GAO

United States General Accounting Office

Report to the Subcommittee on

Government Management, Information,

and Technology, Committee on

Government Reform, House of

Representatives

September 2000 SINGLE AUDIT

Update on the

Implementation of the

Single Audit Act

Amendments of 1996

GAO/AIMD-00-293

Page 1 GAO/AIMD-00-293 Single Audit Act Amendments

Contents

Letter 3

Appendixes Appendix I: Data Collection Form for Reporting on

Audits of States, Local Governments and

Non-profit Organizations 22

Appendix II: Comments From the Office of Management

and Budget 25

Appendix III: GAO Contact and Staff Acknowledgments 26

Tables Table 1: TANF Compliance Findings 17

Abbreviations

AICPA American Institute of Certified Public Accountants

CFDA Catalog of Federal Domestic Assistance

IG Inspector General

OMB Office of Management and Budget

TANF Temporary Assistance to Needy Families
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United States General Accounting Office

Washington, D.C. 20548

Accounting and Information

Management Division

B-286084 Letr

September 29, 2000

The Honorable Steve Horn, Chairman

The Honorable Jim Turner, Ranking Minority Member

Subcommittee on Government Management,

Information, and Technology

Committee on Government Reform

House of Representatives

In May 1999, we testified before your subcommittee on efforts to

implement the Single Audit Act Amendments of 1996.1 At that time, we said

we would continue to monitor implementation of the amendments. This

letter provides you with an update on the implementation of seven key

amendments that cover a range of fundamental issues affecting the single

audit process and the use of single audit results. These seven amendments

1. extend the law to cover all recipients of federal financial assistance,

2. ensure a more cost-beneficial threshold for requiring single audits,

3. focus audit work on programs that present the greatest financial risk to

the federal government,

4. provide for summary reporting of audit results,

5. promote better analyses of audit results through the establishment of a

federal clearinghouse and an automated database,

6. provide for timely reporting of audit results, and

7. authorize pilot projects to further streamline the audit process and

make it more useful.

1

Single Audit: Efforts Underway To Implement 1996 Refinements (GAO/T-AIMD-99-177,

May 13, 1999).
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Results in Brief The intended objectives of the first two amendments have, for the most

part, been accomplished. The legislation and subsequent implementation

guidance issued by the Office of Management and Budget (OMB) resulted

in uniform audit requirements for state and local governments and

nonprofit organizations and raised, to a more cost-beneficial level, the

dollar threshold for determining which recipients are subject to audit.

Federal agencies, state and local governments, and nonprofit organizations

that are recipients of federal awards and their respective auditors are

applying the audit guidance in meeting their single audit responsibilities.

Actions by single audit stakeholders have laid the foundation for effective

implementation of the next four amendments. OMB has issued detailed

criteria on how to apply the risk-based audit approach, and auditors are

using the risk-based approach on their engagements. Single audit reports

now include a summary of the auditor’s results regarding the recipient’s

financial statements, internal controls, and compliance with laws and

regulations. Users of single audit reports can now obtain and analyze

information on more than 27,000 annual reports more quickly than ever

before by using the Internet to access a single audit automated database

established by the Bureau of the Census. Finally, recipients have recently

begun submitting their audit reports under the 9-month reporting deadline

instead of the previous 13-month deadline.

There is not yet enough experience to evaluate the prospects for achieving

the objective of the seventh amendment. OMB received two pilot project

proposals and approved one, a proposal by the Washington State Auditor to

combine 200 separate audits of state educational organizations into one

audit. More experience with pilot projects is needed before their use as an

alternative method for streamlining and improving single audits can be

evaluated.

