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Audit Requirements Reforms

Audit Requirements Reforms

This update, as a follow up to the two previous discussing OMB changes, will discuss the audit requirements reforms for non-federal entities expending federal awards, which can is found in Subpart F of the OMB final guidance. Non-federal entities include state and local governments, Indian tribes, institutions of higher education, not-for-profit organizations and the audit community. The effective date for changes will be fiscal years beginning on or after December 26, 2014.

Audit Requirements

The audit requirements are found in subpart F of the new guidance. Subpart F is broken down into five sections

  1. Audits
  2. Auditees
  3. Federal Agencies
  4. Auditors
  5. Management Decisions

AUDITS

The basis for determining federal awards, frequency of audits and dollar threshold is defined. The threshold for requiring a single audit or program specific audit will increase from $500,000 to $750,000.

AUDITEES

The requirements for the selection of auditors, preparation of financial statements, audit finding follow up and report submission with the federal clearing house are discussed.

FEDERAL AGENCIES

The requirements for the section are for cognizant and oversight agencies as well as requiring all non-federal entities expending more the $50 million of federal awards to have a cognizant agency.

AUDITORS

This section is where you will find a number of changes. The dollar threshold for determining Type A program has increase from $300,000 to $750,000 or a percent of federal awards expended. The auditor is no longer to perform a risk assessment for any Type B programs less than 25 % of Type A program (this increases the bottom limit from $100,000 to $187,500). The percent of federal awards that the auditor is required to test has also changed. If the auditee qualifies as low risk, the amount of federal awards that is required to be tested decreases from 25% to 20%. For those entities that do not qualify as a low risk auditee, the amount required to be tested decreases from 50% to 40% of federal awards. The criteria for determining if an entity qualifies as low risk is also defined in this section. In addition, this section increases the dollar amount of known questioned costs, which is required to be reported, from $10,000 to $25,000.

MANAGEMENT DECISIONS

This section requires the federal awarding or pass-thru entity to issue a response to audit findings within 6 months of the acceptance of the auditee’s audit report.

Need More Information?

If you have any questions about this not-for-profit update, please contact your WithumSmith+Brown professional, fill in the form below.


The information contained herein is not necessarily all-inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriately qualified professionals for your individual facts and circumstances.

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