61616 Federal Register / Vol. 62, No. 222 / Tuesday, November 18, 1997 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Parts 5, 44, 45, 84, and 85

[Docket No. FR–4258–I–01]

RIN 2501–AC40

Adoption of Revised OMB Circular A–

133; Administrative Requirements for

Grantees to Reflect the Single Audit

Act Amendments of 1996

AGENCY: Office of the Chief Financial

Officer, HUD.

ACTION: Interim rule.

SUMMARY: On June 30, 1997, OMB

published revised Circular A–133 to

implement the Single Audit Act

Amendments of 1996. The Act sets forth

requirements for obtaining consistency

and uniformity among Federal agencies

for the audit of States, local

governments, and non-profit

organizations expending Federal

awards. This rule adopts the revised

requirements.

DATES: Effective date: December 18,

1997.

Comment Due Date: January 20, 1998.

ADDRESSES: Interested persons are

invited to submit comments regarding

this interim rule to the Office of the

General Counsel, Rules Docket Clerk,

Room 10276, Department of Housing

and Urban Development, 451 Seventh

Street, S.W., Washington, D.C. 20410–

0500. Comments should refer to the

above docket number and title. A copy

of each communication submitted will

be available for public inspection and

copying during regular business hours

(weekdays 7:30 a.m. to 5:30 p.m. Eastern

time) at the above address. Facsimile

(FAX) comments are not acceptable.

FOR FURTHER INFORMATION CONTACT:

William E. Dobrzykowski, Deputy Chief

Financial Officer for Finance, (202) 708–

0650. (This is not a toll-free number.)

Hearing-impaired or speech-impaired

individuals may access the voice

telephone number listed above by

calling the Federal Information Relay

Service during working hours at 1–800–

877–8339.

SUPPLEMENTARY INFORMATION: On June

30, 1997, the Office of Management and

Budget (OMB) published revised

Circular No. A–133, re-titled ‘‘Audits of

States, Local Governments, and NonProfit Organizations,’’ which established

uniform audit requirements for nonFederal entities that administer Federal

awards and implemented the Single

Audit Act Amendments of 1996 (Pub.L.

104–156, enacted July 5, 1996). OMB

Circular No. A–128, ‘‘Audits of States

and Local Governments,’’ which was

issued in 1985, was rescinded as a result

of the consolidation of audit

requirements under Circular A–133.

One of the more significant revisions

is that the threshold for when an entity

is required to have an audit is raised

from $25,000 to $300,000. Other

significant changes are: a report

submission due date which is shortened

from 13 to 9 months and a report

submission process that includes a data

collection form and streamlined filing

requirements; a new risk-based

approach for major program

determination; and additional guidance

for program-specific audits, audit

findings, and audit findings follow-up.

Through this interim rule the

Department of Housing and Urban

Development (HUD) adopts these

requirements. In addition, HUD is

adding a provision to set forth a

clarification regarding the uniform audit

requirements for non-profit

organizations participating in HUD

programs whose regulations are set forth

in 24 CFR in the part 200 and 800 series,

such as parts 207, 213, 220, 221, 231,

232, 234, 236, 241, 242, 244, 266, 880,

881, 882, 883, 884, 886, and 891. The

clarification provides that non-profit

organizations subject to regulations in

the part 200 and part 800 series of 24

CFR shall comply with the audit

requirements of revised OMB Circular

A–133. Audits of non-profit

organizations under these programs

were previously subject to the

requirements of the Consolidated Audit

Guide for Audits of HUD Programs

(HUD Handbook 2000.04). This audit

guide no longer applies to audits of nonprofit organizations. For HUD programs,

a non-profit organization is the

mortgagor or owner and not a related or

affiliated organization or entity. The

terms ‘‘mortgagor’’ or ‘‘owner’’ are

defined in the regulations in the part

200 and part 800 series, such as

§§ 207.251, 891.205 and 891.305.

HUD is also removing and reserving

24 CFR parts 44 and 45 since these parts

are no longer applicable because of the

revised circular. A number of

conforming technical revisions are

needed throughout HUD’s regulations in

title 24 of the CFR as a result of HUD’s

adoption of the uniform audit

requirements. Those revisions will be

set forth in a subsequent separate

rulemaking.

Findings and Certifications

Environmental Impact

This amendment is excluded from the

environmental review requirements of

the National Environmental Policy Act

(42 U.S.C. 4321–4347) and the other

related Federal environmental laws and

authorities, as set forth in 24 CFR part

50. In keeping with the exclusion

provided for in 24 CFR 50.19(c)(1), this

amendment does not ‘‘direct, provide

for assistance or loan and mortgage

insurance for, or otherwise govern or

regulate property acquisition,

disposition, lease, rehabilitation,

alteration, demolition, or new

construction, or set out or provide for

standards for construction or

construction materials, manufactured

housing, or occupancy.’’

