I

104TH CONGRESS

2D SESSION H. R. 3184

To streamline and improve the effectiveness of chapter 75 of title 31, United

States Code (commonly referred to as the ‘‘Single Audit Act’’).

IN THE HOUSE OF REPRESENTATIVES

MARCH 28, 1996

Mr. HORN (for himself, Mr. CLINGER, Mr. DAVIS, Mrs. MALONEY, and Mr.

PETERSON of Minnesota) introduced the following bill; which was referred

to the Committee on Government Reform and Oversight

A BILL

To streamline and improve the effectiveness of chapter 75

of title 31, United States Code (commonly referred to

as the ‘‘Single Audit Act’’).

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; PURPOSES.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Single Audit Act Amendments of 1996’’.

6 (b) PURPOSES.—The purposes of this Act are to—

7 (1) promote sound financial management, in8 cluding effective internal controls, with respect to
2

•HR 3184 IH

1 Federal awards administered by non-Federal enti2 ties;

3 (2) establish uniform requirements for audits of

4 Federal awards administered by non-Federal enti5 ties;

6 (3) promote the efficient and effective use of

7 audit resources;

8 (4) reduce burdens on State and local govern9 ments, Indian tribes, and nonprofit organizations;

10 and

11 (5) ensure that Federal departments and agen12 cies, to the maximum extent practicable, rely upon

13 and use audit work done pursuant to chapter 75 of

14 title 31, United States Code (as amended by this

15 Act).

16 SEC. 2. AMENDMENT TO TITLE 31, UNITED STATES CODE.

17 Chapter 75 of title 31, United States Code, is amend18 ed to read as follows:

19 ‘‘CHAPTER 75—REQUIREMENTS FOR

20 SINGLE AUDITS

‘‘Sec.

‘‘7501. Definitions.

‘‘7502. Audit requirements; exemptions.

‘‘7503. Relation to other audit requirements.

‘‘7504. Federal agency responsibilities and relations with non-Federal entities.

‘‘7505. Regulations.

‘‘7506. Monitoring responsibilities of the Comptroller General.

‘‘7507. Effective date.
3

•HR 3184 IH

1 ‘‘§ 7501. Definitions

2 ‘‘(a) As used in this chapter, the term—

3 ‘‘(1) ‘Comptroller General’ means the Comptrol4 ler General of the United States;

5 ‘‘(2) ‘Director’ means the Director of the Office

6 of Management and Budget;

7 ‘‘(3) ‘Federal agency’ has the same meaning as

8 the term ‘agency’ in section 551(1) of title 5;

9 ‘‘(4) ‘Federal awards’ means Federal financial

10 assistance and Federal cost-reimbursement contracts

11 that non-Federal entities receive directly from Fed12 eral awarding agencies or indirectly from pass13 through entities;

14 ‘‘(5) ‘Federal financial assistance’ means assist15 ance that non-Federal entities receive or administer

16 in the form of grants, loans, loan guarantees, prop17 erty, cooperative agreements, interest subsidies, in18 surance, donated surplus property, food commod19 ities, direct appropriations, or other assistance, but

20 does not include amounts received as reimbursement

21 for services rendered to individuals in accordance

22 with guidance issued by the Director;

23 ‘‘(6) ‘Federal program’ means all Federal

24 awards to a non-Federal entity assigned a single

25 number in the Catalog of Federal Domestic Assist-
4

•HR 3184 IH

1 ance or encompassed in a group of numbers or other

2 category as defined by the Director;

3 ‘‘(7) ‘generally accepted government auditing

4 standards’ means the government auditing stand5 ards issued by the Comptroller General;

6 ‘‘(8) ‘independent auditor’ means—

7 ‘‘(A) an external State or local government

8 auditor who meets the independence standards

9 included in generally accepted government au10 diting standards; or

11 ‘‘(B) a public accountant who meets such

12 independence standards;

13 ‘‘(9) ‘Indian tribe’ means any Indian tribe,

14 band, nation, or other organized group or commu15 nity, including any Alaskan Native village or re16 gional or village corporation (as defined in, or estab17 lished under, the Alaskan Native Claims Settlement

18 Act) that is recognized by the United States as eligi19 ble for the special programs and services provided by

20 the United States to Indians because of their status

21 as Indians;

22 ‘‘(10) ‘internal controls’ means a process, ef23 fected by an entity’s management and other person24 nel, designed to provide reasonable assurance re-
5

•HR 3184 IH

1 garding the achievement of objectives in the follow2 ing categories:

3 ‘‘(A) Effectiveness and efficiency of oper4 ations.

