[Congressional Record Volume 142, Number 90 (Tuesday, June 18, 1996)]
[House]
[Pages H6464-H6469]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  SINGLE AUDIT ACT AMENDMENTS OF 1996

  Mr. HORN. Mr. Speaker, I move to suspend the rules and pass the 
Senate bill (S. 1579) to streamline and improve the effectiveness of 
chapter 75 of title 31, United States Code (commonly referred to as the 
``Single Audit Act'').
  The Clerk read as follows:

                                S. 1579

       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;

[[Page H6465]]

       ``(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

[[Page H6466]]

     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).

[[Page H6467]]

     ``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.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
California [Mr. Horn] and the gentlewoman from New York [Mrs. Maloney] 
each will control 20 minutes.
  The Chair recognizes the gentleman from California [Mr. Horn].
  Mr. HORN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, this legislation is identical to H.R. 3184, legislation 
I introduced, the purpose of which is to improve the financial 
management of funds provided to grantees by the Federal Government. The 
bill would reduce paperwork burdens on States, local governments, 
universities, and other nonprofit organizations that receive Federal 
assistance.
  I am very pleased that the chairman of the Committee on Government 
Reform and Oversight, Representative William Clinger, joins me in 
supporting the bill, as does Representative Tom Davis of Virginia, 
Representative Carolyn Maloney of New York, Representative Collin 
Peterson of Minnesota, and Representative Scotty Baesler of Kentucky.
  This good government measure was developed on a bipartisan basis. It 
will strengthen accountability by recipients for the Federal assistance 
they receive, while providing flexibility to Federal agencies to place 
oversight resources where they are most effective.
  S. 1579 amends the Single Audit Act of 1984. The 1984 act replaced 
multiple grant-by-grant audits of Federal Assistance programs with an 
annual entity-wide process for State and local governments that receive 
Federal financial assistance.
  During the early 1990's groups affected by the Single Audit Act of 
1984, such as the National State auditors Association and the 
President's Council on Integrity and Efficiency, began a comprehensive 
review of the efficacy of the act and from that effort developed 
suggestions on how it could be improved. The bill incorporates many of 
their ideas for improvement and has been endorsed by those groups.
  The bill provides significant changes to the 1984 act. Those changes 
improve its usefulness.
  The measure allows Federal program managers more flexibility in 
achieving the legislation's purpose, and reduces the audit burden on 
both the managers and the recipients of funding freeing up time and 
resources for programs. It improves the reporting process by asking for 
reports on programs within a shorter time frame, with the addition of 
user-friendly summaries.
  The legislation improves audit coverage by placing both State and 
local governments and nonprofit organizations under the same single 
audit process, and under the same rules. In accordance with current 
law, not-for-profits are not covered by the 1984 act, but instead by 
circular A-133 which is guidance created by the Office of Management 
and Budget. This change helps Federal auditors as well as recipients of 
Federal aid since there will be a single set of rules to follow 
affording less potential for confusion and error.
  The bill reduces the burden of a fiscal audit on recipients. The 
threshold for requiring a single audit is raised from $100,000 annually 
to $300,000 annually. An organization receiving less than $100,000 
would not be required to have an audit; however it would remain subject 
to monitoring and is required to report on the use of the funds. By 
raising the threshold for requiring an audit the bill reduces both the 
audit and paperwork burden, thereby allowing more funds for use by the 
program.
  It is important to note that this change will still allow for 95 
percent of Federal funds provided to recipients to be audited ensuring 
accountability of the use of Federal funds. This is the same percentage 
targeted for coverage by the 1984 act.
  It is imperative that the Federal Government better account for the 
expenditure of the tax dollars of the American people. The Single Audit 
Act helps to accomplish this objective. It does so while eliminating 
unnecessary audits and requiring that all Federal agencies granting 
money to an organization use the single audit. As a former university 
president, I know that Government paperwork requirements cost staff 
time and financial resources that could be better used to provide 
services and jobs. Common sense must be applied to Government 
requirements. This bill does just that.

