[Federal Register Volume 59, Number 12 (Wednesday, January 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1258]


[[Page Unknown]]

[Federal Register: January 19, 1994]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Secretary

24 CFR Parts 44, 45, 85, 92, 207, 213, 221, 232, 236, 242, 277, 
280, 570, 572, 575, 576, 577, 578, 579, 880, 881, 883, 884, 885, 
886, 889, and 890

[Docket No. R-94-1581; FR-2594-F-03]
RIN 2501-AB19

 

Implementation of OMB Circular A-133 ``Audits of Institutions of 
Higher Education and Other Nonprofit Institutions''

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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SUMMARY: OMB Circular A-133 provides policy guidance to Federal 
agencies for establishing uniform requirements for audits of awards 
provided to institutions of higher education and other nonprofit 
organizations. This rule makes final the interim rule that HUD 
promulgated in July 1992 to incorporate the provisions of the circular.

EFFECTIVE DATE: February 18, 1994.

FOR FURTHER INFORMATION CONTACT: Steven O. App, Deputy Chief Financial 
Officer for Finance, room 10166, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410, telephone 
(202) 708-0650. TDD: (202) 708-9300. (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION: OMB Circular A-133 establishes audit 
requirements and defines Federal responsibilities for implementing and 
monitoring such requirements for institutions of higher education and 
other nonprofit institutions receiving Federal awards. It supersedes 
Attachment F, subparagraph 2h, of Circular A-110, ``Uniform 
Administrative Requirements for Grants and other Agreements with 
Institutions of Higher Education, Hospitals, and Other Nonprofit 
Organizations.''
    The provisions of Circular A-133 apply to: a. Federal departments 
and agencies responsible for administering programs that involve 
grants, cost-type contracts and other agreements with institutions of 
higher education and other nonprofit recipients.
    b. Institutions of Higher Education and Other Nonprofit 
Institutions whether they are recipients receiving awards directly from 
Federal agencies, or are subrecipients receiving awards indirectly 
through other recipients.
    On July 27, 1992, the Department published an interim rule at 57 FR 
33252 to adopt the provisions of the circular. The rule adopted the 
provisions of Circular A-133 by adding to Title 24 of the Code of 
Federal Regulations, a new PART 45--NON-FEDERAL AUDIT REQUIREMENTS FOR 
INSTITUTIONS OF HIGHER EDUCATION AND OTHER NONPROFIT INSTITUTIONS. Part 
45 incorporates the requirements set forth in Circular A-133.
    The rule also made numerous technical changes throughout the parts 
of Title 24 in order to make the cross-referencing and conforming 
changes necessary for implementation of Circular A-133. Included in 
these technical changes were a number of changes needed as a result of 
the definition of ``Federal financial assistance,'' as set forth in the 
circular. That definition now covers loans, loan guarantees, and 
insurance. Therefore, programs that make, guarantee, or insure loans to 
nonprofit mortgagors have been brought within the coverage of Circular 
A-133, as it is implemented at part 45.
    However, for HUD programs whose regulations are set forth in 24 CFR 
parts 207, 213, 221, 232, 236, 242, 277, 880, 881, 883, 884, 885, 886, 
889, and 890, a nonprofit institution is the nonprofit corporation 
which owns the individual property receiving the HUD assistance. Each 
project under the parts 200 series and many projects under the parts 
800 series are required to complete project-specific audits because 
they are deemed to be separate entities. The audits currently conducted 
under applicable HUD audit guides for these programs will serve as the 
organization-wide audits required by OMB Circular A-133 and this part. 
In performing the compliance review required by paragraph 13.c. of OMB 
Circular A-133, auditors should consider the compliance requirements 
set forth in the OMB Compliance Supplement. In accordance with the 
regulatory agreement incident to the insured mortgage, where HUD 
provides federal funding, the audit reports pertaining to nonprofit 
organizations subject to these regulations are to be submitted within 
60 days after the end of the fiscal year audited. Each of the parts 
listed in the first sentence of this paragraph is amended to cross-
reference to part 45. The details of coverage of entities receiving 
assistance under these parts is contained in section 45.1(c).1
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    \1\Parts 889 and 890 are programs regarding supportive housing 
for the elderly and persons with disabilities, respectively. The 
regulations for these programs were developed after the publication 
of the interim rule. Nonetheless, the projects under these programs 
are required to complete project-specific audits because they are 
deemed to be separate entities.
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Public Comments

