[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1579 Enrolled Bill (ENR)]

        S.1579

                       One Hundred Fourth Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

         Begun and held at the City of Washington on Wednesday,
   the third day of January, one thousand nine hundred and ninety-six


                                 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.

``Sec. 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;
        ``(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 non-
    Federal 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
            ``(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 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 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 non-
    Federal 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 non-
    Federal 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 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 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).

``Sec. 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 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 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 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 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 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.

``Sec. 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 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 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.

``Sec. 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.

``Sec. 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 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 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.

``Sec. 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).

``Sec. 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.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.