Regulatory Flexibility Act

The Secretary, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), has reviewed this interim rule

before publication and by approving it

certifies that this interim rule will not

have a significant economic impact on

a substantial number of small entities.

This interim rule merely adopts

government-wide requirements related

to auditing. The interim rule does not

affect the amount of funds provided in

the covered programs, but rather

increases the threshold for non-Federal

entities subject to audit, thereby

reducing burden on some small entities.

Executive Order 12612, Federalism

The General Counsel, as the

Designated Official under section 6(a) of

Executive Order 12612, Federalism, has

determined that this interim rule does

not have ‘‘federalism implications’’

because it does not have substantial

direct effects on the States (including

their political subdivisions), or on the

distribution of power and

responsibilities among the various

levels of government.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates

Reform Act of 1995 (Pub. L. 104–4;

approved March 22, 1995) (UMRA)

establishes requirements for Federal

agencies to assess the effects of their

regulatory actions on State, local, and

tribal governments, and on the private

sector. This interim rule would not

impose any Federal mandates on any

State, local, or tribal governments, or on

the private sector, within the meaning of

the UMRA.

List of Subjects

24 CFR Part 5

Administrative practice and

procedure, Aged, Claims, Drug abuse,

Drug traffic control, Grant programs—

housing and community development,

Grant programs-Indians, Grant

programs—low and moderate income

housing, Indians, Individuals with
Federal Register / Vol. 62, No. 222 / Tuesday, November 18, 1997 / Rules and Regulations 61617

disabilities, Intergovernmental relations,

Loan programs—housing and

community development, Low and

moderate income housing, Mortgage

insurance, Penalties, Pets, Public

housing, Rent subsidies, Reporting and

recordkeeping requirements, Social

security, Unemployment compensation,

Wages.

24 CFR Part 44

Accounting, Grant programs, Indians,

Intergovernmental relations, Loan

programs, Reporting and recordkeeping

requirements.

24 CFR Part 45

Accounting, Colleges and universities,

Grant programs, Loan programs, Nonprofit organizations, Reporting and

recordkeeping requirements.

24 CFR Part 84

Accounting, Audit requirements,

Colleges and universities, Grant

programs—housing and community

development, Loan programs—housing

and community development, Nonprofit organizations, Reporting and

recordkeeping requirements.

24 CFR Part 85

Accounting, Audit requirements,

Grant programs, Indians,

Intergovernmental relations, Reporting

and recordkeeping requirements.

Accordingly, parts 5, 44, 45, 84, and

85 of title 24 of the Code of Federal

Regulations are amended as follows:

PART 5—GENERAL HUD PROGRAM

REQUIREMENTS; WAIVERS

1. The authority citation for part 5

continues to read as follows:

Authority: 42 U.S.C. 3535(d), unless

otherwise noted.

2. Subpart A is amended to add a new

§ 5.107 to read as follows:

§ 5.107 Audit requirements for non-profit

organizations

Non-profit organizations subject to

regulations in the part 200 and part 800

series of title 24 of the CFR shall comply

with the audit requirements of revised

OMB Circular A–133, ‘‘Audits of States,

Local Governments, and Non-Profit

Organizations’’ (see 24 CFR 84.26). For

HUD programs, a non-profit

organization is the mortgagor or owner

(as these terms are defined in the

regulations in the part 200 and part 800

series) and not a related or affiliated

organization or entity.

PARTS 44 AND 45—[REMOVED AND

RESERVED]

3. Parts 44 and 45 are removed and

reserved.

PART 84—UNIFORM ADMINISTRATIVE

REQUIREMENTS FOR GRANTS AND

AGREEMENTS WITH INSTITUTIONS

OF HIGHER EDUCATION, HOSPITALS,

AND OTHER NON-PROFIT

ORGANIZATIONS

4. The authority citation for part 84

continues to read as follows:

Authority: 42 U.S.C. 3535(d).

5. Section 84.26 is amended by

revising paragraphs (a), (b), and (c) to

read as follows:

§ 84.26 Non-Federal audits.

(a) Recipients and subrecipients that

are institutions of higher education or

other non-profit organization (including

hospitals) shall be subject to the audit

requirements contained in the Single

Audit Act Amendments of 1996 (31

U.S.C. 7501–7507) and revised OMB

Circular A–133, ‘‘Audits of States, Local

Governments, and Non-Profit

Organizations.’’