Background The Single Audit Act, as amended, established the concept of the single

audit to replace multiple grant audits with one audit of a recipient as a

whole. As such, a single audit is an organizationwide audit that focuses on

the recipient’s internal controls and its compliance with laws and

regulations governing federal awards. Federal awards consist of federal

financial assistance including grants, loans, loan guarantees, property,
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cooperative agreements, interest subsidies, insurance, food commodities,

direct appropriations, and federal cost reimbursement contracts.2

The objectives of the Single Audit Act, as amended, are to

• promote sound financial management, including effective internal

controls, with respect to federal awards administered by nonfederal

entities;

• establish uniform requirements for audits of federal awards

administered by nonfederal entities;

• promote the efficient and effective use of audit resources;

• reduce burdens on state and local governments, Indian tribes, and

nonprofit organizations; and

• ensure that federal departments and agencies, to the maximum extent

practicable, rely on and use audit work done pursuant to the act.

In 1994, we reported3 that state and local government officials had

indicated that the single audit process had contributed to improving state

and local government financial management practices. They reported that

they had installed new accounting systems, begun having annual

comprehensive financial statement audits, adopted or accelerated the

adoption of generally accepted accounting principles, improved systems

for tracking federal funds, strengthened administrative controls over

federal programs, and increased oversight of recipients to whom they

distributed federal funds.

Despite those reported improvements, we identified several issues that

burdened the single audit process, hindered the usefulness of its reports,

and limited its impact. We recommended changes to address these issues.

These actions included increasing the dollar thresholds for determining

which recipients were required to have a single audit, adding program risk

criteria to the process for selecting programs to be audited, and compiling

single audit results so that oversight officials and program managers can

easily access and analyze them.

2

The 1996 amendments added federal cost reimbursement contracts and changed the term

federal financial assistance to federal awards to reflect the inclusion of nonprofit

organizations, which often receive much of their funding through cost reimbursement

contracts for research and development activities.

3

Single Audit: Refinements Can Improve Usefulness (GAO/AIMD-94-133, June 21, 1994).
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The Single Audit Act Amendments of 1996 refined the Single Audit Act of

1984. These amendments and the OMB implementing guidance provide the

underpinnings for improving the auditing of the more than $300 billion in

annual federal awards to nonfederal entities. The changes embodied in the

amendments were developed through the collaborative efforts of the many

stakeholders in the single audit process, including OMB, federal inspectors

general, federal and state program managers, state auditors, the public

accounting profession, and ourselves. The changes addressed the points

we raised in the 1994 report and other issues.

The 1996 amendments were effective for audits of recipients whose fiscal

years began after June 30, 1996. An amendment that required the

submission of audit reports no later than 9 months after a recipient’s yearend contained a 2-year transition period before it went into effect. As a

result, this requirement became effective for entities with fiscal years that

began after June 30, 1998.

Objectives, Scope, and

Methodology

Because of the importance of the Single Audit Act’s objectives, including

promoting sound financial management and the efficient and effective use

of audit resources, we have monitored and will continue to monitor the

progress being made in implementing the Single Audit Act Amendments of

1996. This report addresses the status of the implementation of the seven

amendments cited earlier.

In developing this status report, we

• coordinated the audit plan and the results of this assignment through

the National Intergovernmental Audit Forum,4

• met with representatives of OMB, federal agencies, federal offices of

inspector general, state audit offices, and the American Institute of

Certified Public Accountants (AICPA) to gain their perspectives on

single audit implementation issues,

• met with representatives of the Federal Audit Clearinghouse to

determine the status of the development of the single audit database and

to gain an understanding of their database applications and internal

control responsibilities,

4

The National Intergovernmental Audit Forum is an association of audit executives from

federal, state, and local governments. Its primary purpose is to improve coordination and

cooperation in intergovernmental auditing.
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• met with representatives from OMB about their actions to meet their

