OFFICE
OF MANAGEMENT AND BUDGET
OMB
Circular A-133 Information Collection Under OMB Review
AGENCY:
Office of Management and Budget
ACTION:
Notice.
SUMMARY:
In accordance with the Paperwork Reduction Act of 1980, as
amended (44 U.S.C. 3501 et seq.), this notice announces
that an information collection request was submitted to the
Office of Management and Budget's (OMB) Office of Information
and Regulatory Affairs for processing under 5 CFR 1320.10.
The first notice of this information collection request, as
required by the Paperwork Reduction Act, was published in
the Federal Register on November 5, 1996 (61
FR 57232), as part of the proposed revision of OMB Circular
A-133, re-titled "Audits of States, Local Governments, and
Non-Profit Organizations."
The
information collection request involves two proposed information
collections from two types of entities: (1) Reports from auditors
to auditees concerning audit results, audit findings, and
questioned costs; and, (2) reports from auditees to the Federal
Government providing information about the auditees, the awards
they administer, and the audit results. Circular A-133's information
collection requirements will apply to approximately 25,000
States, local governments, and non-profit organizations on
an annual basis.
DATES:
Written comments must be received by [30 days from publication].
ADDRESSES:
Written comments should be sent by to: Edward Springer, Office
of Information and Regulatory Affairs, OMB, Room 10236, New
Executive Office Building, Washington, DC 20503. Electronic
mail comments may be submitted via the Internet to SPRINGER_E@A1.EOP.GOV.
FOR
FURTHER INFORMATION CONTACT: For further information,
contact Sheila Conley, Office of Federal Financial Management,
OMB (telephone: 202-395-3993). The text of this Notice and
the November 5, 1996, Federal Register are available
electronically on the OMB home page at /OMB, under the caption
"Federal Register Submissions."
SUPPLEMENTARY
INFORMATION:
A.
Background
As
part of the Single Audit Act Amendments of 1996 (1996 Amendments),
Congress intended to improve the usefulness and effectiveness
of single audit reporting with respect to information provided
by both auditors and auditees. In its report on the 1996 Amendments,
the House Committee on Government Reform and Oversight stated
that "the complexity of the reports makes it difficult for
the average reader to understand what has been audited and
reported ... A summary of the audit results would highlight
important information and thus enable users to quickly discern
the overall results of an audit" (H.R. Report 104-607, page
18).
The
revised information collection requirements included in the
proposed revision of Office of Management and Budget (OMB)
Circular A-133, re-titled "Audits of States, Local Governments,
and Non-Profit Organizations," published in the November 5,
1996, Federal Register notice (61 FR 57232), are intended
to improve both the content of single audit reports and the
dissemination of information included therein to various report
users (e.g., Congress, Federal program managers, pass-through
entities). As indicated in the November 5, 1996, Federal
Register notice, OMB believes that the revised information
collection requirements included in the proposed revision
of Circular A-133 would result in significantly improved single
audit reporting and governmentwide data collection.
Circular
A-133's information collection requirements will apply to
approximately 25,000 States, local governments, and non-profit
organizations on an annual basis. OMB's estimate of the total
annual reporting and recordkeeping burden that will result
from this information collection is presented in Table 1.
B.
Public Comments and Responses
Pursuant
to the November 5, 1996, Federal Register notice, OMB
received approximately 150 comments relating to this proposed
information collection. Letters came from Federal agencies
(including Offices of Inspectors General), State governments
(including State auditors), certified public accountants (CPAs),
non-profit organizations (including colleges and universities),
professional organizations, and others. All comments were
considered in preparing OMB's responses presented below and
in developing the final revision to Circular A-133, which
is published in a companion Notice in this Part in today's
Federal Register. The comments received
relating to the information collection and OMB's responses
are summarized below.
Estimates
of Reporting Burden
Comments:
In the preamble of the proposed revision, OMB stated that
the reporting burden per audit will increase from 26 hours
under the existing requirements of Circulars A-128, "Audits
of States and Local Governments," and A-133, "Audits of Institutions
of Higher Education and Other Non-Profit Institutions," to
34 hours under the proposed revision. OMB stated that the
increase in hours was due, in part, to the new requirement
to prepare the data collection form, which would take four
hours, if prepared by the auditee, and two hours, if prepared
by the auditor. Most commenters - primarily State auditors
and CPAs - stated that OMB's estimates regarding the preparation
of the data collection form are too low. Several State auditors
commented that, while the estimates may be appropriate for
smaller States and local governments, they are grossly understated
for larger governments. Some State auditors provided estimates
to prepare the form for smaller entities ranging from two
to four hours but no estimates were provided by State auditors
to prepare the form for larger entities. One State agency
stated that "For an audit the size and complexity of New York
State, the preparation and review of a data collection form
would take at least 15 hours and could take up to 40 hours.
For smaller entities where New York State serves as the pass-through
entity, the estimates range from 5 to 15 hours." One State
auditor questioned how realistic any time estimates can be
until someone actually prepares the form. One CPA commenter
stated that "OMB's estimate that auditor preparation of the
data collection form would take two hours appears to be low.
Most firms, including ours, have implemented policies that
require reviews of work performed and reports issued, whether
involving formal reports or preparation of government forms.
Depending on the size and complexity of an auditee, the preparation
and review of a data collection form could take anywhere from
5 to 15 hours."
Response:
Based on the comments received, OMB revised the reporting
burden and cost estimates, as presented in Table 1. Several
modifications were made in determining the revised estimates.
First, OMB estimated reporting burden hours and costs separately
for large auditees (i.e., auditees most likely to administer
a large number of Federal awards) and all other auditees.
For estimation purposes, OMB separately estimated burden for
200 large auditees, consisting of the 50 States, 50 largest
counties and cities, and 100 largest non-profit organizations
(including colleges and universities). The reporting burden
for both auditees and auditors increases significantly for
entities that administer a large number of Federal awards
because the length of time required to prepare both the schedule
of Federal awards and the data collection form increase with
the number of Federal awards administered by the auditee.
Second, the revised estimates reflect the modified requirements
included in the final revision to Circular A-133 whereby the
auditor will prepare and sign sections of the data collection
form that relate to the audit results and Federal awards,
and the auditee will review and sign the form certifying its
completeness and accuracy. And, third, the cost estimates
are now based on an average rate per hour of $25 per hour
for auditees and $70 per hour for auditors.
The
1996 Amendments increased the threshold that triggers an audit
requirement from $25,000 to $300,000, thereby reducing the
number of entities subject to the Act's requirements from
approximately 35,000 entities under the existing requirements
to approximately 25,000 entities under the 1996 Amendments.
As a result, the overall burden hours of this information
collection decreased by 43,200 hours (from 910,000 burden
hours under the existing requirements to 866,800 under the
new requirements). However, the total annualized cost of this
information collection increased by $1.6 million (from $38.5
million under the existing requirements to $40.1 million under
the new requirements), due to an increase in the number of
hours incurred by auditors (versus auditees) under the new
requirements at a higher hourly rate.
