PUBLIC LAW 104–156—JULY 5, 1996

SINGLE AUDIT ACT AMENDMENTS OF 1996
110 STAT. 1396 PUBLIC LAW 104–156—JULY 5, 1996

Public Law 104–156

104th Congress

An Act

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

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

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; PURPOSES.

(a) SHORT TITLE.—This Act may be cited as the ‘‘Single Audit

Act Amendments of 1996’’.

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

(1) promote sound financial management, including effective internal controls, with respect to Federal awards administered by non-Federal entities;

(2) establish uniform requirements for audits of Federal

awards administered by non-Federal entities;

(3) promote the efficient and effective use of audit

resources;

(4) reduce burdens on State and local governments, Indian

tribes, and nonprofit organizations; and

(5) ensure that Federal departments and agencies, to the

maximum extent practicable, rely upon and use audit work

done pursuant to chapter 75 of title 31, United States Code

(as amended by this Act).

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

Chapter 75 of title 31, United States Code, is amended to

read as follows:

‘‘CHAPTER 75—REQUIREMENTS FOR 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.

‘‘§ 7501. Definitions

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

‘‘(1) ‘Comptroller General’ means the Comptroller General

of the United States;

‘‘(2) ‘Director’ means the Director of the Office of Management and Budget;

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

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

Single Audit Act

Amendments of

1996.

31 USC 7501

note.

July 5, 1996

[S. 1579]
PUBLIC LAW 104–156—JULY 5, 1996 110 STAT. 1397

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

and Federal cost-reimbursement contracts that non-Federal

entities receive directly from Federal awarding agencies or

indirectly from pass-through entities;

‘‘(5) ‘Federal financial assistance’ means assistance that

non-Federal entities receive or administer in the form of grants,

loans, loan guarantees, property, cooperative agreements,

interest subsidies, insurance, food commodities, direct appropriations, or other assistance, but does not include amounts

received as reimbursement for services rendered to individuals

in accordance with guidance issued by the Director;

‘‘(6) ‘Federal program’ means all Federal awards to a nonFederal entity assigned a single number in the Catalog of

Federal Domestic Assistance or encompassed in a group of

numbers or other category as defined by the Director;

‘‘(7) ‘generally accepted government auditing standards’

means the government auditing standards issued by the

Comptroller General;

‘‘(8) ‘independent auditor’ means—

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

who meets the independence standards included in generally accepted government auditing standards; or

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

standards;

‘‘(9) ‘Indian tribe’ means any Indian tribe, band, nation,

or other organized group or community, including any Alaskan

Native village or regional or village corporation (as defined

in, or established under, the Alaskan Native Claims Settlement

Act) that is recognized by the United States as eligible for

the special programs and services provided by the United States

to Indians because of their status as Indians;

‘‘(10) ‘internal controls’ means a process, effected by an

entity’s management and other personnel, designed to provide

reasonable assurance regarding the achievement of objectives

in the following categories:

‘‘(A) Effectiveness and efficiency of operations.

‘‘(B) Reliability of financial reporting.

‘‘(C) Compliance with applicable laws and regulations;

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

within a State, including a county, borough, municipality, city,

town, township, parish, local public authority, special district,

school district, intrastate district, council of governments, any

other instrumentality of local government and, in accordance

with guidelines issued by the Director, a group of local governments;

‘‘(12) ‘major program’ means a Federal program identified

in accordance with risk-based criteria prescribed by the Director

under this chapter, subject to the limitations described under

subsection (b);

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

or nonprofit organization;

‘‘(14) ‘nonprofit organization’ means any corporation, trust,

association, cooperative, or other organization that—

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

service, charitable, or similar purposes in the public

interest;

‘‘(B) is not organized primarily for profit; and
110 STAT. 1398 PUBLIC LAW 104–156—JULY 5, 1996

‘‘(C) uses net proceeds to maintain, improve, or expand

the operations of the organization;

