Grant reform increases single-audit threshold, changes audit rules

New guidelines unveiled Thursday by the Office of Management and Budget (OMB) raise a key threshold for compliance audits of entities that receive federal award money from $500,000 per fiscal year to $750,000 per fiscal year.

Among other things, the new rules raise the federal awards threshold that triggers compliance audits currently performed under OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, which are also referred to as single audits or Circular A-133 audits.

As a result of the new rules, states, local governments, and not-for-profit entities will be required to undergo a single audit if they spend $750,000 or more in federal awards in a fiscal year.

Nonfederal entities that spend less than $750,000 in a fiscal year will be required to make records available for review or audit by appropriate officials of the federal agency, passthrough entity, and the U.S. Government Accountability Office.

Approximately 5,000 nonfederal entities will be relieved of the single-audit requirement as a result of the higher threshold, according to a preliminary online inspection version of the rules. The guidelines are scheduled to be published in the Federal Register on Thursday, Dec. 26.

The comprehensive new rules also contain numerous other changes to the requirements for entities spending federal awards and their auditors.

Raising the threshold is part of a larger federal effort to reduce administrative burden, waste, fraud, and abuse. The new rules combine eight previously separate sets of OMB guidance into one for entities that receive a portion of the $600 billion in federal grants that are awarded annually.

According to a blog on the OMB’s webpage, the new guidance is designed to eliminate duplicative and conflicting guidance, encourage efficient use of information technology and shared services, strengthen oversight, and provide for consistency and transparency.

The OMB and its partners also are continuing work to improve outcomes through effective use of grant-making models, performance metrics, and evaluation, according to the OMB blog.

The new rules are expected to take effect for single audits of fiscal years beginning on or after Jan. 1, 2015, according to an alert from the AICPA Governmental Audit Quality Center to its members.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.