**PART 1 -- BACKGROUND, PURPOSE, AND APPLICABILITY**

**BACKGROUND**

The Single Audit Act of 1984 established requirements for audits of
States, local governments, and Indian tribal governments that administer
Federal financial assistance programs. In 1985, the Office of Management
and Budget (OMB) issued OMB Circular A-128, "Audits of State and Local
Governments," to provide implementing guidance. In 1990, OMB
administratively extended the single audit process to non-profit
organizations by issuing OMB Circular A-133, "Audits of Institutions of
Higher Education and Other Non-Profit Organizations."

On July 5, 1996, the President signed the Single Audit Act Amendments of
1996 (31 USC Chapter 75). The 1996 Amendments extended the statutory
audit requirement to non-profit organizations and substantially revised
various provisions of the 1984 Act. On June 30, 1997, OMB issued
revisions to Circular A-133 (62 FR 35278) to implement the 1996
Amendments, extend OMB Circular A-133's coverage to States, local
governments, and Indian tribal governments, and rescind OMB Circular
A-128. The 1996 Amendments required the Director, OMB, to periodically
review the audit threshold. On June 27, 2003, OMB amended Circular\
A-133 (68 FR 38401) to increase the audit threshold to an aggregate
expenditure of \$500,000 in Federal funds and to make changes in the
thresholds for cognizant and oversight agencies. Those changes took
effect for fiscal years ending after December 31, 2003. OMB further
amended Circular A-133 on June 26, 2007 (72 FR 35080) to: (1) update
internal control terminology and related definitions in Circular A-133
and (2) simplify the auditee reporting package submission requirement.

This Compliance Supplement is based on the requirements of the 1996
Amendments and 1997 revisions to OMB Circular A-133, which provide for
the issuance of a compliance supplement to assist auditors in performing
the required audits. The Senate and House Reports supporting the 1996
Amendments cited studies of the single audit process performed by the
Government Accountability Office, the President's Council on Integrity
and Efficiency and the National State Auditors Association (NSAA). All
three studies supported the need for a current compliance supplement.
The NSAA study stated, "The Compliance Supplement provides an invaluable
tool to both Federal agencies and auditors in setting forth the
important provisions of Federal assistance programs. This tool allows
Federal agencies to effectively communicate items that they believe are
important to the successful management of the program and legislative
intent. Such a valuable tool requires constant review and update."

This document serves to identify existing important compliance
requirements that the Federal Government expects to be considered as
part of an audit required by the 1996 Amendments. Without this
Supplement, auditors would need to research many laws and regulations
for each program under audit to determine which compliance requirements
are important to the Federal Government and could have a direct and
material effect on a program. Providing this Supplement is a more
efficient and cost-effective approach to performing this research. For
the programs contained herein, this Supplement provides a source of
information for auditors to understand the Federal program's objectives,
procedures, and compliance requirements relevant to the audit as well as
audit objectives and suggested audit procedures for determining
compliance with these requirements.

This Supplement also provides guidance to assist auditors in determining
compliance requirements relevant to the audit, audit objectives, and
suggested audit procedures for programs not included herein. For single
audits, this Supplement replaces agency audit guides and other audit
requirement documents for individual Federal programs.

OMB Circular A-133 provides that Federal agencies are responsible to
annually inform OMB of any updates needed to this Supplement. This
responsibility includes ensuring that program objectives, procedures,
and compliance requirements, noncompliance with which could have a
direct and material effect on these individual Federal programs, are
provided to OMB for inclusion in this Supplement, and that agencies keep
current these program objectives, procedures, and compliance
requirements (including statutory and regulatory citations). To
facilitate agency efforts to meet this responsibility, Parts 4 and 5 of
this Supplement provide a stand-alone section for each program included
in this Supplement, which contains program objectives, program
procedures, and compliance requirements. For some programs a separate
section (IV, "Other Information") is also included to communicate
additional information concerning the program. For example, when a
program allows funds to be transferred to another program, section IV
will provide guidance on how those funds should be treated on the
Schedule of Expenditures of Federal Awards and Type A program
determinations. See Appendix IV for a list of programs that contain this
section. These program-specific sections can be updated or replaced as
Federal programs change. Also, sections will be included as part of the
annual update for additional programs once the program objectives,
program procedures, and compliance requirements relevant to the program
are developed.