single audit act responsibilities and other single audit issues,

• tested single audit database functions offered on the Federal Audit

Clearinghouse Internet site, identified problems and challenges, and

worked with clearinghouse officials to address them,

• analyzed the single audit data collection form, the instrument used to

document audit report data entered into the single audit database, and

provided OMB with suggestions for improving the form,

• accessed and analyzed single audit report information on more than

27,000 annual audit reports contained in the Federal Audit

Clearinghouse single audit database,

• developed databases of selected information from the Catalog of

Federal Domestic Assistance5 and federal programs that we have

reported as prone to improper payments6 and then linked them to single

audit data to determine audit coverage of selected programs,

• created a database using Internet sources that identify nonprofit

organizations and matched it with single audit report data to gain a

perspective on the self-reporting aspect of the Single Audit Act and to

demonstrate the potential of linking related sources of information,

• determined that 251 recipients, with federal award expenditures of

$100 million or more, collectively accounted for about 78 percent of

federal award expenditures reported in 1998 single audits,

• discussed the use of the risk-based approach with the auditors from a

sample of 15 non-low-risk recipients that expended $100 million or more

during calendar year 1998, and

• reviewed the results of the Department of Commerce Inspector

General’s (IG) review of the accuracy of the Federal Audit

Clearinghouse single audit database.

We did not independently test the reliability of the single audit database. At

OMB’s request, the Department of Commerce IG performed a review of the

database to assist OMB, the Census Bureau, and other users in assessing

the accuracy of the fiscal year 1998 audit report information in the

5

The Catalog of Federal Domestic Assistance contains information on all financial and

nonfinancial assistance programs administered by the departments and establishments of

the federal government.

6

Financial Management: Increased Attention Needed to Prevent Billions in Improper

Payments (GAO/AIMD-00-10, October 29, 1999).
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database.7 We reviewed the IG’s sampling methodology, monitored the

audit scope and the progress of the review, and discussed the preliminary

results with OMB and IG officials.

We conducted our work from June 1999 through July 2000 in accordance

with generally accepted government auditing standards. We discussed a

draft of this report with representatives of stakeholder groups including

federal inspectors general, state auditors, and the public accounting

profession. We also provided a draft of this report for comment to the

Director of OMB. We have incorporated their comments and views where

appropriate.

Key Amendments and

Status of Implementing

Actions

Following is a synopsis of the implementation status of each of the seven

amendments we are monitoring.

Extend the Law to All

Recipients

The Single Audit Act of 1984 and its implementing guidance, OMB Circular

A-128, covered audits of federal financial assistance to state and local

governments. It did not cover colleges, universities, hospitals, or other

nonprofit recipients. Instead, audit requirements for these entities were

established administratively in OMB Circular A-133. This circular was, in

some ways, inconsistent with OMB Circular A-128. For example, the

circulars contained different criteria for determining which programs were

to receive detailed audit coverage. They also established different time

frames by which the recipients were required to transmit their audit reports

to a federal clearinghouse and make them available for public inspection.

The 1996 amendments expanded the scope of the act to include colleges,

universities, hospitals, and other nonprofit organizations, and required

OMB to prescribe implementation guidance. Accordingly, OMB combined

the two audit circulars and issued a revised Circular A-133, Audits of States,

Local Governments, and Non-Profit Organizations, in June 1997. This

circular establishes policies to guide implementation of the Single Audit

7

Bureau of the Census: Agreed-Upon Procedures and Results Assessment of Federal Audit

Clearinghouse Database Fiscal Year 1998 Audit Reports (Final Audit Report No. ATL-12556-

0-0001/July 2000). The report can also be found at

http://www.oig.doc.gov/reports/recent.htm.
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Act Amendments of 1996 and provides an administrative foundation for

uniform audit requirements for nonfederal entities that administer federal

awards.

A significant part of Circular A-133 is the Compliance Supplement. This

document provides auditors with guidance on compliance requirements

relevant to specific federal programs, suggests audit procedures for these

programs, and includes general audit procedures for programs not

included in the supplement. In our 1994 report, we noted that the then

existing supplement did not reflect all current legal and program

requirements because it had not been updated since 1990.

OMB now updates the Compliance Supplement annually. The supplement

is available in hard copy and has been available through OMB’s Internet

home page (http://www.whitehouse.gov/OMB) for several years. Each year,

OMB works with federal agency representatives to identify programs that

should be added to the supplement and changes that are needed in the

program information for those programs already in the supplement. The

March 2000 update included specific guidance and audit procedures for

about 140 of the approximately 1,400 federal programs listed in the Catalog

of Federal Domestic Assistance (CFDA) and general guidance to assist

auditors in determining compliance requirements, audit objectives, and

audit procedures for programs not included in the supplement. Auditors

generally commended OMB for its update activities and commented that

the annual updates on compliance requirements, audit procedures, and

legislative citations are very helpful to them when performing their audit

work.