    The public was given 60 days in which to submit comments to the 
interim rule published on July 27, 1992, at 57 FR 33252, and comments 
were received from three commenters: One nonprofit organization, one 
certified public accounting firm, and one national association of 
certified public accountants. Below is a listing of the issues raised 
by the commenters and the Department's response and resolution of those 
issues.
    Comment: The requirements for a compliance audit performed by an 
independent accountant seem to be redundant, time-consuming, and 
costly, especially where municipal and county requirements include 
monthly financial and compliance reports, and both municipal and county 
officials perform inspection of the records, programs and procedures. 
Nonprofit organizations that are subrecipients should be allowed to 
continue adherence to the guidelines in Circular A-110. [one nonprofit 
organization and one certified public accounting firm]
    Response: Accommodation of this comment is not feasible. OMB issued 
Circular A-133 to supersede portions of Circular A-110 and clearly 
included, under the A-133 coverage, funds received as a subrecipient. 
The Department is implementing the provisions of the circular and has 
no flexibility in this matter.
    Comment: The rule should be effective for years beginning on or 
after August 26, 1992, the effective date stated for the rule. However, 
the revisions to paragraph 45.1(d) state that the requirements are 
applicable to fiscal years beginning on or after January 1, 1990. An 
effective date of January 1, 1990 requires institutions to 
retroactively apply OMB Circular A-133, creating an undue hardship on 
those institutions and their auditors. [one national association of 
certified public accountants]
    Response: The date in the summary of the interim rule (August 26, 
1992) relates to when the audit is conducted, and the date in section 
45.1 (fiscal years beginning on or after January 1, 1990) relates to 
the period audited. Circular A-133 specifies that audits of periods 
beginning on or after January 1, 1990 will be covered. The Department 
is merely implementing OMB policy.
    Comment: The revisions to paragraph 45.1(b) state that the 
requirements apply to nonprofit institutions ``* * * as defined in OMB 
Circular A-133 (including hospitals that are not affiliated with an 
institution of higher education) * * *.'' However, section 1.k. of the 
Attachment to Circular A-133 excludes hospitals that are not affiliated 
with an institution of higher education. Clarification is needed. [one 
national association of certified public accountants]
    Response: The substitution of Circular A-133, Audits of 
Institutions of Higher Education and Other Nonprofit Institutions, for 
Circular A-110, Attachment F, subparagraph 2h (which covered grants to 
universities, hospitals, and other nonprofit organizations) left open 
the issue of coverage of hospitals. The explanation for this omission, 
advanced by OMB, was that most hospitals receive reimbursement from the 
federally funded Medicaid and Medicare programs, each of which has its 
own statutory audit requirements. Albeit hospitals which are affiliated 
with universities are covered by Circular A-133 by reason of that 
affiliation and non-university affiliated hospitals, which receive 
federal funds pursuant to research contracts, are subject to contract 
closing audits, there still remained a policy decision of coverage of 
non-university affiliated hospitals that may be receiving HUD 
assistance. Therefore, under section 45.1(b) of the interim rule, the 
coverage was continued under Circular A-133 for non-university 
affiliated hospitals that receive HUD assistance. The decision to 
extend coverage to this group of hospitals receiving HUD assistance was 
made as a matter of policy. Any hospital receiving Federal funds 
should, as a matter of sound fiscal management, receive audit reviews 
of the use of those funds.

This Final Rule

    This rule makes final the interim rule that is discussed above. The 
following four programs are added to its coverage by this final rule, 
since the regulations for these programs were developed after the 
publication of the interim rule: PART 92--HOME INVESTMENT PARTNERSHIPS 
PROGRAM, PART 572--HOPE FOR HOMEOWNERSHIP OF SINGLE FAMILY HOMES 
PROGRAM (HOPE 3), PART 889--SUPPORTIVE HOUSING FOR THE ELDERLY, and 
PART 890--SUPPORTIVE HOUSING FOR PERSONS WITH DISABILITIES. As 
discussed earlier in this preamble, the projects under parts 889 and 
890 are required to complete project-specific audits.

Other Matters

    Executive Order 12866. 
    This rule was reviewed by the Office of Management and Budget (OMB) 
under Executive Order 12866 on Regulatory Planning and Review, issued 
by the President on September 30, 1993. Any changes made in the rule 
subsequent to its submission to OMB are identified in the docket file, 
which is available for public inspection in the Office of the Rules 
Docket Clerk, room 10276, Department of Housing and Urban Development, 
451 Seventh Street, SW., Washington, DC 20410.
    Environmental Determination.
    The content of this rule does not constitute a development, nor 
affect the physical condition of project areas or building sites, but 
relates only to auditing and fiscal functions. Thus, the authorities 
and standards of Sec. 50.4 of 24 CFR part 50 (the regulations 
implementing Section 102(2)(C) of the National Environmental Policy Act 
of 1969) are inapplicable to this rule; therefore, it is categorically 
excluded from the NEPA requirements pursuant to Sec. 50.20(k).