  The Single Audit Act of 1984 replaced a disparate approach to audits 
of individual State and local recipients of Federal funds. Prior to its 
passage a system of multiple grant-by-grant audits existed. This 
created a scenario where an organization receiving Federal funds from 
more than one Federal source could find itself spending vast amounts of 
time and resources providing identical information to different Federal 
auditors simply because the funding came from different government 
agencies. Often the agencies would schedule audits at the same time 
resulting in a situation where several Federal auditors competed for 
the same records. Making matters worse, there also existed a variety of 
overlapping, inconsistent, and, too often, duplicative Federal agency 
requirements for audits of individual programs. The Single Audit Act 
replaced that with a unified approach which my legislation continues.
  As I noted, the benefits of the bill include:
  The broadening of the scope of the Single Audit Act to include 
nonprofit organizations, along with State and local governments that 
receive Federal assistance. State and local governments currently 
follows the guidance in OMB circular A-128; nonprofits follow the 
guidance in OMB circular A-133. This change will allow the Office of 
Management and Budget to develop one consolidated body of audit 
requirements for recipients of Federal assistance.
  The Federal burden on many of those entities now required to have 
single audits will be reduced by the proposal, while retaining the same 
level of audit coverage that the 1984 act provided. This occurs by 
raising the Federal dollar threshold for requiring a single audit from 
$100,000 to $300,000. This will benefit small entities which will not 
longer be burdened by the existing OMB circular A-133 regulations.
  In addition the bill will allow for a risk-based approach to audit 
testing. This will encourage the refocusing of audit resources to 
places where there is the greatest risk of waste, fraud or abuse. Based 
on guidance developed by the Office of Management and Budget, auditors 
will be able to exercise good professional judgment in selecting 
programs for testing rather than automatically auditing the same 
programs year after year.
  Over the last few years we have made great strides in reforming 
Federal financial management. Much remains to be done. The Single Audit 
Act of 1984 started the process with States and local governments and 
devised great improvements in financial management by those 
governments. The Chief Financial Officers Act of 1990 continued the 
process and extended the concept of financial accountability to the 
executive branch. The Single Audit Act Amendments of 1996 continues the 
process further by allowing experimentation with performance auditing--
the process of looking at the effectiveness of a program achievement of 
its goal--and allowing for the use of judgment, focusing on a risk-
based approach to auditing rather than just mechanically following 
rules. S. 1579 builds on the accomplishments of the 1984 act, and will 
lead to additional improvement for both Federal agencies and recipients 
of Federal assistance. It is a good government, commonsense initiative. 
I urge support of this motion.

                              {time}  1700

  Mr. Speaker, I reserve the balance of my time.
  Mrs. MALONEY. Mr. Speaker, I yield myself such time as I may consume.
  As the ranking Democrat of the Subcommittee on Government Management, 
Information and Technology, I am proud to be the ranking Democratic 
sponsor of H.R. 3184, the companion bill to S. 1579, the Single Audit 
Act Amendments of 1996. I would like to thank the gentleman from 
California [Mr. Horn], for the bipartisan spirit with which he has 
approached and worked on this legislation and for his leadership on 
this legislation.

[[Page H6468]]