More Cost-Beneficial

Thresholds

The 1984 Single Audit Act established a $100,000 single audit threshold8 for

determining those entities that were required to have a single audit. In

setting this threshold, the Congress intended that entities receiving the

greatest amount of federal financial assistance each year be audited and

that entities receiving comparatively small amounts of federal assistance

be exempted. The fixed threshold, however, did not take into account

future increases in amounts of federal financial assistance. As a result, over

8

The 1984 act included a $25,000 exemption threshold but gave each entity that received

between $25,000 and $100,000 in federal assistance an option to have separate audits of each

of its federal assistance programs or a single audit. The 1996 amendments eliminated the

multiple thresholds.
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time, audit resources were being expended on recipients that received

comparatively small amounts of federal financial assistance.

The 1996 amendments raised the dollar threshold from $100,000 to

$300,000. Further, the threshold is now based on expenditures rather than

receipts, and any recipient that expends less than $300,000 is exempt from

the audit requirement. As a result of the threshold change, audit attention is

again focused where the Congress originally intended that it be focused,

that is, on recipients expending the largest amounts of federal financial

assistance. Although information is not collected on the number of

recipients affected by the threshold change, representatives of federal and

state audit organizations and documents we have reviewed indicate that

the number of entities required to have single audits has decreased, in

some cases significantly. For example, Pennsylvania has reported that this

change eliminated the requirement to audit approximately 1,200 relatively

small entities and still provided audit coverage for 94 percent of the federal

funds spent at the local level. Representatives from Maine, Rhode Island,

and Massachusetts stated that the threshold change had a large impact on

the number of audits conducted, although they did not have specific

information on the number of audits eliminated.

The amendments require the Director of OMB to biennially review the

appropriateness of the dollar threshold. The Director may adjust the

amount consistent with the Single Audit Act’s purpose but cannot lower it

below $300,000. Exercising this authority in the future will give the OMB

Director the flexibility to administratively maintain the single audit

threshold at a reasonable level without the need for periodic legislative

amendments.

OMB performed a preliminary evaluation of the single audit threshold in

late 1999 and updated it during the summer of 2000. For each of these

reviews, OMB used data obtained from the Federal Audit Clearinghouse

database as its principal source of information. The database contained

single audit report data for entities with fiscal years ending on or after

June 30, 1997.

At the time of OMB’s preliminary evaluation, the database did not contain

single audit report information for any full calendar year. OMB officials

have told us that they considered it critical for analysis that more

information be available before OMB attempted to reach conclusions on

the appropriateness of or need for a threshold change. Therefore, OMB

used the 1999 review as a dry run to determine the types of evaluations and
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analyses possible, the additional information needed, and other areas that

needed to be considered before it could make a threshold change decision.

For its summer of 2000 evaluation, OMB analyzed database information for

1997 and 1998 single audit reports. In considering the threshold issue, OMB

attempted to

• understand what threshold provides an appropriate balance between

audit burden and audit coverage,

• provide a reasonable level of assurance that the entities that would no

longer be subject to these audit requirements are not at higher risk for

audit problems, and

• provide reasonable assurance that certain entity types, and by extension

certain federal agencies, are not disproportionately affected by raising

the threshold.

OMB is currently reviewing the results of its study and expects to reach its

conclusion on the appropriateness of the current threshold and the need

for a threshold change some time this fall.

Broader Risk-Based Focus The 1984 act’s criteria for selecting programs for testing during the audit

were based on the amount of federal financial assistance received. The

1996 amendments require auditors to use combined expenditure and riskbased criteria to determine which programs to include in the scope of a

single audit. This gives auditors greater freedom in targeting risky

programs by, for example, allowing them to eliminate low-risk large dollar

programs from testing and include high-risk small dollar programs in their

place.

