PART 1 - BACKGROUND, PURPOSE, AND APPLICABILITY
The Single Audit Act of 1984 established requirements for audits of States, local governments,
and Indian tribal governments that administer Federal financial assistance programs. In 1985, the
Office of Management and Budget (OMB) issued OMB Circular A-128, "Audits of State and
Local Governments," to provide implementing guidance. In 1990, OMB administratively
extended the single audit process to non-profit organizations by issuing OMB Circular A-133,
"Audits of Institutions of Higher Education and Other Non-Profit Organizations."
On July 5, 1996, the President signed the Single Audit Act Amendments of 1996 (31 USC
Chapter 75). The 1996 Amendments extended the statutory audit requirement to non-profit
organizations and substantially revised various provisions of the 1984 Act. On June 30, 1997,
OMB issued final revisions to Circular A-133 (62 FR 35278). The final revisions implement the
1996 Amendments, extend OMB Circular A-133's coverage to States, local governments, and
Indian tribal governments, and rescind OMB Circular A-128.
This Compliance Supplement is based on the requirements of the 1996 Amendments and the final
revision of OMB Circular A-133 which provide for the issuance of a compliance supplement to
assist auditors in performing the required audits. The Senate and House Reports supporting the
1996 Amendments cited studies of the single audit process performed by the General Accounting
Office, the President's Council on Integrity and Efficiency and the National State Auditors
Association (NSAA). All three studies supported the need for a current compliance supplement.
The NSAA study stated, "The Compliance Supplement provides an invaluable tool to both
Federal agencies and auditors in setting forth the important provisions of Federal assistance
programs. This tool allows Federal agencies to effectively communicate items which they believe
are important to the successful management of the program and legislative intent . . . Such a
valuable tool requires constant review and update."
This document serves to identify existing important compliance requirements which the Federal
Government expects to be considered as part of an audit required by the 1996 Amendments.
Without this Supplement, auditors would need to research many laws and regulations for each
program under audit to determine which compliance requirements are important to the Federal
Government and could have a direct and material effect on a program. Providing this Supplement
is a more efficient and cost effective approach to performing this research. For the programs
contained herein, this Supplement provides a source of information for auditors to understand the
Federal program's objectives, procedures, and compliance requirements relevant to the audit as
well as audit objectives and suggested audit procedures for determining compliance with these
This Supplement also provides guidance to assist auditors in determining compliance requirements
relevant to the audit, audit objectives, and suggested audit procedures for programs not included
herein. For single audits, this Supplement replaces agency audit guides and other audit
requirement documents for individual Federal programs.
OMB Circular A-133 provides that Federal agencies are responsible to annually inform OMB of any updates needed to this Supplement. This responsibility includes ensuring that program objectives, procedures, and compliance requirements, noncompliance with which could have a direct and material effect on these individual Federal programs, are provided to OMB for inclusion in this Supplement, and that agencies keep current these program objectives, procedures, and compliance requirements (including statutory and regulatory citations). To facilitate agency efforts to meet this responsibility, Parts 4 and 5 of this Supplement provide a stand-alone section for each program included in this Supplement which contains program objectives, program procedures, and compliance requirements. For some programs a separate subsection (IV. Other Information), is also included to communicate additional information concerning the program. For example, when a program allows funds to be transferred to another program, subsection IV will provide guidance on how those funds should be treated on the Schedule of Expenditures of Federal Awards and Type A program determinations. These individual sections can be updated or replaced as Federal programs change. Also, sections will be added for additional programs once the program objectives, program procedures, and compliance requirements relevant to the program are written.
This Supplement is effective for audits of fiscal years beginning after June 30, 1997, and
supersedes the OMB Circular A-133 Compliance Supplement (Provisional) issued in June 1997,
and the Compliance Supplements "Audits of States and Local Governments," issued in 1990, and
"Audits of Institutions of Higher Education and Other Non-Profit Organizations," issued in 1991.
OMB Circular A-133 describes the non-Federal entity's responsibilities for managing Federal
assistance programs (§ ___.300) and the auditor's responsibility with respect to the scope of audit
(§___.500). Auditors are required to follow the provisions of OMB Circular A-133 and this
Auditors shall consider this Supplement and the referenced laws, regulations, and OMB Circulars
(as codified by Federal agencies in agency regulations) in determining the compliance
requirements that could have a direct and material effect on the programs included herein. That
is, use of this Supplement is mandatory. Accordingly, adherence to this Supplement satisfies the
requirements of OMB Circular A-133. For program-specific audits performed in accordance with
a Federal agency's program-specific audit guide, the auditor shall follow such program-specific
audit guide. Finally, for major programs not included in this Supplement, the auditor shall follow
the guidance in Part 7 and use the types of compliance requirements in Part 3 to identify the
applicable compliance requirements which could have a direct and material effect on the program.