**PURPOSE AND APPLICABILITY (Part 1)**

**Purpose**

This Supplement is effective for audits of fiscal years beginning after
June 30, 2007, and supersedes the OMB Circular A-133 Compliance
Supplement dated March 2007.

OMB Circular A-133 describes the non-Federal entity's responsibilities
for managing Federal assistance programs (§\_\_\_.300) and the auditor's
responsibility with respect to the scope of audit (§\_\_\_.500).
Auditors are required to follow the provisions of OMB Circular A-133 and
this Supplement.

**Applicability**

*General*

Auditors shall consider this Supplement and the referenced laws,
regulations, and OMB Circulars (whether codified by Federal agencies
implementing the Circulars in agency regulations or implemented by other
means) in determining the compliance requirements that could have a
direct and material effect on the programs included herein. That is, use
of this Supplement is mandatory. Accordingly, adherence to this
Supplement satisfies the requirements of OMB Circular A-133. For
program-specific audits performed in accordance with a Federal agency's
program-specific audit guide, the auditor shall follow such
program-specific audit guide. Finally, for major programs not included
in this Supplement, the auditor shall follow the guidance in Part 7 and
use the types of compliance requirements in Part 3 to identify the
applicable compliance requirements which could have a direct and
material effect on the program.

*Update of Requirements*

OMB Circular A-133 provides that Federal agencies are responsible for
annually informing OMB of any updates needed to this Supplement.
However, auditors should recognize that laws and regulations change
periodically and that delays will occur between such changes and
revisions to this Supplement. Moreover, auditors should recognize that
there may be provisions of contract and grant agreements that are not
specified in law or regulation and, therefore, the specifics of such are
not included in this Supplement. For example, the grant agreement may
specify a certain matching percentage or set a priority for how funds
should be spent (e.g., a requirement to not fund certain size projects).
Another example is a Federal agency imposing additional requirements on
a recipient because it is designated high-risk, in accordance with the
A-102 Common Rule or an agency's implementation of Circular A-110 (now
included at 2 Code of Federal Regulations \[CFR\] part 215) or as part
of resolution of prior audit findings.

Accordingly, the auditor should perform reasonable procedures to ensure
that compliance requirements are current and to determine whether there
are any additional provisions of contract and grant agreements that
should be covered by an audit under the 1996 Amendments. Reasonable
procedures would be inquiry of non-Federal entity management and review
of the contract and grant agreements for programs selected for testing
(i.e., major programs).

*Safe Harbor Status*

Because the suggested audit procedures were written to be able to apply
to many different programs administered by many different entities, they
are necessarily general in nature. Auditor judgment will be necessary to
determine whether the suggested audit procedures are sufficient to
achieve the stated audit objectives or whether additional or alternative
audit procedures are needed. Therefore, the auditor should **not**
consider this Supplement to be a "safe harbor" for identifying the audit
procedures to apply in a particular engagement.

However, the auditor can consider this Supplement a "safe harbor" for
identification of compliance requirements to be tested for the programs
included herein if, as discussed above, the auditor (1) performs
reasonable procedures to ensure that the requirements in this Supplement
are current and to determine whether there are any additional provisions
of contract and grant agreements that should be covered by an audit
under the 1996 Amendments, and (2) updates or augments the requirements
contained in this Supplement as appropriate.

*Responsibility for Other Requirements*

Although the focus of this Supplement is on compliance requirements that
could have a direct and material effect on a major program, auditors
also have responsibility under *Generally Accepted Government Auditing
Standards* (GAGAS) for other requirements when specific information
comes to the auditors' attention that provides evidence concerning the
existence of possible noncompliance that could have a material indirect
effect on a major program.