OMB Circular A-133 prescribes a four-step process that auditors are to use

when identifying programs that will be audited. When considering program

risk during this process, auditors shall consider such items as the

recipient’s current and prior audit experience with federal programs; the

results of recent oversight visits by federal, state, or local agencies; and the

inherent risk of the program. The four steps of the risk-based process call

for the auditor to

• identify the larger federal programs, using expenditure criteria specified

in Circular A-133 as applied on an entity-by-entity basis;

• identify the larger federal programs that are low risk;
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• identify smaller federal programs (i.e., those whose expenditures fall

below the Circular A-133 criteria noted in step 1 above) that are high

risk by considering the three areas of potential risk noted above,

documenting risk assessments for programs that meet the expenditure

criteria specified in Circular A-133, and applying auditor judgment; and

• audit all large federal programs, except that the auditor may exclude

those judged low risk, and audit high-risk smaller programs.

When determining the number of smaller programs to audit, the auditor has

two options—to audit at least 50 percent of the smaller programs identified

as high risk, with certain exceptions, or to audit one high-risk smaller

program for each larger program identified as low risk and excluded from

the audit.

Auditors responsible for the 1998 single audits at 15 state and local

governments and nonprofit organizations that we randomly selected to

obtain information on the risk-based approach indicated that they used the

risk-based approach when determining the programs that they examined.

Specifically, the auditors stated that in

• all 15 audits, they used the risk-based approach when performing the

audit;

• 11 instances, the risk-based approach identified at least one small-dollar

program that they selected for testing;

• 4 instances, the risk-based analysis resulted in the auditors concluding

that they should examine all large-dollar programs; and

• 1 instance, a large-dollar program was eliminated based on the riskbased analysis, but no smaller programs were examined because the

risk-based analysis of all small programs resulted in the conclusion that

all of the small programs were low risk.

We also found that, in 4 of the 11 instances where at least one small-dollar

program was audited, the same small program (the Maternal and Child

Health Services Block Grant Program) was audited in 4 states. The audit

reports for all 4 states discussed internal control problems affecting this

program.

In general, the auditors examined more small-dollar programs when the

recipient expended funds from many federal programs than when they

expended funds from a few programs. For example, one state single audit

report identified expenditures for more than 400 federal programs. Based

on its risk analyses, the auditors identified 7 large-dollar programs that they
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deemed were low risk and did not audit. They replaced them with 7 smalldollar programs that the risk-based analysis identified as high risk.

Conversely, for example, the results of the risk-based approach for a

recipient with expenditures from only four federal programs led the

auditors to conclude that all large-dollar programs were high risk. They

audited each of these programs.

In reviewing other information on single audit reports, we found that

51 percent of the entities filing single audit reports expended funds from

five or fewer federal programs. At several of these entities, none of the

programs qualified as a large-dollar program, based on the Circular A-133

criteria. For example, one nonprofit recipient expended funds from two

federal programs, neither of which qualified as a large-dollar program. The

auditors selected the largest of the programs, which accounted for about

81 percent of the expenditures, for audit, thereby meeting the general

requirement that at least 50 percent of the federal expenditures be audited.

The audit officials we spoke to also identified benefits resulting from the

implementation of the risk-based approach. Six of the 15 auditors we spoke

to noted that the approach allows for more auditor flexibility and affords

them the opportunity to use judgment in determining the programs that

they will audit. In addition, two other auditors noted that the requirement

to perform risk assessments has resulted in more intensive audit planning

than was performed prior to the 1996 amendments.

Summary Reporting In 1994, we reported that neither the Single Audit Act nor OMB’s

implementing guidance prescribed the format for conveying the results of

the auditors’ tests and evaluations. Single audit reports contained a series

of as many as eight or more separate reports, including five specifically

focused on federal financial assistance, and significant information was

scattered throughout the separate reports. The 1996 amendments require

that the auditor include, in the single audit report, a summary of the audit’s

results on the recipient’s financial statements, internal controls, and

compliance with laws and regulations. OMB Circular A-133 requires that a

summary of the audit results be included in a schedule of findings and

questioned costs.
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Summary reports typically contain the following types of information:

• the type of auditors report on the entity’s financial statements, internal

controls, and compliance with laws and regulations,

• whether the auditor identified any material internal control weaknesses

or had other audit findings,

• the dollar threshold used to distinguish between large- and small-dollar

programs,

• whether the entity audited was low risk, and

• the federal programs audited.