Update of Requirements
OMB Circular A-133 provides that Federal agencies are responsible to annually inform OMB of
any updates needed to this Supplement. However, auditors should recognize that laws and
regulations change periodically and that delays will occur between such changes and revisions to
this Supplement. Moreover, auditors should recognize that there may be provisions of contract
and grant agreements that are not specified in law or regulation and, therefore, the specifics of
such are not included in this Supplement. For example, the grant agreement may specify a certain
matching percentage or set a priority for how funds should be spent (e.g., a requirement to not
fund certain size projects). Another example is a Federal agency imposing additional
requirements on a recipient because it is high-risk in accordance with the A-102 Common Rule, or
as part of resolution of prior audit findings.
Accordingly, the auditor should perform reasonable procedures to ensure that compliance
requirements are current and to determine whether there are any additional provisions of contract
and grant agreements that should be covered by an audit under the 1996 Amendments.
Reasonable procedures would be inquiry of non-Federal entity management and review of the
contract and grant agreements for programs selected for testing (i.e., major programs).
Safe Harbor Status
Because the suggested audit procedures were written to be able to apply to many different
programs administered by many different entities, they are necessarily general in nature. Auditor
judgment will be necessary to determine whether the suggested audit procedures are sufficient to
achieve the stated audit objectives or whether additional or alternative audit procedures are
needed. Therefore, the auditor should not consider this Supplement to be a "safe harbor" for
identifying the audit procedures to apply in a particular engagement.
However, the auditor can consider this Supplement a "safe harbor" for identification of
compliance requirements to be tested for the programs included herein if, as discussed above, the
auditor (1) performs reasonable procedures to ensure that the requirements in this Supplement are
current and to determine whether there are any additional provisions of contract and grant
agreements that should be covered by an audit under the 1996 Amendments, and (2) updates or
augments the requirements contained in this Supplement as appropriate.
Responsibility for Other Requirements
Although the focus of this Supplement is on compliance requirements that could have a direct and
material effect on a major program, auditors also have responsibility under Generally Accepted
Government Auditing Standards (GAGAS) for other requirements when specific information
comes to the auditors' attention that provides evidence concerning the existence of possible
noncompliance that could have a material indirect effect on a major program.
HUD Supplement for Housing Authorities
Guidance for audits of Public and Indian Housing (PIH) Authorities is contained in the "Public
and Indian Housing Compliance Supplement for Annual Audits of Public Housing Agencies and
Indian Housing Authorities by Independent Auditors" (PIH Supplement). The PIH Supplement
was developed by the HUD Office of Public and Indian Housing and the Office of Inspector
General. It was originally issued in May 1995 and reissued in May 1996. For audits of PIH
Authorities under OMB Circular A-133, the agency program requirements (which would
otherwise be listed in Part 4 of this Supplement) are provided in the PIH Supplement. This
supplement is currently available on the Internet at the HUD OIG home page
(http://www.hud.gov/oig/oigguide.html) under the listing of "Audit Guides" or can be obtained by
sending a fax to 202-401-3963.
The guidance contained in the Section 8 Cluster in Part 4 of this Compliance Supplement (4-14.182-1) is intended for audits of entities other than Public and Indian Housing Authorities that administer or participate in Section 8 programs, including State Housing Agencies and non-profit multifamily housing projects.
Matrix of Compliance Requirements (Part 2)
The Matrix of Compliance Requirements (Matrix) identifies the Federal programs and compliance
requirements addressed by this Supplement and associates the programs with the applicable
compliance requirements. The Matrix also identifies the applicable Federal agency and Catalog of
Federal Domestic Assistance (CFDA) number for each program included in this Supplement.
Compliance Requirements (Part 3)
Part 3 lists and describes the 14 types of compliance requirements and, except for Special Tests
and Provisions, the related audit objectives that the auditor shall consider in every audit conducted
under OMB Circular A-133, with the exception of program-specific audits performed in
accordance with a Federal agency's program-specific audit guide. Suggested audit procedures are
also provided to assist the auditor in planning and performing tests of non-Federal entity
compliance with the requirements of Federal programs. Auditor judgment will be necessary to
determine whether the suggested audit procedures are sufficient to achieve the stated audit
objectives and whether additional or alternative audit procedures are needed. Determining the
nature, timing, and extent of the audit procedures necessary to meet the audit objectives is the
The compliance requirements for Special Tests and Provisions are unique to each Federal
program; therefore, compliance requirements, audit objectives, and suggested audit procedures
for Special Tests and Provisions are not included in Part 3.