  This legislation builds on the Single Audit Act of 1984, which 
replaced the inefficient, cumbersome, multiple grant-by-grant audits of 
Federal assistance programs with an annual entity-wide audit, greatly 
simplifying and improving the system.
  H.R. 3184's major reforms would enhance audit coverage; reduce 
administrative burdens; increase effectiveness by establishing a risk-
based approach for selecting programs for audit, as opposed to auditing 
every single program; thereby focusing resources where they are most 
needed; improve reporting and simplify reporting; and increase 
administrative flexibility.
  Today, more than ever, with 20 percent of the Federal budget being 
passed through to the State and local governments, it is important that 
we have a good accounting of these funds.
  In 1960 the Federal Government gave 7 percent of its funds to State 
and local governments, $7 billion out of $100 billion budget. In 1981, 
when Congress began discussing the single audit concept, the Federal 
budget had grown fivefold, but transfers to State and local governments 
had grown to $95 billion, nearly a 14-fold increase. Today, nearly 20 
percent of the Federal budget of $1.5 trillion goes to State and local 
governments.
  The Single Audit Act was designed to create a system of 
accountability for those dollars. Over the last 12 years it has served 
us well.
  The Single Audit Act of 1984 addressed a serious problem of 
accountability. It replaced a system of multiple grant-by-grant audits 
with a single entitywide audit of all Federal funds.
  Prior to the act, there were many overlapping, inconsistent and 
duplicative Federal requirements. The act eliminated this duplication 
and provided a set of uniform auditing requirements. At the same time, 
it improved accountability for billions of dollars and reduced the 
paperwork burden on State and local governments.
  The Single Audit Act Amendments of 1996 updates the law and makes 
needed and necessary changes.
  The threshold of $100,000 for auditing State and local governments 
was carefully selected in 1984 to cover 95 percent of all transfers. 
Because of inflation, that threshold now covers 99 percent of all 
transfers. This bill raises that threshold to $300,000, returning 
coverage to the 95 percent level.
  To increase the administrative flexibility, this bill also gives the 
director of the Office of Management and Budget the authority to adjust 
the threshold for future inflation. Currently, institutions of higher 
education and other nonprofit organizations of higher education and 
other nonprofit organizations receiving Federal funds are audited under 
executive authority. These amendments will codify the audit 
requirements for those entities. It is important to note that this bill 
also makes the results of these audits more useful to the officials 
responsible for overseeing Federal funds.
  The bill calls for more timely reports, reducing the time from 13 
months to 9, and reports that emphasize the auditor's conclusions, the 
quality of internal controls, and the continuing interest of the 
Federal Government.
  This bill has been negotiated over the last year to address the 
concerns of a number of interested parties. The success of those 
negotiations is reflected in the wide support that the bill enjoys. In 
addition to bipartisan sponsorship in the House and Senate, the bill is 
endorsed by the National State Auditors Association and the 
administration.
  Mr. Speaker, I thank the chairman, I urge my colleagues to support 
this bill, and I reserve the balance of my time.
  Mr. HORN. Mr. Speaker, I thank my distinguished colleague from New 
York for her help and cooperation, and I likewise appreciate the help 
and cooperation of the gentleman from Minnesota [Mr. Peterson], who, as 
an accountant, made a great contribution to the shaping of this bill.
  Mr. Speaker, I yield 3 minutes to the gentleman from Virginia [Mr. 
Davis], one of the most active colleagues on our subcommittee and the 
full committee.
  Mr. DAVIS. Mr. Speaker, I rise today in support of S. 1579, the 
Single Audit Act Amendments of 1996. S. 1579 is an important piece of 
legislation that will significantly reduce the Federal burden on State 
and local governments by amending the Single Audit Act of 1984. As the 
former head of government in Fairfax County, VA, I am keenly aware of 
the success of the Single Audit Act and the worthiness of these 
followup amendments.
  The 1984 act replaced multiple grant-by-grant audits of Federal 
assistance programs with an annual entitywide audit process for State 
and local governments receiving Federal assistance.
  S. 1579 will provide needed changes to the 1984 act by reducing 
unnecessary audit burdens on recipients of Federal assistance while at 
the same time ensuring that accountability for the use of Federal funds 
is maintained. The amendments also provide administrative flexibility 
to adjust statutory requirements and allow for a more efficient and 
cost-effective audit approach.
  Several studies have been conducted that illustrate the influence of 
the 1984 act on the financial management practices of State and local 
governments receiving Federal assistance. All State and local 
participants of the studies have agreed that the single audit process 
has improved the approach to auditing Federal assistance, but that 
further improvements are desirable.
  This bill will meet these desired changes by significantly reducing 
the Federal burden on State and local governments by raising the single 
audit threshold from $100,000 to $300,000 and eliminating the $25,000 
threshold for program audits. These changes will reduce audit and 
paperwork burdens, while preserving audit coverage of the bulk of 
Federal assistance. Why spend $30,000 auditing a $25,000 grant?
  The General Accounting Office has estimated that the $300,000 
threshold would cover 95 percent of direct Federal assistance to local 
governments, which is commensurate with the coverage provided at the 
$100,000 threshold when the act was passed in 1984. In effect, the 
exempting of thousands of entities from single audits would reduce 
audit and paperwork burdens, but would not significantly diminish the 
percentage of Federal assistance covered by single audits.
  Those entities that would fall below the $300,000 threshold would be 
exempt from federally mandated audit coverage but would still have to 
comply with the Federal requirements to maintain records or permit 
access to records. The elimination of the $25,000 threshold, which 
requires entities to have a program audit of each Federal program they 
administer, would further simplify the act by having only one single 
audit threshold.
  This bill, Mr. Speaker, is a commonsense package of amendments that 
will serve to further enhance the effectiveness of the Single Audit Act 
by reducing the Federal burden on State and local governments. 
Therefore, I thank the gentleman from California [Mr. Horn], the 
gentleman from Pennsylvania [Mr. Clinger], and the gentlewoman from New 
York [Mrs. Maloney] for their leadership on this issue, and I urge 
support of the bill.
  Mrs. MALONEY. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Illinois [Mrs. Collins], the distinguished ranking 
member of the Committee on Government Reform and Oversight.
  Mrs. COLLINS of Illinois. Mr. Speaker, I rise in support of this 
bill, and commend Ranking Minority Member Maloney and Chairman Horn for 
their hard efforts on behalf of this legislation.
  The Single Audit Act of 1984 addressed a serious problem of 
accountability. It is more important today than ever.
  The interaction between the Federal Government and State and local 
governments is far more complex than it was 35 years ago. In 1960, out 
of a total Federal budget of about $100 billion, the Federal Government 
gave $7 billion to State and local governments. In 1981, when Congress 
began discussing the single audit concept, the Federal budget had grown 
five-fold, but transfers to State and local governments had grown to 
$95 billion--nearly a 14-fold increase.
  Today, nearly 20 percent of the Federal budget of $1.5 trillion, or 
20 percent of the taxes collected by the IRS, goes to State and local 
governments. The Single Audit Act was designed to create a system of 
accountability for those dollars. Over the last 12 years it has served 
us well.

