[Federal Register Volume 62, Number 125 (Monday, June 30, 1997)]
[Notices]
[Pages 35302-35319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16966]
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OFFICE OF MANAGEMENT AND BUDGET
OMB Circular A-133 Information Collection Under OMB Review
AGENCY: Office of Management and Budget.
ACTION: Notice.
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SUMMARY: In accordance with the Paperwork Reduction Act of 1980, as
amended (44 U.S.C. 3501 et seq.), this notice announces that an
information collection request was submitted to the Office of
Management and Budget's (OMB) Office of Information and Regulatory
Affairs for processing under 5 CFR 1320.10. The first notice of this
information collection request, as required by the Paperwork Reduction
Act, was published in the Federal Register on November 5, 1996 (61 FR
57232), as part of the proposed revision of OMB Circular A-133, re-
titled ``Audits of States, Local Governments, and Non-Profit
Organizations.''
The information collection request involves two proposed
information collections from two types of entities: (1) Reports from
auditors to auditees concerning audit results, audit findings, and
questioned costs; and, (2) reports from auditees to the Federal
Government providing information about the auditees, the awards they
administer, and the audit results. Circular A-133's information
collection requirements will apply to approximately 25,000 States,
local governments, and non-profit organizations on an annual basis.
DATES: Written comments must be received by July 30, 1997.
ADDRESSES: Written comments should be sent to: Edward Springer, Office
of Information and Regulatory Affairs, OMB, Room 10236, New Executive
Office Building, Washington, DC 20503. Electronic mail comments may be
submitted via the Internet to [email protected]
FOR FURTHER INFORMATION CONTACT: For further information, contact
Sheila Conley, Office of Federal Financial Management, OMB (telephone:
202-395-3993). The text of this Notice and the November 5, 1996,
Federal Register are available electronically on the OMB home page at
http://www.whitehouse.gov/WH/EOP/omb, under the caption ``Federal
Register Submissions.''
SUPPLEMENTARY INFORMATION:
A. Background
As part of the Single Audit Act Amendments of 1996 (1996
Amendments), Congress intended to improve the usefulness and
effectiveness of single audit reporting with respect to information
provided by both auditors and auditees. In its report on the 1996
Amendments, the House Committee on Government Reform and Oversight
stated that ``the complexity of the reports makes it difficult for the
average reader to understand what has been audited and reported * * * A
summary of the audit results would highlight important information and
thus enable users to quickly discern the overall results of an audit''
(H.R. Report 104-607, page 18).
The revised information collection requirements included in the
proposed revision of Office of Management and Budget (OMB) Circular A-
133, re-titled ``Audits of States, Local Governments, and Non-Profit
Organizations,'' published in the November 5, 1996, Federal Register
notice (61 FR 57232), are intended to improve both the content of
single audit reports and the dissemination of information included
therein to various report users (e.g., Congress, Federal program
managers, pass-through entities). As indicated in the November 5, 1996,
Federal Register notice, OMB believes that the revised information
collection requirements included in the proposed revision of Circular
A-133 would result in significantly improved single audit reporting and
governmentwide data collection.
Circular A-133's information collection requirements will apply to
approximately 25,000 States, local governments, and non-profit
organizations on an annual basis. OMB's estimate of the total annual
reporting and recordkeeping burden that will result from this
information collection is presented in Table 1.
B. Public Comments and Responses
Pursuant to the November 5, 1996, Federal Register notice, OMB
received approximately 150 comments relating to this proposed
information collection. Letters came from Federal agencies (including
Offices of Inspectors General), State governments (including State
auditors), certified public
[[Page 35303]]
accountants (CPAs), non-profit organizations (including colleges and
universities), professional organizations, and others. All comments
were considered in preparing OMB's responses presented below and in
developing the final revision to Circular A-133, which is published in
a companion Notice in this Part in today's Federal Register. The
comments received relating to the information collection and OMB's
responses are summarized below.
Estimates of Reporting Burden
Comments
In the preamble of the proposed revision, OMB stated that the
reporting burden per audit will increase from 26 hours under the
existing requirements of Circulars A-128, ``Audits of States and Local
Governments,'' and A-133, ``Audits of Institutions of Higher Education
and Other Non-Profit Institutions,'' to 34 hours under the proposed
revision. OMB stated that the increase in hours was due, in part, to
the new requirement to prepare the data collection form, which would
take four hours, if prepared by the auditee, and two hours, if prepared
by the auditor. Most commenters--primarily State auditors and CPAs--
stated that OMB's estimates regarding the preparation of the data
collection form are too low. Several State auditors commented that,
while the estimates may be appropriate for smaller States and local
governments, they are grossly understated for larger governments. Some
State auditors provided estimates to prepare the form for smaller
entities ranging from two to four hours but no estimates were provided
by State auditors to prepare the form for larger entities. One State
agency stated that ``For an audit the size and complexity of New York
State, the preparation and review of a data collection form would take
at least 15 hours and could take up to 40 hours. For smaller entities
where New York State serves as the pass-through entity, the estimates
range from 5 to 15 hours.'' One State auditor questioned how realistic
any time estimates can be until someone actually prepares the form. One
CPA commenter stated that ``OMB's estimate that auditor preparation of
the data collection form would take two hours appears to be low. Most
firms, including ours, have implemented policies that require reviews
of work performed and reports issued, whether involving formal reports
or preparation of government forms. Depending on the size and
complexity of an auditee, the preparation and review of a data
collection form could take anywhere from 5 to 15 hours.''
Response: Based on the comments received, OMB revised the reporting
burden and cost estimates, as presented in Table 1. Several
modifications were made in determining the revised estimates. First,
OMB estimated reporting burden hours and costs separately for large
auditees (i.e., auditees most likely to administer a large number of
Federal awards) and all other auditees. For estimation purposes, OMB
separately estimated burden for 200 large auditees, consisting of the
50 States, 50 largest counties and cities, and 100 largest non-profit
organizations (including colleges and universities). The reporting
burden for both auditees and auditors increases significantly for
entities that administer a large number of Federal awards because the
length of time required to prepare both the schedule of Federal awards
and the data collection form increase with the number of Federal awards
administered by the auditee. Second, the revised estimates reflect the
modified requirements included in the final revision to Circular A-133
whereby the auditor will prepare and sign sections of the data
collection form that relate to the audit results and Federal awards,
and the auditee will review and sign the form certifying its
completeness and accuracy. And, third, the cost estimates are now based
on an average rate per hour of $25 per hour for auditees and $70 per
hour for auditors.
The 1996 Amendments increased the threshold that triggers an audit
requirement from $25,000 to $300,000, thereby reducing the number of
entities subject to the Act's requirements from approximately 35,000
entities under the existing requirements to approximately 25,000
entities under the 1996 Amendments. As a result, the overall burden
hours of this information collection decreased by 43,200 hours (from
910,000 burden hours under the existing requirements to 866,800 under
the new requirements). However, the total annualized cost of this
information collection increased by $1.6 million (from $38.5 million
under the existing requirements to $40.1 million under the new
requirements), due to an increase in the number of hours incurred by
auditors (versus auditees) under the new requirements at a higher
hourly rate.