The
average reporting burden per respondent increased 8.7 hours
under the new requirements (from an average of 26 hours per
respondent under the existing requirements of Circulars A-128
and A-133 to an average of 34.7 hours per respondent under
the new requirements) primarily due to requirements to prepare
and submit to the Federal Government for the first time two
new documents: (1) the auditor's summary of audit findings,
and (2) the data collection form. The auditor's summary of
audit findings is required by the 1996 Amendments. The data
collection form is required by Circular A-133 and will be
used to capture information about Federal awards in a governmentwide
database that will be accessible by the Congress, Federal
Government, non-Federal entities, and the public. These data
are not currently available, yet they are essential for making
decisions about Federal awards, including program design and
delivery and audit requirements.
OMB
estimates that approximately 80 percent of the annualized
reporting burden cost results from statutorily-imposed requirements
included in the 1996 Amendments, while the remaining 20 percent
of the annualized reporting burden cost results from the new
OMB-imposed requirement included in Circular A-133 to prepare
a data collection form.
Necessity
of the Data Collection Form
Comments:
Federal auditors and Federal agencies supported the use of
the data collection form as an efficient and effective means
to capture governmentwide information about Federal awards
administered by non-Federal entities that expend $300,000
or more annually in Federal awards. One Federal auditor stated
that the information collection is necessary for the Federal
agency to carry out its grants management responsibilities.
College and university commenters had mixed reactions, including
some supporting the form and some not.
Many
State auditors and State managers strongly opposed the requirement
to prepare a data requirement form because it is viewed as
being unnecessary, duplicative of information included in
other reports, and especially burdensome for large entities.
One State auditor commented that "Making single audit information
easy for Federal agencies to use seems to have been the primary
consideration in the drafting of the requirements, with less
concern for the preparation time and costs of auditees and
especially auditors." Another State auditor noted that the
Federal Government should be responsible for categorizing
audit findings by using the reporting package as the sole
source of this information. One local government manager stated
that the burden of "spoon-feeding" information that is already
available in the reporting package to the Federal Government
should not be borne by either auditees or auditors. Alternatively,
the commenter recommended that the data collection form should
be an internal document completed by reviewers of single audit
reports at the Federal Government level.
Most
CPA commenters supported using the form to streamline the
distribution of single audit reports and improve governmentwide
collection and analysis of single audit results. One CPA commenter
stated that "We support the use of a data collection form
to streamline distribution of audit reports and governmentwide
collection and analysis of single audit results. Steps which
increase the usefulness of audit results are positive for
both the Federal Government and our profession. Tools, such
as a data collection form, which increase the usability of
audit reports serve that purpose."
Response:
The requirement to prepare and submit a data collection form
at the completion of the audit is included in §___.320(b)
of Circular A-133. To streamline the distribution of audit
reports and improve the governmentwide collection and analysis
of single audit results, Circular A-133 provides for a data
collection form to be prepared at the completion of each audit
and submitted to the Federal clearinghouse designated by OMB.
The data collection form will provide key information about
the auditee, the Federal awards it administers, and the audit
results. It will serve as the basis for developing a governmentwide
database on covered Federal awards administered by States,
local governments, and non-profit organizations that expend
$300,000 or more in Federal awards annually. The database
is intended to be used by entities responsible for overseeing
the funding and administration of Federal awards (e.g., the
Congress, Federal agencies, and pass-through entities) and
entities responsible for administering Federal awards (e.g.,
State and government officials and board of directors of non-profit
organizations). The information provided by the database is
intended to be used to make better decisions about which Federal
awards and recipients to fund in the future, identifying and
resolving areas of noncompliance, and improving the administration
and delivery of Federal awards.
In
addition, this information is essential in developing effective
governmentwide audit policies over Federal awards. For example,
OMB is required by the 1996 Amendments to perform a biennial
review of the threshold that triggers an audit requirement,
prescribe a risk-based approach to auditing major programs,
and provide guidance on other matters necessary to implement
the Act. OMB cannot perform its duties required by the Act
or develop effective future audit policies without the information
to be collected in the database.
Initiatives,
such as the Government Performance and Results Act of 1993
and Government Management Reform Act of 1994, highlighted
the need for the Federal Government to improve its oversight
of and accountability for the over $220 billion of Federal
awards it funds annually. The information provided by the
database will help Federal agencies fulfill their grants management
responsibilities.
OMB
believes that the development of a governmentwide database
on Federal awards administered by non-Federal entities that
expend $300,000 or more in Federal awards annually is critical.
OMB also believes that the most efficient and effective approach
to collecting these data is to have the auditee and auditor
provide the required information to the Federal Government
in a standardized form. An alternative to this approach would
be to have the Federal Government extract the required data
elements from the reporting package and enter the data into
a database. However, OMB believes that the auditee and auditor
are most familiar with the auditee's activities and the Federal
awards it administers, and have a thorough understanding of
the audit results. Therefore, it is most likely that the information
would be more accurate if provided by the auditee and auditor
than if the Federal Government compiled this information from
the reporting packages.
The
data collection form also permits streamlining of the report
distribution process. The form identifies which Federal agencies
are required to receive a copy of the complete reporting package.
When the schedule of findings and questioned costs disclosed
no findings relative to the Federal awards funded by the Federal
agency, and the summary schedule of prior audit findings did
not report on the status of any audit findings relating to
Federal awards funded by the Federal agency or pass-through
entity (see §___.235(c) and §___.320(d) and (e)
of the Circular for report submission requirements), the auditee
will no longer be required to send a complete reporting package
to each Federal agency. Without the data collection form (and
the auditor's association with it), the Federal clearinghouse
would have to review each reporting package submitted to determine
which Federal agencies are required to receive a copy of the
reporting package.
Data
Collection Form Duplicates Other Reported Information
Comment:
Many commenters - mostly State auditors and colleges and universities
- are concerned about the need to repeat information on the
data collection form that is readily available in the reporting
package. Many State auditors specifically identified renumbered
items ix, x, and xi on the data collection form (§___.320(b))
as being the same information presented on the schedule of
expenditures of Federal awards (§___.310(b)). They stated
that providing this information again on the form will be
a time consuming and burdensome effort, as the schedule of
expenditures of Federal awards in some States can range from
17 pages (with more than 700 Federal awards) to over 60 pages
in length. Many State auditors also stated that renumbered
item xii on the form is also particularly burdensome. Item
xii requires a yes or no statement as to whether there are
audit findings and requires that the total amount of questioned
costs for each Federal award be included in the form.
Many
State auditors suggest that the required information on the
form be limited to only those programs with audit findings.
Another State auditor suggested significantly reducing the
required data elements included in the form and having the
Federal Government input the Federal award and audit results
data using the reporting package. This State auditor suggested
that "OMB could require that the schedule of expenditures
of Federal awards be established in a columnar format with
the specified data elements across the top with no subtotals
appearing and by prohibiting the inclusion of extraneous rows
and columns of data which have a tendency to creep in. Essentially,
OMB could require the schedule to look like a spreadsheet
containing a database of information."