**OVERVIEW OF THIS SUPPLEMENT**

**Matrix of Compliance Requirements** **(Part 2)**

The Matrix of Compliance Requirements (Matrix) identifies the Federal
programs and compliance requirements addressed in this Supplement, and
associates the programs with the applicable compliance requirements. The
Matrix also identifies the applicable Federal agency and *Catalog of
Federal Domestic Assistance* (CFDA) number for each program included in
this Supplement.

**Compliance Requirements (Part 3)**

Part 3 lists and describes the 14 types of compliance requirements and,
except for Special Tests and Provisions, the related audit objectives
that the auditor shall consider in every audit conducted under OMB
Circular A-133, with the exception of program-specific audits performed
in accordance with a Federal agency's program-specific audit guide.
Suggested audit procedures are also provided to assist the auditor in
planning and performing tests of non-Federal entity compliance with the
requirements of Federal programs. Auditor judgment will be necessary to
determine whether the suggested audit procedures are sufficient to
achieve the stated audit objectives and whether additional or
alternative audit procedures are needed. Determining the nature, timing,
and extent of the audit procedures necessary to meet the audit
objectives is the auditor's responsibility.

The compliance requirements for Special Tests and Provisions are unique
to each Federal program; therefore, compliance requirements, audit
objectives, and suggested audit procedures for Special Tests and
Provisions other than the audit objectives and suggested audit
procedures for internal control are not included in Part 3.

Consistent with the requirements of OMB Circular A-133, this Part
includes audit objectives and suggested audit procedures to test
internal control. However, the auditor must determine the specific
procedures to test internal control on a case-by-case basis considering
factors such as the non-Federal entity's internal control, the
compliance requirements, the audit objectives for compliance, the
auditor's assessment of control risk, and the audit requirement to test
internal control as prescribed in OMB Circular A-133.

**Agency Program Requirements (Part 4)**

For each Federal program included in this Supplement, Part 4 discusses
program objectives, program procedures, and compliance requirements that
are specific to the program. With the exception of section III.N,
"Special Tests and Provisions," the auditor shall refer to Part 3 for
the audit objectives and suggested audit procedures that pertain to the
compliance requirements associated with the programs. Since Special
Tests and Provisions are unique to the program, the specific audit
objectives and suggested audit procedures for the program are included
in Part 4 with the exception of audit objectives and suggested audit
procedures for internal control, which are included in Part 3.

The description of program procedures is general in nature. Some
programs may operate somewhat differently than described due to: (1) the
complexity of governing Federal and State laws and regulations; (2) the
administrative flexibility afforded non-Federal entities; and (3) the
nature, size, and volume of transactions involved. Accordingly, the
auditor should obtain an understanding of the applicable compliance
requirements and program procedures in operation at the non-Federal
entity to properly plan and perform the audit.

**Clusters of Programs (Part 5)**

A cluster of programs is a grouping of closely related programs that
have similar compliance requirements. The types of clusters are:
Research and Development (R&D), Student Financial Aid (SFA), and other
clusters. "Other clusters" are as identified in this Supplement or
designated in a State award document.

Although the programs within a cluster are administered as separate
programs, a cluster of programs is treated as a single program for the
purpose of meeting the audit requirements of OMB Circular A-133
(§\_\_.105). Part 5 provides compliance requirements, audit objectives,
and suggested audit procedures for R&D and SFA clusters and lists other
clusters.

In planning and performing the audit, the auditor should determine
whether programs administered by the non-Federal entity are part of a
cluster by referring to the provisions of\
Part 5 of this Supplement and the State award documents.

**Internal Control (Part 6)**

As a condition of receiving Federal awards, non-Federal entities agree
to comply with applicable laws, regulations, and the provisions of
contract and grant agreements, and to maintain internal control to
provide reasonable assurance of compliance with these requirements. OMB
Circular A-133 requires auditors to obtain an understanding of the
non-Federal entity's internal control over Federal programs sufficient
to plan the audit to support a low assessed level of control risk for
major programs, plan the testing of internal control over major programs
to support a low assessed level of control risk for the assertions
relevant to the compliance requirements for each major program, and,
unless internal control is likely to be ineffective, perform testing of
internal control as planned. Part 6 is intended to assist non-Federal
entities and their auditors in complying with these requirements by
presenting characteristics of internal control which may be used to
reasonably ensure compliance with the types of compliance requirements
in Part 3. The characteristics of internal control presented in Part 6
are neither mandatory nor all-inclusive.

