There have been several alterations to the Circular A-133. The document from the Office of Management and Budget (OMB) titled, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards,” provides updates on the guidelines established in early 2013.
The changes are intended to eliminate “unnecessary and duplicative” requirements while also attempting to place a higher focus on better results at a lower cost. The stated goal was to reduce the administrative load, along with the risk of waste, deception and exploitation. The document covers changes in audit requirements, cost principles and administrative requirements. The new rules are suggested to become effective for Single Audits of years beginning on or after January 1, 2014, according to an alert from the AICPA governmental Audit Quality Center.
There are several important changes to be mindful of.
Things that are increasing:
According to the document, the single audit threshold was increased from $500,000 to $750,000. In other words, if a nonprofit spent less than $750,000, it would not be mandatory to have a Single Audit.
Determination Process for Major Program
The Circular A-133 states that the minimum threshold for the Type A/B program determination has gone from $300,000 to $750,000. To be considered low-risk as a Type A program, it “must not have failed to receive an unqualified opinion, had a material weakness in internal control, or had questioned costs exceeding five percent of the program’s expenditures.”
Questioned cost threshold for reporting has gone from $10,000 to $25,000, and more detail will be required to be reported in auditor findings.
Things that are decreasing:
Determination Process for Major Program (Type B programs)
Type B programs that would be tested as major programs were reduced from 50% to 25% of the number of low-risk Type A programs.
Percentage of Coverage
Percentage of coverage required in a Single Audit is to be reduced from 50% to 40%. (25% and 20% respectively for low-risk auditees).
Originally, the goal was to reduce 14 types of compliance requirements to six types. However, there were concerns that this might increase administrative burden. Consequently, no changes were made in the 2014 Compliance Supplement (possibly in the 2015 version.)
The final rule supersedes and the eight existing OMB Circulars which are now compiled into one document in the effort to improve clarity, consistency and accessibility. It also establishes conflict of interest policies and necessary disclosure of any violations of federal law.
If you have questions about the nonprofit alterations please contact our office to talk with one of the experienced nonprofit accountants at Salmon Sims Thomas.