5 ‘‘(B) Reliability of financial reporting.

6 ‘‘(C) Compliance with applicable laws and

7 regulations;

8 ‘‘(11) ‘local government’ means any unit of

9 local government within a State, including a county,

10 borough, municipality, city, town, township, parish,

11 local public authority, special district, school district,

12 intrastate district, council of governments, any other

13 instrumentality of local government and, in accord14 ance with guidelines issued by the Director, a group

15 of local governments;

16 ‘‘(12) ‘major program’ means a Federal pro17 gram identified in accordance with risk-based cri18 teria prescribed by the Director under this chapter,

19 subject to the limitations described under subsection

20 (b);

21 ‘‘(13) ‘non-Federal entity’ means a State, local

22 government, or nonprofit organization;

23 ‘‘(14) ‘nonprofit organization’ means any cor24 poration, trust, association, cooperative, or other or25 ganization that—
6

•HR 3184 IH

1 ‘‘(A) is operated primarily for scientific,

2 educational, service, charitable, or similar pur3 poses in the public interest;

4 ‘‘(B) is not organized primarily for profit;

5 and

6 ‘‘(C) uses net proceeds to maintain, im7 prove, or expand the operations of the organiza8 tion;

9 ‘‘(15) ‘pass-through entity’ means a non-Fed10 eral entity that provides Federal awards to a sub11 recipient to carry out a Federal program;

12 ‘‘(16) ‘program-specific audit’ means an audit

13 of one Federal program;

14 ‘‘(17) ‘recipient’ means a non-Federal entity

15 that receives awards directly from a Federal agency

16 to carry out a Federal program;

17 ‘‘(18) ‘single audit’ means an audit, as de18 scribed under section 7502(d), of a non-Federal en19 tity that includes the entity’s financial statements

20 and Federal awards;

21 ‘‘(19) ‘State’ means any State of the United

22 States, the District of Columbia, the Commonwealth

23 of Puerto Rico, the Virgin Islands, Guam, American

24 Samoa, the Commonwealth of the Northern Mariana

25 Islands, and the Trust Territory of the Pacific Is-
7

•HR 3184 IH

1 lands, any instrumentality thereof, any multi-State,

2 regional, or interstate entity which has governmental

3 functions, and any Indian tribe; and

4 ‘‘(20) ‘subrecipient’ means a non-Federal entity

5 that receives Federal awards through another non6 Federal entity to carry out a Federal program, but

7 does not include an individual who receives financial

8 assistance through such awards.

9 ‘‘(b) In prescribing risk-based program selection cri10 teria for major programs, the Director shall not require

11 more programs to be identified as major for a particular

12 non-Federal entity, except as prescribed under subsection

13 (c) or as provided under subsection (d), than would be

14 identified if the major programs were defined as any pro15 gram for which total expenditures of Federal awards by

16 the non-Federal entity during the applicable year exceed—

17 ‘‘(1) the larger of $30,000,000 or 0.15 percent

18 of the non-Federal entity’s total Federal expendi19 tures, in the case of a non-Federal entity for which

20 such total expenditures for all programs exceed

21 $10,000,000,000;

22 ‘‘(2) the larger of $3,000,000, or 0.30 percent

23 of the non-Federal entity’s total Federal expendi24 tures, in the case of a non-Federal entity for which

25 such total expenditures for all programs exceed
8

•HR 3184 IH

1 $100,000,000 but are less than or equal to

2 $10,000,000,000; or

3 ‘‘(3) the larger of $300,000, or 3 percent of

4 such total Federal expenditures for all programs, in

5 the case of a non-Federal entity for which such total

6 expenditures for all programs equal or exceed

7 $300,000 but are less than or equal to

8 $100,000,000.