Because of the diversity of systems in place among non-Federal entities, Part 3 does not include
suggested audit procedures to test internal control. The auditor must determine appropriate
procedures to test internal control on a case by case basis considering factors such as the
non-Federal entity's internal control, the compliance requirements, the audit objectives for
compliance, the auditor's assessment of control risk, and the audit requirement to test internal
control as prescribed in OMB Circular A-133.
Agency Program Requirements (Part 4)
For each Federal program included, Part 4 discusses program objectives, program procedures,
and compliance requirements which are specific to the program. With the exception of Special
Tests and Provisions, the auditor shall refer to Part 3 for the audit objectives and suggested audit
procedures that pertain to the compliance requirements associated with the programs. Since
Special Tests and Provisions are unique to the program, the audit objectives and suggested audit
procedures for the program are included in Part 4.
The description of program procedures is general in nature. Some programs may operate
somewhat differently than described due to: (1) the complexity of governing Federal and State
laws and regulations; (2) the administrative flexibility afforded non-Federal entities; and, (3) the
nature, size, and volume of transactions involved. Accordingly, the auditor should obtain an
understanding of the applicable compliance requirements and program procedures in operation at
the non-Federal entity to properly plan and perform the audit.
Clusters of Programs (Part 5)
A cluster of programs is a grouping of closely related programs that have similar compliance
requirements. The types of clusters are: Research and Development (R&D), Student Financial
Aid (SFA), and other clusters. "Other clusters" are as identified in this Supplement or designated
in a State award document.
Although the programs within a cluster are administered as separate programs, a cluster of
programs is treated as a single program for the purpose of meeting the audit requirements of
OMB Circular A-133 (§__.105). Part 5 provides compliance requirements, audit objectives, and
suggested audit procedures for R&D and SFA clusters and lists other clusters.
In planning and performing the audit, the auditor should determine whether programs
administered by the non-Federal entity are part of a cluster by referring to the provisions of Part 5
of this Supplement and the State award documents.
Internal Control (Part 6)
As a condition of receiving Federal awards, non-Federal entities agree to comply with applicable
laws, regulations, and the provisions of contract and grant agreements, and to maintain internal
control to provide reasonable assurance of compliance with these requirements. OMB Circular
A-133 requires auditors to obtain an understanding of the non-Federal entity's internal control
over Federal programs sufficient to plan the audit to support a low assessed level of control risk
for major programs, plan the testing of internal control over major programs to support a low
assessed level of control risk for the assertions relevant to the compliance requirements for each
major program, and, unless internal control is likely to be ineffective, perform testing of internal
control as planned. Part 6 is intended to assist non-Federal entities and their auditors in
complying with these requirements by presenting characteristics of internal control which may be
used to reasonably ensure compliance with the types of compliance requirements in Part 3. The
characteristics of internal control presented in Part 6 are neither mandatory nor all inclusive.
Guidance for Auditing Programs Not Included in this Compliance Supplement (Part 7)
Part 7 provides guidance to auditors in identifying the compliance requirements and designing
tests of compliance with such requirements for programs not included in this Supplement.
Federal Programs Excluded from the A-102 Common Rule (Appendix I)
This Appendix lists block grants and entitlement programs excluded from the requirements of the
"Uniform Administrative Requirements for Grants and Cooperative Agreements to State and
Local Governments" (also known as the "A-102 Common Rule").
Federal Agency Codification of Certain Governmentwide Grants Requirements (Appendix
This Appendix provides regulatory citations and Federal agencies' codification of the A-102
Common Rule and OMB Circular A-110, "Uniform Administrative Requirements for Grants and
Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit
Organizations," in agency regulations. Some agencies have not yet codified the November 1993
revision to OMB Circular A-110 but either are in the process of doing so or have provided such
policies to grantees through other means such as grant agreements.
Federal Agency Contacts for A-133 Audits (Appendix III)
This Appendix identifies Federal agency contacts from which auditors can request information or materials about Federal programs or the audit requirements of OMB Circular A-133.
