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Single Audit Act of 1984 with Amendments

exceed the larger of $300,000 or 3 percent of such total • Auditors must prepare and sign a data-collection
expenditures. form that is submitted to the federal clearinghouse
Upon completion of the audit, the auditor prepares a rather than submitting the full audit report
report that includes (1) the financial statements and a • Audit report due date is reduced from thirteen to
schedule of federal funded programs with a schedule of
nine months
the total expenditures, (2) an evaluation of internal con-
trol systems that identifies the controls evaluated and Overall, the SAA Amendments of 1996 address a
material weaknesses, if any, and (3) an analysis of compli- number of issues that emerged during and after the imple-
ance stating positive assurance for items tested, negative mentation of the 1984 SAA. The amendments exempt
assurance for items not tested, a summary of cases of non- entities receiving a relatively small amount of federal
compliance, and identification of the total amount of funds, enacts guidelines to ensure that high-risk programs
expenditures questioned. Since the audit demands skills are subject to audit, and simplifies reporting require-
beyond those necessary for a standard audit, auditors are ments.
required to obtain specialized training and expertise. In June 1997 the OMB revised and renamed Circu-
Overall, the audits are a highly rigorous form of oversight.
lar A-133 to implement the SAA’s amendments and to
In 1990 the OMB administratively extended the sin- extend the circular’s coverage to state and local govern-
gle audit process to nonprofit organizations by issuing ments, Indian tribal governments, and nonprofit organi-
OMB Circular A-133, Audits of Institutions of Higher
zations, as well as to rescind OMB Circular A-128. In
Education and Other Non-Profit Organizations. Thus
accordance with the provisions for a periodic review of the
thousands of additional organizations—including muse-
ums, colleges and universities, school districts, hospitals, audit threshold, a 2003 amendment to A-133 increases
voluntary welfare and health organizations—are required the audit threshold to an aggregate federal-funds expendi-
ture of $500,000.
to have an audit performed in accordance with the SAA.
Organizations receiving federal assistance that expend less
than $300,000 must maintain records to support federal DISADVANTAGE OF SINGLE AUDIT
financial assistance programs and must have a financial APPROACH
audit performed under generally accepted auditing stan- A disadvantage of the single audit approach is that some
dards. granting agencies do not receive as much information

about their grant programs as when separate grant audits
AMENDMENTS IN 1996 are performed. As a result, some granting agencies require
Congress amended the SAA by passing Public Law 104- audit work that goes beyond the single audit requirement;
156, the Single Audit Act Amendments of 1996. The new the granting agencies, however, must provide additional
law extended the statutory audit requirement to all non- resources to fund the audit costs.
profit organizations and substantially revised various pro- Studies of single audits began when the Government
visions of the 1984 act. The major amendments and Accountability Office (which was known as the General
changes include:
Accounting Office until July 2004) reports criticized the
• Implementation of a risk-based approach to select quality of audits of governmental entities. Research has
the major federal programs to be audited rather than found that audit quality suffers when the auditor has an
selection solely on the basis of total amount of incentive to limit the amount of audit testing to ensure
expenditures, thus ensuring greater audit coverage that the engagement remains profitable.
for high-risk programs Accountability of the nonprofit organizations receiv-
• The dollar threshold for single audit coverage ing federal financial assistance is a concern in light of well-
increased to $300,000 from $100,000. The amend- publicized financial scandals, revelations of excessive
ment also provides for administrative increases to compensation, and concerns over unethical behavior. A
the threshold but decreases are prohibited review of single audits found compliance to be quite high
for nonprofits receiving substantial federal funding. Nev-
• Audit requirements are triggered by federal funds
expended rather than funds received ertheless, smaller nonprofits and those new to federal pro-
gram assistance and those organizations with prior single
• Auditors must provide a summary of the results of audit findings had a significantly higher rate of adverse
their work concerning the audited entity’s financial audit findings.
statement, internal controls, and compliance with
laws and regulations SEE ALSO Auditing

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 669