(1) Non-profit organizations subject to

regulations in the part 200 and part 800

series of this title which receive awards

subject to part 84 shall comply with the

audit requirements of revised OMB

Circular A–133, ‘‘Audits of States, Local

Governments, and Non-Profit

Organizations.’’ For HUD programs, a

non-profit organization is the mortgagor

or owner (as these terms are defined in

the regulations in the part 200 and part

800 series) and not a related or affiliated

organization or entity.

(2) Reserved.

(b) State and local governments shall

be subject to the audit requirements

contained in the Single Audit Act

Amendments of 1996 (31 U.S.C. 7501–

7507) and revised OMB Circular A–133,

‘‘Audits of States, Local Governments,

and Non-Profit Organizations.’’

(c) For-profit hospitals not covered by

the audit provisions of revised OMB

Circular A–133 shall be subject to the

audit requirements of the Federal

awarding agencies.

* * * * *

6. Section 84.82 is amended by

revising paragraphs (e)(1), (2), and (3) to

read as follows:

§ 84.82 Provisions applicable only to lump

sum grants.

* * * * *

(e) Non-Federal audits. (1) Recipients

and subrecipients that are institutions of

higher education or other non-profit

organizations (including hospitals) shall

be subject to the audit requirements

contained in the Single Audit Act

Amendments of 1996 (31 U.S.C. 7501–

7507) and revised OMB Circular A–133,

‘‘Audits of States, Local Governments,

and Non-Profit Organizations.’’

(i) Non-profit organizations subject to

regulations in the part 200 and part 800

series of this title which receive awards

subject to part 84 shall comply with the

audit requirements of revised OMB

Circular A–133, ‘‘Audits of States, Local

Governments, and Non-Profit

Organizations.’’ For HUD programs, a

non-profit organization is the mortgagor

or owner (as these terms are defined in

the regulations in the part 200 and part

800 series) and not a related or affiliated

organization or entity.

(ii) [Reserved].

(2) State and local governments shall

be subject to the audit requirements

contained in the Single Audit Act

Amendments of 1996 (31 U.S.C. 7501–

7507) and revised OMB Circular A–133,

‘‘Audits of States, Local Governments,

and Non-Profit Organizations.’’

(3) For-profit hospitals not covered by

the audit provisions of revised OMB

Circular A–133 shall be subject to the

audit requirements of the Federal

awarding agencies.

* * * * *

PART 85—UNIFORM ADMINISTRATIVE

REQUIREMENTS FOR GRANTS AND

COOPERATIVE AGREEMENTS TO

STATE AND LOCAL GOVERNMENTS

7. The authority citation for part 85

continues to read as follows:

Authority: 42 U.S.C. 3535(d).

8. Section 85.26 is amended by

revising paragraphs (a), (b) introductory

text, and (b)(1), to read as follows:

§ 85.26 Non-Federal audits.

(a) Basic rule. Grantees and

subgrantees are responsible for

obtaining audits in accordance with the

Single Audit Act Amendments of 1996

(31 U.S.C. 7501–7507) and revised OMB

Circular A–133, ‘‘Audits of States, Local

Governments, and Non-Profit

Organizations.’’ The audits shall be

made by an independent auditor in

accordance with generally accepted

government auditing standards covering

financial audits.

(b) Subgrantees. State or local

governments, as those terms are defined

for purposes of the Single Audit Act

Amendments of 1996, that provide

Federal awards to a subgrantee which

expends $300,000 or more (or other

amount as specified by OMB) in Federal

awards in a fiscal year, shall:

(1) Determine whether State or local

subgrantees have met the audit
61618 Federal Register / Vol. 62, No. 222 / Tuesday, November 18, 1997 / Rules and Regulations

requirements of the Act and whether

subgrantees covered by OMB Circular

A–110, ‘‘Uniform Administrative

Requirements for Grants and

Agreements with Institutions of Higher

Education, Hospitals, and Other NonProfit Organizations,’’ have met the

audit requirements of the Act.

Commercial contractors (private forprofit and private and governmental

organizations) providing goods and

services to State and local governments

are not required to have a single audit

performed. State and local governments

should use their own procedures to

ensure that the contractor has complied

with laws and regulations affecting the

expenditure of Federal funds;

* * * * *

Dated: October 22, 1997.

Andrew Cuomo,

Secretary.

[FR Doc. 97–30181 Filed 11–17–97; 8:45 am]

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