‘‘(15) ‘pass-through entity’ means a non-Federal entity that

provides Federal awards to a subrecipient to carry out a Federal

program;

‘‘(16) ‘program-specific audit’ means an audit of one Federal

program;

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

awards directly from a Federal agency to carry out a Federal

program;

‘‘(18) ‘single audit’ means an audit, as described under

section 7502(d), of a non-Federal entity that includes the entity’s financial statements and Federal awards;

‘‘(19) ‘State’ means any State of the United States, the

District of Columbia, the Commonwealth of Puerto Rico, the

Virgin Islands, Guam, American Samoa, the Commonwealth

of the Northern Mariana Islands, and the Trust Territory of

the Pacific Islands, any instrumentality thereof, any multiState, regional, or interstate entity which has governmental

functions, and any Indian tribe; and

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

receives Federal awards through another non-Federal entity

to carry out a Federal program, but does not include an individual who receives financial assistance through such awards.

‘‘(b) In prescribing risk-based program selection criteria for

major programs, the Director shall not require more programs

to be identified as major for a particular non-Federal entity, except

as prescribed under subsection (c) or as provided under subsection

(d), than would be identified if the major programs were defined

as any program for which total expenditures of Federal awards

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

‘‘(1) the larger of $30,000,000 or 0.15 percent of the nonFederal entity’s total Federal expenditures, in the case of a

non-Federal entity for which such total expenditures for all

programs exceed $10,000,000,000;

‘‘(2) the larger of $3,000,000, or 0.30 percent of the nonFederal entity’s total Federal expenditures, in the case of a

non-Federal entity for which such total expenditures for all

programs exceed $100,000,000 but are less than or equal to

$10,000,000,000; or

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

Federal expenditures for all programs, in the case of a nonFederal entity for which such total expenditures for all

programs equal or exceed $300,000 but are less than or equal

to $100,000,000.

‘‘(c) When the total expenditures of a non-Federal entity’s major

programs are less than 50 percent of the non-Federal entity’s total

expenditures of all Federal awards (or such lower percentage as

specified by the Director), the auditor shall select and test additional

programs as major programs as necessary to achieve audit coverage

of at least 50 percent of Federal expenditures by the non-Federal

entity (or such lower percentage as specified by the Director), in

accordance with guidance issued by the Director.

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

Director, shall not be subject to the application of subsection (b).
PUBLIC LAW 104–156—JULY 5, 1996 110 STAT. 1399

‘‘§ 7502. Audit requirements; exemptions

‘‘(a)(1)(A) Each non-Federal entity that expends a total amount of Federal awards equal to or in excess of $300,000 or such other

amount specified by the Director under subsection (a)(3) in any

fiscal year of such non-Federal entity shall have either a single

audit or a program-specific audit made for such fiscal year in

accordance with the requirements of this chapter.

‘‘(B) Each such non-Federal entity that expends Federal awards

under more than one Federal program shall undergo a single audit

in accordance with the requirements of subsections (b) through

(i) of this section and guidance issued by the Director under section

7505.

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

only one Federal program and is not subject to laws, regulations,

or Federal award agreements that require a financial statement

audit of the non-Federal entity, may elect to have a programspecific audit conducted in accordance with applicable provisions

of this section and guidance issued by the Director under section

7505.

‘‘(2)(A) Each non-Federal entity that expends a total amount of Federal awards of less than $300,000 or such other amount

specified by the Director under subsection (a)(3) in any fiscal year

of such entity, shall be exempt for such fiscal year from compliance

with—

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

‘‘(ii) any applicable requirements concerning financial

audits contained in Federal statutes and regulations governing

programs under which such Federal awards are provided to

that non-Federal entity.

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

shall not exempt a non-Federal entity from compliance with any

provision of a Federal statute or regulation that requires such

non-Federal entity to maintain records concerning Federal awards

provided to such non-Federal entity or that permits a Federal

agency, pass-through entity, or the Comptroller General access

to such records.