**Guidance for Auditing Programs Not Included in this Compliance
Supplement (Part 7)**

Part 7 provides guidance to auditors in identifying the compliance
requirements and designing tests of compliance with such requirements
for programs not included in this Supplement.

**Federal Programs Excluded from the A-102 Common Rule (Appendix I)**

This Appendix lists block grants and other programs excluded from the
requirements of the "Uniform Administrative Requirements for Grants and
Cooperative Agreements to State and Local Governments" (also known as
the "A-102 Common Rule").

**Federal Agency Codification of Certain Governmentwide Grants
Requirements\
(Appendix II)**

This Appendix provides regulatory citations for Federal agencies'
codification of the A-102 Common Rule and OMB Circular A-110 (2 CFR part
215), "Uniform Administrative Requirements for Grants and Agreements
With Institutions of Higher Education, Hospitals, and Other Non-Profit
Organizations," in agency regulations. Some agencies have not codified
the November 1993 revision to OMB Circular A-110, but have provided such
policies to grantees through other means such as grant agreements. This
Appendix also includes regulatory citations for Federal agencies'
codification of the OMB guidance on nonprocurement suspension and
debarment in 2 CFR part 180, as well as the codification for those
agencies still operating under the predecessor Common Rule on Debarment
and Suspension (November 26, 2003).

**Federal Agency Contacts for A-133 Audits (Appendix III)**

This Appendix identifies Federal agency contacts from whom auditors can
request information or materials about Federal programs or the audit
requirements of OMB Circular A-133.

**Internal Reference Tables (Appendix IV)**

This Appendix provides a listing of programs in Parts 4 and 5 that
include section IV, "Other Information." This listing allows the auditor
to quickly determine which programs have other information, such as
guidance on Type A and Type B program determination or display on the
Schedule of Expenditures of Federal Awards. This Appendix also indicates
that the Medicaid Cluster is the only program currently identified as
higher risk by OMB pursuant to Circular A-133, §\_\_\_.525(c)(2).

**List of Changes for the 2008 Compliance Supplement** (**Appendix V**)

This Appendix provides a list of changes from the OMB Circular A-133
Compliance Supplement dated March 2007 to this 2008 Supplement.

**Disaster Waivers and Special Provisions Affecting Single Audits
(Appendix VI)**

This Appendix addresses waivers, special provisions, and
program-specific information on the listed Federal programs in response
to Hurricanes Katrina and Rita.

**Other OMB Circular A-133 Advisories (Appendix VII)**

Reserved.

**SAS 70 Examinations of EBT Service Organizations (Appendix VIII)**

This Appendix provides guidance on audits of State electronic benefits
transfer (EBT) service providers (service organizations) regarding the
issuance, redemption, and settlement of benefits under the Food Stamps
program (CFDA 10.551) in accordance with the American Institute of
Certified Public Accountants (AICPA) Statement on Auditing Standards
(SAS) No. 70, Service Organizations.

**Compliance Supplement Core Team (Appendix IX)**

This Appendix provides a listing of the Compliance Supplement Core Team
members who were responsible for the production of this Supplement.

**TECHNICAL INFORMATION**

**Page Numbering Scheme**

The following page numbering scheme is used in this Supplement to
facilitate future revisions.

Each page included in Parts 1, 2, 3 (Introduction), 6 (Introduction),
and 7 is identified by a label that represents the part number and
sequential page number. A dash (-) separates the part number from the
page number. For example, Part 1 is numbered as follows: 1-1, 1-2, 1-3,
and so on.

Each page included in Parts 3 (excluding the Introduction), 4, 5, and 6
(excluding the Introduction) is identified by a label that represents
the part number, section number identifier, and sequential page number.
For example, Section A of Part 3 is numbered 3-A-1, 3-A-2, 3-A-3, and so
on. The section number identifier for Part 4 represents the CFDA number
of the applicable program. For example, the Department of Labor's
Unemployment Insurance program, CFDA number 17.225, is numbered
4-17.225-1, 4-17.225-2, 4-17.225-3, and so on.