9 ‘‘(c) When the total expenditures of a non-Federal

10 entity’s major programs are less than 50 percent of the

11 non-Federal entity’s total expenditures of all Federal

12 awards (or such lower percentage as specified by the Di13 rector), the auditor shall select and test additional pro14 grams as major programs as necessary to achieve audit

15 coverage of at least 50 percent of Federal expenditures

16 by the non-Federal entity (or such lower percentage as

17 specified by the Director), in accordance with guidance is18 sued by the Director.

19 ‘‘(d) Loan or loan guarantee programs, as specified

20 by the Director, shall not be subject to the application of

21 subsection (b).

22 ‘‘§ 7502. Audit requirements; exemptions

23 ‘‘(a)(1)(A) Each non-Federal entity that expends a

24 total amount of Federal awards equal to or in excess of

25 $300,000 or such other amount specified by the Director
9

•HR 3184 IH

1 under subsection (a)(3) in any fiscal year of such non2 Federal entity shall have either a single audit or a pro3 gram-specific audit made for such fiscal year in accord4 ance with the requirements of this chapter.

5 ‘‘(B) Each such non-Federal entity that expends Fed6 eral awards under more than one Federal program shall

7 undergo a single audit in accordance with the require8 ments of subsections (b) through (i) of this section and

9 guidance issued by the Director under section 7505.

10 ‘‘(C) Each such non-Federal entity that expends

11 awards under only one Federal program and is not subject

12 to laws, regulations, or Federal award agreements that re13 quire a financial statement audit of the non-Federal en14 tity, may elect to have a program-specific audit conducted

15 in accordance with applicable provisions of this section and

16 guidance issued by the Director under section 7505.

17 ‘‘(2)(A) Each non-Federal entity that expends a total

18 amount of Federal awards of less than $300,000 or such

19 other amount specified by the Director under subsection

20 (a)(3) in any fiscal year of such entity, shall be exempt

21 for such fiscal year from compliance with—

22 ‘‘(i) the audit requirements of this chapter; and

23 ‘‘(ii) any applicable requirements concerning fi24 nancial audits contained in Federal statutes and reg-
10

•HR 3184 IH

1 ulations governing programs under which such Fed2 eral awards are provided to that non-Federal entity.

3 ‘‘(B) The provisions of subparagraph (A)(ii) of this

4 paragraph shall not exempt a non-Federal entity from

5 compliance with any provision of a Federal statute or reg6 ulation that requires such non-Federal entity to maintain

7 records concerning Federal awards provided to such non8 Federal entity or that permits a Federal agency, pass9 through entity, or the Comptroller General access to such

10 records.

11 ‘‘(3) Every 2 years, the Director shall review the

12 amount for requiring audits prescribed under paragraph

13 (1)(A) and may adjust such dollar amount consistent with

14 the purposes of this chapter, provided the Director does

15 not make such adjustments below $300,000.

16 ‘‘(b)(1) Except as provided in paragraphs (2) and

17 (3), audits conducted pursuant to this chapter shall be

18 conducted annually.

19 ‘‘(2) A State or local government that is required by

20 constitution or statute, in effect on January 1, 1987, to

21 undergo its audits less frequently than annually, is per22 mitted to undergo its audits pursuant to this chapter bien23 nially. Audits conducted biennially under the provisions of

24 this paragraph shall cover both years within the biennial

25 period.
11

•HR 3184 IH

1 ‘‘(3) Any nonprofit organization that had biennial au2 dits for all biennial periods ending between July 1, 1992,

3 and January 1, 1995, is permitted to undergo its audits

4 pursuant to this chapter biennially. Audits conducted bien5 nially under the provisions of this paragraph shall cover

6 both years within the biennial period.

7 ‘‘(c) Each audit conducted pursuant to subsection (a)

8 shall be conducted by an independent auditor in accord9 ance with generally accepted government auditing stand10 ards, except that, for the purposes of this chapter, per11 formance audits shall not be required except as authorized

12 by the Director.

