March 28, 2013
By Mark Schoenberg, CPA
On February 1, 2013, the Office of Management and Budget (“OMB”) issued proposed guidance which, if enacted, would supersede and combine eight different OMB circulars into one single document. Entitled Proposed OMB Uniform Guidance: Cost Principles, Audit, and Administrative Requirements for Federal Awards, the adoption of these changes would lessen the burden for not-for-profit entities subject to compliance audits under OMB Circular A-133, as follows:
1. Under the current guidance, an entity expending $500,000 or greater in a single year is required to have a single audit. This threshold increases to $750,000 under the proposed guidance.
2. Auditors are currently required to test 50% and 25% of federal expenditures for high-risk and low-risk auditees, respectively. The proposed guidance updates the criteria for low-risk auditee status and decreases those thresholds to 40% and 20%.
3. The minimum threshold for a federally-funded program to be considered type A would increase from $300,000 to $500,000. In addition, the criteria for type A/type B risk determination have been lessened.
4. The number of compliance requirements auditors will have to consider would decrease from the current 14 to six, as follows:
a. Activities Allowed or Unallowed and Allowable Costs/Cost Principles
b. Cash Management
e. Subrecipient Monitoring
f. Special Tests and Provisions
Comments on these proposed changes are due to the OMB by May 2, 2013. There is no specified date when these changes would go into effect; however, not-for-profit entities should be familiar with these changes and consider their potential implications when accepting federal funding.