Most
college and university commenters stated that the data collection
form duplicates information already available from the schedule
of expenditures of Federal awards and auditor's reports. The
views of many respondents are reflected in the following statement
by one college and university commenter that recommended "that
the schedule of expenditures of Federal awards be expanded
to incorporate the necessary data and that information in
the auditor's reports be cross-referenced to the schedule
of expenditures of Federal awards to achieve the equivalent
of the data collection form without creating another form."
Another college and university commenter stated that "The
recapping of Catalog of Federal Domestic Assistance (CFDA)
number and name of each program is entirely unwarranted. So
is the requirement to list individual awards within a cluster.
If the information is needed, it should be separately gathered
by the authorized Federal paying agencies. Surely, this information
is available for each recipient."
One
Federal auditor encouraged OMB to explore the possibility
of incorporating the schedule of expenditures of Federal awards
in the data collection form to reduce redundancy.
One
Federal auditor, one State manager, and one CPA commenter
stated that it was duplicative to include a summary of the
auditor's results in the schedule of findings and questioned
costs prepared by the auditor (required by §___.505(d)(1)
of the Circular) and to present essentially the same information
in the data collection form. One commenter recommended that,
if the auditor prepares the data collection form, then the
auditor's summary can be included in the data collection form
and the requirement to include the auditor's summary in the
schedule of findings and questioned costs can be removed from
the Circular. One CPA commenter stated that "Elimination of
the summary of auditor results (data collection form would
serve as the summary) could potentially reduce auditor time
spent by one-half."
Several
commenters suggested requiring the data collection form to
be prepared only when there are no audit findings and submitting
it in lieu of the complete reporting package.
Response:
OMB acknowledges that there are many duplicative aspects of
the proposed data collection form. OMB has already begun working
with the Federal clearinghouse to implement some of the suggestions
provided by commenters, such as providing for the electronic
submission of the data collection form information through
the Internet and the electronic submission of the entire reporting
package. OMB is fully committed to reducing or eliminating
duplication in the future through electronic means. However,
the Federal Government needs the information provided by the
data collection form currently. Therefore, in the near term,
reporting required by the Circular will be submitted initially
to the Federal Government in "hard copy."
The
proposed revision states that the form will use a "machine-readable
format." This term was removed from the Circular to provide
the Federal clearinghouse flexibility in processing the initial
data collections. OMB expects iterative developments in the
data submission process which will evolve from initial hard
copy submissions to electronic submissions.
§___.320(j)
of Circular A-133 states that "Nothing in this part shall
preclude electronic submissions to the Federal clearinghouse
in such manner as may be approved by OMB. With OMB approval,
the Federal clearinghouse may pilot test methods of electronic
submissions." The first phase of this pilot test has already
begun and it is concentrating on providing auditees with the
means to electronically submit the data collection form information
through the Internet to the Federal clearinghouse for fiscal
years beginning after June 30, 1997. In addition, the Federal
clearinghouse is working with certain States to develop a
mechanism whereby auditees may submit the required information
to the Federal clearinghouse in a computerized format or diskette
for fiscal years beginning after June 30, 1997.
The
objective of the second phase will be to develop the capability
to electronically submit the complete reporting package or
key components of it, such as the auditee's schedule of expenditures
of Federal awards and the auditor's schedule of findings and
questioned costs. It is expected that, when auditees submit
their reporting packages electronically, there will no longer
be a need for the data collection form. However, the Federal
clearinghouse will continue to process data collection forms
for auditees that are unable or choose not to submit their
reporting packages electronically.
Until
such time as electronic submission is available, OMB's intent
is to simplify the preparation of the data collection form
by only requesting information in the form that is already
required to be included in the reporting package. While this
approach results in some duplication, it is intended to facilitate
the ease of completing the form and the accuracy of the information
provided.
With
respect to renumbered items ix, x, and xi on the data collection
form, OMB believes that it is necessary to capture Federal
award information at this level of detail. The governmentwide
database must contain information at the Federal program level
so that future decisions about Federal awards and related
audit policies (e.g., audit thresholds, the risk-based approach
to determining major programs) can be made. Some commenters
appeared to misunderstand the intended level of detail. For
instance, one commenter indicated that it was onerous to list
individual awards within a cluster of programs. Other than
Research and Development (R&D), most clusters of programs
include only about two or three Federal programs (CFDA numbers).
For R&D, total Federal awards expended may be shown either
by individual award or by Federal agency and major subdivision
within the Federal agency.
It
is also important to track in the governmentwide database
not only which Federal awards had audit findings but also
an indication of the nature of the audit findings relative
to the Federal awards. For this reason, renumbered item xii
in the proposed form is retained. Item xii requires a yes
or no statement as to whether there are audit findings and
the total amount of any questioned costs related to each Federal
award. It also requires an indication of the type of compliance
requirement to which the audit findings relate. This information
is critically important for monitoring Federal awards, identifying
systemic problems, and developing future policy changes for
Federal awards.
In
response to the comments received suggesting that the information
in the form be limited to only those programs with audit findings,
OMB believes that it is important that the governmentwide
database include information about all Federal awards administered
by auditees, not just those Federal awards with findings.
The form must reflect each Federal award to ensure the completeness
of the database, which will be important for future decisionmaking.
OMB
does not support the comments suggesting that the schedule
of expenditures of Federal awards be expanded to serve in
lieu of the data collection form and that the Federal Government
input the data using the reporting package. Similarly, OMB
does not support the suggestion that the form be submitted
only when there are no audit findings and in lieu of submitting
the reporting package. OMB's long term goal is to eliminate
the data collection form for auditees that report electronically
in the future. However, in the near term, when hard copy reports
are submitted, OMB opposes expanding the minimum reporting
requirements on auditees beyond those included in §___.310(b)
of the Circular and having the Federal Government input the
data using the reporting package. As previously stated, OMB
believes that the information would be more accurate if prepared
by the auditee and auditor than if the Federal Government
compiled this information from the reporting packages.
In
response to comments received regarding the duplication between
information required to be included in the form and also in
the summary of audit results required by §___.505(d)(1)
of Circular, OMB acknowledges the duplication. However, the
requirement for the auditor to prepare a summary of the auditor's
results is contained 1996 Amendments (31 U.S.C. 7502(g)(2)).
Also, Congress intended for this summary to be readily available
to any reader of the reporting package. Some commenters suggested
that the data collection form could satisfy the Act's summary
reporting requirements, rather than preparing a separate schedule.
However, the data collection form cannot be used to satisfy
the Act's requirement because it will not be available to
all users of the reporting package. In fact, the form will
only be sent to the Federal clearinghouse. Also, this duplication
can be eliminated once reporting packages are submitted electronically.
Data
Elements in the Data Collection Form
Comment:
Many comments were received addressing various data elements
included in proposed data collection form (§___.320(b))
as follows: former item 2 - Commenters suggested removing
the requirement to state whether the auditor's report indicated
that the auditor had substantial doubt about the auditee's
ability to continue as a going concern; renumbered item vi
- A commenter recommended removing the requirement to list
which pass-through entities are required to receive a copy
of the reporting package; renumbered item xii - A commenter
suggested removing the list of types of compliance requirements
(particularly the item for "other") into which audit findings
are to be categorized, and including in its place a reference
to the compliance supplement which will list the types of
compliance requirements which the auditor is expected to test;
renumbered item xiii - A commenter noted that it may be necessary
for auditees to provide multiple employer identification numbers
(EINs); and, renumbered item xv - A commenter questioned whether
this item was necessary since every auditee will have either
a cognizant or oversight agency for audit.