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

requiring audits prescribed under paragraph (1)(A) and may adjust

such dollar amount consistent with the purposes of this chapter,

provided the Director does not make such adjustments below

$300,000.

‘‘(b)(1) Except as provided in paragraphs (2) and (3), audits

conducted pursuant to this chapter shall be conducted annually.

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

or statute, in effect on January 1, 1987, to undergo its audits

less frequently than annually, is permitted to undergo its audits

pursuant to this chapter biennially. Audits conducted biennially

under the provisions of this paragraph shall cover both years within

the biennial period.

‘‘(3) Any nonprofit organization that had biennial audits for

all biennial periods ending between July 1, 1992, and January

1, 1995, is permitted to undergo its audits pursuant to this chapter

biennially. Audits conducted biennially under the provisions of this

paragraph shall cover both years within the biennial period.

‘‘(c) Each audit conducted pursuant to subsection (a) shall be

conducted by an independent auditor in accordance with generally

accepted government auditing standards, except that, for the
110 STAT. 1400 PUBLIC LAW 104–156—JULY 5, 1996

purposes of this chapter, performance audits shall not be required

except as authorized by the Director.

‘‘(d) Each single audit conducted pursuant to subsection (a)

for any fiscal year shall—

‘‘(1) cover the operations of the entire non-Federal entity;

or

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

shall include a series of audits that cover departments, agencies, and other organizational units which expended or otherwise administered Federal awards during such fiscal year provided that each such audit shall encompass the financial statements and schedule of expenditures of Federal awards for each

such department, agency, and organizational unit, which shall

be considered to be a non-Federal entity.

‘‘(e) The auditor shall—

‘‘(1) determine whether the financial statements are presented fairly in all material respects in conformity with generally accepted accounting principles;

‘‘(2) determine whether the schedule of expenditures of

Federal awards is presented fairly in all material respects

in relation to the financial statements taken as a whole;

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

compliance requirements for each major program—

‘‘(A) obtain an understanding of such internal controls;

‘‘(B) assess control risk; and

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

deemed to be ineffective; and

‘‘(4) determine whether the non-Federal entity has complied

with the provisions of laws, regulations, and contracts or grants

pertaining to Federal awards that have a direct and material

effect on each major program.

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

to a recipient shall—

‘‘(A) provide such recipient the program names (and any

identifying numbers) from which such awards are derived, and

the Federal requirements which govern the use of such awards

and the requirements of this chapter; and

‘‘(B) review the audit of a recipient as necessary to determine whether prompt and appropriate corrective action has

been taken with respect to audit findings, as defined by the

Director, pertaining to Federal awards provided to the recipient

by the Federal agency.

‘‘(2) Each pass-through entity shall—

‘‘(A) provide such subrecipient the program names (and

any identifying numbers) from which such assistance is derived,

and the Federal requirements which govern the use of such

awards and the requirements of this chapter;

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

through site visits, limited scope audits, or other means;

‘‘(C) review the audit of a subrecipient as necessary to

determine whether prompt and appropriate corrective action

has been taken with respect to audit findings, as defined by

the Director, pertaining to Federal awards provided to the

subrecipient by the pass-through entity; and

‘‘(D) require each of its subrecipients of Federal awards

to permit, as a condition of receiving Federal awards, the

independent auditor of the pass-through entity to have such
PUBLIC LAW 104–156—JULY 5, 1996 110 STAT. 1401

access to the subrecipient’s records and financial statements

as may be necessary for the pass-through entity to comply

with this chapter.

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

conducted pursuant to this section, in accordance with guidance

issued by the Director.

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

include a summary of the auditor’s results regarding the nonFederal entity’s financial statements, internal controls, and compliance with laws and regulations.