13 ‘‘(d) Each single audit conducted pursuant to sub14 section (a) for any fiscal year shall—

15 ‘‘(1) cover the operations of the entire non-Fed16 eral entity; or

17 ‘‘(2) at the option of such non-Federal entity

18 such audit shall include a series of audits that cover

19 departments, agencies, and other organizational

20 units which expended or otherwise administered

21 Federal awards during such fiscal year provided that

22 each such audit shall encompass the financial state23 ments and schedule of expenditures of Federal

24 awards for each such department, agency, and orga-
12

•HR 3184 IH

1 nizational unit, which shall be considered to be a

2 non-Federal entity.

3 ‘‘(e) The auditor shall—

4 ‘‘(1) determine whether the financial statements

5 are presented fairly in all material respects in con6 formity with generally accepted accounting prin7 ciples;

8 ‘‘(2) determine whether the schedule of expendi9 tures of Federal awards is presented fairly in all ma10 terial respects in relation to the financial statements

11 taken as a whole;

12 ‘‘(3) with respect to internal controls pertaining

13 to the compliance requirements for each major pro14 gram—

15 ‘‘(A) obtain an understanding of such in16 ternal controls;

17 ‘‘(B) assess control risk; and

18 ‘‘(C) perform tests of controls unless the

19 controls are deemed to be ineffective; and

20 ‘‘(4) determine whether the non-Federal entity

21 has complied with the provisions of laws, regula22 tions, and contracts or grants pertaining to Federal

23 awards that have a direct and material effect on

24 each major program.
13

•HR 3184 IH

1 ‘‘(f)(1) Each Federal agency which provides Federal

2 awards to a recipient shall—

3 ‘‘(A) provide such recipient the program names

4 (and any identifying numbers) from which such

5 awards are derived, and the Federal requirements

6 which govern the use of such awards and the re7 quirements of this chapter; and

8 ‘‘(B) review the audit of a recipient as nec9 essary to determine whether prompt and appropriate

10 corrective action has been taken with respect to

11 audit findings, as defined by the Director, pertaining

12 to Federal awards provided to the recipient by the

13 Federal agency.

14 ‘‘(2) Each pass-through entity shall—

15 ‘‘(A) provide such subrecipient the program

16 names (and any identifying numbers) from which

17 such assistance is derived, and the Federal require18 ments which govern the use of such awards and the

19 requirements of this chapter;

20 ‘‘(B) monitor the subrecipient’s use of Federal

21 awards through site visits, limited scope audits, or

22 other means;

23 ‘‘(C) review the audit of a subrecipient as nec24 essary to determine whether prompt and appropriate

25 corrective action has been taken with respect to
14

•HR 3184 IH

1 audit findings, as defined by the Director, pertaining

2 to Federal awards provided to the subrecipient by

3 the pass-through entity; and

4 ‘‘(D) require each of its subrecipients of Fed5 eral awards to permit, as a condition of receiving

6 Federal awards, the independent auditor of the pass7 through entity to have such access to the

8 subrecipient’s records and financial statements as

9 may be necessary for the pass-through entity to

10 comply with this chapter.

11 ‘‘(g)(1) The auditor shall report on the results of any

12 audit conducted pursuant to this section, in accordance

13 with guidance issued by the Director.

14 ‘‘(2) When reporting on any single audit, the auditor

15 shall include a summary of the auditor’s results regarding

16 the non-Federal entity’s financial statements, internal

17 controls, and compliance with laws and regulations.

18 ‘‘(h) The non-Federal entity shall transmit the re19 porting package, which shall include the non-Federal enti20 ty’s financial statements, schedule of expenditures of Fed21 eral awards, corrective action plan defined under sub22 section (i), and auditor’s reports developed pursuant to

23 this section, to a Federal clearinghouse designated by the

24 Director, and make it available for public inspection within

25 the earlier of—
15

•HR 3184 IH

1 ‘‘(1) 30 days after receipt of the auditor’s re2 port; or

3 ‘‘(2)(A) for a transition period of at least 2

4 years after the effective date of the Single Audit Act

5 Amendments of 1996, as established by the Direc6 tor, 13 months after the end of the period audited;

7 or

8 ‘‘(B) for fiscal years beginning after the period

9 specified in subparagraph (A), 9 months after the

10 end of the period audited, or within a longer time11 frame authorized by the Federal agency, determined

12 under criteria issued under section 7505, when the

13 9-month timeframe would place an undue burden on

14 the non-Federal entity.