Response:
§___.320(b) of Circular A-133 was revised to reflect
several modifications as a result of these comments. First,
former item 2 was removed from the final revision for consistency
purposes because the requirement to report "going concern"
information in the summary of the auditor's results (§___.505(d)(1))
was removed. Second, renumbered item vi was modified to remove
the requirement to list pass-through entities that are required
to receive a copy of the reporting package. Third, renumbered
item xii was revised to reflect the types of compliance requirements
included in the provisional "Circular A-133 Compliance Supplement"
(which is Appendix B to Circular A-133). Fourth, renumbered
item xiii was modified to indicate whether there are multiple
EINs. While not currently required, it may be necessary in
the future for auditees to provide each EIN covered by the
form for identification purposes. And, finally, a clarification
was made to renumbered item xv. It is important to distinguish
between whether an auditee has either a cognizant or oversight
agency for audit, and to include this information in the governmentwide
datatbase because of the different duties assigned to cognizant
and oversight agencies in §___.400(a) and (b) of Circular
A-133.
Comment:
Suggestions were also made to add to the data collection form
each of the matters addressed in the summary of the auditor's
results, described in §___.505(d)(1), such as the matters
discussed in §___.505(d)(1)(ii), §___.505(d)(1)(iii),
and §___.505(d)(1)(iv).
Response:
§___.320(b) of Circular A-133 was revised to include
in the data collection form each of the matters addressed
in the summary of the auditor's results under §___.505(d)(1).
Suggested
Additional Data Elements for Inclusion in the Form
Comment:
Several commenters - primarily Federal auditors and a pass-through
entity - requested that the data collection form indicate
if a management letter was issued. Commenters stated that
management letters sometimes discuss significant deficiencies
that are not disclosed in the auditor's report. One commenter
requested that management letters be submitted to the Federal
Government as part of the reporting package and, if that were
not possible, then the data collection form should indicate
if a management letter was issued. Conversely, two State auditors
requested that the requirement in §___.320(f) of the
proposed revision, which requires auditees to provide copies
of management letters if requested by a Federal agency and
pass-through entity, be removed from the Circular.
Response:
No changes to Circular A-133 were made as a result of these
comments. The management letter will not be a required component
of the reporting package (§___.320(c)) and the data elements
on the form (§___.320(b)) will not include a statement
as to whether or not a management letter was issued by the
auditor. The Circular (§___.510(a)) clearly describes
matters that the auditor shall report as audit findings in
the schedule of findings and questioned costs. In no
instance should the management letter be used as a substitute
for reporting audit findings in the schedule of findings and
questioned costs. OMB believes that the fundamental cause
of the concern raised by the Federal auditors regarding the
misuse of management letters has more to do with audit quality
than with the content of management letters. OMB believes
that it is more effective for Federal agencies to address
the issue of audit quality (including adherence to professional
standards and regulatory audit requirements) as part of their
quality reviews of auditors performing audits in accordance
with Circular.
Also,
no change was made to §___.320(f) of Circular A-133.
OMB agrees with many commenters that it is not necessary to
routinely submit all management letters issued by auditors.
However, because management letters may contain information
relevant to the needs of Federal agencies and pass-through
entities to monitor Federal awards, the provision permitting
Federal agencies and pass-through entities to request a copy
of management letters remains unchanged in Circular A-133.
Who
Should Sign the Data Collection Form for the Auditee
Comment:
Several commenters questioned who within an auditee's organization
would be required to sign the data collection form, particularly
for large entities, such as a State government.
Response:
The proposed revision (§___.320(b)) provided that the
chief executive officer or chief financial officer shall sign
a statement that the information on the form is accurate and
complete. The requirement was modified to clearly indicate
that a senior official from State or local government shall
sign the form, as appropriate. The intent of this requirement
is to ensure that the form is signed by a senior or executive
level representative of the auditee that is authorized to,
and can be held accountable for, representations made to the
Federal Government on behalf of the auditee. The certifying
official should be knowledgeable about the Federal awards
administered by the auditee, the requirements of Circular
A-133, and the actual audit results. In a State-wide single
audit, it is expected that a State official (e.g., State controller,
State treasurer) would sign the form.
Level
of Form's Specificity Provided in the Circular and Supplemental
Forms
Comment:
One Federal auditor stated that, while it was necessary to
include specific certification language on the form to provide
reviewers with sufficient detail to understand the proposal,
the Circular should not contain language that is so detailed
that it precludes amending the data collection form without
revising the Circular. The commenter recommended removing
the certification language in §___.320(b) of the Circular
and including a provision authorizing OMB to add or remove
data elements, as needed. A CPA commented that the final revised
Circular should provide specific guidance on preparing the
form and include, as an attachment, the form itself and the
standard wording to be developed by OMB and the audit community
to appropriately characterize the auditor's and auditee's
responsibility for information included in the form. One college
and university commenter recommended that OMB clearly state
that the data collection form is the only form that can be
used by Federal agencies and pass-through entities to gather
information related to the audit and that entities may not
develop their own supplemental forms.
Response:
Circular A-133 (§___.320(b)) identifies the data elements
to be included in the data collection form and provides a
general description of the auditee's certification and auditor's
statement that will accompany the form. The data collection
form to be used by the Federal clearinghouse will be presented
as an Appendix to the final revised Circular A-133. The form,
developed cooperatively by a Federal interagency task force,
is the only form that may be used by a Federal agency
for the purpose of collecting single audit data. However,
OMB expects that the standard form may be modified in the
future, as circumstances warrant. Any revisions require approval
from OMB's Office of Information and Regulatory Affairs and
the revised form, or a notice of its revision, will be published
in the Federal Register.
Data
Collection Form Sent Only to the Federal Clearinghouse
Comment:
The CPA community's support for the proposal requiring the
auditor to prepare and sign the form was based on the understanding
that the data collection form would be sent only to the Federal
clearinghouse designated by OMB and not to Federal agencies
and pass-through entities. Also, several college and university
commenters urged OMB to permit a subrecipient to simply send
a letter to a pass-through entity when there are no audit
findings that relate to the Federal awards provided by the
pass-through entity.
Response:
Several modifications were necessary to reflect this understanding
in the final revision of Circular A-133. First, Circular A-133
now reflects that the data collection form will no longer
be a required component of the reporting package described
in §___.235(c)(3) and §___.320(c) of the Circular.
Also, the requirement for subrecipients to send copies of
the data collection form to pass-through entities was removed
from §___.235(c)(3) and §___.320(e) of the Circular.