[[Page H6469]]

  The experience of the last 12 years has also shown a number of places 
where the legislation can be improved. The Single Audit Act Amendments 
of 1996 incorporates those changes.
  The threshold of $100,000 for auditing State and local governments 
was carefully selected in 1984 to cover 95 percent of all transfers. 
Because of inflation, that threshold now covers 99 percent of all 
transfers. This bill raises the threshold to $300,000, and returns 
coverage to the 95 percent level. This bill also give the Director of 
the Office of Management and Budget the authority to adjust the 
threshold for future inflation.
  Among other changes to the Single Audit Act, this bill makes the 
results of these audits more useful to the administration officials 
responsible for overseeing these funds, by requiring more timely 
reports--reducing the time from 13 months to 9--and requiring that 
reports emphasize the auditors conclusions, the quality of internal 
controls, and the continuing interests of the Federal Government.
  This bill has been negotiated over the last year to address the 
concerns of a number of interested parties. The success of those 
negotiations is reflected in the wide support this bill enjoys. In 
addition to bipartisan sponsorship in the House and Senate, the bill is 
endorsed by the National State Auditors Association, and the 
administration.
  Mr. Speaker, I again commend the ranking member and the chairman of 
the subcommittee for this fine piece of work, and urge all of my 
colleagues to support this good piece of legislation.
  Mrs. MALONEY. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  Mr. HORN. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Nethercutt). The question is on the 
motion offered by the gentleman from California [Mr. Horn] that the 
House suspend the rules and pass the Senate bill, S. 1579.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the Senate bill was passed.
  A motion to reconsider was laid on the table.

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