As part of its review of the accuracy of the Federal Audit Clearinghouse

single audit database, the Department of Commerce IG compared

information contained in several components of the single audit reporting

package and the data collection form with the information contained in the

summary report. All single audit reports examined by the Commerce IG

contained a summary report. However, the auditors identified several

errors and discrepancies when matching single audit report information

with the information contained in the summary report. For example, for the

150 single audit reports reviewed, the IG auditors found 8 instances in

which the reportable condition information entered on the clearinghouse

data collection form did not agree with the information included on the

summary report. By projecting these errors to the universe of 18,992

reports from which the sample was selected, the Commerce auditors

calculated that these errors could occur in up to 1,847 reports. They also

found 4 instances in which a mismatch existed between the audit findings

listed on the data collection form and the audit findings included on the

summary report. These errors were the result of auditor mistakes in

completing one of the documents examined. By projecting these mistakes,

the Commerce auditors reported that these errors could occur in up to

1,333 reports.

Better Basis for Analysis Our 1994 report also highlighted that data on the results of single audits

were not readily accessible and discussed the benefits of compiling those

results in an automated database. The Single Audit Act Amendments of

1996 has resulted in the establishment of an automated database of single

audit information at the Federal Audit Clearinghouse. This database—

containing information on over 27,000 annual reports and various query

options—provides potential users (including program managers, auditors,

and other interested parties) with significant amounts of readily available

information on nonfederal entity financial management and internal
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control systems and compliance with federal laws and regulations.

Database analysis can provide, among other things, leads for follow-on

audits and program oversight.

OMB Circular A-133 now requires all entities that submit single audit

reports to submit a data collection form that includes information about

the entity, its federal programs, and the results of the audit. Recipients are

to submit these forms to the Federal Audit Clearinghouse along with their

single audit reporting packages.

The Federal Audit Clearinghouse uses this data collection form as the

source of the information for its automated, Internet-accessible9 database

of key information contained in single audit reports. Appendix I contains a

copy of the data collection form. OMB is currently working with

representatives of federal agencies and the Federal Audit Clearinghouse on

form revisions. OMB is revising the form as part of its 3-year review

required under the Paperwork Reduction Act and to clarify instructions for

completing the form, allow for more detailed analyses of federal awards

contained in the database, and facilitate more accurate report distribution.

For example, one change is the addition of a question that asks whether

awards are received directly from a federal awarding agency or received by

a subrecipient indirectly from a pass-through entity. Federal agencies and

pass-through entities need this information for resolution of audit findings

(i.e., federal agencies resolve findings applicable to direct awards, and

pass-through entities resolve findings applicable to indirect awards). The

Federal Audit Clearinghouse needs this information to ensure proper

report distribution.

The July 11, 2000, Federal Register included OMB’s notice and request for

comments on the draft revised form. OMB requested comments on or

before September 11, 2000, and plans to require entities to use the new data

collection form for audit periods ending on or after January 1, 2001.

Potential users can access the database and perform analyses of its

information in two ways. First, they can select the data query function that

is a part of the Federal Audit Clearinghouse Internet site’s on-line options.

Under this alternative, users select data fields from the options on the

query form, which mirrors the data collection form, and the built-in query

function will search the database and provide the search results. For

9

The web address for the clearinghouse database is http://harvester.census.gov/sac.
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example, using this method, a user can identify the number of specific

single audit reports that identified internal control weaknesses in any

program with a CFDA number. The 1999 catalog identifies and presents

budget and other information on approximately 1,400 federal programs and

assigns a specific number to each.