The average reporting burden per respondent increased 8.7 hours
under the new requirements (from an average of 26 hours per respondent
under the existing requirements of Circulars A-128 and A-133 to an
average of 34.7 hours per respondent under the new requirements)
primarily due to requirements to prepare and submit to the Federal
Government for the first time two new documents: (1) the auditor's
summary of audit findings, and (2) the data collection form. The
auditor's summary of audit findings is required by the 1996 Amendments.
The data collection form is required by Circular A-133 and will be used
to capture information about Federal awards in a governmentwide
database that will be accessible by the Congress, Federal Government,
non-Federal entities, and the public. These data are not currently
available, yet they are essential for making decisions about Federal
awards, including program design and delivery and audit requirements.
OMB estimates that approximately 80 percent of the annualized
reporting burden cost results from statutorily-imposed requirements
included in the 1996 Amendments, while the remaining 20 percent of the
annualized reporting burden cost results from the new OMB-imposed
requirement included in Circular A-133 to prepare a data collection
form.
Necessity of the Data Collection Form
Comments:
Federal auditors and Federal agencies supported the use of the data
collection form as an efficient and effective means to capture
governmentwide information about Federal awards administered by non-
Federal entities that expend $300,000 or more annually in Federal
awards. One Federal auditor stated that the information collection is
necessary for the Federal agency to carry out its grants management
responsibilities. College and university commenters had mixed
reactions, including some supporting the form and some not.
Many State auditors and State managers strongly opposed the
requirement to prepare a data requirement form because it is viewed as
being unnecessary, duplicative of information included in other
reports, and especially burdensome for large entities. One State
auditor commented that ``Making single audit information easy for
Federal agencies to use seems to have been the primary consideration in
the drafting of the requirements, with less concern for the preparation
time and costs of auditees and especially auditors.'' Another State
auditor noted that the Federal Government should be responsible for
categorizing audit findings by using the reporting package as the sole
source of this information. One local government manager stated that
the burden of ``spoon-feeding''
[[Page 35304]]
information that is already available in the reporting package to the
Federal Government should not be borne by either auditees or auditors.
Alternatively, the commenter recommended that the data collection form
should be an internal document completed by reviewers of single audit
reports at the Federal Government level.
Most CPA commenters supported using the form to streamline the
distribution of single audit reports and improve governmentwide
collection and analysis of single audit results. One CPA commenter
stated that ``We support the use of a data collection form to
streamline distribution of audit reports and governmentwide collection
and analysis of single audit results. Steps which increase the
usefulness of audit results are positive for both the Federal
Government and our profession. Tools, such as a data collection form,
which increase the usability of audit reports serve that purpose.''
Response: The requirement to prepare and submit a data collection
form at the completion of the audit is included in Sec. ____.320(b) of
Circular A-133. To streamline the distribution of audit reports and
improve the governmentwide collection and analysis of single audit
results, Circular A-133 provides for a data collection form to be
prepared at the completion of each audit and submitted to the Federal
clearinghouse designated by OMB. The data collection form will provide
key information about the auditee, the Federal awards it administers,
and the audit results. It will serve as the basis for developing a
governmentwide database on covered Federal awards administered by
States, local governments, and non-profit organizations that expend
$300,000 or more in Federal awards annually. The database is intended
to be used by entities responsible for overseeing the funding and
administration of Federal awards (e.g., the Congress, Federal agencies,
and pass-through entities) and entities responsible for administering
Federal awards (e.g., State and government officials and board of
directors of non-profit organizations). The information provided by the
database is intended to be used to make better decisions about which
Federal awards and recipients to fund in the future, identifying and
resolving areas of noncompliance, and improving the administration and
delivery of Federal awards.
In addition, this information is essential in developing effective
governmentwide audit policies over Federal awards. For example, OMB is
required by the 1996 Amendments to perform a biennial review of the
threshold that triggers an audit requirement, prescribe a risk-based
approach to auditing major programs, and provide guidance on other
matters necessary to implement the Act. OMB cannot perform its duties
required by the Act or develop effective future audit policies without
the information to be collected in the database.
Initiatives, such as the Government Performance and Results Act of
1993 and Government Management Reform Act of 1994, highlighted the need
for the Federal Government to improve its oversight of and
accountability for the over $220 billion of Federal awards it funds
annually. The information provided by the database will help Federal
agencies fulfill their grants management responsibilities.
OMB believes that the development of a governmentwide database on
Federal awards administered by non-Federal entities that expend
$300,000 or more in Federal awards annually is critical. OMB also
believes that the most efficient and effective approach to collecting
these data is to have the auditee and auditor provide the required
information to the Federal Government in a standardized form. An
alternative to this approach would be to have the Federal Government
extract the required data elements from the reporting package and enter
the data into a database. However, OMB believes that the auditee and
auditor are most familiar with the auditee's activities and the Federal
awards it administers, and have a thorough understanding of the audit
results. Therefore, it is most likely that the information would be
more accurate if provided by the auditee and auditor than if the
Federal Government compiled this information from the reporting
packages.
The data collection form also permits streamlining of the report
distribution process. The form identifies which Federal agencies are
required to receive a copy of the complete reporting package. When the
schedule of findings and questioned costs disclosed no findings
relative to the Federal awards funded by the Federal agency, and the
summary schedule of prior audit findings did not report on the status
of any audit findings relating to Federal awards funded by the Federal
agency or pass-through entity (see Sec. ____.235(c) and
Sec. ____.320(d) and (e) of the Circular for report submission
requirements), the auditee will no longer be required to send a
complete reporting package to each Federal agency. Without the data
collection form (and the auditor's association with it), the Federal
clearinghouse would have to review each reporting package submitted to
determine which Federal agencies are required to receive a copy of the
reporting package.
Data Collection Form Duplicates Other Reported Information
Comment
Many commenters--mostly State auditors and colleges and
universities--are concerned about the need to repeat information on the
data collection form that is readily available in the reporting
package. Many State auditors specifically identified renumbered items
ix, x, and xi on the data collection form (Sec. ____.320(b)) as being
the same information presented on the schedule of expenditures of
Federal awards (Sec. ____.310(b)). They stated that providing this
information again on the form will be a time consuming and burdensome
effort, as the schedule of expenditures of Federal awards in some
States can range from 17 pages (with more than 700 Federal awards) to
over 60 pages in length. Many State auditors also stated that
renumbered item xii on the form is also particularly burdensome. Item
xii requires a yes or no statement as to whether there are audit
findings and requires that the total amount of questioned costs for
each Federal award be included in the form.
Many State auditors suggest that the required information on the
form be limited to only those programs with audit findings. Another
State auditor suggested significantly reducing the required data
elements included in the form and having the Federal Government input
the Federal award and audit results data using the reporting package.
This State auditor suggested that ``OMB could require that the schedule
of expenditures of Federal awards be established in a columnar format
with the specified data elements across the top with no subtotals
appearing and by prohibiting the inclusion of extraneous rows and
columns of data which have a tendency to creep in. Essentially, OMB
could require the schedule to look like a spreadsheet containing a
database of information.''
Most college and university commenters stated that the data
collection form duplicates information already available from the
schedule of expenditures of Federal awards and auditor's reports. The
views of many respondents are reflected in the following statement by
one college and university commenter that recommended ``that the
schedule of expenditures of Federal awards be expanded to incorporate
the necessary
[[Page 35305]]
data and that information in the auditor's reports be cross-referenced
to the schedule of expenditures of Federal awards to achieve the
equivalent of the data collection form without creating another form.''
