Published on November 16, 2015
In December 2013, the U.S. Office of Management and Budget (OMB) issued its long-awaited final grant reform rules.
The “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards,” more commonly known as the “Uniform Guidance,” consolidated and updated eight previous OMB circulars into a single set of regulations. These changes improved clarity, consistency and accessibility and consisted of changes to audit and administrative requirements, and cost principles.
These regulations – designed to reduce administrative burden and the risk of waste, fraud and abuse – are effective for all Single Audits for years beginning on or after December 26, 2014.
While the previous threshold requiring a Single Audit was $500,000, the Uniform Guidance raised the threshold for nonprofit organizations to $750,000 in federal funds per fiscal year. Despite this change, this threshold does not apply to pass-through entities if they have stipulated a requirement for a Single Audit in their contracts, which is often the case when providing funding to another entity.
Some of the changes related to the major determination process included raising the minimum threshold for the Type A/B program determination from $300,000 to $750,000. For a Type A program to be considered low-risk, it must not have failed to receive an unqualified opinion, had a material weakness in internal control or had questioned costs exceeding five percent of the program’s expenditures in the most recent period.
As a result of the Uniform Guidance, the number of high-risk Type B programs required to be tested as major programs was reduced from 50% to 25% of the number of low-risk Type A programs.
The percentage of coverage required in a Single Audit was 50% (25% for low-risk auditees). The percentage was reduced to 40% (20% for low-risk auditees) under the Uniform Guidance. The final guidance also revised the criteria for low-risk auditee status.
The Uniform Guidance did not propose any changes to the 14 types of compliance requirements to be tested in a Single Audit. In June 2015, OMB issued the final 2015 Compliance Supplement. Upon the issuance of the 2015 Compliance Supplement, two of the compliance requirements, the Davis-Bacon Act and Real Property Acquisition and Relocation Assistance, were eliminated. The 2015 Compliance Supplement also includes two sections on compliance requirements, one for testing awards subject to “old” OMB Circulars and one for testing awards subject to the new Uniform Guidance.
Under the Uniform Guidance, more detail is required to be reported in auditor findings. Upon implementation of these regulations, questioned cost threshold for reporting was increased from $10,000 to $25,000.
Editor's Note: This post was originally published in January 2014 and has been updated to reflect new insights and information.
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Published on November 16, 2015