‘‘(h) The non-Federal entity shall transmit the reporting package, which shall include the non-Federal entity’s financial statements, schedule of expenditures of Federal awards, corrective action

plan defined under subsection (i), and auditor’s reports developed

pursuant to this section, to a Federal clearinghouse designated

by the Director, and make it available for public inspection within

the earlier of—

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

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

the effective date of the Single Audit Act Amendments of 1996,

as established by the Director, 13 months after the end of

the period audited; or

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

in subparagraph (A), 9 months after the end of the period

audited, or within a longer timeframe authorized by the Federal

agency, determined under criteria issued under section 7504,

when the 9-month timeframe would place an undue burden

on the non-Federal entity.

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

any audit findings, as defined by the Director, including material

noncompliance with individual compliance requirements for a major

program by, or reportable conditions in the internal controls of,

the non-Federal entity with respect to the matters described in

subsection (e), the non-Federal entity shall submit to Federal officials designated by the Director, a plan for corrective action to

eliminate such audit findings or reportable conditions or a statement describing the reasons that corrective action is not necessary.

Such plan shall be consistent with the audit resolution standard

promulgated by the Comptroller General (as part of the standards

for internal controls in the Federal Government) pursuant to section

3512(c).

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

methods of achieving the purposes of this chapter. Such pilot

projects may begin only after consultation with the Chair and

Ranking Minority Member of the Committee on Governmental

Affairs of the Senate and the Chair and Ranking Minority Member

of the Committee on Government Reform and Oversight of the

House of Representatives.

‘‘§ 7503. Relation to other audit requirements

‘‘(a) An audit conducted in accordance with this chapter shall

be in lieu of any financial audit of Federal awards which a nonFederal entity is required to undergo under any other Federal

law or regulation. To the extent that such audit provides a Federal

agency with the information it requires to carry out its responsibilities under Federal law or regulation, a Federal agency shall rely

upon and use that information.

Reports.
110 STAT. 1402 PUBLIC LAW 104–156—JULY 5, 1996

‘‘(b) Notwithstanding subsection (a), a Federal agency may conduct or arrange for additional audits which are necessary to carry

out its responsibilities under Federal law or regulation. The provisions of this chapter do not authorize any non-Federal entity (or

subrecipient thereof) to constrain, in any manner, such agency

from carrying out or arranging for such additional audits, except

that the Federal agency shall plan such audits to not be duplicative

of other audits of Federal awards.

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

of Federal agencies to conduct, or arrange for the conduct of, audits

and evaluations of Federal awards, nor limit the authority of any

Federal agency Inspector General or other Federal official.

‘‘(d) Subsection (a) shall apply to a non-Federal entity which

undergoes an audit in accordance with this chapter even though

it is not required by section 7502(a) to have such an audit.

‘‘(e) A Federal agency that provides Federal awards and conducts or arranges for audits of non-Federal entities receiving such

awards that are in addition to the audits of non-Federal entities

conducted pursuant to this chapter shall, consistent with other

applicable law, arrange for funding the full cost of such additional

audits. Any such additional audits shall be coordinated with the

Federal agency determined under criteria issued under section 7504

to preclude duplication of the audits conducted pursuant to this

chapter or other additional audits.

‘‘(f) Upon request by a Federal agency or the Comptroller General, any independent auditor conducting an audit pursuant to

this chapter shall make the auditor’s working papers available

to the Federal agency or the Comptroller General as part of a

quality review, to resolve audit findings, or to carry out oversight

responsibilities consistent with the purposes of this chapter. Such

access to auditor’s working papers shall include the right to obtain

copies.

‘‘§ 7504. Federal agency responsibilities and relations with

non-Federal entities

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

issued by the Director under section 7505, with regard to Federal

awards provided by the agency—

‘‘(1) monitor non-Federal entity use of Federal awards,

and

‘‘(2) assess the quality of audits conducted under this chapter for audits of entities for which the agency is the single

Federal agency determined under subsection (b).

‘‘(b) Each non-Federal entity shall have a single Federal agency,

determined in accordance with criteria established by the Director,

to provide the non-Federal entity with technical assistance and

assist with implementation of this chapter.