Another college and university commenter stated that ``The recapping of
Catalog of Federal Domestic Assistance (CFDA) number and name of each
program is entirely unwarranted. So is the requirement to list
individual awards within a cluster. If the information is needed, it
should be separately gathered by the authorized Federal paying
agencies. Surely, this information is available for each recipient.''
One Federal auditor encouraged OMB to explore the possibility of
incorporating the schedule of expenditures of Federal awards in the
data collection form to reduce redundancy.
One Federal auditor, one State manager, and one CPA commenter
stated that it was duplicative to include a summary of the auditor's
results in the schedule of findings and questioned costs prepared by
the auditor (required by Sec. ____.505(d)(1) of the Circular) and to
present essentially the same information in the data collection form.
One commenter recommended that, if the auditor prepares the data
collection form, then the auditor's summary can be included in the data
collection form and the requirement to include the auditor's summary in
the schedule of findings and questioned costs can be removed from the
Circular. One CPA commenter stated that ``Elimination of the summary of
auditor results (data collection form would serve as the summary) could
potentially reduce auditor time spent by one-half.''
Several commenters suggested requiring the data collection form to
be prepared only when there are no audit findings and submitting it in
lieu of the complete reporting package.
Response: OMB acknowledges that there are many duplicative aspects
of the proposed data collection form. OMB has already begun working
with the Federal clearinghouse to implement some of the suggestions
provided by commenters, such as providing for the electronic submission
of the data collection form information through the Internet and the
electronic submission of the entire reporting package. OMB is fully
committed to reducing or eliminating duplication in the future through
electronic means. However, the Federal Government needs the information
provided by the data collection form currently. Therefore, in the near
term, reporting required by the Circular will be submitted initially to
the Federal Government in ``hard copy.''
The proposed revision states that the form will use a ``machine-
readable format.'' This term was removed from the Circular to provide
the Federal clearinghouse flexibility in processing the initial data
collections. OMB expects iterative developments in the data submission
process which will evolve from initial hard copy submissions to
electronic submissions.
Section ____.320(j) of Circular A-133 states that ``Nothing in this
part shall preclude electronic submissions to the Federal clearinghouse
in such manner as may be approved by OMB. With OMB approval, the
Federal clearinghouse may pilot test methods of electronic
submissions.'' The first phase of this pilot test has already begun and
it is concentrating on providing auditees with the means to
electronically submit the data collection form information through the
Internet to the Federal clearinghouse for fiscal years beginning after
June 30, 1997. In addition, the Federal clearinghouse is working with
certain States to develop a mechanism whereby auditees may submit the
required information to the Federal clearinghouse in a computerized
format or diskette for fiscal years beginning after June 30, 1997.
The objective of the second phase will be to develop the capability
to electronically submit the complete reporting package or key
components of it, such as the auditee's schedule of expenditures of
Federal awards and the auditor's schedule of findings and questioned
costs. It is expected that, when auditees submit their reporting
packages electronically, there will no longer be a need for the data
collection form. However, the Federal clearinghouse will continue to
process data collection forms for auditees that are unable or choose
not to submit their reporting packages electronically.
Until such time as electronic submission is available, OMB's intent
is to simplify the preparation of the data collection form by only
requesting information in the form that is already required to be
included in the reporting package. While this approach results in some
duplication, it is intended to facilitate the ease of completing the
form and the accuracy of the information provided.
With respect to renumbered items ix, x, and xi on the data
collection form, OMB believes that it is necessary to capture Federal
award information at this level of detail. The governmentwide database
must contain information at the Federal program level so that future
decisions about Federal awards and related audit policies (e.g., audit
thresholds, the risk-based approach to determining major programs) can
be made. Some commenters appeared to misunderstand the intended level
of detail. For instance, one commenter indicated that it was onerous to
list individual awards within a cluster of programs. Other than
Research and Development (R&D), most clusters of programs include only
about two or three Federal programs (CFDA numbers). For R&D, total
Federal awards expended may be shown either by individual award or by
Federal agency and major subdivision within the Federal agency.
It is also important to track in the governmentwide database not
only which Federal awards had audit findings but also an indication of
the nature of the audit findings relative to the Federal awards. For
this reason, renumbered item xii in the proposed form is retained. Item
xii requires a yes or no statement as to whether there are audit
findings and the total amount of any questioned costs related to each
Federal award. It also requires an indication of the type of compliance
requirement to which the audit findings relate. This information is
critically important for monitoring Federal awards, identifying
systemic problems, and developing future policy changes for Federal
awards.
In response to the comments received suggesting that the
information in the form be limited to only those programs with audit
findings, OMB believes that it is important that the governmentwide
database include information about all Federal awards administered by
auditees, not just those Federal awards with findings. The form must
reflect each Federal award to ensure the completeness of the database,
which will be important for future decisionmaking.
OMB does not support the comments suggesting that the schedule of
expenditures of Federal awards be expanded to serve in lieu of the data
collection form and that the Federal Government input the data using
the reporting package. Similarly, OMB does not support the suggestion
that the form be submitted only when there are no audit findings and in
lieu of submitting the reporting package. OMB's long term goal is to
eliminate the data collection form for auditees that report
electronically in the future. However, in the near term, when hard copy
reports are submitted, OMB opposes expanding the minimum reporting
requirements on auditees beyond those included in Sec. ____.310(b) of
the Circular and having the Federal Government input the data
[[Page 35306]]
using the reporting package. As previously stated, OMB believes that
the information would be more accurate if prepared by the auditee and
auditor than if the Federal Government compiled this information from
the reporting packages.
In response to comments received regarding the duplication between
information required to be included in the form and also in the summary
of audit results required by Sec. ____.505(d)(1) of Circular, OMB
acknowledges the duplication. However, the requirement for the auditor
to prepare a summary of the auditor's results is contained 1996
Amendments (31 U.S.C. 7502(g)(2)). Also, Congress intended for this
summary to be readily available to any reader of the reporting package.
Some commenters suggested that the data collection form could satisfy
the Act's summary reporting requirements, rather than preparing a
separate schedule. However, the data collection form cannot be used to
satisfy the Act's requirement because it will not be available to all
users of the reporting package. In fact, the form will only be sent to
the Federal clearinghouse. Also, this duplication can be eliminated
once reporting packages are submitted electronically.
Data Elements in the Data Collection Form
Comment
Many comments were received addressing various data elements
included in proposed data collection form (Sec. ____.320(b)) as
follows: former item 2--Commenters suggested removing the requirement
to state whether the auditor's report indicated that the auditor had
substantial doubt about the auditee's ability to continue as a going
concern; renumbered item vi--A commenter recommended removing the
requirement to list which pass-through entities are required to receive
a copy of the reporting package; renumbered item xii--A commenter
suggested removing the list of types of compliance requirements
(particularly the item for ``other'') into which audit findings are to
be categorized, and including in its place a reference to the
compliance supplement which will list the types of compliance
requirements which the auditor is expected to test; renumbered item
xiii--A commenter noted that it may be necessary for auditees to
provide multiple employer identification numbers (EINs); and,
renumbered item xv--A commenter questioned whether this item was
necessary since every auditee will have either a cognizant or oversight
agency for audit.