When
there are no audit findings that relate to a Federal award
provided by a pass-through entity, the subrecipient is not
required to send the reporting package to that pass-through
entity. In this situation, without receiving the data collection
form, the pass-through entity would not otherwise receive
any audit result information about the Federal awards it provides
to the subrecipient. Therefore, §___.235(c)(3) and §___.320(e)
of Circular A-133 requires a subrecipient in this situation
to inform a pass-through entity that an audit of the subrecipient
was conducted in accordance with Circular A-133 and that no
audit findings relative to the Federal awards provided by
the pass-through entity were reported. Examples of ways in
which the subrecipient may communicate this information to
the pass-through entity include: (1) writing a letter to the
pass-through entity indicating that an audit of the subrecipient
was conducted in accordance with Circular A-133 and that no
audit findings relative to the Federal awards provided by
the pass-through entity were reported, (2) submitting the
complete reporting package to the pass-through entity, and
(3) a combination of both (1) and (2).
Applicability
of Freedom of Information Act and Other Federal Laws
Comment:
One CPA commenter asked whether the data collection form is
available under the Freedom of Information Act (FOIA) and
whether other Federal laws apply, such as those relating to
false statements.
Response:
The data collection form is subject to FOIA. Also, representations
made by auditees and auditors are subject to applicable penalties
for false statements.
Report
Copies
Comment:
One Federal auditor suggested that a copy of the report be
provided to the Federal clearinghouse by all auditees that
have cognizant agencies for audit (i.e., auditees that expend
more than $25 million a year in Federal awards), so that each
cognizant agency can carry out its responsibilities required
by the Circular. A State agency commented that reports should
be provided for every Federal agency and pass-through entity
that provided Federal awards to the auditee, regardless if
any audit findings are reported or not. This commenter stated
that the reports are necessary for closeout and other program
monitoring purposes, and that this State agency will now be
required to request all reports. The commenter also stated
that this proposal to streamline the report distribution process
places additional pressure on auditors to issue more reports
with no audit findings.
Response:
No change was made to the number of reporting package copies
to be sent to the Federal clearinghouse. In all instances,
the Federal clearinghouse will retain one copy for archival
purposes. If requested by the cognizant agency for audit,
the Federal clearinghouse will provide a copy of the reporting
package to the cognizant agency.
OMB
believes that the benefits to be achieved through report distribution
streamlining outweigh the possible inconveniences that may
result for some Federal agencies and pass-through entities
from having to request report copies, as needed. Therefore,
no changes to the proposed streamlined report distribution
process were made.
Comment:
One local government manager commented that savings may result
from using the data collection form rather than submitting
the reporting package to every Federal agency and pass-through
entity. However, if those entities routinely request copies
of the reporting package regardless of the audit results,
then the savings will diminish. It was suggested that OMB
discourage routine requests for the reporting packages and
monitor report distribution during the next few years.
Response:
For several reasons, OMB does not expect Federal agencies
or pass-through entities to routinely request copies of reporting
packages that do not include audit findings or report on the
status of prior findings relative to the Federal awards funded
by the Federal agency or pass-through entity. First, Federal
agencies and pass-through entities are facing resource constraints
with respect to both the administrative capacity to collect
and store reports and the professional capability to review
and process "no findings" reports. Also, once Federal agencies
and pass-through entities become familiar with the information
that will be routinely provided to them from (or accessible
to them through) the governmentwide database maintained by
the Federal clearinghouse, OMB believes requests for reporting
packages will decline. However, over the next few years, OMB
will periodically review if the objectives of streamlining
the report distribution process have been met.
Report
Submission and Distribution
Comment:
Several commenters requested clarification regarding the report
submission requirements.
Response:
§___.320(d) and (e) of the proposed revision were modified
slightly to reflect the following report submission requirements.
In all instances, an auditee is required to submit, at a minimum,
the data collection form and one copy of the reporting package
to the Federal clearinghouse. An auditee is also required
to submit to the Federal clearinghouse a copy of the reporting
package for each Federal awarding agency when there are audit
findings reported in the auditor's schedule of findings and
questioned costs, or the auditee's summary of prior audit
findings reports on the status of any audit findings, relating
to the Federal awards that the Federal awarding agency provided
directly. The Federal clearinghouse will be responsible for
actually distributing the reporting packages to the appropriate
Federal agencies.
Where
the auditee is also a subrecipient, the subrecipient shall
submit a copy of the reporting package to each pass-through
entity when there are audit findings reported in the auditor's
schedule of findings and questioned costs, or the auditee's
summary of prior audit findings reports on the status of any
audit findings, relating to the Federal awards provided by
the pass-through entity. When there are no audit findings
reported in the auditor's schedule of findings and questioned
costs and the auditee's summary schedule of prior audit findings
does not report on the status of any audit findings relating
to the Federal awards provided by the pass-through entity,
the subrecipient is not required to submit the reporting
package to the pass-through entity, unless the pass-through
entity requests a copy under §___.320(f). However, if
the subrecipient chooses not to submit the reporting package
to the pass-through entity in these circumstances, the subrecipient
must inform the pass-through entity, in writing, that an audit
of the subrecipient was conducted in accordance with Circular
A-133, and that no audit findings were reported (nor was the
status of any prior audit finding reported) that relate to
the Federal awards provided by the pass-through entity.
To
illustrate the report submission process, suppose an auditee
administers four Federal awards. The first program is provided
directly to the auditee from the U.S. Department of Health
and Human Services (HHS), and the auditor reported audit findings
relating to this program. The second program is provided directly
to the auditee from the U.S. Department of Education (ED),
and no audit findings have ever been reported relating to
this program. The third program is provided to the auditee
by a State agency, or pass-through entity, funded by the U.S.
Department of Labor, and audit findings were reported relating
to this program. The fourth program is provided to the auditee
by a local government pass-through entity funded by the U.S.
Department of Agriculture, and no audit findings have ever
been reported relating to this program. In this example, the
auditee would be required to submit to the Federal clearinghouse
a data collection form and two copies of the reporting package
(one for the Federal clearinghouse to retain for archival
purposes and one for the Federal clearinghouse to distribute
to HHS). The auditee would also be required to submit a reporting
package to the State agency because audit findings were reported
that relate to the third program and the State agency needs
the reporting package to ensure appropriate resolution of
the audit findings. With respect to the fourth program, the
auditee could either send the reporting package to the local
government, or send some form of written communication stating
that the audit was conducted in accordance with the Circular
and no audit findings were reported relating to the fourth
program.
Federal
Clearinghouse Responsibilities
Comment:
A few college and university commenters requested that the
Federal clearinghouse be responsible for supplying all report
copies to Federal agencies and pass-through entities.
One commenter suggested that the Federal clearinghouse provide
reporting packages in electronic form accessible to potential
users through the Internet. Another respondent requested more
specific information about acceptable forms of electronic
submissions.
Response:
Until such time as the reporting packages are available in
electronic form, it is not feasible for the Federal clearinghouse
to be responsible for distributing reporting packages to pass-through
entities. It is possible, however, that once reporting packages
are available electronically, there may not be a continued
need for pass-through entities to receive "hard paper copies"
of the reporting packages. As previously noted, the Federal
clearinghouse expects to be capable of processing reporting
packages electronically for audits of fiscal years beginning
after June 30, 1998.
