OMB Circular A-133 (Single Audit)Heather Perry, CPA

Amy Ring, CPA@dozcpa

OMB Circular A-133 – Audits of States, Local Governments and Non-Profit Organizations

What is OMB Circular A-133 (Single Audit) and who does it apply to?

Created to standardize the audits of non-profit organizations receiving at least $500,000 in federal awards annually• Prior to A-133, each federal agency was responsible

for its own audits• Audits were not consistent• Resulted in additional costs to the government

What is OMB Circular A-133 (Single Audit)

A Single audit consists of two main parts:• Audit of basic financial statements• Audit of the entity’s major federal awards program(s)

• Gaining an understanding of and testing the internal controls over compliance

• Testing compliance with requirements over the program(s)

• Understanding of internal control over financial reporting

Single Audit Objectives

Express an opinion on:• Financial statements in conformity with GAAP and

schedule of expenditures of federal awards is presented fairly in relation to the financial statements taken as a whole.

• Auditee complied with laws, regulations, and the provisions of contracts or grant agreements on each major program.

Single Audit Objectives (continued)

Does not express an opinion on:• Internal control over the financial reporting and

compliance.

Who is Required to Follow OMB Circular A-133?

Any NFP receiving federal awards is subject to this guide.• Federal programs are identified by federal

program name, federal agency and CFDA number

• If the federal award is included in the A-133 Compliance Supplement, specific audit risks are identified

Who is Required to Follow OMB Circular A-133?

An A-133 audit includes examining an entity’s:• Financial records• Financial statements• Federal award transactions and expenditures• General management of its operations• Internal control systems• Federal assistance received during the audit

period

Who is Required to Follow OMB Circular A-133?

For fiscal years ending after December 31, 2003, organizations that expend less than $500,000 in federal awards during the year are exempt from single audit requirements.

Total Federal Awards Expended

One Program More than One Program

$0 - $499,999 No audit No audit

$500,000 or more Program-specific or A-133 Audit

A-133 Single Audit

Who is Required to Follow OMB Circular A-133?

Which of these examples require an A-133 audit:

1. Section 202 Mortgage of $750,000 and Section 8 of $200,000

2. Section 202 Capital Advance of $900,000 and PRAC of $125,000

3. Section 202 Mortgage of $200,000 and Section 8 of $200,000

4. Section 202 Capital Advance of $400,000 and PRAC of $150,000

OMB Circular A-133 (Single Audit)

Under A-133, non-profit organizations are required to:• Maintain internal control for federal programs• Comply with laws, regulations and the provisions of

contracts or grant agreements• Prepare appropriate financial statements, including the

Schedule of Expenditures of Federal Awards (SEFA)• Ensure that required single audits are properly performed

and submitted when due• Follow up and take corrective actions on findings

Differences between an A-133 audit and a HUD audit

Determination of major programs• HUD – over $500,000 = major• A-133 – risk based approach

Compliance areas• HUD – follow Chapter 3 of the HUD Audit Guide• A-133 – follow Compliance Supplement

Differences between an A-133 audit and a HUD audit

Differences between an A-133 audit and a HUD audit

Schedule of Expenditures of Federal Awards (“SEFA”)• Auditee’s responsibility to prepare• Includes all Federal programs received and

expended, program title, CFDA number, award number and year, name of the Federal agency, name of pass-through entity (if applicable), and footnotes

• Auditor’s responsibility to opine on whether the SEFA is presented fairly in all material respects

Differences between an A-133 audit and a HUD audit

Differences between an A-133 audit and a HUD audit

Internal Control• Internal control testing for A-133 requires the auditor

to perform procedures to obtain an understanding of internal control over Federal programs and plan and perform tests of internal controls to support a low assessed level of control risk for major programs; if the auditor cannot do this, the auditor must report a reportable condition

Differences between an A-133 audit and a HUD audit

Sampling• HUD allows for sampling at the management

company level for properties that utilize the same system of controls. A-133 does not have a sampling provision, and compliance must be done on an individual entity basis.

Reporting Package and Submission

Reporting package• Financial statements and SEFA• Schedule of prior audit findings• Auditor’s opinion which must include either combined or separately

• An opinion (or disclaimer) on whether the financial statements are presented fairly in all material respects in accordance w/ GAAP

• An opinion on whether the SEFA is presented fairly in all material respects

• A report on compliance for major programs and internal control over compliance

Reporting Package and Submission

Reporting package (continued)• Auditor’s opinion (continued)

• A report on compliance with laws, regulations, and provisions of contracts/grant agreements, noncompliance that could have a material effect on the financial statements as well as an opinion as to whether the entity complied with laws, regulations, and provisions that could have a direct and material effect on each of the major programs

• If applicable, a schedule of findings and questioned costs• Corrective action plan

Reporting Package and Submission

Report Submission• Data Collection – each entity must submit the

reporting package with a data collection form to the Federal Clearinghouse certified by both the auditee and auditor

• Submission deadline is the earlier of 30 days after receipt of the auditor’s report or 9 months after the end of the audit period

Efforts to Bring A-133 and HUD Requirements Closer Together

Non-profit entities, regardless of which federal agency provided the award, are not required to have an audit unless the entity receives at least $500,000 in federal awards.

Efforts to Bring A-133 and HUD Requirements Closer Together

In August 2013, HUD released Notice 2013-23 – Change in Annual Financial Statement Submission for Some Multifamily Housing Projects• HUD Notice 2013-23 applied this same rule to For-

Profit entities• Beginning with year ends of 12/31/2013 – entities

receiving less than $500,000 in federal awards are not required by HUD to be audited and can submit Owner Certified financial statements.

Proposed Changes To A-133 and How It Will Affect the Audits

In January 2013 OMB issued Proposed OMB Uniform Guidance: Cost Principals, Audit and Administrative Requirements for Federal Awards which proposed broad revisions to OMB Circular A-133.

Proposed Changes To A-133 and How It Will Affect the Audits

Key areas of proposed changes• Increase the single audit threshold to $750,000• Increase the single audit threshold for Type A/Type B

programs from $300,000 to $500,000• For a Type A program to be high-risk it must have failed to

receive an unqualified opinion, had a material weakness in internal control, or had questioned costs exceeding 5% of the program’s expenditures

• Reduce the number of Type B programs that must be tested as major programs

Proposed Changes To A-133 and How It Will Affect the Audits

Key areas of proposed changes (continued)• Reduce the percentage of coverage of major programs

required in a single audit from 50% (normal) and 25% (low-risk auditees) to 40% (normal) and 20% (low-risk auditees)

• Criteria for low-risk auditee status would be revised to included

• Timely submission of data collection forms• Auditor did not report a substantial doubt about the

entity’s ability to continue as a going concern

Proposed Changes To A-133 and How It Will Affect the Audits

Key areas of proposed changes (continued)• Reduction in the types of compliance areas to be

tested from 14 to 6• Findings – more detail required, however questioned

costs could increase from $10,000 to $25,000.

Questions?

Heather Perry, hperry@doz.net

Amy Ring, aring@doz.net

@dozcpa

References

OMB Office of Federal and Financial Management, The Single Audit(http://www.whitehouse.gov/omb/financial/fin_single_audit.html)

American Institute of CPAs – GAQC Alert #211(

http://www.aicpa.org/InterestAreas/GovernmentalAuditQuality/NewsAndPublications/GAQCALERT/2013/Pages/GAQCAlertNo211.aspx)

Consolidated Audit Guide for Audits of HUD Programs Handbook (2000.4)(

http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/oigh/2000.4)