Response: Sec. ____.320(b) of Circular A-133 was revised to reflect
several modifications as a result of these comments. First, former item
2 was removed from the final revision for consistency purposes because
the requirement to report ``going concern'' information in the summary
of the auditor's results (Sec. ____.505(d)(1)) was removed. Second,
renumbered item vi was modified to remove the requirement to list pass-
through entities that are required to receive a copy of the reporting
package. Third, renumbered item xii was revised to reflect the types of
compliance requirements included in the provisional ``Circular A-133
Compliance Supplement'' (which is Appendix B to Circular A-133).
Fourth, renumbered item xiii was modified to indicate whether there are
multiple EINs. While not currently required, it may be necessary in the
future for auditees to provide each EIN covered by the form for
identification purposes. And, finally, a clarification was made to
renumbered item xv. It is important to distinguish between whether an
auditee has either a cognizant or oversight agency for audit, and to
include this information in the governmentwide datatbase because of the
different duties assigned to cognizant and oversight agencies in
Sec. ____.400(a) and (b) of Circular A-133.
Comment
Suggestions were also made to add to the data collection form each
of the matters addressed in the summary of the auditor's results,
described in Sec. ____.505(d)(1), such as the matters discussed in
Sec. ____.505(d)(1)(ii), Sec. ____.505(d)(1)(iii), and
Sec. ____.505(d)(1)(iv).
Response: Sec. ____.320(b) of Circular A-133 was revised to include
in the data collection form each of the matters addressed in the
summary of the auditor's results under Sec. ____.505(d)(1).
Suggested Additional Data Elements for Inclusion in the Form
Comment
Several commenters--primarily Federal auditors and a pass-through
entity--requested that the data collection form indicate if a
management letter was issued. Commenters stated that management letters
sometimes discuss significant deficiencies that are not disclosed in
the auditor's report. One commenter requested that management letters
be submitted to the Federal Government as part of the reporting package
and, if that were not possible, then the data collection form should
indicate if a management letter was issued. Conversely, two State
auditors requested that the requirement in Sec. ____.320(f) of the
proposed revision, which requires auditees to provide copies of
management letters if requested by a Federal agency and pass-through
entity, be removed from the Circular.
Response: No changes to Circular A-133 were made as a result of
these comments. The management letter will not be a required component
of the reporting package (Sec. ____.320(c)) and the data elements on
the form (Sec. ____.320(b)) will not include a statement as to whether
or not a management letter was issued by the auditor. The Circular
(Sec. ____.510(a)) clearly describes matters that the auditor shall
report as audit findings in the schedule of findings and questioned
costs. In no instance should the management letter be used as a
substitute for reporting audit findings in the schedule of findings and
questioned costs. OMB believes that the fundamental cause of the
concern raised by the Federal auditors regarding the misuse of
management letters has more to do with audit quality than with the
content of management letters. OMB believes that it is more effective
for Federal agencies to address the issue of audit quality (including
adherence to professional standards and regulatory audit requirements)
as part of their quality reviews of auditors performing audits in
accordance with Circular.
Also, no change was made to Sec. ____.320(f) of Circular A-133. OMB
agrees with many commenters that it is not necessary to routinely
submit all management letters issued by auditors. However, because
management letters may contain information relevant to the needs of
Federal agencies and pass-through entities to monitor Federal awards,
the provision permitting Federal agencies and pass-through entities to
request a copy of management letters remains unchanged in Circular A-
133.
Who Should Sign the Data Collection Form for the Auditee
Comment
Several commenters questioned who within an auditee's organization
would be required to sign the data collection form, particularly for
large entities, such as a State government.
Response: The proposed revision (Sec. ____.320(b)) provided that
the chief executive officer or chief financial officer shall sign a
statement that the
[[Page 35307]]
information on the form is accurate and complete. The requirement was
modified to clearly indicate that a senior official from State or local
government shall sign the form, as appropriate. The intent of this
requirement is to ensure that the form is signed by a senior or
executive level representative of the auditee that is authorized to,
and can be held accountable for, representations made to the Federal
Government on behalf of the auditee. The certifying official should be
knowledgeable about the Federal awards administered by the auditee, the
requirements of Circular A-133, and the actual audit results. In a
State-wide single audit, it is expected that a State official (e.g.,
State controller, State treasurer) would sign the form.
Level of Form's Specificity Provided in the Circular and Supplemental
Forms
Comment
One Federal auditor stated that, while it was necessary to include
specific certification language on the form to provide reviewers with
sufficient detail to understand the proposal, the Circular should not
contain language that is so detailed that it precludes amending the
data collection form without revising the Circular. The commenter
recommended removing the certification language in Sec. ____.320(b) of
the Circular and including a provision authorizing OMB to add or remove
data elements, as needed. A CPA commented that the final revised
Circular should provide specific guidance on preparing the form and
include, as an attachment, the form itself and the standard wording to
be developed by OMB and the audit community to appropriately
characterize the auditor's and auditee's responsibility for information
included in the form. One college and university commenter recommended
that OMB clearly state that the data collection form is the only form
that can be used by Federal agencies and pass-through entities to
gather information related to the audit and that entities may not
develop their own supplemental forms.
Response: Circular A-133 (Sec. ____.320(b)) identifies the data
elements to be included in the data collection form and provides a
general description of the auditee's certification and auditor's
statement that will accompany the form. The data collection form to be
used by the Federal clearinghouse will be presented as an Appendix to
the final revised Circular A-133. The form, developed cooperatively by
a Federal interagency task force, is the only form that may be used by
a Federal agency for the purpose of collecting single audit data.
However, OMB expects that the standard form may be modified in the
future, as circumstances warrant. Any revisions require approval from
OMB's Office of Information and Regulatory Affairs and the revised
form, or a notice of its revision, will be published in the Federal
Register.
Data Collection Form Sent Only to the Federal Clearinghouse
Comment
The CPA community's support for the proposal requiring the auditor
to prepare and sign the form was based on the understanding that the
data collection form would be sent only to the Federal clearinghouse
designated by OMB and not to Federal agencies and pass-through
entities. Also, several college and university commenters urged OMB to
permit a subrecipient to simply send a letter to a pass-through entity
when there are no audit findings that relate to the Federal awards
provided by the pass-through entity.
Response: Several modifications were necessary to reflect this
understanding in the final revision of Circular A-133. First, Circular
A-133 now reflects that the data collection form will no longer be a
required component of the reporting package described in
Sec. ____.235(c)(3) and Sec. ____.320(c) of the Circular. Also, the
requirement for subrecipients to send copies of the data collection
form to pass-through entities was removed from Sec. ____.235(c)(3) and
Sec. ____.320(e) of the Circular.
When there are no audit findings that relate to a Federal award
provided by a pass-through entity, the subrecipient is not required to
send the reporting package to that pass-through entity. In this
situation, without receiving the data collection form, the pass-through
entity would not otherwise receive any audit result information about
the Federal awards it provides to the subrecipient. Therefore,
Sec. ____.235(c)(3) and Sec. ____.320(e) of Circular A-133 requires a
subrecipient in this situation to inform a pass-through entity that an
audit of the subrecipient was conducted in accordance with Circular A-
133 and that no audit findings relative to the Federal awards provided
by the pass-through entity were reported. Examples of ways in which the
subrecipient may communicate this information to the pass-through
entity include: (1) writing a letter to the pass-through entity
indicating that an audit of the subrecipient was conducted in
accordance with Circular A-133 and that no audit findings relative to
the Federal awards provided by the pass-through entity were reported,
(2) submitting the complete reporting package to the pass-through
entity, and (3) a combination of both (1) and (2).
