OMB Circular A-133 (Single Audit)

1. OMB Circular A-133 (Single Audit) Heather Perry, CPA Amy Ring, CPA @dozcpa

2. OMB Circular A-133 – Audits of States, Local Governments and Non-Profit Organizations

3. What is OMB Circular A-133 (Single Audit) and who does it apply to? Created to standardize the audits of non-profit organizations receiving at least $500,000 in federal awards annually • Prior to A-133, each federal agency was responsible for its own audits • Audits were not consistent • Resulted in additional costs to the government

4. What is OMB Circular A-133 (Single Audit) A Single audit consists of two main parts: • Audit of basic financial statements • Audit of the entity’s major federal awards program(s) • Gaining an understanding of and testing the internal controls over compliance • Testing compliance with requirements over the program(s) • Understanding of internal control over financial reporting

5. Single Audit Objectives Express an opinion on: • Financial statements in conformity with GAAP and schedule of expenditures of federal awards is presented fairly in relation to the financial statements taken as a whole. • Auditee complied with laws, regulations, and the provisions of contracts or grant agreements on each major program.

6. Single Audit Objectives (continued) Does not express an opinion on: • Internal control over the financial reporting and compliance.

7. Who is Required to Follow OMB Circular A-133? Any NFP receiving federal awards is subject to this guide. • Federal programs are identified by federal program name, federal agency and CFDA number • If the federal award is included in the A-133 Compliance Supplement, specific audit risks are identified

8. Who is Required to Follow OMB Circular A-133? An A-133 audit includes examining an entity’s: • Financial records • Financial statements • Federal award transactions and expenditures • General management of its operations • Internal control systems • Federal assistance received during the audit period

9. Who is Required to Follow OMB Circular A-133? For fiscal years ending after December 31, 2003, organizations that expend less than $500,000 in federal awards during the year are exempt from single audit requirements.

10. Who is Required to Follow OMB Circular A-133? Which of these examples require an A-133 audit: • Section 202 Mortgage of $750,000 and Section 8 of $200,000 • Section 202 Capital Advance of $900,000 and PRAC of $125,000 • Section 202 Mortgage of $200,000 and Section 8 of $200,000 • Section 202 Capital Advance of $400,000 and PRAC of $150,000

11. OMB Circular A-133 (Single Audit) Under A-133, non-profit organizations are required to: • Maintain internal control for federal programs • Comply with laws, regulations and the provisions of contracts or grant agreements • Prepare appropriate financial statements, including the Schedule of Expenditures of Federal Awards (SEFA) • Ensure that required single audits are properly performed and submitted when due • Follow up and take corrective actions on findings

12. Differences between an A-133 audit and a HUD audit Determination of major programs • HUD – over $500,000 = major • A-133 – risk based approach Compliance areas • HUD – follow Chapter 3 of the HUD Audit Guide • A-133 – follow Compliance Supplement

13. Differences between an A-133 audit and a HUD audit

14. Differences between an A-133 audit and a HUD audit Schedule of Expenditures of Federal Awards (“SEFA”) • Auditee’s responsibility to prepare • Includes all Federal programs received and expended, program title, CFDA number, award number and year, name of the Federal agency, name of pass-through entity (if applicable), and footnotes • Auditor’s responsibility to opine on whether the SEFA is presented fairly in all material respects

15. Differences between an A-133 audit and a HUD audit

16. Differences between an A-133 audit and a HUD audit Internal Control • Internal control testing for A-133 requires the auditor to perform procedures to obtain an understanding of internal control over Federal programs and plan and perform tests of internal controls to support a low assessed level of control risk for major programs; if the auditor cannot do this, the auditor must report a reportable condition

17. Differences between an A-133 audit and a HUD audit Sampling • HUD allows for sampling at the management company level for properties that utilize the same system of controls. A-133 does not have a sampling provision, and compliance must be done on an individual entity basis.

18. Reporting Package and Submission Reporting package • Financial statements and SEFA • Schedule of prior audit findings • Auditor’s opinion which must include either combined or separately • An opinion (or disclaimer) on whether the financial statements are presented fairly in all material respects in accordance w/ GAAP • An opinion on whether the SEFA is presented fairly in all material respects • A report on compliance for major programs and internal control over compliance

19. Reporting Package and Submission Reporting package (continued) • Auditor’s opinion (continued) • A report on compliance with laws, regulations, and provisions of contracts/grant agreements, noncompliance that could have a material effect on the financial statements as well as an opinion as to whether the entity complied with laws, regulations, and provisions that could have a direct and material effect on each of the major programs • If applicable, a schedule of findings and questioned costs • Corrective action plan

20. Reporting Package and Submission Report Submission • Data Collection – each entity must submit the reporting package with a data collection form to the Federal Clearinghouse certified by both the auditee and auditor • Submission deadline is the earlier of 30 days after receipt of the auditor’s report or 9 months after the end of the audit period

21. Efforts to Bring A-133 and HUD Requirements Closer Together Non-profit entities, regardless of which federal agency provided the award, are not required to have an audit unless the entity receives at least $500,000 in federal awards.

22. Efforts to Bring A-133 and HUD Requirements Closer Together In August 2013, HUD released Notice 2013-23 – Change in Annual Financial Statement Submission for Some Multifamily Housing Projects • HUD Notice 2013-23 applied this same rule to For-Profit entities • Beginning with year ends of 12/31/2013 – entities receiving less than $500,000 in federal awards are not required by HUD to be audited and can submit Owner Certified financial statements.

23. Proposed Changes To A-133 and How It Will Affect the Audits In January 2013 OMB issued Proposed OMB Uniform Guidance: Cost Principals, Audit and Administrative Requirements for Federal Awards which proposed broad revisions to OMB Circular A-133.

24. Proposed Changes To A-133 and How It Will Affect the Audits Key areas of proposed changes • Increase the single audit threshold to $750,000 • Increase the single audit threshold for Type A/Type B programs from $300,000 to $500,000 • For a Type A program to be high-risk it must have failed to receive an unqualified opinion, had a material weakness in internal control, or had questioned costs exceeding 5% of the program’s expenditures • Reduce the number of Type B programs that must be tested as major programs

25. Proposed Changes To A-133 and How It Will Affect the Audits Key areas of proposed changes (continued) • Reduce the percentage of coverage of major programs required in a single audit from 50% (normal) and 25% (low-risk auditees) to 40% (normal) and 20% (low-risk auditees) • Criteria for low-risk auditee status would be revised to included • Timely submission of data collection forms • Auditor did not report a substantial doubt about the entity’s ability to continue as a going concern

26. Proposed Changes To A-133 and How It Will Affect the Audits Key areas of proposed changes (continued) • Reduction in the types of compliance areas to be tested from 14 to 6 • Findings – more detail required, however questioned costs could increase from $10,000 to $25,000.

27. Questions? Heather Perry, hperry@doz.net Amy Ring, aring@doz.net @dozcpa

28. References OMB Office of Federal and Financial Management, The Single Audit (http://www.whitehouse.gov/omb/financial/fin_single_audit.html) American Institute of CPAs – GAQC Alert #211 (http://www.aicpa.org/InterestAreas/GovernmentalAuditQuality/NewsAndPublications/GAQCALERT/2013/Pages/GAQCAlertNo211.aspx) Consolidated Audit Guide for Audits of HUD Programs Handbook (2000.4) (http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/oigh/2000.4)