**UNITED STATES DEPARTMENT OF EDUCATION**

**OFFICE OF SPECIAL EDUCATION AND**

**REHABILITATIVE SERVICES**

**REHABILITATION SERVICES ADMINISTRATION**

**WASHINGTON, DC 20202**

INFORMATION MEMORANDUM

RSA-IM-01-05

DATE: October 26, 2000

ADDRESSESS: STATE VOCATIONAL REHABILITATION AGENCIES (GENERAL)

STATE VOCATIONAL REHABILITATION AGENCIES (BLIND)

CLIENT ASSISTANCE PROGRAMS

PROTECTION AND ADVOCACY OF INDIVIDUAL RIGHTS

PROGRAMS

REGIONAL REHABILITATION CONTINUING EDUCATION

PROGRAMS

RSA SENIOR MANAGEMENT TEAM

> SUBJECT: OMB CIRCULAR NO. A-133, AUDITS OF STATES, LOCAL GOVERNMENTS,
> NON-PROFIT ORGANIZATIONS, AND INSTITUTIONS OF HIGHER EDUCATION: AUDIT
> COVERAGE OF RSA PROGRAMS.
>
> CONTENT: The purpose of this issuance is to inform RSA grantees of
> significant changes to the Single Audit Act and emphasize recipient
> responsibility in implementing the revised Office of Management and
> Budget (OMB) Circular A-133.
>
> [Purpose of Revised OMB Circular A-133]{.underline}
>
> Circular A-133 is issued pursuant to the Single Audit Act of 1984,
> P.L. 98-502, and the Single Audit Act Amendments of 1996, P.L.
> 104-156. It sets forth standards for obtaining consistency and
> uniformity among Federal agencies for audits of States, local
> governments, and non-profit organizations expending Federal awards.
> Probably the most significant difference between the revised Circular
> A-133 and the previous A-133 is the inclusion of State and local
> governments in the revised A-133.
>
> [Rescission and Supersession]{.underline}
>
> This Circular rescinds Circular A-128, "Audits of State and Local
> Governments," issued April 12, 1985, and supersedes the prior Circular
> A-133, "Audits of Institutions of Higher Education and Other
> Non-profit Institutions," issued April 22, 1996.
>
> [RSA Recipient and Sub-Recipients]{.underline}
>
> OMB Circular A-133 establishes a single audit requirement of States,
> Local Governments, Institutions of Higher Education and other
> non-profit institutions, which are recipients, or sub-recipients of
> Federal awards. Consistent with the Rehabilitation Act of 1973, as
> amended, and in accordance with audit coverage required by OMB
> Circular A-133, the definitions of RSA recipient and RSA sub-recipient
> are as follows:
>
> 1\. [RSA Recipient]{.underline}: Under Circular A-133, a recipient is
> a non-Federal entity that expends Federal awards received directly
> from a Federal awarding agency to carry out a Federal program.
> Rehabilitation Act recipients under Circular A-133 would include a
> State VR agency, an Independent Living Center, a State agency or
> non-profit institution that receives Client Assistance and Protection
> and Advocacy for Individual Rights funds, as well as an Institution of
> Higher Education.
>
> 2\. [RSA Sub-recipient]{.underline}: Under Circular A-133, a
> sub-recipient is a non-Federal entity that expends Federal awards
> received from a pass-through entity to carry out a Federal program,
> but does not include an individual that is a beneficiary of such a
> program. A sub-recipient may also be a recipient of other Federal
> awards directly from a Federal awarding agency. Guidance on
> distinguishing between a sub-recipient and a vendor is provided in
> §.210 in the Circular. Rehabilitation Act sub-recipients under
> Circular A-133 would include non-profit institutions that receive
> Title VII -- Independent Living Services and Centers for Independent
> Living grants from a State vocational rehabilitation agency to provide
> independent living services under the State Plan approved under
> Section 704 of the Act or Section 723.
>
> [Significant Changes in Revised OMB CIRCULAR A-133 from]{.underline}
>
> [OMB Circular A-128]{.underline}
>
> The threshold that triggers an audit requirement under the Circular
> increases from \$25,000 to \$300,000. Non-Federal entities that expend
> \$300,000 or more in a year in Federal awards shall have a single or
> program-specific audit. The \$300,000 threshold is for expenditures
> and not for Federal funds received. Non-Federal entities that expend
> less than \$300,000 a year in Federal awards are exempt from Federal
> audit requirements for the year. However, records must be available
> for review or audit by appropriate officials even if expenditures are
> less than \$300,000.
>
> The basis for the determination of major programs has changed. The
> auditor will use a risk-based approach to determine which Federal
> programs are major programs. The risk-based approach will include
> consideration of current and prior audit experience, oversight by
> Federal agencies and pass-through entities, and the inherent risk of
> the Federal program.
>
> The method of determining the cognizant agency for the audit has been
> modified. Recipients expending more than \$25 million a year in
> Federal awards will have a cognizant agency for audit. The designated
> cognizant agency for audit shall be the Federal awarding agency that
> provides the predominant amount of direct funding to a recipient
> unless OMB makes a specific cognizant agency for audit assignment and
> provides notice in the Federal Register.
>
> There are restrictions placed on auditors preparing indirect cost
> proposals. An auditor who prepares the indirect cost proposal or cost
> allocation plan may not also be selected to perform the required audit
> when the indirect costs recovered by the auditee during the prior year
> exceed one million dollars.
>
> The audit report must be submitted to the cognizant agency in a
> shorter period. The audit will be completed and submitted within nine
> months after the end of the audit period, unless agreement for a
> longer period has been reached in advance by the cognizant agency for
> audit. However, for fiscal years beginning on or before June 30, 1998,
> auditees will have 13 months after the end of the audit period to
> complete the audit and submit the reporting package.
>
> The auditee is required to use a data collection form. The auditee
> will complete a data collection form, which states whether the audit
> was completed in accordance with A-133 and provides information about
> the auditee, its Federal programs, and the results of the audit. This
> form will be available from the Federal clearinghouse designated by
> OMB. The auditee's chief executive officer or chief financial officer
> will sign a statement that the information on the form is accurate and
> complete.
>
> The specific requirements and responsibilities for all RSA recipients
> and sub-recipients are contained in OMB Circular A-133. A copy of this
> document can be accessed at the OMB website at
> [http://www:whitehouse.gov/omb/circulars/a133/a133.html]{.underline}.
>
> INQUIRIES: RSA Regional Commissioners

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Fredric K. Schroeder, Ph.D.

Commissioner

cc: Council of State Administrators of Vocational Rehabilitation

National Association of Protection and Advocacy Systems

National Council for Independent Living

National Rehabilitation Facilities Coalition