Applicability of Freedom of Information Act and Other Federal Laws
Comment
One CPA commenter asked whether the data collection form is
available under the Freedom of Information Act (FOIA) and whether other
Federal laws apply, such as those relating to false statements.
Response: The data collection form is subject to FOIA. Also,
representations made by auditees and auditors are subject to applicable
penalties for false statements.
Report Copies
Comment
One Federal auditor suggested that a copy of the report be provided
to the Federal clearinghouse by all auditees that have cognizant
agencies for audit (i.e., auditees that expend more than $25 million a
year in Federal awards), so that each cognizant agency can carry out
its responsibilities required by the Circular. A State agency commented
that reports should be provided for every Federal agency and pass-
through entity that provided Federal awards to the auditee, regardless
if any audit findings are reported or not. This commenter stated that
the reports are necessary for closeout and other program monitoring
purposes, and that this State agency will now be required to request
all reports. The commenter also stated that this proposal to streamline
the report distribution process places additional pressure on auditors
to issue more reports with no audit findings.
Response: No change was made to the number of reporting package
copies to be sent to the Federal clearinghouse. In all instances, the
Federal clearinghouse will retain one copy for archival purposes. If
requested by the cognizant agency for audit, the Federal clearinghouse
will provide a copy of the reporting package to the cognizant agency.
OMB believes that the benefits to be achieved through report
distribution streamlining outweigh the possible inconveniences that may
result for some Federal agencies and pass-through entities from having
to request report copies, as needed. Therefore, no changes to the
proposed streamlined report distribution process were made.
Comment
One local government manager commented that savings may result from
[[Page 35308]]
using the data collection form rather than submitting the reporting
package to every Federal agency and pass-through entity. However, if
those entities routinely request copies of the reporting package
regardless of the audit results, then the savings will diminish. It was
suggested that OMB discourage routine requests for the reporting
packages and monitor report distribution during the next few years.
Response: For several reasons, OMB does not expect Federal agencies
or pass-through entities to routinely request copies of reporting
packages that do not include audit findings or report on the status of
prior findings relative to the Federal awards funded by the Federal
agency or pass-through entity. First, Federal agencies and pass-through
entities are facing resource constraints with respect to both the
administrative capacity to collect and store reports and the
professional capability to review and process ``no findings'' reports.
Also, once Federal agencies and pass-through entities become familiar
with the information that will be routinely provided to them from (or
accessible to them through) the governmentwide database maintained by
the Federal clearinghouse, OMB believes requests for reporting packages
will decline. However, over the next few years, OMB will periodically
review if the objectives of streamlining the report distribution
process have been met.
Report Submission and Distribution
Comment
Several commenters requested clarification regarding the report
submission requirements.
Response: Sec. ____.320 (d) and (e) of the proposed revision were
modified slightly to reflect the following report submission
requirements. In all instances, an auditee is required to submit, at a
minimum, the data collection form and one copy of the reporting package
to the Federal clearinghouse. An auditee is also required to submit to
the Federal clearinghouse a copy of the reporting package for each
Federal awarding agency when there are audit findings reported in the
auditor's schedule of findings and questioned costs, or the auditee's
summary of prior audit findings reports on the status of any audit
findings, relating to the Federal awards that the Federal awarding
agency provided directly. The Federal clearinghouse will be responsible
for actually distributing the reporting packages to the appropriate
Federal agencies.
Where the auditee is also a subrecipient, the subrecipient shall
submit a copy of the reporting package to each pass-through entity when
there are audit findings reported in the auditor's schedule of findings
and questioned costs, or the auditee's summary of prior audit findings
reports on the status of any audit findings, relating to the Federal
awards provided by the pass-through entity. When there are no audit
findings reported in the auditor's schedule of findings and questioned
costs and the auditee's summary schedule of prior audit findings does
not report on the status of any audit findings relating to the Federal
awards provided by the pass-through entity, the subrecipient is not
required to submit the reporting package to the pass-through entity,
unless the pass-through entity requests a copy under Sec. ____.320(f).
However, if the subrecipient chooses not to submit the reporting
package to the pass-through entity in these circumstances, the
subrecipient must inform the pass-through entity, in writing, that an
audit of the subrecipient was conducted in accordance with Circular A-
133, and that no audit findings were reported (nor was the status of
any prior audit finding reported) that relate to the Federal awards
provided by the pass-through entity.
To illustrate the report submission process, suppose an auditee
administers four Federal awards. The first program is provided directly
to the auditee from the U.S. Department of Health and Human Services
(HHS), and the auditor reported audit findings relating to this
program. The second program is provided directly to the auditee from
the U.S. Department of Education (ED), and no audit findings have ever
been reported relating to this program. The third program is provided
to the auditee by a State agency, or pass-through entity, funded by the
U.S. Department of Labor, and audit findings were reported relating to
this program. The fourth program is provided to the auditee by a local
government pass-through entity funded by the U.S. Department of
Agriculture, and no audit findings have ever been reported relating to
this program. In this example, the auditee would be required to submit
to the Federal clearinghouse a data collection form and two copies of
the reporting package (one for the Federal clearinghouse to retain for
archival purposes and one for the Federal clearinghouse to distribute
to HHS). The auditee would also be required to submit a reporting
package to the State agency because audit findings were reported that
relate to the third program and the State agency needs the reporting
package to ensure appropriate resolution of the audit findings. With
respect to the fourth program, the auditee could either send the
reporting package to the local government, or send some form of written
communication stating that the audit was conducted in accordance with
the Circular and no audit findings were reported relating to the fourth
program.
Federal Clearinghouse Responsibilities
Comment
A few college and university commenters requested that the Federal
clearinghouse be responsible for supplying all report copies to Federal
agencies and pass-through entities. One commenter suggested that the
Federal clearinghouse provide reporting packages in electronic form
accessible to potential users through the Internet. Another respondent
requested more specific information about acceptable forms of
electronic submissions.
Response: Until such time as the reporting packages are available
in electronic form, it is not feasible for the Federal clearinghouse to
be responsible for distributing reporting packages to pass-through
entities. It is possible, however, that once reporting packages are
available electronically, there may not be a continued need for pass-
through entities to receive ``hard paper copies'' of the reporting
packages. As previously noted, the Federal clearinghouse expects to be
capable of processing reporting packages electronically for audits of
fiscal years beginning after June 30, 1998.
Requirement for the Auditor To Prepare and Sign the Data Collection
Form
Comment
In the preamble of the proposed revision, OMB stated that it was
considering adding a provision that requires the auditor (rather than
the auditee) to prepare and sign the data collection form and requested
respondents to comment on this proposal. OMB received approximately 45
comments --'' more than any other individual issue included in the
November 5, 1996, Federal Register publication --'' in response to this
proposed requirement.
