[Federal Register Volume 62, Number 222 (Tuesday, November 18, 1997)]
[Rules and Regulations]
[Pages 61616-61618]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30181]



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Part III





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 5, et al.



Adoption of Revised OMB Circular A-133; Administrative Requirements for 
Grantees to Reflect the Single Audit Act Amendments of 1996; Interim 
Rule

  Federal Register / Vol. 62, No. 222 / Tuesday, November 18, 1997 / 
Rules and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5, 44, 45, 84, and 85

[Docket No. FR-4258-I-01]
RIN 2501-AC40


Adoption of Revised OMB Circular A-133; Administrative 
Requirements for Grantees to Reflect the Single Audit Act Amendments of 
1996

AGENCY: Office of the Chief Financial Officer, HUD.

ACTION: Interim rule.

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SUMMARY: On June 30, 1997, OMB published revised Circular A-133 to 
implement the Single Audit Act Amendments of 1996. The Act sets forth 
requirements for obtaining consistency and uniformity among Federal 
agencies for the audit of States, local governments, and non-profit 
organizations expending Federal awards. This rule adopts the revised 
requirements.

DATES: Effective date: December 18, 1997.
    Comment Due Date: January 20, 1998.

ADDRESSES: Interested persons are invited to submit comments regarding 
this interim rule to the Office of the General Counsel, Rules Docket 
Clerk, Room 10276, Department of Housing and Urban Development, 451 
Seventh Street, S.W., Washington, D.C. 20410-0500. Comments should 
refer to the above docket number and title. A copy of each 
communication submitted will be available for public inspection and 
copying during regular business hours (weekdays 7:30 a.m. to 5:30 p.m. 
Eastern time) at the above address. Facsimile (FAX) comments are not 
acceptable.

FOR FURTHER INFORMATION CONTACT: William E. Dobrzykowski, Deputy Chief 
Financial Officer for Finance, (202) 708-0650. (This is not a toll-free 
number.) Hearing-impaired or speech-impaired individuals may access the 
voice telephone number listed above by calling the Federal Information 
Relay Service during working hours at 1-800-877-8339.

SUPPLEMENTARY INFORMATION: On June 30, 1997, the Office of Management 
and Budget (OMB) published revised Circular No. A-133, re-titled 
``Audits of States, Local Governments, and Non-Profit Organizations,'' 
which established uniform audit requirements for non-Federal entities 
that administer Federal awards and implemented the Single Audit Act 
Amendments of 1996 (Pub.L. 104-156, enacted July 5, 1996). OMB Circular 
No. A-128, ``Audits of States and Local Governments,'' which was issued 
in 1985, was rescinded as a result of the consolidation of audit 
requirements under Circular A-133.
    One of the more significant revisions is that the threshold for 
when an entity is required to have an audit is raised from $25,000 to 
$300,000. Other significant changes are: a report submission due date 
which is shortened from 13 to 9 months and a report submission process 
that includes a data collection form and streamlined filing 
requirements; a new risk-based approach for major program 
determination; and additional guidance for program-specific audits, 
audit findings, and audit findings follow-up.
    Through this interim rule the Department of Housing and Urban 
Development (HUD) adopts these requirements. In addition, HUD is adding 
a provision to set forth a clarification regarding the uniform audit 
requirements for non-profit organizations participating in HUD programs 
whose regulations are set forth in 24 CFR in the part 200 and 800 
series, such as parts 207, 213, 220, 221, 231, 232, 234, 236, 241, 242, 
244, 266, 880, 881, 882, 883, 884, 886, and 891. The clarification 
provides that non-profit organizations subject to regulations in the 
part 200 and part 800 series of 24 CFR shall comply with the audit 
requirements of revised OMB Circular A-133. Audits of non-profit 
organizations under these programs were previously subject to the 
requirements of the Consolidated Audit Guide for Audits of HUD Programs 
(HUD Handbook 2000.04). This audit guide no longer applies to audits of 
non-profit organizations. For HUD programs, a non-profit organization 
is the mortgagor or owner and not a related or affiliated organization 
or entity. The terms ``mortgagor'' or ``owner'' are defined in the 
regulations in the part 200 and part 800 series, such as Secs. 207.251, 
891.205 and 891.305.
    HUD is also removing and reserving 24 CFR parts 44 and 45 since 
these parts are no longer applicable because of the revised circular. A 
number of conforming technical revisions are needed throughout HUD's 
regulations in title 24 of the CFR as a result of HUD's adoption of the 
uniform audit requirements. Those revisions will be set forth in a 
subsequent separate rulemaking.