**Code of Federal Regulations**

The CFR is a codification of the rules issued by Federal agencies. The
CFR is divided into\
50 titles, which comprise the broad areas subject to Federal regulation.
Each title is further divided into parts and sections, with most
references to the CFR being made at this level.

Portions of the CFR are revised daily and these changes are published in
the *Federal Register*. However, a revised version of the CFR is
published only once each calendar year, on a quarterly basis as follows:
titles 1--16 on January 1, titles 17--27 on April 1, titles 28--41 on
July 1, and titles 42--50 on October 1.

In the event that changes to a particular section of a title have
changed since the last published update of that section, a notation is
made in the List of CFR Sections Affected (LSA), which is published
monthly. The LSA cites the *Federal Register* page number that contains
the changes to the CFR section.

In order to obtain the most current regulations, the user should consult
not only the latest version of the CFR, but also the LSA issued in the
current month. The *Federal Register* home page
(<http://www.gpoaccess.gov/nara/index.html>) offers links to both the
*Federal Register* and the CFR. An electronic CFR (e-CFR) is available
at <http://www.gpoaccess.gov/ecfr/>. The e-CFR is an unofficial
editorial compilation of CFR material and *Federal Register* amendments.
It is a current, daily updated version of the Code of Federal
Regulations (CFR); however, it is not an official legal edition of the
CFR. Please note that on-line versions of the CFR may not be the most
current available.

**HOW TO OBTAIN ADDITIONAL GUIDANCE**

Guidance to assist auditors in performing audits in accordance with OMB
Circular A-133 can be obtained from the following sources.

**Office of Management and Budget**

The following information is located under the grants management heading
on OMB's Internet home page ([http://www.omb.gov](http://www.omb.gov/)).

-- OMB publications, including OMB Circulars and this Supplement for
audits under OMB Circular A-133.

-- SF‑SAC, *Data Collection Form for Reporting on Audits of States,
Local Governments, and Non‑Profit Organizations*.

-- Codification of Certain Governmentwide Grants Requirements by
Department (including the A-102 Common Rule and OMB Circular A-110 (2
CFR part 215)).

**General Services Administration (GSA)**

-- *Catalog of Federal Domestic Assistance* (CFDA).

A searchable copy of the CFDA and a pdf version are available through
the Internet on the GSA Home Page (<http://www.gsa.gov/cfda>). The CFDA
is also available on machine-readable magnetic tape, high-density floppy
diskettes and CD-ROM from GSA at 202-208-4296).

**Government Printing Office (GPO)**

Superintendent of Documents

P.O. Box 371954

Pittsburgh, PA 15250-7954

Telephone: (202) 512-1800

-- Government Auditing Standards (stock number 020-000-00-265-4).

-- March 2008 Circular A-133 Compliance Supplement (stock number:
041-001-00658-3).

**Inspectors General**

IGnet Home Page on the Internet
([http://www.ignet.gov](http://www.ignet.gov/)) contains an Inspector
General Directory and the Inspector General Act.

**Federal Audit Clearinghouse**

The Federal Audit Clearinghouse acts as an agent for OMB to: (1)
establish and maintain a governmentwide database of single audit results
and related Federal award information;\
(2) serve as the Federal repository of single audit reports; and (3)
distribute single audit reports to Federal agencies.

The Clearinghouse maintains a site on the Internet at
<http://harvester.census.gov/sac/>. For Data Collection Form (SF-SAC)
and OMB Circular A-133 submission questions, contact the Federal Audit
Clearinghouse by e-mail (<govs.fac@census.gov>), phone (301-763‑1551
(voice) and 800-253-0696 (toll free)), or fax 301-457-1592. For
questions regarding previous submissions, contact the Federal Audit
Clearinghouse Processing Unit at 888-222-9907. The Form SF-SAC and A-133
submission should be mailed to Federal Audit Clearinghouse, 1201 E. 10th
Street, Jeffersonville, IN 47132.