All Federal auditors and State governments, and most CPAs and
Federal agencies supported this proposal. Many of these respondents
commented that the auditor should prepare and sign the sections of the
form that relate to the audit results, and that, even if the auditor
prepares and
[[Page 35309]]
signs sections of the form, the auditee should also be required to sign
the form certifying to the completeness and accuracy of the entire
form.
Federal auditors, Federal agencies, and State governments cited the
following reasons for supporting the proposal for auditors to prepare
and sign the form: (1) greater assurance as to the accuracy of the form
and the governmentwide database, (2) greater efficiency in preparing
the form, (3) more streamlined audit reporting achieved by having the
auditor sign the form rather than issuing a separate report describing
the auditor's association with and responsibility for the form, (4)
more timely data collection, and (5) reduced need for independent
verification of data included in the governmentwide database by Federal
agencies. One Federal agency supported having the auditor prepare the
form but did not support requiring the auditor to sign the form.
Reasons cited included that the proposal is ``contrary to and
inconsistent with the Government's long-established practice of
requiring the institution [auditee], not the auditor, to sign existing
certifications' and that the proposal raises new concerns about the
auditor's litigation liability, which will take time to research and
resolve.
Most CPA commenters indicated that independent auditor association
with the form would enhance its usefulness. However, most CPA
commenters and some Federal auditors and Federal agencies were
concerned that certain report users may view the information contained
in the form as a substitute for reading the full auditor's reports,
which present a more complete picture of the auditor's testing and
findings. These commenters also stated their belief that a form can be
developed that would meet the needs of OMB and Federal agencies and
also address the concerns of the CPA community. Commenters strongly
encouraged OMB to work with the American Institute of Certified Public
Accountants (AICPA), the Inspectors General, Federal agencies, and
other interested parties to develop a useful data collection form, and
many commenters offered to assist OMB in this effort.
Several CPA commenters suggested that, to provide appropriate
protection to auditors, the auditor signature section of the form
should possess certain elements including: (1) a statement that certain
information included in the form is based on the auditor's reports and
is not a substitute for such reports, (2) a statement concerning the
availability of the auditor's reports, (3) a statement that the content
of the form is limited to information prescribed by OMB, and (4) a
clear indication of which information is being provided by the auditor
versus that which is the responsibility of the auditee. CPA commenters'
support for this proposal was based on the understanding that: (1) the
form would be sent only to the Federal clearinghouse and not to Federal
agencies and pass-through entities, and (2) acceptable language would
be added to the form to appropriately characterize the nature of the
information included in the form and the auditor's and auditee's
responsibility for information included in the form. One CPA commenter
did not support the proposal stating that it ``is beyond the scope of
reporting required by professional and governmental auditing
standards.''
Most State auditors and one professional organization commented
that they were strongly opposed to requiring the auditor to prepare and
sign the data collection form. Reasons cited included: (1) the
requirement for the auditee to prepare and sign the form emphasizes the
auditee's responsibility for administering Federal funds in compliance
with the law, ensuring the accuracy and completeness of information
provided to the Federal Government, and resolving deficiencies
uncovered by audits; (2) the type of information required by the form
is readily available and should be clearly understood by the auditee;
(3) if the auditor is required to sign the form, the auditor's legal
liability exposure may increase, which will result in increased audit
fees; (4) it is not justified to reduce burden on auditees by
increasing the burden on auditors; (5) if the auditor is required to
prepare the form, the auditor's independence may be questioned and the
distinction between management and auditor responsibilities may be
blurred; and, (6) it is uncertain whether the auditor or auditee can
prepare the form more efficiently.
One State auditor commented that ``We see it [the requirement for
the auditee to prepare and sign the form] as the first step in a
process that will ultimately result in auditees' providing management
assertions on internal controls and compliance regarding their use of
Federal funds * * * We view the requirement for the auditee to prepare
the data collection form as a kind of ``homework assignment'' by which
auditee personnel will read the auditor's reports and start to
understand the significance of the issues covered in those reports * *
* Therefore, we are quite concerned with OMB's suggestion * * * [to
require] the auditor to prepare and sign the data collection form.''
Several State auditors suggested alternatives to the proposal for
the auditor to prepare and sign the form including: (1) requiring the
auditee to prepare the form and have the auditor review the form (but
not as a separate engagement) for accuracy in relation to the auditee's
financial statements taken as a whole, for limited distribution to the
Federal Government; (2) requiring the auditee to prepare the form and
have the auditor issue a separate letter of assurance on the form
regarding its reasonableness; (3) removing the requirement to prepare
the form and requiring the auditee to send a transmittal letter along
with the audit report to the Federal Government, stating that the audit
was completed in accordance with the single audit requirements; (4)
presenting certain summary information on the form with no signature by
either the auditee or auditor, and having the auditee sign a separate
form asserting that an audit in accordance with Circular A-133 was
performed; (5) adding a provision to the financial reporting section of
the compliance supplement directing the auditor to verify the
completeness and accuracy of the form; and, (6) requiring the auditee
to prepare the form and having the auditor sign it, provided that the
auditor's signature is accompanied by standard language specifically
describing and limiting the assurance the auditor is providing by
signing the form.
Several State auditors supported the proposal for the auditor to
sign the form, provided that the form includes ``liability limiting
statements'' similar to the wording suggested by the CPA commenters,
and indicated that it would be more efficient for auditors to prepare
the form.
Two college and university commenters opposed the proposal stating
that many colleges and universities could readily prepare the form
similar to other documents they are required to prepare (e.g., the
schedule of Federal awards and corrective action plans) and that the
additional cost for the auditor to prepare the form is not justified
compared to the benefit received. However, one of these college and
university commenters also indicated that having the auditor prepare
the form would add to its accuracy and greatly assist many auditees and
suggested a more flexible solution to permit either the auditor or
auditee to prepare the form (at the option of the auditee) and require
the auditor to sign the form as a reviewer. One college and university
commenter indicated that neither the auditors nor auditees want to
prepare the form
[[Page 35310]]
because of the additional cost but that, if OMB decides to require the
form, then the auditor would be the logical choice to prepare the form.
One local government commented that the single audit is a
collaborative effort between auditors and auditees and that the process
used to prepare and sign the form should be similar to procedures used
to satisfy other single audit requirements. Specifically, the commenter
suggested that the auditee prepare the form with the assistance of the
auditor and that both sign the form.
Response: Auditor association with the data collection form is
essential to streamlining the audit report distribution process and
ensuring the accuracy of the governmentwide database. However, OMB
agrees with the view of many commenters that the auditee is primarily
responsible for ensuring the accuracy and completeness of Federal award
information submitted to the Federal Government, and that this
responsibility should not be diminished. Therefore, the requirement for
the auditee to sign a statement included in the form that acknowledges
the auditee's responsibility for the entire form and certifies its
completeness and accuracy remains in Sec. ____.320(b) of Circular A-
133. In addition, the proposal requiring the auditor to prepare and
sign the sections of the form that relate to the auditor's results and
the Federal awards was adopted in the final revision of Circular A-133
(Sec. ____.320(b)(3)). The Circular also states that the auditee is
responsible for submitting the data collection form and reporting
package to the appropriate parties (Sec. ____.320(d) and (e)).
OMB commits to working with the audit community (e.g., Inspectors
General, AICPA, State auditors), Federal agencies, and other interested
parties to finalize language on the form to appropriately characterize
the auditor's and auditee's responsibility for information on the form.