To demonstrate further, suppose that a user is looking for information in

1998 single audits concerning the Temporary Assistance to Needy Families

(TANF) program. A search of the database, using the CFDA number as the

program identifier, reveals that TANF was cited in 1,518 single audit

reports. Analysis of these reports shows that auditors identified internal

control weaknesses—either reportable conditions, material weaknesses, or

both—146 times. These control weaknesses existed in state and local

governments and nonprofit organizations. Using this query alternative, a

user can quickly identify entities that expended TANF funds, entities that

experienced internal control problems in their TANF operations, and

specific pages within the entity single audit reports that discuss those

problems.

This ability did not exist prior to the 1996 amendments. At that earlier time,

a user would have to review paper copies of all single audit reports in an

attempt to identify problems in programs of interest to them. Now a user

has the opportunity to electronically create an automated inventory of

reports that identifies problems. An inventory of reports identifying needed

corrective action would be a useful tool for program managers that are

responsible for managing resources required for resolving program

compliance problems and for assuring that all expected audit reports are

received.

Under the second query option, users can download the database and

perform computations, develop a variety of analytical queries, and design

graphics. For example, using the download alternative, a user can compute

the percentage of reported TANF expenditures that were audited for

compliance with TANF requirements. For the 1998 audit reports, about

90 percent of reported TANF expenditures were tested for compliance with

laws and regulations. The problems identified most frequently in these

reports (see table 1) included noncompliance with allowable costs/cost

principles and noncompliance with program eligibility criteria. This type of

summary statistics could be used to measure program improvement over

time.
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Table 1: TANF Compliance Findings

Source: Federal Audit Clearinghouse database as of July 19, 2000.

Timely Reporting Under the 1984 act, entities had up to 13 months from their fiscal year-end

to submit their single audit reporting packages to the federal government.

Our 1994 report noted that nearly 90 percent of the program managers we

queried told us that a 13-month reporting time frame provided data too late.

Program managers supported changing the time frame to 9 months for

state government single audits and to 6 months for all other entities.

The 1996 amendments reduced the reporting time frame to 9 months.

However, compliance with this requirement was not mandatory for 2 years.

As a result, this requirement became effective for entities with fiscal years

that began after June 30, 1998. Thus, the first entities subject to the new

time frame are those with fiscal years beginning on July 1, 1998. Their

reporting packages were due 9 months after June 30, 1999, meaning by

March 31, 2000. The single audit reporting package contains (1) the

financial statements and schedule of expenditures of federal awards,

(2) the summary schedule of prior audit findings, (3) the auditor’s report,

and (4) the corrective action plan. Entities also submit the data collection

form with their reporting packages.

Compliance area

Number of

findings

A: Activities allowed or unallowed 13

B: Allowable costs/cost principles 52

C: Cash management 21

D: Davis Bacon Act 2

E: Eligibility 41

F: Equipment and real property management 17

G: Matching, level of effort, earmarking 4

H: Period of availability of funds 4

I: Procurement 15

J: Program income 1

K: Real property acquisition and relocation assistance 0

L: Reporting 37

M: Subrecipient monitoring 27

N: Special tests and provisions 19
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Based on information obtained from Federal Audit Clearinghouse officials

and the single audit database, as of March 31, 2000, the Federal Audit

Clearinghouse had received 14,993 single audit reporting packages from

entities with a June 30, 1999, year-end. Of these, available information

showed that 13,891 reporting packages contained all required information

and 1,102 were returned to the entity for resubmission because of items

missing from the reporting package, errors in the data collection form, or

both. By June 30, 2000, the cumulative number of reporting packages the

Federal Audit Clearinghouse reported as being received had increased to

16,800, with 799 of these shown as returned to the entities and not yet

resubmitted.

Neither OMB nor the Federal Audit Clearinghouse could precisely

determine the number of single audit reports that were due by March 31,

2000, or any other date because of current data limitations. The trigger for

evoking the need for a single audit is the nonfederal recipient’s expenditure

of $300,000 in federal awards within its own fiscal year. However,

according to clearinghouse and OMB officials, there are no current

governmentwide systems that routinely collect data on nonfederal

recipients’ expenditures of federal awards applicable to their respective

financial reporting periods. OMB plans to work with federal agencies to

explore ways to identify recipients that are required to submit a single audit

report and the due dates.

