U.S. DEPARTMENT OF LABOR
Employment and Training Administration
Washington, D. C. 20210

CLASSIFICATION

Audits

CORRESPONDENCE SYMBOL

TMG

ISSUE DATE

December 17, 1996

RESCISSIONS

None

EXPIRATION DATE

Continuing

DIRECTIVE : TRAINING AND EMPLOYMENT INFORMATION NOTICE NO. 15-96
 
TO : ALL STATE JTPA LIAISONS
ALL STATE EMPLOYMENT SECURITY AGENCIES
ALL STATE WORKER ADJUSTMENT LIAISONS
ALL ONE-STOP CAREER CENTER SYSTEM LEADS
 
FROM : BARBARA ANN FARMER
Administrator
for Regional Management
 
SUBJECT : Revisions to OMB Circular A-133

 

  1. Purpose. To inform States of revisions made to OMB Circular A-133; of the impact of the Single Audit Act amendments on Circulars A-128 and A-133; and of a recently issued proposed revision to Circular A-133.

  2. References. OMB Circular A-133, as revised April 30, 1996; Single Audit Act, as amended July 5, 1996 (P.L. 104-156).

  3. Background. A proposed revision to OMB Circular A-133 was published in the Federal Register on March 17, 1995; the final revision to the circular was published on April 30, 1996. The revised circular continues to apply only to institutions of higher education and non-profit organizations, including hospitals. The effective date of this circular is July 1, 1996, and applies to audits of fiscal years ending on or after June 30, 1997. The circular was written in such a way that after amendment of the Single Audit Act, it could be easily adapted to accommodate the provisions of the amendments. The intent was to make one law and circular applicable to both State and local governments and non-profit organizations.

    The amendments to the Single Audit Act were signed by President Clinton on July 5, 1996. As a result of these amendments, the requirements of OMB Circular A-128, which apply to State and local governments, will be rescinded, and its applicable requirements will be folded into OMB Circular A-133.

    OMB issued, in the November 5, 1996 Federal Register, a proposed, newly revised OMB Circular A-133, applicable to non-profits and State and local governments, which combines OMB Circulars A-128 and A-133. Comments are due to OMB by January 6, 1997.

  4. Summary. 

    Following is an outline which summarizes the requirements of the revised circular. Significant changes from previous requirements are in bold type.

    1. Audit threshold increased from $25,000 to $300,000

    2. Determination of major high risk programs no longer based solely on level of expenditures. Now they are determined by the auditor based on:

      1. Risk Assessment

      2. Prior audit experience

      3. Oversight performed by the Federal agency and others

      4. Inherent risk of the Federal program

    3. Assignment of Federal cognizant agency is now based on a dollar threshold of awards received, not by OMB.

    4. Auditee Responsibilities

      1. Identify and account for Federal awards

      2. Maintain internal controls over Federal awards

      3. Comply with laws, regulations and contracts

      4. Prepare required financial statements, etc.

      5. Ensure that A-133 requirements are met

      6. Follow-up and resolve audit findings

    5. Auditors

      1. The auditor that does the audit shall not prepare the auditee's indirect cost proposal or cost allocation plan, when indirect costs exceed $1 million in the prior year. (This is in affect on audits of fiscal years ending on or after June 30, 1999.)

      2. The Single Audit Act amendments will require the auditor to express an opinion on whether the schedule of expenditures of Federal award is fairly presented in all material aspects in relation to the financial statements.

    6. Reporting

      1. Reports must be submitted no later than nine months after the end of the year audited, or within 30 days after issuance of the auditor's report to the auditee, whichever is earlier. This will be transitioned in over a two year period.

      2. Auditee Reporting Requirements

          (1)  Financial statements

          (2)  Schedule of Federal awards expenditures

          (3)  Summary schedule of prior audit findings

            (a)  Includes status of all findings included in the auditor's prior year schedule of findings and questioned costs of Federal award

            (b)  IIncludes status of findings reported in the auditee's prior year summary schedule of prior findings until resolved or no longer valid. To be consider no longer valid, the following must apply:

              (i)  Two years have passed since the finding was reported;

              (ii)  Grantor is not currently pursuing; and

              (iii)  No management decision was issued

          (4)  Corrective action plan, where the auditor identifies audit findings for:

            (a)  Material noncompliance with individual compliance requirements for a major program; or

            (b)  Material weaknesses in the auditee's internal controls

          (5)  Data collection form

      3. Audit Costs

        1. Single Audit Act amendments establish the requirement that the percentage of the audit costs charged to Federal awards generally cannot be greater than the ratio of the entity's Federal awards expended to its total expenditures.

        2. A greater percentage can be charged only if the entity can demonstrate that the cost of auditing the Federal awards was higher

        3. If an entity expends less than $300,000 (or higher if the threshold is raised) in Federal awards, they may not charge single audit costs to the Federal awards. They may be allowed to charge the cost of limited scope audits to monitor subrecipients.

    7. Action Required. Please share these changes with appropriate staff.

      Comments on the proposed revisions of OMB Circular A-133 should be sent to OMB by no later than January 6, 1997.

    8. Inquiries. Questions on this TEIN should be directed to either the appropriate Regional Office or Lance Grubb/Patricia Wilkinson on 202-219-6719.

    9. Attachments. Federal Register notice dated April 30, 1996, containing OMB Circular A-133; Paper entitled, Revisions to OMB Circular A-133 and the Single Audit Act; Federal Register notice dated November 5, 1996, containing the proposed revisions to Circular A-133.

     

    NOTE: Attachments not available to DMS