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule does not have a significant 
economic impact on a substantial number of small entities, because the 
rule does not impose additional audit requirements, but merely makes 
uniform the procedures that will be followed.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that this rule 
does not have ``federalism implications'' because it does not have 
substantial direct effects on the States (including their political 
subdivisions), or on the distribution of power and responsibilities 
among the various levels of government.

Executive Order 12606, the Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, the Family, has determined that this rule does not have 
potential significant impact on family formation, maintenance, and 
general well-being.

Semiannual Agenda of Regulations

    This rule was listed as item 1467 in the Department's Semiannual 
Agenda of Regulations published on October 25, 1993 (58 FR 56402, 
56415), in accordance with Executive Order 12866 and the Regulatory 
Flexibility Act.

List of Subjects

24 CFR Part 44

    Accounting, Grant programs, Grant programs--housing and community 
development, Intergovernmental relations, Loan programs--housing and 
community development, Reporting and recordkeeping requirements.

24 CFR Part 45

    Audit requirements-nonprofits, universities; Reporting and 
recordkeeping requirements.

24 CFR Part 85

    Accounting, Grant programs, Intergovernmental relations, Reporting 
and recordkeeping requirements.

24 CFR Part 92

    Administrative practice and procedure, Grant programs--housing and 
community development, Grant programs--Indians, Low and moderate income 
housing, Manufactured homes, Rent subsidies, reporting and 
recordkeeping requirements.

24 CFR Part 207

    Manufactured homes, Mortgage insurance, Reporting and recordkeeping 
requirements, Solar energy.

24 CFR Part 213

    Cooperatives, Mortgage insurance, Reporting and recordkeeping 
requirements.

24 CFR Part 221

    Low and moderate income housing, Mortgage insurance, Reporting and 
recordkeeping requirements.

24 CFR Part 232

    Fire prevention, Health facilities, Loan programs--health, Loan 
programs--housing and community development, Mortgage insurance, 
Nursing homes, Reporting and recordkeeping requirements.

24 CFR Part 236

    Grant programs--housing and community development, Low and moderate 
income housing, Mortgage insurance, Rent subsidies, Reporting and 
recordkeeping requirements.

24 CFR Part 242

    Hospitals, Mortgage insurance, Reporting and recordkeeping 
requirements.

24 CFR Part 277

    Aged, Handicapped, Loan programs--housing and community 
development, Low and moderate income housing.

24 CFR Part 280

    Community development, Grant programs--housing and community 
development, Loan programs--housing and community development, Low and 
moderate income housing, Nonprofit organizations, Reporting and 
recordkeeping requirements.

24 CFR Part 570

    Administrative practice and procedure, American Samoa, Community 
development block grants, Grant programs--housing and community 
development, Grant programs--education, Guam, Lead poisoning, Loan 
programs--housing and community development, Low and moderate income 
housing, Northern Mariana Islands, Pacific Islands Trust Territory, 
Puerto Rico, Reporting and recordkeeping requirements, Virgin Islands, 
Student aid.

24 CFR Part 572

    Condominiums, Cooperatives, Fair housing, Government property, 
Grant programs--housing and community development, Low and moderate 
income housing, Nonprofit organizations, reporting and recordkeeping 
requirements.

24 CFR Part 575

    Civil rights, Community facilities, Grant programs--housing and 
community development, Grant programs--social programs, Homeless, 
Reporting and recordkeeping requirements.

24 CFR Part 576

    Community facilities, Grant programs--housing and community 
development, Emergency shelter grants, Homeless, Reporting and 
recordkeeping requirements.

24 CFR Part 577

    Grant programs--housing and community development, Homeless, 
Community facilities, Employment, Grant programs--social programs, 
Handicapped, Mental health programs, Nonprofit organizations, Reporting 
and recordkeeping.

24 CFR Part 578

    Community facilities, Grant programs--housing and community 
development, Grant programs--social programs, Handicapped, Homeless, 
Reporting and recordkeeping requirements, Mental health programs, 
Nonprofit organizations, Technical assistance.

24 CFR Part 579

    Grant programs--housing and community development, Homeless, 
Reporting and recordkeeping requirements, Community facilities, Grant 
programs--social programs.

24 CFR Part 880

    Grant programs--housing and community development, Rent subsidies, 
Reporting and recordkeeping requirements.