Requirement
for the Auditor to Prepare and Sign the Data Collection Form
Comment:
In the preamble of the proposed revision, OMB stated that
it was considering adding a provision that requires the auditor
(rather than the auditee) to prepare and sign the data collection
form and requested respondents to comment on this proposal.
OMB received approximately 45 comments - more than any
other individual issue included in the November 5, 1996, Federal
Register publication - in response to this proposed
requirement.
All
Federal auditors and State governments, and most CPAs and
Federal agencies supported this proposal. Many of these respondents
commented that the auditor should prepare and sign the sections
of the form that relate to the audit results, and that, even
if the auditor prepares and signs sections of the form, the
auditee should also be required to sign the form certifying
to the completeness and accuracy of the entire form.
Federal
auditors, Federal agencies, and State governments cited the
following reasons for supporting the proposal for auditors
to prepare and sign the form: (1) greater assurance as to
the accuracy of the form and the governmentwide database,
(2) greater efficiency in preparing the form, (3) more streamlined
audit reporting achieved by having the auditor sign the form
rather than issuing a separate report describing the auditor's
association with and responsibility for the form, (4) more
timely data collection, and (5) reduced need for independent
verification of data included in the governmentwide database
by Federal agencies. One Federal agency supported having the
auditor prepare the form but did not support requiring the
auditor to sign the form. Reasons cited included that the
proposal is "contrary to and inconsistent with the Government's
long-established practice of requiring the institution [auditee],
not the auditor, to sign existing certifications" and that
the proposal raises new concerns about the auditor's litigation
liability, which will take time to research and resolve.
Most
CPA commenters indicated that independent auditor association
with the form would enhance its usefulness. However, most
CPA commenters and some Federal auditors and Federal agencies
were concerned that certain report users may view the information
contained in the form as a substitute for reading the full
auditor's reports, which present a more complete picture of
the auditor's testing and findings. These commenters also
stated their belief that a form can be developed that would
meet the needs of OMB and Federal agencies and also address
the concerns of the CPA community. Commenters strongly encouraged
OMB to work with the American Institute of Certified Public
Accountants (AICPA), the Inspectors General, Federal agencies,
and other interested parties to develop a useful data collection
form, and many commenters offered to assist OMB in this effort.
Several
CPA commenters suggested that, to provide appropriate protection
to auditors, the auditor signature section of the form should
possess certain elements including: (1) a statement that certain
information included in the form is based on the auditor's
reports and is not a substitute for such reports, (2) a statement
concerning the availability of the auditor's reports, (3)
a statement that the content of the form is limited to information
prescribed by OMB, and (4) a clear indication of which information
is being provided by the auditor versus that which is the
responsibility of the auditee. CPA commenters' support for
this proposal was based on the understanding that: (1) the
form would be sent only to the Federal clearinghouse and not
to Federal agencies and pass-through entities, and (2) acceptable
language would be added to the form to appropriately characterize
the nature of the information included in the form and the
auditor's and auditee's responsibility for information included
in the form. One CPA commenter did not support the proposal
stating that it "is beyond the scope of reporting required
by professional and governmental auditing standards."
Most
State auditors and one professional organization commented
that they were strongly opposed to requiring the auditor to
prepare and sign the data collection form. Reasons cited included:
(1) the requirement for the auditee to prepare and sign the
form emphasizes the auditee's responsibility for administering
Federal funds in compliance with the law, ensuring the accuracy
and completeness of information provided to the Federal Government,
and resolving deficiencies uncovered by audits; (2) the type
of information required by the form is readily available and
should be clearly understood by the auditee; (3) if the auditor
is required to sign the form, the auditor's legal liability
exposure may increase, which will result in increased audit
fees; (4) it is not justified to reduce burden on auditees
by increasing the burden on auditors; (5) if the auditor is
required to prepare the form, the auditor's independence may
be questioned and the distinction between management and auditor
responsibilities may be blurred; and, (6) it is uncertain
whether the auditor or auditee can prepare the form more efficiently.
One
State auditor commented that "We see it [the requirement for
the auditee to prepare and sign the form] as the first step
in a process that will ultimately result in auditees' providing
management assertions on internal controls and compliance
regarding their use of Federal funds ... We view the requirement
for the auditee to prepare the data collection form as a kind
of 'homework assignment' by which auditee personnel will read
the auditor's reports and start to understand the significance
of the issues covered in those reports ... Therefore, we are
quite concerned with OMB's suggestion ... [to require] the
auditor to prepare and sign the data collection form."
Several
State auditors suggested alternatives to the proposal for
the auditor to prepare and sign the form including: (1) requiring
the auditee to prepare the form and have the auditor review
the form (but not as a separate engagement) for accuracy in
relation to the auditee's financial statements taken as a
whole, for limited distribution to the Federal Government;
(2) requiring the auditee to prepare the form and have the
auditor issue a separate letter of assurance on the form regarding
its reasonableness; (3) removing the requirement to prepare
the form and requiring the auditee to send a transmittal letter
along with the audit report to the Federal Government, stating
that the audit was completed in accordance with the single
audit requirements; (4) presenting certain summary information
on the form with no signature by either the auditee or auditor,
and having the auditee sign a separate form asserting that
an audit in accordance with Circular A-133 was performed;
(5) adding a provision to the financial reporting section
of the compliance supplement directing the auditor to verify
the completeness and accuracy of the form; and, (6) requiring
the auditee to prepare the form and having the auditor sign
it, provided that the auditor's signature is accompanied by
standard language specifically describing and limiting the
assurance the auditor is providing by signing the form.
Several
State auditors supported the proposal for the auditor to sign
the form, provided that the form includes "liability limiting
statements" similar to the wording suggested by the CPA commenters,
and indicated that it would be more efficient for auditors
to prepare the form.
Two
college and university commenters opposed the proposal stating
that many colleges and universities could readily prepare
the form similar to other documents they are required to prepare
(e.g., the schedule of Federal awards and corrective action
plans) and that the additional cost for the auditor to prepare
the form is not justified compared to the benefit received.
However, one of these college and university commenters also
indicated that having the auditor prepare the form would add
to its accuracy and greatly assist many auditees and suggested
a more flexible solution to permit either the auditor or auditee
to prepare the form (at the option of the auditee) and require
the auditor to sign the form as a reviewer. One college and
university commenter indicated that neither the auditors nor
auditees want to prepare the form because of the additional
cost but that, if OMB decides to require the form, then the
auditor would be the logical choice to prepare the form.
One
local government commented that the single audit is a collaborative
effort between auditors and auditees and that the process
used to prepare and sign the form should be similar to procedures
used to satisfy other single audit requirements. Specifically,
the commenter suggested that the auditee prepare the form
with the assistance of the auditor and that both sign the
form.
