[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1579 Reported in Senate (RS)]
Calendar No. 401
104th CONGRESS
2d Session
S. 1579
[Report No. 104-266]
_______________________________________________________________________
A BILL
To streamline and improve the effectiveness of chapter 75 of title 31,
United States Code (commonly referred to as the ``Single Audit Act'').
_______________________________________________________________________
May 13, 1996
Reported with amendments
Calendar No. 401
104th CONGRESS
2d Session
S. 1579
[Report No. 104-266]
To streamline and improve the effectiveness of chapter 75 of title 31,
United States Code (commonly referred to as the ``Single Audit Act'').
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
February 27 (legislative day, February 23), 1996
Mr. Glenn (for himself, Mr. Stevens, Mr. Levin, Mr. Cochran, Mr. Pryor,
Mr. Cohen, Mr. Lieberman, Mr. Brown, and Mr. Grassley) introduced the
following bill; which was read twice and referred to the Committee on
Governmental Affairs
May 13, 1996
Reported by Mr. Stevens, with amendments
[Omit the part struck through and insert the part printed in italic]
_______________________________________________________________________
A BILL
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, <DELETED>donated
surplus property,</DELETED> 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
<DELETED>7505</DELETED> 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.