15 ‘‘(i) If an audit conducted pursuant to this section

16 discloses any audit findings, as defined by the Director,

17 including material noncompliance with individual compli18 ance requirements for a major program by, or reportable

19 conditions in the internal controls of, the non-Federal en20 tity with respect to the matters described in subsection

21 (e), the non-Federal entity shall submit to Federal officials

22 designated by the Director, a plan for corrective action

23 to eliminate such audit findings or reportable conditions

24 or a statement describing the reasons that corrective ac25 tion is not necessary. Such plan shall be consistent with
16

•HR 3184 IH

1 the audit resolution standard promulgated by the Comp2 troller General (as part of the standards for internal con3 trols in the Federal Government) pursuant to section

4 3512(c).

5 ‘‘(j) The Director may authorize pilot projects to test

6 alternative methods of achieving the purposes of this chap7 ter. Such pilot projects may begin only after consultation

8 with the Chair and Ranking Minority Member of the Com9 mittee on Governmental Affairs of the Senate and the

10 Chair and Ranking Minority Member of the Committee

11 on Government Reform and Oversight of the House of

12 Representatives.

13 ‘‘§ 7503. Relation to other audit requirements

14 ‘‘(a) An audit conducted in accordance with this

15 chapter shall be in lieu of any financial audit of Federal

16 awards which a non-Federal entity is required to undergo

17 under any other Federal law or regulation. To the extent

18 that such audit provides a Federal agency with the infor19 mation it requires to carry out its responsibilities under

20 Federal law or regulation, a Federal agency shall rely

21 upon and use that information.

22 ‘‘(b) Notwithstanding subsection (a), a Federal agen23 cy may conduct or arrange for additional audits which are

24 necessary to carry out its responsibilities under Federal

25 law or regulation. The provisions of this chapter do not
17

•HR 3184 IH

1 authorize any non-Federal entity (or subrecipient thereof)

2 to constrain, in any manner, such agency from carrying

3 out or arranging for such additional audits, except that

4 the Federal agency shall plan such audits to not be dupli5 cative of other audits of Federal awards.

6 ‘‘(c) The provisions of this chapter do not limit the

7 authority of Federal agencies to conduct, or arrange for

8 the conduct of, audits and evaluations of Federal awards,

9 nor limit the authority of any Federal agency Inspector

10 General or other Federal official.

11 ‘‘(d) Subsection (a) shall apply to a non-Federal en12 tity which undergoes an audit in accordance with this

13 chapter even though it is not required by section 7502(a)

14 to have such an audit.

15 ‘‘(e) A Federal agency that provides Federal awards

16 and conducts or arranges for audits of non-Federal enti17 ties receiving such awards that are in addition to the au18 dits of non-Federal entities conducted pursuant to this

19 chapter shall, consistent with other applicable law, arrange

20 for funding the full cost of such additional audits. Any

21 such additional audits shall be coordinated with the Fed22 eral agency determined under criteria issued under section

23 7504 to preclude duplication of the audits conducted pur24 suant to this chapter or other additional audits.
18

•HR 3184 IH

1 ‘‘(f) Upon request by a Federal agency or the Comp2 troller General, any independent auditor conducting an

3 audit pursuant to this chapter shall make the auditor’s

4 working papers available to the Federal agency or the

5 Comptroller General as part of a quality review, to resolve

6 audit findings, or to carry out oversight responsibilities

7 consistent with the purposes of this chapter. Such access

8 to auditor’s working papers shall include the right to ob9 tain copies.

10 ‘‘§ 7504. Federal agency responsibilities and relations

11 with non-Federal entities

12 ‘‘(a) Each Federal agency shall, in accordance with

13 guidance issued by the Director under section 7505, with

14 regard to Federal awards provided by the agency—

15 ‘‘(1) monitor non-Federal entity use of Federal

16 awards, and

17 ‘‘(2) assess the quality of audits conducted

18 under this chapter for audits of entities for which

19 the agency is the single Federal agency determined

20 under subsection (b).