‘‘(c) The Director shall designate a Federal clearinghouse to—

‘‘(1) receive copies of all reporting packages developed in

accordance with this chapter;

‘‘(2) identify recipients that expend $300,000 or more in

Federal awards or such other amount specified by the Director

under section 7502(a)(3) during the recipient’s fiscal year but

did not undergo an audit in accordance with this chapter;

and

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

out responsibilities under this chapter.
PUBLIC LAW 104–156—JULY 5, 1996 110 STAT. 1403

‘‘§ 7505. Regulations

‘‘(a) The Director, after consultation with the Comptroller General, and appropriate officials from Federal, State, and local governments and nonprofit organizations shall prescribe guidance to implement this chapter. Each Federal agency shall promulgate such

amendments to its regulations as may be necessary to conform

such regulations to the requirements of this chapter and of such

guidance.

‘‘(b)(1) The guidance prescribed pursuant to subsection (a) shall

include criteria for determining the appropriate charges to Federal

awards for the cost of audits. Such criteria shall prohibit a nonFederal entity from charging to any Federal awards—

‘‘(A) the cost of any audit which is—

‘‘(i) not conducted in accordance with this chapter;

or

‘‘(ii) conducted in accordance with this chapter when

expenditures of Federal awards are less than amounts

cited in section 7502(a)(1)(A) or specified by the Director

under section 7502(a)(3), except that the Director may allow

the cost of limited scope audits to monitor subrecipients

in accordance with section 7502(f)(2)(B); and

‘‘(B) more than a reasonably proportionate share of the

cost of any such audit that is conducted in accordance with

this chapter.

‘‘(2) The criteria prescribed pursuant to paragraph (1) shall

not, in the absence of documentation demonstrating a higher actual

cost, permit the percentage of the cost of audits performed pursuant

to this chapter charged to Federal awards, to exceed the ratio

of total Federal awards expended by such non-Federal entity during

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

total expenditures during such fiscal year or years.

‘‘(c) Such guidance shall include such provisions as may be

necessary to ensure that small business concerns and business

concerns owned and controlled by socially and economically disadvantaged individuals will have the opportunity to participate

in the performance of contracts awarded to fulfill the audit requirements of this chapter.

‘‘§ 7506. Monitoring responsibilities of the Comptroller General

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

financial audits of non-Federal entities that receive Federal awards

that are contained in bills and resolutions reported by the committees of the Senate and the House of Representatives.

‘‘(b) If the Comptroller General determines that a bill or resolution contains provisions that are inconsistent with the requirements

of this chapter, the Comptroller General shall, at the earliest practicable date, notify in writing—

‘‘(1) the committee that reported such bill or resolution;

and

‘‘(2)(A) the Committee on Governmental Affairs of the Senate (in the case of a bill or resolution reported by a committee

of the Senate); or

‘‘(B) the Committee on Government Reform and Oversight

of the House of Representatives (in the case of a bill or resolution reported by a committee of the House of Representatives).
110 STAT. 1404 PUBLIC LAW 104–156—JULY 5, 1996

LEGISLATIVE HISTORY—S. 1579 (H.R. 3184):

HOUSE REPORTS: No. 104–607 accompanying H.R. 3184 (Comm. on Government

Reform and Oversight).

SENATE REPORTS: No. 104–266 (Comm. on Governmental Affairs).

CONGRESSIONAL RECORD, Vol. 142 (1996):

June 14, considered and passed Senate.

June 18, considered and passed House.

WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 32 (1996):

July 5, Presidential statement.

Æ

‘‘§ 7507. Effective date

‘‘This chapter shall apply to any non-Federal entity with respect

to any of its fiscal years which begin after June 30, 1996.’’.

SEC. 3. TRANSITIONAL APPLICATION.

Subject to section 7507 of title 31, United States Code (as

amended by section 2 of this Act) the provisions of chapter 75

of such title (before amendment by section 2 of this Act) shall

continue to apply to any State or local government with respect

to any of its fiscal years beginning before July 1, 1996.

Approved July 5, 1996.

31 USC 7501

note.