Response:
Auditor association with the data collection form is essential
to streamlining the audit report distribution process and
ensuring the accuracy of the governmentwide database. However,
OMB agrees with the view of many commenters that the auditee
is primarily responsible for ensuring the accuracy and completeness
of Federal award information submitted to the Federal Government,
and that this responsibility should not be diminished. Therefore,
the requirement for the auditee to sign a statement included
in the form that acknowledges the auditee's responsibility
for the entire form and certifies its completeness and accuracy
remains in §___.320(b) of Circular A-133. In addition,
the proposal requiring the auditor to prepare and sign the
sections of the form that relate to the auditor's results
and the Federal awards was adopted in the final revision of
Circular A-133 (§___.320(b)(3)). The Circular also states
that the auditee is responsible for submitting the data collection
form and reporting package to the appropriate parties (§___.320(d)
and (e)).
OMB
commits to working with the audit community (e.g., Inspectors
General, AICPA, State auditors), Federal agencies, and other
interested parties to finalize language on the form to appropriately
characterize the auditor's and auditee's responsibility for
information on the form. As a starting point, OMB used the
recommendations provided by one CPA commenter for the auditor's
standard language including: (1) a statement that certain
information included in the form is based on the auditor's
reports and is not a substitute for such reports, (2) a statement
concerning the availability of the auditor's reports, (3)
a statement that the content of the form is limited to information
prescribed by OMB, and (4) a clear indication of which information
is being provided by the auditor versus that which is the
responsibility of the auditee. OMB concurs with several CPA
commenters that stated that the auditor's exposure to litigation
regarding association with the form could be reduced by incorporating
acceptable standard language in the form.
Increased
Costs for Auditors to Prepare and Sign Form
Comment:
Several respondents commented that requiring the auditor to
prepare and sign the data collection form will result in increased
audit costs. One CPA stated that the proposal "is perceived
as increasing auditor responsibility without increasing the
value of the audit for which the auditee would be willing
to compensate the auditor." One State auditor commented that
"it is misleading to consider requiring the auditor to do
this [prepare the form] while speculating that it will not
significantly increase audit costs. The auditor is entitled
to charge for the time associated with preparing the form
and for assuming the increased liability of associating his
name with the information on the form." One State manager
stated that, if the requirement to prepare the data collection
form remains, the auditor should be responsible for the data
collection provided OMB determines "a true-cost benefit of
this requirement before implementing it."
Several
college and university commenters stated that the preparation
of a data collection form will result in increased and unreimbursable
audit costs at a time when many organizations have reached
or exceeded the administrative cap under the Facilities and
Administrative reimbursement rate.
One
Federal auditor commented that "we believe that 'experienced'
auditors should be able to provide at a reasonable cost the
information requested on the data collection form." One Federal
agency commenter stated that "The additional cost of completing
this form is expected to be insignificant, particularly when
its intended use is considered."
Response:
OMB acknowledges that there are costs associated with the
new requirement to prepare the data collection form. Using
an average rate per hour of $25 per hour for auditees and
$70 per hour for auditors, OMB estimates that the cost for
auditor's to prepare and sign specified sections of the form
is $7.3 million and the cost for auditees to prepare specified
sections of the form and sign it is $1.2 million, for a total
cost of $8.5 million.
OMB
believes the decision to require the form is justified for
several reasons. First, costs will be fully or partially offset
by the savings realized from implementing other provisions
of the 1996 Amendments and the revised Circular A-133. Examples
of opportunities for savings include: the reduced scope of
audits of low-risk auditees; the elimination of auditing and
reporting requirements previously associated with non-major
programs; and, the elimination of the requirement to report
all matters of noncompliance, regardless of significance.
Second, the data collection form, including the auditor's
association with it, is essential to streamlining the historical
report distribution and review processes and reducing associated
burden. Finally, OMB believes that the data collection form,
including the auditor's association with it, is essential
to the development of a reliable governmentwide database that
is critical to effective Federal award administration.
With
respect to comments received from several colleges and universities
stating that this new requirement may result in unreimbursed
audit costs because their administrative caps have been reached,
OMB suggests that auditees consider discussing with their
auditor whether any increases due to preparing the data collection
form will be offset by: audit cost savings associated with
reduced scope of audit work for a low-risk auditee, the auditor
having to audit fewer programs under the risk-based approach,
a reduction of audit work and related reporting for Federal
programs not considered major, and the removal of the requirement
to report all instances of noncompliance.
It
will take several years for OMB to determine the actual "cost-benefit"
of this new requirement. However, OMB believes that it is
important to implement this reporting requirement as part
of the final revision of Circular A-133, rather than postpone
implementation until a later date. The estimates presented
in Table 1 are based on the best information available to
date. OMB will reevaluate the burden estimates within the
next three years (the sunset date for resubmission for approval
under the Paperwork Reduction Act of 1980, as amended) using
actual results.
Retention
of Audit Workpapers
Comment:
One Federal auditor requested that Federal awarding agencies
be added to the list of entities that may notify the auditor
to retain the working papers beyond three years.
Response:
No change was made to the Circular as a result of these comments.
OMB believes that requests by Federal awarding agencies for
auditors to retain working papers beyond the minimum period
should be coordinated through either the cognizant or oversight
agency for audit.
Schedule
of Expenditures of Federal Awards
Comment:
One State auditor commented that the State's accounting system
could not capture Federal award expenditure information and
requested that the Circular permit alternatives methods of
reporting Federal award information, such as reporting receipts.
Response:
No change was made to the Circular based on this comment.
Auditees shall report the amount of expenditures of Federal
awards. This information is important to Federal agencies
and pass-through entities and the amount of Federal award
expenditures is critical to every monetary determination required
by the Circular (e.g., the threshold that triggers a Circular
A-133 audit requirement, and the dollar threshold used to
distinguish Type A and Type B programs using the risk-based
approach to determining major programs). Also, the requirement
to report Federal award expenditures is consistent with the
financial management systems requirements of §___.20
in the Grants Management Common Rule, published March 11,
1988 (53 FR 8034) and amended April 19, 1995 (60 FR 19638),
whereby States' systems should permit accounting for expenditures
to a level sufficient to demonstrate compliance with applicable
laws and regulations.
Comment:
Several commenters interpreted the proposal as requiring that
the schedule of expenditures of Federal awards include information
about the amount of Federal funds awarded (rather than Federal
awards expended), and that such information be presented by
award year. One commenter asked whether the information requested
by Federal agencies and pass-through entities to be included
on the schedule was limited to the minimum requirements or
whether such requests could include additional information.
Response:
A change was made to §___.310(b) to clarify that the
schedule requires presentation of the amounts of Federal awards
expended, rather than the amounts awarded. Also, §___.310(b)
was modified to indicate that an auditee may choose to provide
information requested by Federal agencies and pass-through
entities to make the schedule easier to use. However, the
auditee is not required by the Circular to provide information
beyond the minimum requirements described in §___.310(b).
Comment:
§___.310(b)(1) of the proposed revision requires that
the schedule of expenditures of Federal awards list individual
Federal programs by Federal agency and major subdivision within
a Federal agency. Many respondents strongly opposed the requirement
to provide the major subdivision within a Federal agency.
Reasons cited include that this information is readily available
to the Federal Government through the CFDA numbers and that
it is particularly onerous for large entities, such as States,
to provide this information for each individual Federal program.