Findings and Certifications

Environmental Impact

    This amendment is excluded from the environmental review 
requirements of the National Environmental Policy Act (42 U.S.C. 4321-
4347) and the other related Federal environmental laws and authorities, 
as set forth in 24 CFR part 50. In keeping with the exclusion provided 
for in 24 CFR 50.19(c)(1), this amendment does not ``direct, provide 
for assistance or loan and mortgage insurance for, or otherwise govern 
or regulate property acquisition, disposition, lease, rehabilitation, 
alteration, demolition, or new construction, or set out or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy.''

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this interim rule before publication and 
by approving it certifies that this interim rule will not have a 
significant economic impact on a substantial number of small entities. 
This interim rule merely adopts government-wide requirements related to 
auditing. The interim rule does not affect the amount of funds provided 
in the covered programs, but rather increases the threshold for non-
Federal entities subject to audit, thereby reducing burden on some 
small entities.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that this interim 
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.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal 
agencies to assess the effects of their regulatory actions on State, 
local, and tribal governments, and on the private sector. This interim 
rule would not impose any Federal mandates on any State, local, or 
tribal governments, or on the private sector, within the meaning of the 
UMRA.

List of Subjects

24 CFR Part 5

    Administrative practice and procedure, Aged, Claims, Drug abuse, 
Drug traffic control, Grant programs--housing and community 
development, Grant programs-Indians, Grant programs--low and moderate 
income housing, Indians, Individuals with

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disabilities, Intergovernmental relations, Loan programs--housing and 
community development, Low and moderate income housing, Mortgage 
insurance, Penalties, Pets, Public housing, Rent subsidies, Reporting 
and recordkeeping requirements, Social security, Unemployment 
compensation, Wages.

24 CFR Part 44

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

24 CFR Part 45

    Accounting, Colleges and universities, Grant programs, Loan 
programs, Non-profit organizations, Reporting and recordkeeping 
requirements.

24 CFR Part 84

    Accounting, Audit requirements, Colleges and universities, Grant 
programs--housing and community development, Loan programs--housing and 
community development, Non-profit organizations, Reporting and 
recordkeeping requirements.

24 CFR Part 85

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

    Accordingly, parts 5, 44, 45, 84, and 85 of title 24 of the Code of 
Federal Regulations are amended as follows:

PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

    1. The authority citation for part 5 continues to read as follows:

    Authority: 42 U.S.C. 3535(d), unless otherwise noted.

    2. Subpart A is amended to add a new Sec. 5.107 to read as follows:


Sec. 5.107  Audit requirements for non-profit organizations

    Non-profit organizations subject to regulations in the part 200 and 
part 800 series of title 24 of the CFR shall comply with the audit 
requirements of revised OMB Circular A-133, ``Audits of States, Local 
Governments, and Non-Profit Organizations'' (see 24 CFR 84.26). For HUD 
programs, a non-profit organization is the mortgagor or owner (as these 
terms are defined in the regulations in the part 200 and part 800 
series) and not a related or affiliated organization or entity.

PARTS 44 AND 45--[REMOVED AND RESERVED]

    3. Parts 44 and 45 are removed and reserved.

PART 84--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 
AGREEMENTS WITH INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, AND 
OTHER NON-PROFIT ORGANIZATIONS

    4. The authority citation for part 84 continues to read as follows:

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

    5. Section 84.26 is amended by revising paragraphs (a), (b), and 
(c) to read as follows:


Sec. 84.26  Non-Federal audits.