Pilot Projects The 1996 amendments allow the Director of OMB to authorize pilot

projects to test alternative ways to achieve the objectives of the Single

Audit Act. To date, OMB has received two requests for pilot project

approval. OMB approved the first proposal, by the Washington State

Auditor’s Office for an annual audit of the Washington State Education

System, on May 7, 1999, for a maximum of 4 years. The other proposal, by

the Georgia State Auditor’s Office for an audit of local education agencies,

was not finalized, in part because of other priorities at the State audit

office. Because of the limited number of requests for and conduct of pilot

projects, it would be premature at this time to draw a conclusion on the

benefits of these projects.

In Washington, the state’s education system is made up of three groups—

the state education agency, educational service districts, and local

education agencies—that work in unison to fulfill both federal and state

educational goals. In the past, each of the approximately 200 organizations

in these three groups was audited separately. With centralized planning and
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reporting, development of standardized audit programs, and good internal

communication, the state audit office proposed that the resulting audit

report would be an informative, comparative, and constructive report that

would be more useful to both Washington State and the federal community.

The Washington State Auditor has completed two audits under this pilot

project—the first on September 30, 1999, and the second on June 26, 2000.

An advisory committee, consisting of about 30 stakeholders from

throughout the state, provided input and other guidance to the auditors

throughout the pilot project process. Further, the advisory committee is

conducting a post-audit evaluation, and representatives of federal

inspector general organizations are conducting a quality control review of

the pilot audits. These evaluations, which have not been completed, will

focus on issues including what should be done on the pilot in subsequent

years.

OMB Comments In commenting on a draft of this report, OMB agreed with our assessment

of the status of the implementation of the 1996 amendments.

We are sending copies of this report to Senator Fred Thompson, Chairman,

and Senator Joseph I. Lieberman, Ranking Minority Member, Senate

Committee on Governmental Affairs; Representative Dan Burton,

Chairman, and Representative Henry A. Waxman, Ranking Minority

Member, House Committee on Government Reform; and members of other

interested committees. We are also sending copies to the Honorable Jacob

J. Lew, Director of the Office of Management and Budget, and

representatives of the Federal Audit Clearinghouse, the National

Intergovernmental Audit Forum, federal agencies, federal offices of

inspector general, state audit offices, and the AICPA, who where

stakeholders on this review. Copies will also be made available to others

upon request.
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If you or your staff have any questions about our work, I can be reached at

(202) 512-9489 or by e-mail at clarkd.aimd@gao.gov. Staff contacts and

other key contributors to this letter are listed in appendix III.

David L. Clark

Director, Audit Oversight and Liaison
Page 21 GAO/AIMD-00-293 Single Audit Act Amendments
Page 22 GAO/AIMD-00-293 Single Audit Act Amendments

Appendix I

Data Collection Form for Reporting on Audits Apendxies

of States, Local Governments and Non-profit

Organizations ApendxiI
Appendix I

Data Collection Form for Reporting on

Audits of States, Local Governments and

Non-profit Organizations

Page 23 GAO/AIMD-00-293 Single Audit Act Amendments
Appendix I

Data Collection Form for Reporting on

Audits of States, Local Governments and

Non-profit Organizations

Page 24 GAO/AIMD-00-293 Single Audit Act Amendments
Page 25 GAO/AIMD-00-293 Single Audit Act Amendments

Appendix II

Comments From the Office of Management

and Budget ApendxiI
Page 26 GAO/AIMD-00-293 Single Audit Act Amendments

Appendix III

GAO Contact and Staff Acknowledgments ApendxiI

GAO Contact Thomas Broderick, (202) 512-8705

Acknowledgments Staff making key contributions to this report were Mary Ellen Chervenic,

Perry Datwyler, and Gloria Hernandez-Saunders.

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