garding the achievement of objectives in the follow-
ing categories:
‘‘(A) Effectiveness and efficiency of oper-
ations.
‘‘(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 accord-
ance with guidelines issued by the Director, a group
of local governments;
‘‘(12) ‘major program’ means a Federal pro-
gram identified in accordance with risk-based cri-
teria 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 cor-
poration, trust, association, cooperative, or other or-
ganization that—
‘‘(A) is operated primarily for scientific,
educational, service, charitable, or similar pur-
poses in the public interest;
‘‘(B) is not organized primarily for profit;
and
‘‘(C) uses net proceeds to maintain, im-
prove, or expand the operations of the organiza-
tion;
‘‘(15) ‘pass-through entity’ means a non-Fed-
eral entity that provides Federal awards to a sub-
recipient 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 de-
scribed under section 7502(d), of a non-Federal en-
tity 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 Is-
lands, any instrumentality thereof, any multi-State,
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 cri-
teria 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 pro-
gram 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 non-Federal entity’s total Federal expendi-
tures, 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 non-Federal entity’s total Federal expendi-
tures, 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 non-Federal 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 Di-
rector), the auditor shall select and test additional pro-
grams 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 is-
sued by the Director.
‘‘(d) Loan or loan guarantee programs, as specified
by the Director, shall not be subject to the application of
subsection (b).
‘‘§ 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 pro-
gram-specific audit made for such fiscal year in accord-
ance with the requirements of this chapter.
‘‘(B) Each such non-Federal entity that expends Fed-
eral awards under more than one Federal program shall
undergo a single audit in accordance with the require-
ments 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 re-
quire a financial statement audit of the non-Federal en-
tity, may elect to have a program-specific 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 fi-
nancial audits contained in Federal statutes and reg-
ulations governing programs under which such Fed-
eral 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 reg-
ulation 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 per-
mitted to undergo its audits pursuant to this chapter bien-
nially. Audits conducted biennially under the provisions of
this paragraph shall cover both years within the biennial
period.
‘‘(3) Any nonprofit organization that had biennial au-
dits 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 bien-
nially 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 accord-
ance with generally accepted government auditing stand-
ards, except that, for the purposes of this chapter, per-
formance audits shall not be required except as authorized
by the Director.
‘‘(d) Each single audit conducted pursuant to sub-
section (a) for any fiscal year shall—
‘‘(1) cover the operations of the entire non-Fed-
eral 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 state-
ments and schedule of expenditures of Federal
awards for each such department, agency, and orga-
nizational 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 con-
formity with generally accepted accounting prin-
ciples;
‘‘(2) determine whether the schedule of expendi-
tures of Federal awards is presented fairly in all ma-
terial 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 pro-
gram—
‘‘(A) obtain an understanding of such in-
ternal 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, regula-
tions, 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 re-
quirements of this chapter; and
‘‘(B) review the audit of a recipient as nec-
essary 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 require-
ments 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 nec-
essary 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 Fed-
eral awards to permit, as a condition of receiving
Federal awards, the independent auditor of the pass-
through entity to have such 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 non-Federal entity’s financial statements, internal
controls, and compliance with laws and regulations.
‘‘(h) The non-Federal entity shall transmit the re-
porting package, which shall include the non-Federal enti-
ty’s financial statements, schedule of expenditures of Fed-
eral awards, corrective action plan defined under sub-
section (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 re-
port; 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 Direc-
tor, 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 time-
frame authorized by the Federal agency, determined
under criteria issued under section 7505, 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 compli-
ance requirements for a major program by, or reportable
conditions in the internal controls of, the non-Federal en-
tity 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 ac-
tion is not necessary. Such plan shall be consistent with
the audit resolution standard promulgated by the Comp-
troller General (as part of the standards for internal con-
trols 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 chap-
ter. Such pilot projects may begin only after consultation
with the Chair and Ranking Minority Member of the Com-
mittee 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 non-Federal entity is required to undergo
under any other Federal law or regulation. To the extent
that such audit provides a Federal agency with the infor-
mation it requires to carry out its responsibilities under
Federal law or regulation, a Federal agency shall rely
upon and use that information.
‘‘(b) Notwithstanding subsection (a), a Federal agen-
cy 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 dupli-
cative 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 en-
tity 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 enti-
ties receiving such awards that are in addition to the au-
dits 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 Fed-
eral agency determined under criteria issued under section
7504 to preclude duplication of the audits conducted pur-
suant to this chapter or other additional audits.
‘‘(f) Upon request by a Federal agency or the Comp-
troller 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 ob-
tain 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 Fed-
eral agency, determined in accordance with criteria estab-
lished by the Director, to provide the non-Federal entity
with technical assistance and assist with implementation
of this chapter.