Response:
The requirement to list each individual Federal program by
major subdivision within a Federal agency was removed from
§___.310(b)(1) of the Circular, except for the R&D
program cluster. This revision reduces reporting burden for
many auditees that administer a large number of Federal awards.
For the R&D program cluster, auditees are provided the
option of reporting Federal awards expended either by individual
Federal award or by Federal agency and major subdivision within
the Federal agency. This option reduces burden on auditees
that administer a large number of R&D awards, such as
certain colleges and universities, by permitting summary reporting
at the Federal agency and major subdivision level. Federal
awarding agencies and pass-through entities providing R&D
awards should assist auditees in identifying major subdivisions
within the Federal agency responsible for such awards.
Comment:
Several commenters opposed the proposal included in §___.310(b)(5)
which requested, to the extent practical, pass-through entities
to identify on the schedule of expenditures of Federal awards
the total amount provided to subrecipients from each Type
A program and each Type B program audited as major. This provision
was perceived as burdensome. One CPA commenter was concerned
that, if such information were provided for all Type A programs,
including those Type A programs that were not audited as major,
then the auditor would be required to report on a schedule
that includes unaudited information.
Response:
A change was made to the Circular as a result of these comments.
The proposal requested auditees to provide information about
amounts provided to subrecipients from each Type A program
and each Type B program audited as major. The final revision
to Circular A-133 requests this information for each Federal
program. This change was made to simplify the requirement
but does not necessarily increase burden on auditees because
the information is not mandatory. This information should
be included on the schedule, to the extent practical. In response
to a CPA's concern, the schedule of expenditures of Federal
awards includes information about each of the Federal awards
administered by the auditee, not just those audited as major.
OMB does not believe that presenting information about amounts
provided to subrecipients is different from other information
included in the schedule relating to programs that were not
audited as major.
Summary
Schedule of Prior Audit Findings
Comment:
Several State auditors and State agencies questioned the need
for a separate schedule reporting the status of prior audit
findings. One State auditor noted that requiring the auditor
to report any material misrepresentations made by the auditee
in the schedule will increase pressure on auditors and strain
their relationship with the auditee. A State agency commented
that the information in the new summary schedule of prior
audit findings is also included in other required reports
and recommended that the cognizant agency for audit be responsible
for reviewing and approving follow-up actions outlined in
the corrective action plan. One Federal auditor noted the
importance of continuing to report deficiencies until the
finding is adequately resolved and suggested that the schedule
also include a description of the means used to substantiate
the audit finding resolution.
Response:
No change was made to §___.315 of the Circular as a result
of these comments. It is important for the auditee to report
on the status of prior audit findings in a consistent and
systematic manner. It is also important that the auditor assess
the fairness of management's representations included in the
schedule, as required by §___.500(e) of the Circular.
Summary
of the Auditor's Results
Comment:
One Federal auditor recommended revising the Circular to require
the auditor to provide a narrative summary at the beginning
of the single audit reporting package. One State auditor opposed
the requirement to prepare a summary of auditor's results
and commented that the Federal Government could obtain this
information by reviewing the documents included in the reporting
package.
Response:
No change was made to §___.505(d)(1) of the Circular
as a result of these comments. The 1996 Amendments include
a provision (31 U.S.C. 7502(g)(2)) whereby "the auditor shall
include a summary of the auditor's results regarding the non-Federal
entity's financial statements, internal controls, and compliance
with laws and regulations." OMB believes that the summary
of auditor's results prescribed by §___.505(d)(1) of
the final revision satisfies the requirements of the 1996
Amendments, and will facilitate consistency and uniformity
of the summary information provided to Federal awarding agencies
and pass-through entities and captured in the governmentwide
database.
Auditor's
Schedule of Findings and Questioned Costs
Comment:
Several State auditors indicated that the requirements described
in §___.505(d)(2) and (3) of the proposed revision may
result in duplicative and more cumbersome audit reporting
and, as a result, increased audit costs.
Response:
No changes were made to the Circular as a result of these
comments. The purpose of §___.505(d) of the Circular
is to present the results of audit in one location or schedule.
In the past, this information was presented in a variety of
locations throughout the auditor's reports. This provision
of the Circular prescribes where this information must be
reported and provides guidance on reporting audit findings
that relate to the same issue and that relate to matters affecting
both the financial statements and the Federal awards administered
by the auditee. OMB believes the reporting requirements included
in the Circular will improve the usefulness and uniformity
of audit reports.
Report
Due Date
Comment:
Many respondents - mostly State managers and college and university
commenters - stated that shortening the report due date from
13 months to nine months after the end of the audit period
was unrealistic and that it will adversely affect audit scheduling
and workloads, increase audit costs and burden on auditees,
and may result in increased noncompliance by subrecipients.
Many commenters suggested that the 13-month report due date
be retained in the Circular and that, if the due date must
be shortened, then a 12-month due date would be more acceptable.
One local government suggested granting an automatic extension
of the report due date to auditees that expend over $25 million
in Federal awards. A Federal agency stated that a six-month
report due date should be imposed and that the two-year transition
period is unnecessary.
Response:
No change was made to the Circular as a result of these comments.
The report due date is prescribed by the 1996 Amendments (31
U.S.C. 7502(h)). The 1996 Amendments require the report to
be submitted within the earlier of 30 days after receipt of
the auditor's report, or nine months after the end of the
audit period for audits of fiscal years beginning after June
30, 1998. A transition period of at least two years is provided
in the 1996 Amendments whereby the report shall be submitted
within the current 13-month due date (or 30 days after the
receipt of the auditor's report, if earlier). OMB believes
that the transition period of two years is sufficient for
most auditees to meet the new report due date. However, cognizant
or oversight agencies for audit may provide extensions to
auditees.
Comment:
One State auditor commented that total audit hours will increase
as a result of preparing a data collection form, and "Since
our audit resources are limited, any increase in audit hours
is likely to make it more difficult for us to meet the 9-month
reporting deadline required by §___.320(a) of the Circular."
Response:
As presented in Table 1, OMB estimates the average number
of auditor hours necessary to prepare and sign the appropriate
sections of the data collection form to be 24 hours for auditees
that administer a large number of Federal awards and four
hours for other auditees. Moreover, the requirements of the
1996 Amendments and the final revision to Circular A-133 are
designed to reduce audit burden by decreasing the number of
entities subject to audit and improving the effectiveness
of the audit requirements. Accordingly, OMB believes that
the two-year transition period is sufficient for most auditors
to incorporate the data collection form preparation requirements
into their audit plans so that the work can be completed within
the nine-month due date.
Effective
Date for the Data Collection Form Requirement
Comment:
One Federal auditor stated that it was not clear from reading
the proposed revision when the proposed requirement to prepare
and submit the data collection form would be effective.
Response:
The requirement to prepare and submit a data collection form
will be effective for audits of fiscal years beginning after
June 30, 1996.
The
proposed data collection form and its instructions follow
Table 1.
John
A. Koskinen, Deputy Director for Management
BILLING
CODE 3110-01
Table
1: Reporting Burden Estimate
|
Existing
Burden
|
New
Burden |
Change
in Burden - Increase
(Decrease)
|
|