As a starting point, OMB used the recommendations provided by one CPA
commenter for the auditor's standard language including: (1) a
statement that certain information included in the form is based on the
auditor's reports and is not a substitute for such reports, (2) a
statement concerning the availability of the auditor's reports, (3) a
statement that the content of the form is limited to information
prescribed by OMB, and (4) a clear indication of which information is
being provided by the auditor versus that which is the responsibility
of the auditee. OMB concurs with several CPA commenters that stated
that the auditor's exposure to litigation regarding association with
the form could be reduced by incorporating acceptable standard language
in the form.
Increased Costs for Auditors To Prepare and Sign Form
Comment
Several respondents commented that requiring the auditor to prepare
and sign the data collection form will result in increased audit costs.
One CPA stated that the proposal ``is perceived as increasing auditor
responsibility without increasing the value of the audit for which the
auditee would be willing to compensate the auditor.'' One State auditor
commented that ``it is misleading to consider requiring the auditor to
do this [prepare the form] while speculating that it will not
significantly increase audit costs. The auditor is entitled to charge
for the time associated with preparing the form and for assuming the
increased liability of associating his name with the information on the
form.'' One State manager stated that, if the requirement to prepare
the data collection form remains, the auditor should be responsible for
the data collection provided OMB determines ``a true-cost benefit of
this requirement before implementing it.''
Several college and university commenters stated that the
preparation of a data collection form will result in increased and
unreimbursable audit costs at a time when many organizations have
reached or exceeded the administrative cap under the Facilities and
Administrative reimbursement rate.
One Federal auditor commented that ``we believe that
``experienced'' auditors should be able to provide at a reasonable cost
the information requested on the data collection form.'' One Federal
agency commenter stated that ``The additional cost of completing this
form is expected to be insignificant, particularly when its intended
use is considered.''
Response: OMB acknowledges that there are costs associated with the
new requirement to prepare the data collection form. Using an average
rate per hour of $25 per hour for auditees and $70 per hour for
auditors, OMB estimates that the cost for auditor's to prepare and sign
specified sections of the form is $7.3 million and the cost for
auditees to prepare specified sections of the form and sign it is $1.2
million, for a total cost of $8.5 million.
OMB believes the decision to require the form is justified for
several reasons. First, costs will be fully or partially offset by the
savings realized from implementing other provisions of the 1996
Amendments and the revised Circular A-133. Examples of opportunities
for savings include: the reduced scope of audits of low-risk auditees;
the elimination of auditing and reporting requirements previously
associated with non-major programs; and, the elimination of the
requirement to report all matters of noncompliance, regardless of
significance. Second, the data collection form, including the auditor's
association with it, is essential to streamlining the historical report
distribution and review processes and reducing associated burden.
Finally, OMB believes that the data collection form, including the
auditor's association with it, is essential to the development of a
reliable governmentwide database that is critical to effective Federal
award administration.
With respect to comments received from several colleges and
universities stating that this new requirement may result in
unreimbursed audit costs because their administrative caps have been
reached, OMB suggests that auditees consider discussing with their
auditor whether any increases due to preparing the data collection form
will be offset by: audit cost savings associated with reduced scope of
audit work for a low-risk auditee, the auditor having to audit fewer
programs under the risk-based approach, a reduction of audit work and
related reporting for Federal programs not considered major, and the
removal of the requirement to report all instances of noncompliance.
It will take several years for OMB to determine the actual ``cost-
benefit'' of this new requirement. However, OMB believes that it is
important to implement this reporting requirement as part of the final
revision of Circular A-133, rather than postpone implementation until a
later date. The estimates presented in Table 1 are based on the best
information available to date. OMB will reevaluate the burden estimates
within the next three years (the sunset date for resubmission for
approval under the Paperwork Reduction Act of 1980, as amended) using
actual results.
Retention of Audit Workpapers
Comment
One Federal auditor requested that Federal awarding agencies be
added to the list of entities that may notify the auditor to retain the
working papers beyond three years.
Response: No change was made to the Circular as a result of these
comments. OMB believes that requests by Federal awarding agencies for
auditors to retain working papers beyond the minimum
[[Page 35311]]
period should be coordinated through either the cognizant or oversight
agency for audit.
Schedule of Expenditures of Federal Awards
Comment
One State auditor commented that the State's accounting system
could not capture Federal award expenditure information and requested
that the Circular permit alternatives methods of reporting Federal
award information, such as reporting receipts.
Response: No change was made to the Circular based on this comment.
Auditees shall report the amount of expenditures of Federal awards.
This information is important to Federal agencies and pass-through
entities and the amount of Federal award expenditures is critical to
every monetary determination required by the Circular (e.g., the
threshold that triggers a Circular A-133 audit requirement, and the
dollar threshold used to distinguish Type A and Type B programs using
the risk-based approach to determining major programs). Also, the
requirement to report Federal award expenditures is consistent with the
financial management systems requirements of Sec. ____.20 in the Grants
Management Common Rule, published March 11, 1988 (53 FR 8034) and
amended April 19, 1995 (60 FR 19638), whereby States' systems should
permit accounting for expenditures to a level sufficient to demonstrate
compliance with applicable laws and regulations.
Comment
Several commenters interpreted the proposal as requiring that the
schedule of expenditures of Federal awards include information about
the amount of Federal funds awarded (rather than Federal awards
expended), and that such information be presented by award year. One
commenter asked whether the information requested by Federal agencies
and pass-through entities to be included on the schedule was limited to
the minimum requirements or whether such requests could include
additional information.
Response: A change was made to Sec. ____.310(b) to clarify that the
schedule requires presentation of the amounts of Federal awards
expended, rather than the amounts awarded. Also, Sec. ____.310(b) was
modified to indicate that an auditee may choose to provide information
requested by Federal agencies and pass-through entities to make the
schedule easier to use. However, the auditee is not required by the
Circular to provide information beyond the minimum requirements
described in Sec. ____.310(b).
Comment
Sec. ____.310(b)(1) of the proposed revision requires that the
schedule of expenditures of Federal awards list individual Federal
programs by Federal agency and major subdivision within a Federal
agency. Many respondents strongly opposed the requirement to provide
the major subdivision within a Federal agency. Reasons cited include
that this information is readily available to the Federal Government
through the CFDA numbers and that it is particularly onerous for large
entities, such as States, to provide this information for each
individual Federal program.
Response: The requirement to list each individual Federal program
by major subdivision within a Federal agency was removed from
Sec. ____.310(b)(1) of the Circular, except for the R&D program
cluster. This revision reduces reporting burden for many auditees that
administer a large number of Federal awards. For the R&D program
cluster, auditees are provided the option of reporting Federal awards
expended either by individual Federal award or by Federal agency and
major subdivision within the Federal agency. This option reduces burden
on auditees that administer a large number of R&D awards, such as
certain colleges and universities, by permitting summary reporting at
the Federal agency and major subdivision level. Federal awarding
agencies and pass-through entities providing R&D awards should assist
auditees in identifying major subdivisions within the Federal agency
responsible for such awards.
