all not-for-profit organizations receiving federal grants should review the OMB’s final guidance and evaluate the potential impact of the circular changes to the organization and audit process.


For more information, please contact Anne Schrantz, Partner, at 301-961-5535, John Alfonso, Partner, at 646-254-7415, or John Eusanio, Partner, at 646-625-5767. To learn more about CohnReznick’s Not-for-Profit Industry Practice, please visit our webpage.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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