21 ‘‘(b) Each non-Federal entity shall have a single Fed22 eral agency, determined in accordance with criteria estab23 lished by the Director, to provide the non-Federal entity

24 with technical assistance and assist with implementation

25 of this chapter.
19

•HR 3184 IH

1 ‘‘(c) The Director shall designate a Federal clearing2 house to—

3 ‘‘(1) receive copies of all reporting packages de4 veloped in accordance with this chapter;

5 ‘‘(2) identify recipients that expend $300,000

6 or more in Federal awards or such other amount

7 specified by the Director under section 7502(a)(3)

8 during the recipient’s fiscal year but did not undergo

9 an audit in accordance with this chapter; and

10 ‘‘(3) perform analyses to assist the Director in

11 carrying out responsibilities under this chapter.

12 ‘‘§ 7505. Regulations

13 ‘‘(a) The Director, after consultation with the Comp14 troller General, and appropriate officials from Federal,

15 State, and local governments and nonprofit organizations

16 shall prescribe guidance to implement this chapter. Each

17 Federal agency shall promulgate such amendments to its

18 regulations as may be necessary to conform such regula19 tions to the requirements of this chapter and of such guid20 ance.

21 ‘‘(b)(1) The guidance prescribed pursuant to sub22 section (a) shall include criteria for determining the appro23 priate charges to Federal awards for the cost of audits.

24 Such criteria shall prohibit a non-Federal entity from

25 charging to any Federal awards—
20

•HR 3184 IH

1 ‘‘(A) the cost of any audit which is—

2 ‘‘(i) not conducted in accordance with this

3 chapter; or

4 ‘‘(ii) conducted in accordance with this

5 chapter when expenditures of Federal awards

6 are less than amounts cited in section

7 7502(a)(1)(A) or specified by the Director

8 under section 7502(a)(3), except that the Direc9 tor may allow the cost of limited scope audits

10 to monitor subrecipients in accordance with sec11 tion 7502(f)(2)(B); and

12 ‘‘(B) more than a reasonably proportionate

13 share of the cost of any such audit that is conducted

14 in accordance with this chapter.

15 ‘‘(2) The criteria prescribed pursuant to paragraph

16 (1) shall not, in the absence of documentation demonstrat17 ing a higher actual cost, permit the percentage of the cost

18 of audits performed pursuant to this chapter charged to

19 Federal awards, to exceed the ratio of total Federal

20 awards expended by such non-Federal entity during the

21 applicable fiscal year or years, to such non-Federal entity’s

22 total expenditures during such fiscal year or years.

23 ‘‘(c) Such guidance shall include such provisions as

24 may be necessary to ensure that small business concerns

25 and business concerns owned and controlled by socially
21

•HR 3184 IH

1 and economically disadvantaged individuals will have the

2 opportunity to participate in the performance of contracts

3 awarded to fulfill the audit requirements of this chapter.

4 ‘‘§ 7506. Monitoring responsibilities of the Comptrol5 ler General

6 ‘‘(a) The Comptroller General shall review provisions

7 requiring financial audits of non-Federal entities that re8 ceive Federal awards that are contained in bills and reso9 lutions reported by the committees of the Senate and the

10 House of Representatives.

11 ‘‘(b) If the Comptroller General determines that a bill

12 or resolution contains provisions that are inconsistent with

13 the requirements of this chapter, the Comptroller General

14 shall, at the earliest practicable date, notify in writing—

15 ‘‘(1) the committee that reported such bill or

16 resolution; and

17 ‘‘(2)(A) the Committee on Governmental Af18 fairs of the Senate (in the case of a bill or resolution

19 reported by a committee of the Senate); or

20 ‘‘(B) the Committee on Government Reform

21 and Oversight of the House of Representatives (in

22 the case of a bill or resolution reported by a commit23 tee of the House of Representatives).
22

•HR 3184 IH

1 ‘‘§ 7507. Effective date

2 ‘‘This chapter shall apply to any non-Federal entity

3 with respect to any of its fiscal years which begin after

4 June 30, 1996.’’.

5 SEC. 3. TRANSITIONAL APPLICATION.

6 Subject to section 7507 of title 31, United States

7 Code (as amended by section 2 of this Act), the provisions

8 of chapter 75 of such title (before amendment by section

9 2 of this Act) shall continue to apply to any State or local

10 government with respect to any of its fiscal years begin11 ning before July 1, 1996.

Æ