    (a) Recipients and subrecipients that are institutions of higher 
education or other non-profit organization (including hospitals) shall 
be subject to the audit requirements contained in the Single Audit Act 
Amendments of 1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-
133, ``Audits of States, Local Governments, and Non-Profit 
Organizations.''
    (1) Non-profit organizations subject to regulations in the part 200 
and part 800 series of this title which receive awards subject to part 
84 shall comply with the audit requirements of revised OMB Circular A-
133, ``Audits of States, Local Governments, and Non-Profit 
Organizations.'' For HUD programs, a non-profit organization is the 
mortgagor or owner (as these terms are defined in the regulations in 
the part 200 and part 800 series) and not a related or affiliated 
organization or entity.
    (2) Reserved.
    (b) State and local governments shall be subject to the audit 
requirements contained in the Single Audit Act Amendments of 1996 (31 
U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of States, 
Local Governments, and Non-Profit Organizations.''
    (c) For-profit hospitals not covered by the audit provisions of 
revised OMB Circular A-133 shall be subject to the audit requirements 
of the Federal awarding agencies.
* * * * *
    6. Section 84.82 is amended by revising paragraphs (e)(1), (2), and 
(3) to read as follows:


Sec. 84.82  Provisions applicable only to lump sum grants.

* * * * *
    (e) Non-Federal audits. (1) Recipients and subrecipients that are 
institutions of higher education or other non-profit organizations 
(including hospitals) shall be subject to the audit requirements 
contained in the Single Audit Act Amendments of 1996 (31 U.S.C. 7501-
7507) and revised OMB Circular A-133, ``Audits of States, Local 
Governments, and Non-Profit Organizations.''
    (i) Non-profit organizations subject to regulations in the part 200 
and part 800 series of this title which receive awards subject to part 
84 shall comply with the audit requirements of revised OMB Circular A-
133, ``Audits of States, Local Governments, and Non-Profit 
Organizations.'' For HUD programs, a non-profit organization is the 
mortgagor or owner (as these terms are defined in the regulations in 
the part 200 and part 800 series) and not a related or affiliated 
organization or entity.
    (ii) [Reserved].
    (2) State and local governments shall be subject to the audit 
requirements contained in the Single Audit Act Amendments of 1996 (31 
U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of States, 
Local Governments, and Non-Profit Organizations.''
    (3) For-profit hospitals not covered by the audit provisions of 
revised OMB Circular A-133 shall be subject to the audit requirements 
of the Federal awarding agencies.
* * * * *

PART 85--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 
COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS

    7. The authority citation for part 85 continues to read as follows:
    Authority: 42 U.S.C. 3535(d).

    8. Section 85.26 is amended by revising paragraphs (a), (b) 
introductory text, and (b)(1), to read as follows:


Sec. 85.26  Non-Federal audits.

    (a) Basic rule. Grantees and subgrantees are responsible for 
obtaining audits in accordance with the Single Audit Act Amendments of 
1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of 
States, Local Governments, and Non-Profit Organizations.'' The audits 
shall be made by an independent auditor in accordance with generally 
accepted government auditing standards covering financial audits.
    (b) Subgrantees. State or local governments, as those terms are 
defined for purposes of the Single Audit Act Amendments of 1996, that 
provide Federal awards to a subgrantee which expends $300,000 or more 
(or other amount as specified by OMB) in Federal awards in a fiscal 
year, shall:
    (1) Determine whether State or local subgrantees have met the audit

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requirements of the Act and whether subgrantees covered by OMB Circular 
A-110, ``Uniform Administrative Requirements for Grants and Agreements 
with Institutions of Higher Education, Hospitals, and Other Non-Profit 
Organizations,'' have met the audit requirements of the Act. Commercial 
contractors (private for-profit and private and governmental 
organizations) providing goods and services to State and local 
governments are not required to have a single audit performed. State 
and local governments should use their own procedures to ensure that 
the contractor has complied with laws and regulations affecting the 
expenditure of Federal funds;
* * * * *
    Dated: October 22, 1997.
Andrew Cuomo,
Secretary.
[FR Doc. 97-30181 Filed 11-17-97; 8:45 am]
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