Internal Reference Tables (Appendix IV)
This Appendix provides a listing of programs in Parts 4 or 5 which include "IV. Other
Information." This listing allows the auditor to quickly determine which programs have other
information such as guidance on Type A and Type B program determination or display on the
Schedule of Expenditures of Federal Awards. Also identified in this Appendix is that the
Medicaid Cluster is the only program currently identified as higher risk by OMB pursuant to
Circular A-133, §___.525(c)(2).
List of Changes for the 1998 Compliance Supplement - Appendix V
This Appendix provides a list of changes from the OMB Circular A-133 Compliance Supplement (Provisional) issued in June 1997 to this 1998 Supplement.
Page Numbering Scheme
The following page numbering scheme is used in this Supplement to facilitate future revisions.
Each page included in Parts 1, 2, 3 (introduction), 6 (introduction), and 7 is identified by a label
that represents the part number and sequential page number. A dash (-) separates the part number
from the page number. For example, Part 1 is numbered as follows: 1-1, 1-2, 1-3, and so on.
Each page included in Parts 3 (excluding introduction), 4, 5, and 6 (excluding introduction) is
identified by a label that represents the part number, section number identifier, and sequential page
number. For example, Section A of Part 3 is numbered 3-A-1, 3-A-2, 3-A-3, and so on. The
section number identifier for Part 4 represents the CFDA number of the applicable program. For
example, the Department of Labor (DOL) Unemployment Insurance program, CFDA number
17.225, is numbered 4-17.225-1, 4-17.225-2, 4-17.225-3, and so on.
Code of Federal Regulations
The Code of Federal Regulations (CFR) is a codification of the rules issued by Federal agencies.
The CFR is divided into 50 titles which comprise the broad areas subject to Federal regulation.
Each title is further divided into parts and sections, with most references to the CFR being made
at this level.
Portions of the CFR are revised daily and these changes are published in the Federal Register.
However, a revised version of the CFR is published only once each calendar year, on a quarterly
basis as follows: titles 1-16 on January 1, titles 17-27 on April 1, titles 28-41 on July 1, and titles
42-50 on October 1.
In the event that changes to a particular section of a title have changed since the last published
update of that section, a notation is made in the List of CFR Sections Affected (LSA), which is
published monthly. The LSA cites the Federal Register page number which contains the changes
to the CFR section.
In order to obtain the most current regulations, the user should consult not only the latest version of the CFR, but also the LSA issued in the current month. The Federal Register home page (http://www.access.gpo.gov/nara/) offers links to both the Federal Register and the CFR. Please note that on-line versions of the CFR may not be the most current available.
Guidance to assist auditors in performing audits in accordance with OMB Circular A-133 can be
obtained from the following sources.
Office of Management and Budget
A Guide to OMB's Grants Management Circulars and Related Documents on the Internet
- OMB publications, including OMB Circulars and this Supplement for audits under OMB Circular A-133.
- SF-SAC, Data Collection Form for Reporting on Audits of States, Local Governments, and Non-Profit Organizations.
- Codification of Certain Governmentwide Grants Requirements by Department (including the
Grants Management Common Rule and OMB Circular A-110)
OMB Fax Information Line - Telephone: (202) 395-9068:
- OMB publications of less than 50 pages.
Office of Administration:
Publications Office, Room 2200
New Executive Office Building
Washington, DC 20503
Telephone: (202) 395-7332
- OMB publications.
General Services Administration (GSA)
Federal Domestic Assistance Catalog Staff (MVS)
General Services Administration
Ground Floor, Reporters Building
300 7th Street, S.W., Washington, DC 20407
Telephone: (202) 708-5126
- Catalog of Federal Domestic Assistance (CFDA).
A searchable copy of the CFDA is available through the Internet on the GSA Home Page
(http://www.gsa.gov/fdac). The CFDA is also available in hard copy (from the Government
Printing Office), and on machine-readable magnetic tape, high-density floppy diskettes, and
CD-ROM (from GSA).
Government Printing Office (GPO)
Superintendent of Documents
P.O. Box 371954
Pittsburgh, PA 15250-7954
Telephone: (202) 512-1800
- Catalog of Federal Domestic Assistance
- Government Auditing Standards (stock number 020-000-00-265-4)
- May 1998 Circular A-133 Compliance Supplement (stock number 041-001-00507-2)
IGnet Home Page on the Internet (http://www.sba.gov/ignet).
- Inspector General Directory
- Government Auditing Standards
- Inspector General Act
- Single Audit Home Page
- Virtual Library
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