24 CFR Part 881

    Grant programs--housing and community development, Rent subsidies, 
Reporting and recordkeeping requirements.

24 CFR Part 883

    Grant programs--housing and community development, Rent subsidies, 
Reporting and recordkeeping requirements.

24 CFR Part 884

    Grant programs--housing and community development, Rent subsidies, 
Reporting and recordkeeping requirements, Rural areas.

24 CFR Part 885

    Aged, Handicapped, Loan programs--housing and community 
development, Low and moderate income housing, Reporting and 
recordkeeping requirements.

24 CFR Part 886

    Grant programs--housing and community development, Lead poisoning, 
Rent subsidies, Reporting and recordkeeping requirements.

24 CFR Part 889

    Aged, Capital advance programs, Grant programs--housing and 
community development, Loan programs--housing and community 
development, Low and moderate income housing, Rent subsidies, Reporting 
and recordkeeping requirements.

24 CFR Part 890

    Civil rights, Grant programs--housing and community development, 
Individuals with disabilities, Loan programs--housing and community 
development, Low and moderate income housing, Mental health programs, 
Reporting and recordkeeping requirements.

    Accordingly, title 24 of the Code of Federal Regulations, parts 44, 
45, 85, 207, 213, 221, 232, 236, 242, 277, 280, 570, 575, 576, 577, 
578, 579, 880, 881, 883, 884, 885, and 886, Implementation of OMB 
Circular A-133 ``Audits of Institutions of Higher Education and Other 
Nonprofit Institutions'', is amended by adopting as final the interim 
rule, published in the Federal Register on July 27, 1992 at 57 FR 
33252, and is further amended with the following revisions to parts 92, 
572, 881, 889, and 890, to read as follows:

PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM

    1. The authority for part 92 continues to read as follows:

    Authority: 42 U.S.C. 3535(d) and 12701-12839.

    2. Section 92.506 is revised to read as follows:


Sec. 92.506  Audit.

    Audits of the participating jurisdiction and subrecipients must be 
conducted in accordance with 24 CFR parts 44 and 45, as applicable.
    3. Section 92.646 is revised to read as follows:


Sec. 92.646  Audit.

    Audits of the Indian tribe and subrecipients must be conducted in 
accordance with 24 CFR parts 44 and 45, as applicable.

PART 572--HOPE FOR HOMEOWNERSHIP OF SINGLE FAMILY HOMES PROGRAM 
(HOPE 3)

    4. The authority for part 572 continues to read as follows:

    Authority: 42 U.S.C. 3535(d) and 12891.
    5. In Sec. 572.420, the last sentence of paragraph (a)(1) is 
revised to read as follows:


Sec. 572.420  Miscellaneous requirements.

    (a) * * *
    (1) * * *Recipients are also subject to the audit requirements of 
OMB Circular A-128 (Audits of State and Local Governments) implemented 
at 24 CFR part 44, and OMB Circular A-133 (Audits of Institutions of 
Higher Learning and Other Nonprofit Institutions), implemented at 24 
CFR part 45, as applicable.
* * * * *

PART 881--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR 
SUBSTANTIAL REHABILITATION

    6. The authority for part 881 is revised to read as follows:

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, and 3535(d).

    7. In Sec. 881.211, paragraph (b) is revised to read as follows:


Sec. 881.211  Audit.

* * * * *
    (b) Where a nonprofit organization is the eligible owner of a 
project, receiving financial assistance under this part, the audit 
requirements in 24 CFR part 45 shall apply.

PART 889--SUPPORTIVE HOUSING FOR THE ELDERLY

    8. The authority for part 889 continues to read as follows:

    Authority: 12 U.S.C. 1701q; 42 U.S.C. 3535(d).

    9. Part 889 is amended to add a new Sec. 889.280 to subpart B, to 
read as follows:


Sec. 889.280  Audit requirements.

    Nonprofits receiving assistance under this part are subject to the 
audit requirements in 24 CFR part 45.

PART 890--SUPPORTIVE HOUSING FOR PERSONS WITH DISABILITIES

    10. The authority for part 890 continues to read as follows:

    Authority: 42 U.S.C. 3535(d) and 8013.

    11. Part 890 is amended to add a new Sec. 890.275 to subpart B to 
read as follows:


Sec. 890.275  Audit requirements.

    Nonprofits receiving assistance under this part are subject to the 
audit requirements in 24 CFR part 45.

    Dated: December 21, 1993.
Henry G. Cisneros,
Secretary.
[FR Doc. 94-1258 Filed 1-18-94; 8:45 am]
BILLING CODE 4210-32-P