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 dis-
closes any audit findings, as defined by the Director, in-
cluding material noncompliance with individual compli-
ance 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 des-
ignated 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 Gen-
eral (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 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 Gov-
ernment Reform and Oversight of the House of Representa-
tives.
‘‘§ 7503. Relation to other audit requirements
‘‘(a) An audit conducted in accordance with this chap-
ter 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 information 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 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 author-
ize any non-Federal entity (or subrecipient thereof) to con-
strain, in any manner, such agency from carrying out or
arranging for such additional audits, except that the Fed-
eral 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 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 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 sub-
section (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.
‘‘(c) The Director shall designate a Federal clearing-
house to—
‘‘(1) receive copies of all reporting packages de-
veloped in accordance with this chapter;
‘‘(2) identify recipients that expend $300,000 or
more in Federal awards or such other amount speci-
fied 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.
‘‘§ 7505. Regulations
‘‘(a) The Director, after consultation with the Comp-
troller 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 cri-
teria shall prohibit a non-Federal 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 sub-
recipients 
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 ac-
cordance 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 Fed-
eral awards, to exceed the ratio of total Federal awards ex-
pended by such non-Federal entity during the applicable
fiscal year or years, to such non-Federal entity’s total ex-
penditures 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 eco-
nomically disadvantaged individuals will have the oppor-
tunity 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 re-
ceive Federal awards that are contained in bills and resolu-
tions 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 res-
olution; and
‘‘(2)(A) the Committee on Governmental Affairs
of the Senate (in the case of a bill or resolution re-
ported 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).
‘‘§ 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 gov-
ernment with respect to any of its fiscal years beginning
before July 1, 1996.