Comment
Several commenters opposed the proposal included in
Sec. ____.310(b)(5) which requested, to the extent practical, pass-
through entities to identify on the schedule of expenditures of Federal
awards the total amount provided to subrecipients from each Type A
program and each Type B program audited as major. This provision was
perceived as burdensome. One CPA commenter was concerned that, if such
information were provided for all Type A programs, including those Type
A programs that were not audited as major, then the auditor would be
required to report on a schedule that includes unaudited information.
Response: A change was made to the Circular as a result of these
comments. The proposal requested auditees to provide information about
amounts provided to subrecipients from each Type A program and each
Type B program audited as major. The final revision to Circular A-133
requests this information for each Federal program. This change was
made to simplify the requirement but does not necessarily increase
burden on auditees because the information is not mandatory. This
information should be included on the schedule, to the extent
practical. In response to a CPA's concern, the schedule of expenditures
of Federal awards includes information about each of the Federal awards
administered by the auditee, not just those audited as major. OMB does
not believe that presenting information about amounts provided to
subrecipients is different from other information included in the
schedule relating to programs that were not audited as major.
Summary Schedule of Prior Audit Findings
Comment
Several State auditors and State agencies questioned the need for a
separate schedule reporting the status of prior audit findings. One
State auditor noted that requiring the auditor to report any material
misrepresentations made by the auditee in the schedule will increase
pressure on auditors and strain their relationship with the auditee. A
State agency commented that the information in the new summary schedule
of prior audit findings is also included in other required reports and
recommended that the cognizant agency for audit be responsible for
reviewing and approving follow-up actions outlined in the corrective
action plan. One Federal auditor noted the importance of continuing to
report deficiencies until the finding is adequately resolved and
suggested that the schedule also include a description of the means
used to substantiate the audit finding resolution.
Response: No change was made to Sec. ____.315 of the Circular as a
result of these comments. It is important for the auditee to report on
the status of prior audit findings in a consistent and systematic
manner. It is also important that the auditor assess the fairness of
management's representations included in the schedule, as required by
Sec. ____.500(e) of the Circular.
Summary of the Auditor's Results
Comment
One Federal auditor recommended revising the Circular to require
the auditor to provide a narrative summary at the beginning of the
single audit reporting package. One State auditor opposed the
requirement to prepare a
[[Page 35312]]
summary of auditor's results and commented that the Federal Government
could obtain this information by reviewing the documents included in
the reporting package.
Response: No change was made to Sec. ____.505(d)(1) of the Circular
as a result of these comments. The 1996 Amendments include a provision
(31 U.S.C. 7502(g)(2)) whereby ``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.'' OMB believes that the summary of auditor's results
prescribed by Sec. ____.505(d)(1) of the final revision satisfies the
requirements of the 1996 Amendments, and will facilitate consistency
and uniformity of the summary information provided to Federal awarding
agencies and pass-through entities and captured in the governmentwide
database.
Auditor's Schedule of Findings and Questioned Costs
Comment
Several State auditors indicated that the requirements described in
Sec. ____.505(d) (2) and (3) of the proposed revision may result in
duplicative and more cumbersome audit reporting and, as a result,
increased audit costs.
Response: No changes were made to the Circular as a result of these
comments. The purpose of Sec. ____.505(d) of the Circular is to present
the results of audit in one location or schedule. In the past, this
information was presented in a variety of locations throughout the
auditor's reports. This provision of the Circular prescribes where this
information must be reported and provides guidance on reporting audit
findings that relate to the same issue and that relate to matters
affecting both the financial statements and the Federal awards
administered by the auditee. OMB believes the reporting requirements
included in the Circular will improve the usefulness and uniformity of
audit reports.
Report Due Date
Comment
Many respondents--mostly State managers and college and university
commenters--stated that shortening the report due date from 13 months
to nine months after the end of the audit period was unrealistic and
that it will adversely affect audit scheduling and workloads, increase
audit costs and burden on auditees, and may result in increased
noncompliance by subrecipients. Many commenters suggested that the 13-
month report due date be retained in the Circular and that, if the due
date must be shortened, then a 12-month due date would be more
acceptable. One local government suggested granting an automatic
extension of the report due date to auditees that expend over $25
million in Federal awards. A Federal agency stated that a six-month
report due date should be imposed and that the two-year transition
period is unnecessary.
Response: No change was made to the Circular as a result of these
comments. The report due date is prescribed by the 1996 Amendments (31
U.S.C. 7502(h)). The 1996 Amendments require the report to be submitted
within the earlier of 30 days after receipt of the auditor's report, or
nine months after the end of the audit period for audits of fiscal
years beginning after June 30, 1998. A transition period of at least
two years is provided in the 1996 Amendments whereby the report shall
be submitted within the current 13-month due date (or 30 days after the
receipt of the auditor's report, if earlier). OMB believes that the
transition period of two years is sufficient for most auditees to meet
the new report due date. However, cognizant or oversight agencies for
audit may provide extensions to auditees.
Comment
One State auditor commented that total audit hours will increase as
a result of preparing a data collection form, and ``Since our audit
resources are limited, any increase in audit hours is likely to make it
more difficult for us to meet the 9-month reporting deadline required
by Sec. ____.320(a) of the Circular.''
Response: As presented in Table 1, OMB estimates the average number
of auditor hours necessary to prepare and sign the appropriate sections
of the data collection form to be 24 hours for auditees that administer
a large number of Federal awards and four hours for other auditees.
Moreover, the requirements of the 1996 Amendments and the final
revision to Circular A-133 are designed to reduce audit burden by
decreasing the number of entities subject to audit and improving the
effectiveness of the audit requirements. Accordingly, OMB believes that
the two-year transition period is sufficient for most auditors to
incorporate the data collection form preparation requirements into
their audit plans so that the work can be completed within the nine-
month due date.
Effective Date for the Data Collection Form Requirement
Comment
One Federal auditor stated that it was not clear from reading the
proposed revision when the proposed requirement to prepare and submit
the data collection form would be effective.
Response: The requirement to prepare and submit a data collection
form will be effective for audits of fiscal years beginning after June
30, 1996.
The proposed data collection form and its instructions follow.
John A. Koskinen,
Deputy Director for Management.
[[Page 35313]]
Table 1.--Reporting Burden Estimate
----------------------------------------------------------------------------------------------------------------
New burden
---------------------------------------
Auditees Change in
Existing with a burden
burden large Other Total increase
number of auditees auditees (decrease)
programs
----------------------------------------------------------------------------------------------------------------
Number of Auditees............................. 35,000 200 24,800 25,000 (10,000)
Number of Auditors............................. 35,000 200 24,800 25,000 (10,000)
Auditee hours to prepare reporting package..... 16 48 16 1 16.3 .3
Auditee hours to prepare & sign data collection
form.......................................... ........... 6 2 1 2.0 2.0
Auditor hours to prepare auditor's reports..... 10 40 12 1 12.2 2.2
Auditor hours to prepare & sign data collection
form.......................................... ........... 24 4 1 4.2 4.2
Average hour burden per respondent............. 26 118 34 1 34.7 8.7
----------------------------------------------------------------
Total burden hours......................... 910,000 23,600 843,200 866,800 (43,200)
----------------------------------------------------------------------------------------------------------------
\1\ Weighted average.
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[FR Doc. 97-16966 Filed 6-27-97; 8:45 am]
BILLING CODE 3110-01-C
